I don’t know how I missed it, but last week, Jones Day laid off 65 IT workers.  Most of them were from my home town of Columbus, Ohio. [UPDATE: It appears the bulk of cuts were in Cleveland, not C-bus. Still Buckeyes though. 🙁 ]  As I began reading the article, my first thought was, “I told you.” But as I continued and I read the quotes from Jones Partner, Joe Sims, I started to regret the things I had written.  Had he or anyone at Jones read any of my posts?  Was I in any way influential in this decision?

Of course, that’s completely irrational and extremely arrogant. But still, the thought briefly crossed my mind. The quotes from Sims and Jones Day sound very much like things I have said and written.

“…we concluded we could do it better, faster and more effectively with a reorganized approach, and that reorganization didn’t require so many people.”  

“It’s basically a change from a local, personal touch to a remote-access basis for fixing little problems, and instead of having people literally on the ground…”  

“We have determined that a reorganized technology function will improve both the effectiveness and the cost of our services to clients.”

Shorter Jones Day: We don’t need so many expensive people to run things anymore.

Ouch.

Keep an eye on Jones to see if they quietly start picking up more IT people in the near future.  If they don’t, and they appear to be otherwise successful, then hold on tight, these cuts are coming to a firm near you soon.

But wait, it gets worse for IT people!

Edward Snowden (Hero or Traitor, love him or hate him) has not only drawn attention to nefarious government activities, he’s also drawn a lot of attention to Systems Administrators everywhere. SysAdmins rule the world. We have access to everything.  We can get into your emails, your private files, your super secret extra hidden browser history. And despite the occasional disgruntled outburst from an overworked and underpaid master of the universe, people generally trust us to keep our mouths shut and keep the company’s private information private.  Snowden ripped the poorly tied blindfold off and danced naked atop the NSA’s servers, shouting wildly about all of the confidential and private information stored there (mostly yours and mine).

In response, the New York Times ran an article in yesterday’s paper, asking the question that very few people have asked before now: “Can the I.T. staff be trusted?“

Now, knowing what we all know about law firms’ aversion to risk and their lemming-like “follow the guy in front off the cliff” behavior, how do you think this is all adds up?

Image [cc] lowjumpingfrog

#1 and I were chatting (not quite at 3 Beers) and he made a statement that really made me think.

Damn him.

We were talking about whether lawyers will embrace internal messaging apps or any other type of social media apps as KM or just communications tools. I commented that IT clings to some false hope that the next application they install will be a killer, one that gets used by everyone just because it’s there – just like email was. It’s my opinion that email has been the only true killer application for lawyers. It was the only one lawyers embraced simply because it was there. Since then firms hold out hope that the next application they install will be so useful and cool that their lawyers will jump on it.

This never happens.

We were talking about why that is the case, when Greg said, “I think they embraced email since it allowed them to avoid using their phones.”

Oh sweet epiphany.

We all know lawyers prefer to avoid change. But the epiphany tells us they are even more willing to avoid talking to clients (or maybe anyone else). One of my Golden Rules: Lawyers will doing anything to avoid talking to clients about fees. Likely this ‘avoidance rule’ extends well beyond that of fees and in to client conversations in general.

The lesson here is that those in search of the next Killer App for legal should build tools that focus on delivering a level of ‘Client Conversation Avoidance’ above useful features.

Commence with development.


Jane:  I recently read a short book by Nilofer Merchant called 11 Rules for Creating Value in the Social Era. In this lovely little tome she draws some powerful conclusions about the impact of the Social Era on business and the opportunity it provides to promote the Onlyness of individuals.  Onlyness is the concept that each and every person brings a unique set of knowledge, intuition, and experience to the workplace.  When done correctly, social media allows the organization to tap directly into an individual’s Onlyness and to leverage the vast knowledge and experience that typically goes unnoticed by the enterprise. Take for example, Rosanne, a legal secretary with 25 years of experience supporting litigation lawyers. Rosanne is a great resource for the few lawyers that she supports directly, but her Onlyness is almost entirely unavailable to the rest of the firm. Through social media, her Onlyness could be become a firm-wide resource, easily tapped by anyone and everyone who wants a piece of it.

Dan: Put away the love beads and go wash your Birkenstocks, Jane. The halcyon days of free love have been over for more than 40 years and, last I checked, tapping the Onlyness of a secretary is generally frowned upon in our more enlightened era.  I don’t deny that law firms have plenty of underutilized resources within their employee base, but there is no way that social media is the answer.  Most of the interactions on social networks revolve around gossiping with Facebook friends, or Tweeting your cat’s latest hi-jinx. Spreading around that kind of Onlyness does absolutely nothing to help the business, it is just another distraction from the work that employees should be focusing on.

Jane: Dan, by that logic — and I always use that word loosely when talking about you —  we should brick-up all of the windows in the office. I’ve seen plenty of attorneys and managers (the rest of us don’t have windows) while-away the hours gazing absent-mindedly through the glass.

Dan: It’s not surprising that you would confuse deep thought with absent-mindedness, Jane. Knowledge workers, like attorneys and managers, often focus deeply on a problem. Granted, to the ignorant, such focus could easily be misunderstood as “whiling away the time”.

Jane: Leaving aside you’re “ignorant” jab for the moment (pun intended),  you don’t consider secretaries and other staff to be knowledge workers?

Dan: Not in the same way that attorneys are, no.

Jane: You care to dig your own grave on that one?

Dan: There’s no digging my grave about it. The fact is, most employees in a law firm are task-completers, not creative types like attorneys and managers.  Their access to knowledge is simply, by any measure, not as important as…

Jane: You know what, I think we’ve just hit on another Dan and Jane topic.  Let’s table this for now and come back to it later.  Regardless of whether employees are “knowledge workers” there is clearly value in better connecting people within the enterprise.  It’s important to create relationships where there would otherwise not be any; between offices, regions, practice areas, etc.  It is about building community, Dan. Surely, you don’t deny that it’s important for IT personnel, for example, in various offices and at every level throughout the firm to communicate effortlessly.

Dan: Jane, why in the world would I want IT people to talk to each other?  I, as a partner, am not paying them to talk, I’m paying them to fix things.

Jane:  Wow. I’m speechless… Let me give you an example you might understand, Rumpelstiltskin.  Back in your day, people would congregate around the water cooler. This would provide a connecting point for employees and allow them to discuss ideas, some of which related to work and many that didn’t.  More importantly these conversations, work related or not, created connections between people, and those connections allowed them to more easily work together to solve work related problems.  The water cooler conversations allowed the individual to share their Onlyness with their colleagues. Today, we are too dispersed and everybody is moving too fast for a water cooler to provide that kind of informal and serendipitous communication, however, social networking can accomplish the same thing on a global scale, instantaneously. Social Networking is the new water cooler.

Dan:  I remember the water cooler. We got rid of it because people like you would stand there all day talking instead of getting their work done. You’re suggesting we should now make it possible to achieve that same level of inefficiency from the comfort of your own desk chair?  Your social “tools” will only make it harder to tell when someone is wasting the firm’s time.

Jane: Speaking of wasting time… The point here is not which “tool” we use, Dan, it is that we must unleash the potential knowledge and expertise of ALL of our employees. Law firms have a very strong caste system, and it does not serve the enterprise well. There are many problems to be solved and many long time employees have a much better understanding of the inner workings of the firm, and the legal business in general, than young associates, or even many partners do. In the traditional social model of the law firm, there is no mechanism to incorporate the vast experiences of the lower caste employees into the eventual solutions that will propel the firm to new heights. Social networking levels the old system and makes it possible for little old Roseanne to contribute to the ultimate success of the firm.

Dan: Roseanne?

Jane: Roseanne…uh, Dan!….uh… never mind.


Image [cc] Rigmarole

As legal pricing evolves, it is taking many twists and turns – along with some convoluted spins. The initial efforts by clients to save money typically results in requests for bigger discounts. This allows the GC to go back to the CEO and say “we saved 5% more this year.”

After a year or so of this approach, clients realized bigger discounts don’t directly translate into savings. I would argue that in this situation, clients can’t even tell if they are saving money or not. So at a point the CEO comes back and says “Show me the money.”

Next up on the pricing evolution list is usually Fee Caps. These are hourly billings with a “not to exceed” number. Of course these deals usually retain whatever discount level the client previously received. So now the client can say with more certainty they are saving money. Or can they?

To fully explore this question, we need to understand the behavior such a fee arrangement drives. People like to talk about value pricing, which many times means creating an alignment of interests between client and law firm. So an examination of the behavior each type of pricing arrangement motivates, for both law firm and client, is in order.

On the surface it appears a fee cap motivates efficiencies. Law firms should logically want to keep their fees under the cap, so they will carefully dole out resources during the engagement to avoid hitting the cap. This is the “efficiency” clients seek. And to some degree this outcome may be true.

However, lawyers are motivated to maximize revenue in order to drive up their personal compensation. To that end, they are motivated to hit the cap. Going over does mean write-offs, but coming in too far under means lost revenue attributed to them for comp. These lawyers are also motivated to have as many of their personal hours involved in the matter as well. Since their comp is also driven by that factor. And once a cap is exceeded, the lawyers are motivated to reduce their personal hours and pull back on resources. So instead of motivating efficiencies, fee caps can easily motivate counter-productive behaviors.

Now one might point accusing fingers at law firm compensation systems (and rightly so), but that doesn’t change the current motivations.

On the client side with these motivations in place, they need to closely monitor work on matters to make sure the right tasks are being performed by the right levels of expertise.Clients trying to manage costs under a traditional hourly arrangement will have the same burdens. An added burden is watching the fees billed against the cap. I heard of one client using fee caps who was not monitoring this metric. One month they suddenly noticed the size of the bills dropped dramatically. The outside counsel had hit the cap and pulled back case activity significantly. 

One other point for clients to consider – fee caps with discounts can put law firms in a no-win situation. If as a client your goal is reducing your law firms’ profitability, fee caps are a great tool. They make it increasingly difficult for law firms to maintain a healthy bottom line. Now many will argue this goal, perhaps as an unintended consequence, is not so bad. I would argue as a client you probably don’t want to be doing business with financially unstable partners. 

Fee caps probably deliver some savings to clients in some form. However, they bring with them significant unintended consequences. My advice to both clients and firms considering various fee arrangements: make sure the arrangement truly aligns interests. As I repeatedly say – it’s about The Conversation. Clients and lawyers need to have open, honest conversations about goals and motivations when it comes to fees. Otherwise, clients may get what they pay for and not what they wanted.

As many of you have watched over the past two years, JC Penny has gone through a bit of a rough patch with its failed experiment with Ron Johnson as its CEO. In fact, today is the two-year anniversary of Johnson’s appointment, which collapsed back on April 8th. Johnson was viewed by most people as an impressive strategist who made the Apple Stores into the success it is. There were many people, most of whom seemed to hold sway on JCP’s shareholders, that thought Johnson could come in, apply his strategy to JCP’s ‘mismanaged’ retail operations, and make it into the anchor-store equivalent to Apple. Needless to say, it just didn’t work out as envisioned.

Roger Martin of the Harvard Business Review Blog Network wrote an interesting article on Thursday that discussed how one of the basic failures that “Under Johnson, JCP had nothing even vaguely resembling a worthwhile strategy and its path to get to where it wished was comically disastrous.” Although Martin’s article gives much more on the topic, the basic failure was that JCP didn’t make a “coherent set of choices about where-to-play (WTP) and how-to-win (HTW)
.” It was this concept of WTP and HTW choices that really stuck out to me, and it made me wonder how these strategic concepts are applied to what many of us are attempting to do in the legal industry.

I run in a circle of friends, peers, and acquaintances within the legal industry that are always questioning the status quo. None of us are content with the way things are, and we all think that we have great ideas on what our piece of the legal industry should be doing to change for the better. Pricing gurus want firms to be better at how they address revenues, profitability and how we structure the business of law. Knowledge Management gurus want us to be better at sharing, re-using, and improving our overall abilities to leverage our previous experiences in order to be better, faster and cheaper in our current experiences. Library and Research gurus want us to be able to access external resources needed for our firms to practice law effectively in a way that gives us an advantage over our competitors, in regards to content, quality, coverage, use, and price.

These are all great ideas, but are these ideas aligned with a strategy of where we want to play?

Are we asking the WTP questions like:
  •  Which people within the firm do we focus?
  •  What products and processes are we promoting?
  •  How do we do this better than the competitors or alternative processes?

This is all about strategy, but Greg Satell has a great quote that many of us need to repeat to ourselves whenever we think our strategy is impressive:

 â€œYour customers don’t care what your strategy is
. What they really want is for your product or service to do an important job for them, to be reasonably convenient and available at an attractive price.” 

In other words, your customers (most likely, attorneys and key decision makers in your firm) want you to deliver and maintain value to them on a consistent basis.

We all have good ideas on where we want our firms to go, but so did JCP’s CEO, Ron Johnson. Are you thinking about where to play your strategy and if that aligns you with how to win by creating a result that is viewed by your customer as important, valuable, convenient, and affordable? That’s the formula for how to win.

Image [cc] paojus

One of Adam Smith’s great contributions to economics was his commentary on the ‘division of labor’ – explained in his pin factory example. For those of you who may have fell asleep during this part of the Econ 101 lecture, Adam Smith demonstrated how productive capacity increases with specialization.

He evaluated an artisan craftsman who makes pins with great care and quality, one at a time. The craftsman performs every function, from straightening the metal to attaching the pin head. Adam Smith then describes a factory where each function is performed by a specialist who only straightens the metal or only applies the pin heads.

He researched this to compare how many pins could be made each day per worker with each approach. His thesis was that the division of labor leads to much higher productivity. “The result of labor division in Smith’s example resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division.” His argument was compelling to the point that Henry Ford modeled his car factories based on these principles.

You may have already jumped ahead of me in how this applies to the practice of law, especially after I used the term “artisan craftsman.” Most lawyers are generalists / craftsmen (please excuse the sexist reference)  as it relates to their functions. They may specialize in patent litigation, but under that umbrella they perform all of the practice functions. One might argue certain functions are reserved for more experienced lawyers, however that is not specialization. That is expertise. Specialization would be document drafting, or oral arguments at hearings or prior art research or any other specific function.

Instead lawyers fancy themselves as artisans who work with clay (e.g. words) to create works of art (e.g. pleadings). In their minds specialization, and the standardization that follows, equals lower quality. In contrast, in Adam Smith’s world, specialization and standardization equal efficiency and quality.

For as smart as lawyers can be, they continue to miss some basic business lessons. In this instance, Adam Smith was proven right decades ago 
 repeatedly.

Add “division of labor” to the list of changes needed at law firms.

Image [cc] – Tomozaurus

Jane: The billable hour is dead, Dan. It is the sad and lonely remnant of an era when clients were to stupid to realize they were being fleeced by outside counsel. I for one can no longer, in good conscience, blatantly steal my client’s money. I officially declare the billable hour six feet under, pushing up daisies, defunct, deceased, kaput. Never to be heard from a


Dan: OK, OK. I get it. You do realize, Jane, that repeating something incessantly doesn’t make it true, it just makes you slightly more annoying than usual. Also, as a graduate of North Tuvalu Online Law School, I’m pretty sure you’re stealing your client’s money regardless of the billing arrangement.
Jane: Woo hoo! Go Land Sharks! I choose to ignore your petty insults, Dan. They are nothing more than the last dying gasp of a big dumb lizard.
Dan: What is that supposed to mean?
Jane: It means that you, my unfriend, are a post-asteroid BigLaw Dinosaur. Desperately grasping at the last lingering rays of light before the sun is forever blocked out, the plants all die, the critters that eat the plants pass away, and your BigLaw Tyrannosaurus — still billing by the hour — ignominiously starves to death.
Dan: OK, first of all, paleo-breath, the dinosaurs that survived evolved into birds not reptiles.  Secondly given your ridiculous scenario, my Tyrannosaurus would die of dehydration or disease long before it starved to death. And finally, you’ve taken this metaphor waaaaay too far. I have no idea what your original point was.
Jane: My point IS that the billable hour, by its nature, creates terribly perverse financial incentives for the attorney and provides absolutely no value whatsoever to the client.
Dan:  I have no idea how that relates, but let’s move on. Perverse financial incentives?
Jane: By rewarding the total time spent working, rather than the actual work completed, the billable hour incentivizes attorneys to either do more work than is necessary, or to work more slowly. Either way, the client is paying more for less relevant work product.
Dan: I’ll keep this really simple for you Jane; the method of billing doesn’t incentivize anything.  The structure of attorney compensation is the problem. Take for instance the guy that changes the tires on your pickup truck. He doesn’t care whether the garage charges you for parts and labor (hourly billing) or a flat rate. He only cares how HE is compensated. If he is paid based on how long it takes him to change the tires, rather than the number of tires he changes, then he’d be a fool not to double tighten your every lug nut and thoroughly polish your rims.
Jane: You pig!
Dan: What?
Jane: I
 don’t know, but it sure sounded… Anyway, your argument fails to take into account that by artificially increasing revenue, the billable hour incentivizes the owner to create those bad compensation structures in the first place. Any way you look at it, the billable hour amounts to little more than institutional theft and I, for one, am shocked that you would defend, even advocate for such chicanery!
Dan: I’m not advocating for anything! I’m saying that, as usual, you have entirely missed the point! For certain engagements, certain clients will always be best served by aligning effort and outcome, not just focusing on the outcome. Your attempt to prematurely bury the billable hour is severely hampered by the fact that it is still the most prominent method of billing for legal services. I’m not saying it is the greatest thing ever, or even appropriate most of the time, just that the problem for clients is that the cost of legal services has steadily risen, while the value they have received in return has stagnated. This is not a problem of billing practices; this is a lack of management oversight. Law firms need to completely rethink the way they manage their practices, the way they compensate their attorneys and, yes, the way they bill their clients! But even if the billable hour as a concept were to completely disappear from the face of the earth tomorrow, the vast majority of the problems facing BigLaw and their clients would remain entirely unaffected!
Jane: 
.
Dan: C’mon, Jane! No snappy comeback? No witty repartee?
Jane: The last dying gasp of a big dumb turkey.
Dan: I’ll take that as a no.

Please submit topic suggestions or make your own arguments at dandj3Geeks@gmail.com.

It seems everyone is talking about the NSA’s surveillance program, PRISM, these days. Although the program seems to be very creative in ways of gathering information, it seems that the group’s presentation skills need a bit of work. Don’t worry, French freelance presentation designer, Emiland, has come in to help!

Emiland has taken the poorly designed NSA PowerPoint presentation and converted the data into something that is actually worth monitoring.

NSA Children’s Books

Emiland isn’t alone in noticing a lack of creative expression from the NSA. The Guardian has assisted in helping (well, in addition to breaking the story), by creating a gallery of #NSAKidsBooks crowdsourced by Darth (probably without a court order, or copyright permission… but, hey, it’s a parody, so we’ll let it slide this time around.)

Even one of my favorite artists/cartoonists/graphic designers, has contributed to help the NSA with their ability to express their abilities in the form of a Venn Diagram, that shows the NSA that “They’ve seen it all.“

Of course, we still live in an age that requires some of us to be stimulated by short videos helping us understand why such a program is worth the price we pay for it (how much is a Civil Liberty going for these days??) Don’t worry NSA, BreitbartTV has you covered there,too.

Let’s hand it to those on the Interwebs that can step up and help the US Government when it falls a little short in its abilities to graphically describe how it is monitoring you.

Image [cc] doni19
Everyone seems to agree that BigLaw is f’d up. The business model is completely screwed up and not in alignment with reality. This allows great sport for those of us who enjoy picking at the various aspects of exactly how BigLaw is headed for disaster.

But what does this disaster look like?

Many prognosticators are on death watch. Which firm will be the next Dewey / Howrey to collapse?

I propose another alternative for BigLaw – Death by a Thousand Cuts. The vast majority of firms will not implode, but instead will fade slowly to black.

Why do I say this?

Law firms, for the most part, act like sheep. They keenly watch the actions of the other sheep and then match them. As we have noted previously on 3 Geeks, most innovative ideas at firms are met with the response: “What are other firms doing?” The result is that firms don’t break away. Instead, they move as a herd.

Alongside the Sheep Factor is the Financially Conservative Factor. BigLaw firms love to brag about being debt free. The point being is that most firms are not in a “Dewey” situation, where their finances are in bad shape. Instead, they will experience profit pressures at the margin. The profitability of their work will slide over time. So instead of facing a cliff, they face a relatively gentle slope.

They will then react in one of two ways (per the Sheep Factor). First they may just accept declining profit. At a former firm I repeatedly heard partners say “Maybe we have been making too much money.” Those partners may be perfectly fine with slowly declining (high) incomes.

The second option will be right-sizing the firms. This will likely take the form of fewer equity partners: be that through de-equitization or smaller incoming partner classes. In this scenario, profits may be maintained or even enhanced, but there will be a smaller ownership pool. So effectively theses firms will shrink to maintain profit.

In either case, these firms will not be in much danger of imploding. They will pay their bills and make partner distributions. Their market share will be shrinking, but there will not be catastrophic collapses.

Of course firms whose financial fundamentals are not in shape should be concerned. But I would venture a guess that after Dewey, most firms took a hard look at those numbers, tightened up their lateral policies and further limited their debt exposure. So there may not be many firms facing a cliff.

Which leads us to our Death of 1000 Cuts â€“ which greatly lowers the entertainment factor of a Death Watch.

Image [cc] Ed Callow
I used to joke with Geek #1 about how we could pluck a lawyer from 1985, teach her email and Word, send her to a few CLEs to update her legal knowledge and she would be “good-to-go” to practice law. The point being – the practice of law hasn’t changed much in 20 or even 30 years.


As a car guy, I tend to translate legal (or any other) market issues into the market for cars. Recently I purchased an older car for a fun project (‘72 Coupe De Ville if you care to know). Besides sending me back in time, the difference between the Caddy and cars of today is extreme. Cars are WAY nicer, safer, faster, more fuel efficient, more comfortable, …. For those who may want to get a ride in the Caddy, I will make sure to point out the advances in braking technology before you get in.

The main point here is that the value proposition of cars advances every year. Recent advances include things like adaptive cruise control, a/c in the seats, self-parking and lane assist. So price increases are more about increased value than they are about inflation, although inflation does factor in.

So 
 here’s the trick question: How are lawyers advancing their value every year (to match price increases)? Keeping up on the law doesn’t count. Neither does upgrading your office suite or getting new computers.

But now here’s a better trick question: How much does Efficiency and Effectiveness add to value? Clients are pushing for lower prices, which is ‘‘more for less’ but is that more value?


I am definitely an advocate of utilizing legal project management and approaches like process improvement. But for all these tools provide, they are not designed to increase value. They reduce costs. In my humble opinion, efficiency is not a value enhancer. One might argue effectiveness is, but I see that as semantics. “Effective” is being better at getting desired results. It’s not about getting different results.

Here are some examples to demonstrate the point: 
– Instead of securing better litigation results, offer a service to reduce the amount of litigation. 
– Or how about a service that organizes client legal content for consistency, to reduce risk. 
– Or how about a service that monitors patent filings against a patent portfolio? 
– Or how about a service that organizes legal content to streamline acquisitions (for clients in acquisition mode)?

Pondering this topic, one value adding legal example does jump to mind: The Poison Pill Strategy developed by Wachtell. That was a new service that added value. But I struggle to think of others.

Back to cars – Auto makers employ process improvement, project management, new technology (robots), out-sourcing and other tools to lower their cost of production. You might argue some of these efforts that focus on effectiveness add value, such as improved gas mileage. However, value-add does not come from improving efficiencies in production to lower costs. Value add comes from new features, functions and services.

Where are those in legal services?