Previously I have ranted about how billing task codes are not magic pixie dust. There seems to be a broad perception that task codes will solve pricing and legal project management problems for all practices. “If we only had task codes for [insert type of work], we would know how to price this.”

My general feeling is that A) the task codes were not designed to address this need. B) The use of task codes is highly inconsistent, so the data is poorly structured. And C) Even if the data was in good shape, it won’t provide magic pricing and budgets.

Recently I was ranting on this subject with a friend who works in the e-billing space. I was especially going off on how the task codes were not intended for solving the pricing problem. The e-billing person made an offhand comment about the current state of the use of task codes for their actual intended purpose. This got me thinking. So I checked the task code web site to better understand the actual intent of the development of task codes and the need for a standard set of them.

There was not much about intent, but here’s what I found:

In the mid-1990’s major US law departments and insurers wanted to better understand the services provided by outside counsel. 

As part of this effort, it was decided that electronic invoice time entries should be task-based and aggregated by type of work performed, resulting in the possibility that multiple time entries could result from the services performed in a single day on a matter. 

 What occurred to me is that the task codes have not even met the original purpose. My e-billing friend’s comment centered on the fact that clients use their own unique task codes and that lawyers need training in order to get effective use of them. And we know how often lawyers go to training. Rarely.

I read Outside Counsel Guidelines (OCGs) on a regular basis and keep an eye out for things like task codes and their use. Just last week I read one where they do not even use ‘L” codes. They have their own letter.

What I see is very inconsistent use of task codes by clients, compounded by inconsistent application of the codes by law firms. Result: Serious questions about whether task codes have even met their intended purpose.

Yet somehow task codes are poised to solve a problem they weren’t built to address.

Good luck with that.

As the saying goes, “Everything’s bigger in Texas.” That phrase also applies to the State Bar membership benefits. The State Bar of Texas has agreed to add Fastcase as a member benefit on top of its already existing Casemaker access. This makes it the first Bar in the country to offer both services. In addition to adding Fastcase, the State Bar of Texas increased the level of subscription to Casemaker to include the premium services of Casecheck+, CiteCheck, and CasemakerDigest to the member benefit. That is a major coup for the Bar.

Fastcase’s access will depend upon the size of your firm. For those under 11 attorneys, you will have access to the premium Fastcase database (all states & fed), for those 11+ attorney firms, you will have access to the Texas plan. Everyone will have access to the mobile apps and to the HeinOnline integration for the covered material.

It is a great day for the State Bar of Texas and its members. Read the Fastcase and SBOT press releases below for more information.

To log in to this free benefit, members will visit the State Bar website at http://www.texasbar.com and log in with their bar number and password. The service is also available via the TexasBarCLE website at http://www.texasbarcle.com/.

PRESS RELEASES

State Bar of Texas adds Fastcase as free legal research benefit alongside expanded Casemaker service

AUSTIN — Texas attorneys now have unprecedented free access to two nationwide legal research services.

The State Bar of Texas has signed an agreement to provide its members free access to Fastcase, one of the nation’s most popular legal research systems. Texas attorneys will continue to receive free access to the Casemaker legal research service, along with expanded premium Casemaker services at no cost. The State Bar of Texas is the first and only bar association to offer its members free access to both Fastcase and Casemaker.

“We are thrilled to offer this free research tool as an additional benefit to Texas attorneys alongside our popular Casemaker service,” said Trey Apffel, 2014-15 State Bar of Texas president. “Part of our mission at the State Bar of Texas is to provide superior online resources and benefits to members which help them better serve their clients. We believe this agreement helps us achieve that.”

With the new Fastcase partnership, 27 state bar associations and more than 800,000 lawyers now have a subscription to Fastcase. The service usually costs $995 a year for an individual subscriber, but State Bar of Texas members will receive two great Fastcase benefits for free, effective immediately.

Firms of 11 lawyers or more will have free access to Fastcase’s extensive Texas Plan, including opinions of the Supreme Court of Texas and courts of appeal back to 1 Tex. 1 (1846), U.S. Supreme Court opinions back to 1 U.S. 1, Fifth Circuit opinions back to 1 F.2d 1, the U.S. Code annotated, the Texas Statutes annotated, the Texas Constitution, and 70 other Texas-specific legal research libraries.

Solo practitioners and firms of 10 lawyers or fewer will have access to Fastcase’s Premium Plan, including all libraries in the Texas Plan, plus nationwide coverage from state and federal courts, state statutes and administrative regulations, as well as court rules, constitutions, and other valuable libraries. To access the scope of coverage on the Web, visit www.fastcase.com/whatisfastcase/coverage.

The agreement provides State Bar of Texas members access to Fastcase’s intuitive legal research tools, training webinars and tutorials, mobile apps, and live customer support. The free member benefit has no restrictions on time or number of transactions and includes unlimited printing, unlimited reference assistance, and unlimited customer service.

Texas attorneys will also have access to annotated statutes from other states, Fastcase’s annotated U.S. Code, transactional access to newspaper articles, federal court filings, and legal forms, and transactional access through HeinOnline to the largest collection of law reviews in the world.

“We’re excited to offer Fastcase’s powerful research tools as a free benefit to Texas lawyers,” Fastcase President Phil Rosenthal said. “Providing the best legal research tools to Texas lawyers will improve the administration of justice and level the playing field for clients. We’re proud to partner with the State Bar of Texas in this effort.”

Casemaker’s expanded offerings include access to premium services (Casecheck+, CiteCheck, and CasemakerDigest) at no cost for all members. These services were previously available only to paid subscribers. Casemaker continues to provide the Administrative Code, Attorney General Opinions from 1947, Texas Case Law since 1886, State Constitution, Federal Court Rules, Texas Session Laws from 1995, State Court Rules, Texas Revised Statutes, including annual archived versions since 2001, as well as a robust federal library.

Casecheck+ is a negative citator system built into Casemaker that validates your research and identifies whether or not your case law citations are still good law. CiteCheck allows researchers to upload a brief (or other document) to Casemaker which quickly creates a table of the cases found, checks the latter case history of the cases cited, and displays any negative later case history. CasemakerDigest delivers daily summaries of state and federal appellate cases classified by practice area.

Casemaker has also added its new Subsequent History feature especially for Texas attorneys. At a glance, researchers can now determine writ and petition history. Casemaker’s new statute annotator feature is now available to Texas attorneys as well. At a click, researchers can quickly get an accurate picture of how the courts have cited, applied, interpreted, and construed each statute.

“We are proud to have provided the Texas lawyers with Casemaker’s online legal research for the past 10 years,” Casemaker CEO David Harriman said. “Our experienced legal editors are committed to providing the most up-to-date cases and statutes available anywhere.”

— — —

The State Bar of Texas is an administrative agency of the Supreme Court of Texas that provides educational programs for the legal profession and the public, administers the minimum continuing legal education program for attorneys, and manages the attorney discipline system. For more information, follow the State Bar on Twitter @statebaroftexas, like the State Bar on Facebook at www.facebook.com/statebaroftexas, or visit www.texasbar.com.

Fastcase is a leading legal publisher focused on smarter legal software that democratizes the law, making it more accessible to more people. Using patented software that combines the best of legal research with the best of Web search, Fastcase helps busy users sift through the clutter, ranking the best cases first and enabling the re-sorting of results to find answers fast. Founded in 1999, Fastcase has more than 800,000 subscribers from around the world. Fastcase is an American company based in Washington, D.C. For more information, follow Fastcase on Twitter at @Fastcase or visit www.fastcase.com.
Since 1999 Casemaker has operated with the single purpose of providing attorneys with affordable access to quality legal research. The company has invested heavily in developing the finest editorial team and state-of-the-art technology to increase speed and search functionality. Attorneys have a product that stands toe-to-toe with the traditional and expensive legal research providers. Casemaker offers a Google-like search engine, accurate citation services, and many organizational features that make research that much faster, easier, and reliable. Attorneys across the United States are using Casemaker’s simple high-definition search on a daily basis to find relevant cases, codes, statutes, and more, fast. Casemaker is based in Charlottesville, Virginia. Follow Casemaker on Twitter @casemakerlegal or Facebook at www.facebook.com/casemakerlegal.  

State Bar of Texas Launches

Free Legal Research Benefit with Fastcase

New Visualization Tools, Mobile Apps, Annotated Statutes for Members

AUSTIN, TX AND WASHINGTON, DC (June 26, 2014) – The State Bar of Texas today announced that it has signed an agreement to provide its members free access to Fastcase’s nationwide legal research system, effective immediately.

Headquartered in Washington, D.C., Fastcase is one of the nation’s most popular legal research services. Twenty-seven state bar associations have subscribed to Fastcase, as well as scores of the nation’s largest law firms. With this partnership, more than 800,000 lawyers have a subscription to Fastcase, many through their state bar association. The service ordinarily costs $995 per year for an individual subscriber, but starting today, State Bar of Texas members will get two great Fastcase benefits for free.

Firms of 11 lawyers or more will have free access to Fastcase’s extensive Texas Plan, including opinions of the Supreme Court of Texas and courts of appeal back to 1 Tex. 1 (1846), U.S. Supreme Court opinions back to 1 U.S. 1, Fifth Circuit opinions back to 1 F.2d 1, the U.S. Code annotated, the Texas Statutes annotated, the Texas Constitution, and 70 other Texas-specific legal research libraries.

Solo practitioners and firms of 10 lawyers or fewer will have access to Fastcase’s Premium Plan, including all libraries in the Texas Plan, plus nationwide coverage from state and federal courts, state statutes and administrative regulations, as well as court rules, constitutions, and other valuable libraries. You can access the scope of coverage on the Web at www.fastcase.com/whatisfastcase/coverage.

The Fastcase benefit is offered in addition to the State Bar’s Casemaker benefit, expanding members’ free legal research options.

“We’re excited to offer Fastcase’s powerful research tools as a free benefit to Texas lawyers,” said Fastcase President Phil Rosenthal. “Providing the best legal research tools to Texas lawyers will improve the administration of justice and level the playing field for clients. We’re proud to partner with the State Bar of Texas in this effort.”

SBOT members will receive access to Fastcase’s intuitive, smarter legal research tools, training webinars and tutorials, industry-leading mobile apps, and live customer support from members of the Fastcase team. The member benefit has no restrictions on time or number of transactions, unlimited printing, unlimited reference assistance, and unlimited customer service included for free.

The service also includes annotated statutes from other states, Fastcase’s annotated U.S. Code, transactional access to newspaper articles, federal court filings, and legal forms, and transactional access through HeinOnline to the largest collection of law reviews in the world.

“We are thrilled to offer this free research tool as an additional benefit to Texas attorneys,” said Trey Apffel, 2014-15 State Bar of Texas president. “Part of our mission at the State Bar of Texas is to provide superior online resources and benefits to members which help them better serve their clients. We believe this agreement helps us achieve that.”

To log in to this free benefit, members will visit the State Bar website at http://www.texasbar.com and log in with their bar number and password. The service is also available via the TexasBarCLE website at http://www.texasbarcle.com/ .

The Fastcase service will be free to members of the State Bar of Texas, but it is not a discount legal research service. Fastcase has pioneered the smartest legal research tools in the market, with integrated citation analysis tools, data visualization maps of search results, and the first legal research apps for iPhone, iPad, and Android devices. The service also includes Bad Law Bot, the first big data service to identify negative citations to judicial opinions.

Fastcase has gained strong momentum in the legal research market and continues to challenge the norm in legal publishing and legal technology. Fastcase was voted No. 1 in Law Technology News’s inaugural Customer Satisfaction Survey, finishing first in seven out of 10 categories over traditional research providers Westlaw and LexisNexis. Fastcase has introduced new opinion summaries, and has been named to the prestigious EContent 100 list of leading digital publishing and media companies alongside Google, Amazon, Apple, and Facebook for three years in a row.

In 2010, Fastcase was the first company to launch an app for legal research, and later, the first company to launch an app for iPad. The American Association of Law Libraries named Fastcase’s integration with HeinOnline its 2014 New Product of the Year, and its app for iPhone the 2010 New Product of the Year. In 2011, Rocket Matter named Fastcase’s apps for iPhone and iPad the Legal Productivity App of the Year and the company furthered its mobile market presence by debuting the Fastcase for Android app in 2012. Lawyers on the go appreciate Fastcase Mobile Sync, which allows full integration of its mobile apps with the desktop version of Fastcase.

About the State Bar of Texas

The State Bar of Texas is an administrative agency of the Supreme Court of Texas that provides educational programs for the legal profession and the public, administers the minimum continuing legal education program for attorneys, and manages the attorney disciplinary system. For more information, follow the State Bar of Texas on Twitter at @statebaroftexas or visit www.texasbar.com.

 

About Fastcase

Fastcase is a leading legal publisher focused on smarter legal software that democratizes the law, making it more accessible to more people. Using patented software that combines the best of legal research with the best of Web search, Fastcase helps busy users sift through the clutter, ranking the best cases first and enabling the re-sorting of results to find answers fast. Founded in 1999, Fastcase has more than 800,000 subscribers from around the world. Fastcase is an American company based in Washington, D.C. For more information, follow Fastcase on Twitter at @Fastcase or visit www.fastcase.com.

This morning, I had the honour of spending half a day with the famed Daniel Goleman exploring emotional intelligence, focus and leadership as a part of the CEO Global Network – Great CEO Speaker Series.  The room was filled with C-Suite executives from a broad range of backgrounds and professions.  Of course, all I could think about was how to apply the theories and methodologies discussed to the practice (or business) of law. 
Dr. Goleman introduced the concept of “mindfulness”, a meditative practice that originates in Buddhism, but has gained popularity as a distinctive method for managing emotions.  The participants in the room were each asked to close their eyes and focus on their breath for a moment or two, and if their minds wandered, to bring the focus back to breath again.  It is believed that by being able to focus for extended periods of time, over the long term, you will be able to react to stress better and recover more quickly from emotional episodes or outbursts.  Imagine if it got so heated in a courtroom that the judge made everyone stop and focus on their breath for a moment? Or if midway through a tough take-over bid all parties stopped to meditate rather than allow their emotional reaction to prevail?  It sounds a bit foolish but the idea is to train the brain and its related muscles to resist distraction, stay focused and thereby manage the stressful situation more effectively.  Only though practicing when it is not necessary can you rely on the muscle function to be there when you actually need it.  I think six minute meditation should become mandatory in firms, keeping lawyers focused can only be a good thing for the bottom line.    
As important as “mindfulness” is, the concept that resonated most with me from a law firm perspective is the notion of “flow”, and how when in  “flow” or when focused on a task at hand, people are at their peak performance. Great leaders will learn to read those they lead and encourage 
them into a state of flow.  Flow is described in four parts: 
  1. Clear goals
  2. Flexibility – ability to change and adapt
  3. Immediate feedback  – it is believed that a person focused on a task will respond better to feedback during the task, as it is happening and this will make success that much more achievable.
  4. Matching of goals with skills
As we’ve seen throughout the legal community (3 Geeks included), over the last several years and specifically, in the last six months, there has been a great deal of talk around legal project management, AFAs, increasing productivity and process improvement.  Essentially, there’s been talk of wanting to increase the flow between lawyers and clients.  Consider the four parts above in this analogy: 
  1. Define a clear mandate of work or scope for the firm, no periphery or ancillary legal work
  2. Lawyers need to be able to adapt to the changing environments of the market and their clients as the mandate unfolds
  3. Lawyers and clients both need to keep one another apprised of the progress throughout the process with an open and honest dialogue
  4. The firm needs to staff client files with the appropriate balance of expertise and experience to meet the client needs effectively and efficiently. 
If we can achieve the four steps above on every client file, then client service will be in “flow” or at peak performance.  Efforts will be focused and outcomes will be (hopefully) successful for everyone involved.  Sounds utopian, but I believe it is possible, it just make take some mindful work to get firms working and focusing on these steps consistently.

Moving from four to three, great leaders according to Goleman are composed of equal parts:

  1. self awareness,
  2. people or social awareness and;
  3. a wider public awareness. 
I would argue that great law firms are much the same.  First, they need to understand what kind of firm they are and where they exist in a market.  Secondly, firms need to be socially aware of their client interactions – from billing to social events, from blogging to in-person meetings, from CLE and training to regular filings and other client touch points.  And finally, firms need to be aware of the wider world in which they and their clients operate.  As a CI practitioner who often describes my role as bringing the outside world in, this third pillar of leadership particularly inspires me as it positions CI in a leadership context.  Put another way, the firms that will lead the race for client service and  client engagement, will know their role, know their audience, and know their context.
Goleman ended his talk with some tips on how to improve emotional intelligence. These tips can equally apply to firms wanting to increase their wallet share. The tips taken together are a blue print for success and despite their simple message are actually quite difficult to achieve.  Improve emotional intelligence by: articulating a goal, planning for that goal, change habits to meet that goal and making yourself (or your firm) accountable to someone in achieving those goals.  It sounds very basic but when you start to look at even defining a single goal or strategic objective it can become very difficult, and that’s before you tackle setting a plan, acting on that plan, or changing habits (billing by the hour??) in support of that goal.  
Despite all the technological advancement of our time and our ability to do work smarter and faster,  Goleman reminded us several times that the human brain is built for social interaction and the only way to spread enthusiasm is in person.  So while we work on our process improvement plans, firm AFAs, as well as personal and professional mindfulness, always remember to get out of your offices to exploit the best of your firm and explore the parts that may need some tweaking. 
Image [cc] Free 2 Be

Marlene Gebauer, in a guest post, takes me to task for my recent post on how the law firm model is not broken. Based on the comments I received from that post, I told her to “get in line” if she wanted to take a shot at me, but then I decided to hand her the microphone.

 Enjoy.

Every Legal Project Manager who read Toby’s last post on “The Business Model Is Not Broken” is saying a big THANK YOU right now. They are pretty much guaranteed employment for life based on his musings.

I agree that financial management of legal practice, the “cost of doing business” if you will, is extremely important-whether that be in terms of hourly billing, alternatives fees or collections.

But a law firm is not exactly an assembly line for automobiles. In order to create internal efficiencies, automotive companies did create assembly lines and automate. Which many argue we can and should do at least in certain instances of legal practice. But what automotive companies also did was measure the average time it took to complete each task and communicate that to its employees. So the internal standard was established and those who purchased cars benefit from the lower cost and faster delivery times.

Law firms may have a difficult time establishing the metrics delivered in the automotive industry because they deliver a service, not a product. Law firms, billing hourly, have to standardize time entry by time increment (easy) and task code (not so easy) to determine how long a specific task will take. Some may say that alone is impossible, but let’s play devil’s advocate and say it is doable. People who purchase cars don’t ever see (or likely care about) the internal production metrics. In contrast, legal clients review and have a say about those time entries-and they care about them a great deal. A law firms’ billing classification system may not jive with a client’s. A client may need certain sorts of coding to correspond to their own internal systems. While a firm can adjust to a client’s needs, if done significantly, the internal efficiency metrics become meaningless because you are no longer comparing apples to apples. If that happens I guess you just hire the big guy with the cat o’ nine tails.

Image [cc] schoeband

Recently I participated in a think-tank discussion about how the law firm business model is broken. I kept quiet for the first part of the discussion (for those who know me, this was not easy). People in the room attacked most aspects of how law firms are run, which is popular and fun these days. Truth be told – I partake in it as well on this blog. But at a point I couldn’t hold it in any longer and blurted out: The business model is not broken.

Everyone turned and gave me the ‘who farted’ look (HT to Lincoln Mead for that descriptive phrase).

Which brings us to the question: What is the law firm business model? As I see it, it’s a
professional services firm in a partnership (or partnership-like) model where the owners actively participate in the delivery of services. Law firms sell the time and expertise of their people at a profit. Firms utilize various pricing approaches, more heavily focused on a time and material approach (a.k.a. the billable hour).

So in the conversation, I put forth the statement: What is broken about that?

One example thrown out was how the billable hour was broken since it motivates bad behavior. As in it motivates lawyers to spend excessive time performing various tasks.

My counter: the billable hour motivates hard work. What is wrong with that? Last time I checked, most ‘business models’ reward hard work, whether it’s spending extra time working or driving more value through creativity.

I suggest the billable hour is not a bad or broken aspect of the business model. But there is something missing: Leadership and Management. By this I mean that firm management has not done a good job of setting expectations around how hours can be accumulated. At the truck assembly plant, workers can increase their comp by taking extra shifts. However they are not the ones deciding how much effort they can apply to each task. If they take twice as along to install a wheel, instead of getting twice as much work credit, they probably get a reprimand since they are slowing down the assembly line.

Law firms need to adopt such an oversight function into their processes and practices. Many firms are pursuing project management as a means to accomplish this.

The point here is that although law firms are under increasing pressure to lower the cost of delivering their services, the basic business model is fine. What is needed is adoption of more business-like practices within that model. In the 70’s and 80’s the business model of American car manufacturers was not ‘broken.’ Instead they needed to adapt the practices and process to an increasingly competitive market. They installed automated assembly equipment to cut their cost of producing cars. They did not change their basic business model. They are all still corporations, designing, building and selling automobiles.

I’m not sure exactly what type of business model law firms would adopt if the current one is broken. Maybe we should set up a dealership network and offer incentives at the end of the year to clear inventory. Or not.

The model is not broken. Firms just need to evolve into a mode where they continually adapt to a changing market.

And if you are wondering; No – I did not break wind.

In Part One of this series, we talked about how pricing is pulling towards the compensation challenge for law firms, based on how pricing is interwoven with profitability. In this next section we put forth a “Straw Man” for how compensation might change to better motivate profitable behavior by law firm partners.
Part Two
A Modest (and High-level) Compensation Proposal
What follows is a possible approach to developing a next-generation comp system for a law firm. This approach breaks down comp into a base, plus three different reward or bonus buckets, allowing a firm to reward all types of profit enhancing behavior from partners. The challenge for this system, and any system like it, will be striking the right balance between the three reward options. As previously noted, the balance will need to protect current revenue along with encouraging new revenue. And it will need to properly reward key partners, to retain them within the firm.
Baseline Worker Comp Reward
First – law firm partners need to continue to function as workers. Clients hire them because of their expertise. So any comp system will have to first account for that worker aspect. This proposed model sets a base level of billable effort (a.k.a. work), that all partners should reach. The exceptions (there are always exceptions) might be partners with leadership and administrative responsibilities.
Further refining this concept, we might divide the base level of compensation into two or three levels, where partners are rewarded as workers. This reflects the value of partners as workers and should likely reflect their experience levels. For argument’s sake, let’s set this threshold at 1000 hours. And for their 1000 hours, a firm would set base comp of at three levels (recognizing junior, mid-level and senior partner experience), so if all the partner does is bill (and collect) on the 1000 hours, they will be paid the base amount relative to their assigned level. This base level might be treated as a “labor cost” in a firm’s profitability model.
Of course, firms will set expectations that the base is not enough. Any partner functioning only at this level will likely be let go in short order since they would be only be a worker performing at a substandard level of effort.
Above the Base
Our theoretical firm has three options for a partner to increase their income (and keep their jobs).
Reward Option #1 – Be a better worker.
In this option, the partner would increase their billed and collected hours well above the 1000 hour mark. Our future firm might set a per hour ‘bonus’ for each partner level. Partners who fit solely into this category for comp might be high-level subject experts, such as first-chair trial lawyers, high-value niche regulatory experts, or others with higher effective billing rates.
There will be long-term challenges with partners who only function in this role, as they are truly serving in just a worker role. They may be highly specialized, high-demand workers, but they are not actively expanding the business. Consider a star player on a NFL Team. They will be paid very handsomely, but they don’t make decisions about the business.
Reward Option #2 – Maintain an existing, valuable client relationship
Many partners at firms inherit institutional clients of the firm. Keeping these clients happy has tremendous value. Although in a new model, keeping this client work profitable will be equally, if not more important. A client that brings in $2mm in fees might sound appealing, but if it cost the firm $3mm to serve that client, there is an obvious problem. So the compensation rewards for this option will be tied to maintaining revenue levels and improving the profitability of the revenue.
Here the comp reward can be tied to revenue and profit levels for existing clients. A partner pursuing this comp option will want a happy client and well-managed work. They will be concerned about practice management resources such as project management and practice innovation, and will be pushing for greater efficiencies and new value propositions in service offerings.
Reward Option #3 – Bring in new work
New work will come from both existing and new clients. From existing clients, this might be cross-selling new types of work or significantly expanding work in a given practice. In both circumstances, the revenue will need to be profitable or have the potential for profit. New work may initially be profit-challenged, but ultimately must fall within a firm’s acceptable level of profit. Of course, adding new, profitable revenue to a firm will have the highest value and be reflected in the comp systems as such.
Partners pursuing this option for comp will demand business development resources and differentiated service offerings. They will want to see efficiency enhancing efforts implemented to keep the services cost competitive, although they may not be the ones personally driving those innovations.
Combinations
Depending on the type of practice, a partner might enhance their comp through a combination of the three options. For instance, they may choose to bill a lot and bring in new work. In any event, partners who work hard across any of our options can be properly rewarded. But those that expand the business and enhance profit will be rewarded at the highest levels.
Note: For those partners still living in the old world (e.g. Tax lawyers), this new model will still be able to properly reward their efforts. Those in the old world can still be getting rate increases and still be getting work by being high-level subject matter experts. They would see rewards from all three options and thus be properly compensated.
This reward schema is different from many current law firm comp systems, as they tend to place first emphasis on a partner’s “worker” behavior at the highest value. “Hard work” is primarily perceived as having many billable hours. As billable hours is only one driver of law firm profit, the new models, like the one proposed here, will need to move away from that narrow thinking. Hard work comes in many other ways than just billing time. This new approach recognizes and rewards all of those efforts.
The Leap of Faith?
Regardless of the changes firms make to their comp systems, they will need to find some way to balance out how they reward various profit enhancing behaviors by their partners. They may choose to place greater emphasis on one option or another, but to have an effective comp system, they will want to include all three. Leaving one out and assuming or hoping their partners will still engage in that type of behavior is ill advised. Current comp systems reward “worker” behavior at a high level and as a consequence, partners will focus on that effort to the exclusion of most of the others.
As a former Knowledge Management (KM) professional, from personal experience I can tell you that partners (and lawyers in general) will not engage in efforts that do not impact their comp. One example is CRM. Law firms installed expensive enterprise software systems expecting lawyers to take the time to utilize them, adding valuable client data and leveraging that to bring in more work. Lawyers, for the most part, did not participate. The moral of this story is firms should not expect changes in behavior from lawyers unless they create a clear economic incentive for that change.
Where does that leave us? First – the traditional law firm compensation systems reward behavior that is outdated. They focus on rewards for hours and revenue. They tend to reward partners who bill a lot of hours, along with partners who bring in revenue, regardless of how profitable that revenue is. In today’s market, those rewards are not sufficient to drive profitable partner behavior. Innovative firms will start altering their compensation systems to reward partner behavior that drives a profitable practice in this changing, competitive market.

In this two part series, we will look at how the legal pricing role has been drawn into the profitability role and is now being pulled towards the compensation side of law firms. From there we will apply the knowledge being gained from pricing and lay out a possible future compensation approach focused on motivating profitable behavior by law firm partners. Throughout this discussion we will look at the pitfalls of making such a change, and not making any change.

Part One

As the pricing role has been pulled into the sphere of law firm profitability, many times that pull continues on over into the compensation arena. As noted in the recently published The Law Firm Pricing Report, pricing is a role that takes center stage for profitability, such that the pricing function many times becomes the voice of profitability in a firm. And once profitability is understood within a partnership’s ranks, questions quickly rise about its potential role in compensation.

Discussed at length in the Report is the broader challenge of law firm profitability. The challenge arises since law firm partners (in the general use of the term) are both owners and workers. Any profit methodology needs to tackle the issue of how you treat partner compensation in relation to profit. Is it treated as all profit, or entirely as a labor cost? Or is it split between the two in some fashion? Whichever approach a firm takes, this first pass highlights the relationship between profit and compensation, which in turn makes it clear how pricing will be drawn into the compensation dialog as it evolves.

And the dialog about profit and compensation will definitely be evolving – and as importantly, ongoing. The underlying goal of most compensation efforts, especially outside of the legal market, is driving value and profitability. Compensation should motivate profit enhancing behaviors and should always be adapting to changing market conditions. Therefore a prerequisite for firms is sending a clear and consistent profitability message to its partnership. Without a clear understanding of profitability, a firm cannot expect any compensation system to properly motivate profitable partner behaviors.

This law firm profit message centers on a shift from the old to the new. The old profit discussion was about hours and revenue, since that was effective at increasing profits. However, the market conditions have changed, as in there is no longer increasing demand and low price sensitivity. Under flat demand and growing price sensitivity, the new discussion needs to be a broader conversation about revenue and profit. Prior to 2008, hours and revenue were enough to drive profits. But since then rate increases are down, realization against those rates has dropped from 94% to 84% and the utilization of law firm lawyers has also dropped (increasing the cost per hour of lawyers to the firm), ‘hours and revenue’ is no longer effective in driving profit.

When developing a “revenue and profit” comp system, one should keep in mind the Law of Unintended Consequences. Comp motivates behavior, which means there is always the problem of unintentionally motivating counterproductive behavior. Whenever a system is created, you immediately create incentives for people to game the system to their individual benefit. Although a scary prospect when changing comp systems, firms should realize this ‘gaming’ is already happening under current comp systems. It’s just that the firms are accustomed to the current gaming efforts and have in place checks and balances for tempering those efforts. New comp systems will need to evolve to develop another set of checks and balances to keep ‘gaming’ efforts under control.

The Legal Twist

In many respects, next generation comp systems will need a component that functions along the lines of traditional sales comp systems. This aspect will need to carefully balance protecting current revenue and profit, alongside encouraging new revenue. For those who have been involved in designing sales comp systems, this is no easy task on its own. But here’s the Twist – law firms have an added a degree of difficulty, due to their owner / worker conundrum. Sales people are rarely also front line workers. They do not build the widgets they sell. In contrast, law firm partners need to be rewarded as both workers and salespeople. Both of these efforts have value for firms, but they have a different kind of value. Comp systems will have to balance how each behavior is rewarded.

Caution

Lawyers, being Type-A personalities, tend to see things in black and white. Profit lends itself to such viewpoints. Under this thinking, profit is seen as an absolute. Practices and clients are either good or bad. As an example, a partner might see all profit below average as bad (or even failing). But profit is a mental construct and can be viewed in many different ways. For instance, costs can be calculated on either a budgeted level or an actual level. Which approach used depends on the circumstances and goals. So firms also need to take into account how they communicate profit in relation to comp. Instead of being a black and white issue, profit should be communicate as having a healthy range and that the goal is increasing profits across that range. In other words, instead of using profit as a stick when it comes to comp, it is better used as a carrot.

Of course firms should fully expect some bumps in the road as they begin to transition to different compensation systems. Effective change management will be a necessity, since changes in comp impact the wallets of those involved. When wallets are involved, firms should expect strong reactions and proactively move to address those. Firms should also be ready to make thoughtful adjustments to comp systems. I say “thoughtful” and not reactionary. Be prepared to adapt to core concerns, but be very careful about reacting to individual partner complaints.

Oh yeah – and one more challenge – some practices still function just fine in the old world (e.g. tax and bankruptcy) so new systems will also need to account for that.

In Part Two of this series, we will explore a possible next-generation law firm compensation methodology. 

Inspired by recent events.

Dewey said to Cheatum, “What ever shall we do?
Our book is getting slimmer and I haven’t got a clue
How to run a proper business, you know, one that still makes money?
We can’t just raise our rates… stop your laughing. It’s not funny!”

“Silly Dewey, how you worry!” chortled Cheatum through his drink.
“There’s no problem we can’t tackle with a good and proper think.
We’re the brightest and the smartest and by far the best paid too,
We’ll just put our heads together and we’ll figure what to do.”

From across the polished table Old Man Howe rose to his feet.
Which caught them by surprise, as he never left his seat.
This they knew was bound to be one of his classic epic speeches.
Howe began with, “Don’t ya know the depths t’which ethics reaches?”

Dewey stared into his glass and Cheatum smiled broadly.
“One tool my friends will always save the righteous and the godly!”
Howe barked his words with fervor and a bit of indignation,
“There’s no problem can’t be solved with just a tiny publication.

Let me see here, what’s the trouble causin’ you boys such distressin’?
You’re belly achin’ and wallerin’! It’s downright darn depressin’!”
“You see, sir,” started Cheatum, in his smarmy weasel voice,
“There’s all these people coming by to tell us we’ve no choice

But to change the way we’ve done things since time immemorial,
And frankly, sir, some of them’s becoming dictatorial.
How dare these non-attorneys tell us how to run our firms!?
Since when do JD Yale-ies take advice from State School worms!?”

“On the other hand,” said Dewey, “There might be something to it.
The world is clearly changing and maybe we should do it…
Change… I mean,” choked Dewey as Howe’s gaze began to burn
With the fire of holy terror at his colleague’s faithless turn.

“Noooooo!” roared Howe, “Cheatum’s got the right idea!
No non-attorney’s ever gonna call the shots ’round he-yah!”
Some staff began to cower and back away from all the clamor.
This attorney wields his ethics, like a carpenter, a hammer.

“I’ll tell you what we’ll do, to keep the riff-raff in their place.
Just change a little rule, and then we’ll throw it in their face!
We’ll say WE can’t be trusted not to cheat our own clients
As long as non-attorney staff oversee our non-compliance!”

With a gasp and sickening thud Old Man Howe collapsed and died.
Cheatum quickly grabbed his wallet; Dewey shook his head and sighed.
Before the body was even cold they’d divvied up his clients.
Dewey got the big ones, but Cheatum took the giants.

That very day they wrote the rule that Howe had recommended.
Though sometimes even good ideas have pieces unintended.
Their non-attorney staffers all packed up and walked away.
Leaving Dewey alone with Cheatum to await their dying day.

Part 2 of the The Legal Intelligencer’s ongoing series on Law Firm Competitive Intelligence came out on May 13th.  The author, Gina Passarelli, makes a few points that, well, let’s just say I have a different perspective on. 

Let’s start with the firms that were interviewed for this article.  They are AMLAW100 firms with resources and budgets (personnel and otherwise) not found in the vast majority of firms.  Their experiences and opinions are not the norm for the legal industry.  I have found the norm for most firms to be a collaborative process between Marketing and Research Services (aka the Library).  This allows for the use of staff in multiple capacities without incurring the additional personnel cost of a dedicated CI analyst.

This also allows the Marketing Department to take advantage of the unique skills and internal knowledge of the research professionals. These professionals are skilled at finding information efficiently, analyzing it to meet the attorneys needs and packaging it for their consumption.  Despite the implications of the gentleman quoted from Duane Morris,  researchers (aka librarians) are not as a rule “faithful compilers of phone books.”  Merely handing off reams of information (otherwise known as Data Dumps) are not a work product that attorneys have the time or inclination to review in any context, be it legal research or CI.  This understanding of not only what attorneys need to see but how they want to see it adds to the value of the research professional in conducting CI.

It is no accident that many excellent CI professionals have a background and/or training as a librarian. I found it striking how uninformed the author appeared to be regarding the involvement of law librarians in the Competitive Intelligence analysis process.  The inclusion of sweeping stereotypical statements such as “[Librarians] gather the info and the marketing team makes it presentable” and the implications of a Chief Marketing Officer that the Library produces academic studies are not accurate depictions of how this works in the Legal Industry.

Here are three prominent examples of CI professionals missed by Ms. Passarelli:

  • Zena Applebaum, who was quoted prominently in the first article of this series, is not only the Director of Competitive Intelligence for Bennett Jones but is also the award-winning Chair-Elect of the Competitive Intelligence Division of the Special Libraries Association.  Not to mention the excellent post she wrote on CI on Thursday.
  • Jan Rivers, who wrote an article on CI for the National Law Journal, is the Director of Information Resource Services at Dorsey and Whitney LLP and is a well-known CI professional.  
  • Emily Cunningham Rushing, Competitive Intelligence Manager at Haynes and Boone, LLP, has her Masters in Library and Information Science and is also a well-known CI professional

The list above does not include the many other talented research professionals acting in the same capacity for their firm.  In my previous post on the first article of this series, I pointed out that there are over 300 librarians in law firms nationwide currently practicing the art of of CI.  This does not include the members of the CI Division of the Special Libraries Association or the law firm members of the Society of Competitive Intelligence Professionals.  Full disclosure here:  I have been a law librarian for almost 25 years and have been practicing CI for 20 of those years. 

The information presented above shows the skills that librarians have in their toolbox .  Of course, this doesn’t mean that every librarian will make a good CI professional or that only librarians can be CI professionals.  However, when looking for someone with the requisite skills for this type of task, the Library (or Research Services) is a good place to start.  By using these atypical examples and statements, Ms. Passarelli paints a misleading picture of how to operate a successful Competitive Intelligence operation.  I guess my question really is…why weren’t mid-size firms that are more representative of the industry (and, yes, as a result rely more on librarians) consulted as part of this article?  They aren’t hard to find.

I recently returned from the 29th annual Strategic and Competitive Intelligence Professionals (SCIP) Conference in sunny and warm Orlando.  The conference was a terrific networking event as per usual. I am constantly impressed, and inspired by the professionals who work in CI across a variety of industries every day.  But I am also intrigued by the questions and concerns that underlie so many of the sessions and the hallway talk afterwards. It seems regardless of the industry, CI professionals share common issues, even if the language or descriptions of the challenges are nuanced.  As a known entity within the CI community, I am often asked for my advice on helping to solve practitioner challenges and rather than answer them one at a time, I thought some 3 Geeks readers might also benefit from the answers and/or be able to contribute and add further suggestions.  To that end, below are five of the more interesting questions that were bantered about throughout the conference and my attempt to answer them.  The questions are in no particular order and my answers are a combination of my own thoughts as well as some of what I heard while at the conference.

1 – Where in an organization should CI sit?

Everyone has an opinion here. Some believe that CI should always and only report to Marketing, others to the CEO, others to finance.  Research &Development was another reporting option, and I even heard one practitioner suggest that sales was the only appropriate place for CI to report.  Since law firms don’t have sales departments I think we can safely rule sales out. But lawyers, specifically partners who interface with clients on a regular basis are similar to sales people in many respects. As CI practitioners in firms, its important to always maintain a good rapport, even develop close relationship with partners to keep the lines of communication open.  It will aid with HUMINT collection, but it will also provide a window into the issues facing lawyers and clients in the course of daily business.  But CI in a law firms can’t report into the partnership at large, so the function does need a home.  Some law firm CI practitioners report to Marketing, others to the Library, KM or some hybrid of the above just as our colleagues in other industries.  The bottom line is:  it doesn’t matter much where you report, so long as you are providing excellent service in meeting intelligence needs in anticipating surprises for your firm and its clients.  In ideal world, a law firm CI function is so highly collaborative between the various administrative groups the reporting becomes only a formality for booking vacation (what is that?).

2 – Do hiring managers prefer CI practitioners with CI certification, or industry knowledge?

This one’s a bit trickier. I heard Directors of CI two Fortune 500 companies say the opposite where this issue is concerned. Its seems the response is both culturally and hiring manager specific.  But one element of the hiring process was clear:  soft skills are as important as the hard skills.  For those of you looking to transition into a CI role, or increase your responsibilities in a current one, brush up on your networking skills, practice your elicitation, develop your analytical fitness and never stop being curious or creative.  These are the essential qualities to a perfect CI practitioner – certified or otherwise.

3 – How do I merge a competitive intelligence practice with a Library function? Or a KM function?

See the note above about collaboration. In the three short days of the conference alone, I saw the “C” of CI referred to as Collaborative, Cooperative, Collective, and I am sure if I attended a few more sessions, I am certain I would have seen a few other permutations.  CI is at its root an information-based vocation. Information needs people. People need a great many things, you can look to Maslow’s hierarchy or the more recent 10 Demandments from Kelly Mooney to understand people what people need and getting various information brokers together – whether from the intelligence community, the KM community, the Library, Marketing or anywhere else requires a nurturing of those same needs.  Get people engaged and interested by gaining their trust, but giving them the space to control how they contribute at the same time. It’s a fine balance but if you can manage to work to individual strengths in both the hard and soft skills of CI (which ever “C” you choose) the end result will be better than the sum of the parts.  After all, intelligence comes from the interpretation and analysis of information and what better way to analyze a situation than with multiple perspectives, educational backgrounds and strengths attacking the business problem.   

4 – How do I market the CI services within my organizations?

First of all, this is a great question, posed the right way.  Its not asking “do I need to market my service”, or “why do I need to market”, but rather “how”. The question assumes that the person/people asking already understand the need for Marketing, and so the battle is at least half won. 

The easiest and best way to market the CI services within your organization is to do great work, amazing work and then get repeat clients.   I remember an old boss of mine suggesting that I need not hang out a shingle and wait for people to come, because once I started to provide value, it would be a bouncer I needed not a shingle. Three other easy and quick ways to market the function are to:

  1. Tell people about it. Sounds simple enough, but it means that the CI team needs to be visible and participate in organized activities like product launches, social events and just get out of their offices/cubes/ or libraries and walk around to meet the people they are serving.
  2. Prepare and practice your elevator speech so when you get asked what you are up to in the elevator or waiting at the coffee machine, you have a 30 second sound bite ready to roll.  You can talk about a project or the impact you are making and thereby selling your services.  Remind potential clients within your organization that CI is an active for both tracking future engagements and helping to set strategy or plan for the future.
  3. Be consistent with deliverables.  This need not mean a template approach, but make sure that what you deliver to all clients, at any level of the organization is polished, proofed and perfect.  Consistent work product will go a long away to promoting the function and helping it appear as professional and needed service. Once you have a key process for proofing and polishing down among your CI team, you can start to explore the notion of marketing your function with a brand and series of on going reports. But that’s a blog posting for another time.

5 – How can I evolving a competitive intelligence practice to become even more relevant, useful and perhaps add some measurable ROI-type “returns”.

Measureable returns can be hard to define.  Especially if the CI function is removed from the decision making process and your reports/suggestions are taken but results are never returned.  First and foremost, where you can, establish open lines of communications with Partners so that you can ask the difficult questions around whether or not a new file was opened or a new client retained. Then, track the client matter number as it goes through your firm.  While you may not be able to directly attribute that new client directly to the CI that was provided, you can indicate that CI had a role, perhaps a 5% or 20% role in helping to secure that new client.  Use this information as an ROI for the service you provide.  Other forms of measurable ROI come not from new engagements, but from time saved or efficiency increased. Start to think about the CI function in terms of how having a CI team or individual contributor of CI added to the bottom line by taking research and analysis off of someone else’s plate and/or provided a service that wasn’t there before that allows for better use of time, smarter client engagements and a well turned out organization.  It may not be measurable in the truest sense, but certainly it add to the relevance of the function and of the firm in the eyes of its client.  Client surveys time and time again suggest that firms are chosing outside counsel based not on fees or expertise alone, but that clients want to work with firms who understand their buniess, their risks and their challenges. Who better to keep your lawyers and other practitioners informed than a CI?  Relevancy is CI currency.
 
So that’s my five question, answer and response from the 29th annual SCIP conference & trade show. I encourage anyone else out there who wants to take a stab at answering to please leave a comment.  As I gear up for the Special Libraries Association 2014 Annual Conference & INFO-EXPO June 8-10th in Vancouver, I can’t wait to see what the questions around CI and its role in and with the Library might be. I suspect many of the same themes will be repeated and I welcome the discussion.