In this day and age of constant communications and observation, I guess the announcement from TLO shouldn’t surprise me as much as it did. It seems that TLO is launching a new service tomorrow that will use License Plate Recognition (LPR) technology and will return to you the places, times and dates that those license plates (and presumably the car it is attached) were spotted by the LPR and give you “the historical whereabouts of both individuals and vehicles.”

I haven’t seen the reports yet, but I’m not sure whether I’m impressed that TLO has this ability now, or scared that this type of information is out there for public consumption. I’m also going to guess that this type of survellance to public record searching technology is only going to get bigger as time goes on.

So… in just reading this press release, are you:

  • impressed
  • scared
  • meh
  • moving to Europe

Important Admin Information: TLO Unveils Vehicle Sightings
Tomorrow
TLO®
Unveils Vehicle Sightings
Starting Thursday,
June 27, 2013
Important
Administrator information – Please Read
Groundbreaking
Vehicle Sightings to be Released Tomorrow To TLOxp Users
 
Using
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TLOxp’s Vehicle
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Instantly
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TLOxp’s In-Depth
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Your
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IMPORTANT INFORMATION FOR ADMINISTRATORS:
  • If you utilize User
    Groups
    for managing your users, you will need to activate Vehicle Sightings
    for your users. This can be done easily by clicking “My Account” and
    then selecting the “User Groups” tab.  Vehicle Sightings will
    be available for selection upon product release.
  • If you do not utilize
    User Groups    ,
    Vehicle Sightings will be automatically available to your users upon
    release. You may customize your users’ access by setting up User
    Groups. Additionally, you may restrict access to this report upon
    release by clicking “My Account” and then selecting the “Users” tab.
 
PLEASE NOTE that this report is not included in any flat
rate or per seat pricing plans and is available only on a transactional
basis. After your account’s 5 free reports have been run, you will be
billed per report.
 
Vehicle Sightings
Report Pricing*
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Dan: You may not know this Jane, but I’ve been moving into more of a Pricing role at my firm.

Jane: I’m impressed.  And a little frightened for the well being of your firm.

Dan:  Every firm needs to have at least one person focused on determining the right price and fee structure for every matter.

Jane: I completely agree.

Dan: … But…?

Jane: No but. For once I think you’re right, Dan.

Dan: …really? I’m may need to reconsider my position.

Jane:  No, I think this is may be one issue where the reality of the situation is so clear that we can’t help but agree.

Dan: Wow! That’s kind of strange.  I guess it had to happen some time.  And this is so obvious.  Someone has to calculate revenue and expenses to determine profitability and most attorneys aren’t capable or interested in economics. Without someone in that role, how would you ever determine the lowest possible bid to get more work?

Jane:  I’m sorry?

Dan:  I mean, with so many clients issuing RFPs for new matters now, someone has to have an idea of how  low they can go?  Otherwise, attorneys will just make up a number. And you don’t want them to do th…

Jane: That’s how you’re doing pricing?

Dan: That IS pricing.

Jane: That’s dumb. Pricing isn’t about determining the lowest price you can possibly charge.  That’s a shortcut to bankruptcy.  Pricing is about building a relationship with the client and understanding their needs. Often clients aren’t looking for the lowest price, they’re looking for a firm that is flexible enough to build fee arrangements around their needs.

Dan: I don’t follow. If you bid the lowest, then you get more work.  More work is more revenue.  Which means everyone makes more money!

Jane: And they’re paying you for this brilliant financial insight?  Pricing Legal services is not like selling used cars. You can’t just put out an ad that says, “Will not be under bid! Lowest Price Lawyers in Town!”

Dan: How did you…?  Do you have….?  That ad doesn’t go out until next week.

Jane: You’re an idiot and apparently you have one in marketing too.  Pricing is an offensive strategic business development tool.  The way you do it is entirely defensive and reactionary.  Suppose I was a client and I came to you with an RFP, what is your first move?

Dan: Offer 10 percent off our standard rates.

Jane: And if the client balks?

Dan: 20 percent. We don’t tell them, but 35 is absolutely our lowest offer.  Although, for big clients, we might go to 40.

Jane: And you’re doing this with all of your clients?

Dan: No, of course not.  Just the ones we think might be considering hiring other firms. The rest we just bill at our standard hourly rates.

Jane: What’s the written equivalent of a face palm?  Has it occurred to you to be proactive with your pricing?  Take the time to get to know and understand the client.  Ask them about their concerns.  Where are they getting pressure to reduce legal spending? What headaches are their outside counsel causing them?  Take that information and offer the client an alternative fee structure tailored to meet THEIR needs BEFORE they even ask you for a discount!  Pricing legal matters is not strictly about getting more business, it’s about making clients happier, which WILL ultimately get you more business!  You are an incompetent imbecile, a danger to your firm, and should be fired immediately!  Why are you smiling?

Dan: We’re disagreeing again.

Jane:  Feel better?

Dan:  Much.

Jane:  Me too.

I wasn’t a part of the not quite 3 Beer lunch that Greg and Toby had last week that spawned their last two posts. (They never invite me to anything.) But you know me, ignorance has never kept me from espousing an opinion.

There is a clear connection between Greg’s recognition that certain people have different personalities online and off, while some seem to have no personality in either place, and Toby’s revelation that attorneys only embraced email because it allowed them to avoid speaking with clients or anyone else.

I think it’s reasonable to assume that many attorneys fall into Greg’s 3rd Band Member category.  Generally, they don’t like people. They like to practice law, or play music in a band, and they don’t really care for the social aspect of their job whether online or in real life. There is nothing wrong with that. It’s just the way some people are. I didn’t see the band’s performance (again, not invited) but I would bet no one put more effort or energy into that performance than #3. He probably wasn’t the most exciting to watch on stage, but he put in the most hours of practice and he was the most focused on the job at hand during the performance. He probably didn’t smile, or even look up from the instrument. He was in the zone while the more social hooligans were jumping around the stage and crowd surfing.  Think Slash to Axel, Eddie to David Lee, or Keith to Mick.

While it can be difficult to engage these people about anything other than their one obsession, they serve an important purpose. They’re the ones that keep playing when everyone else is too busy preening to notice that they’ve lost the beat.

The law, accounting, traditional professional services, have historically been a safe havens for these non-people people.  A single minded focus on the minutiae of legal precedence, or a balance sheet, works well for people who can’t be bothered with the niceties of social interaction. Unfortunately, many people who entered the legal profession 20 years ago, with a reasonable expectation that they would become wealthy and successful without needing to shake too many hands or smile at too much inane small talk, suddenly find themselves living and working in a hyper-social world, where even small talk isn’t enough. Now you have to be engaged in other peoples lives on a regular basis or they will think something is wrong with you.  Toby hasn’t exactly called it this, and I’m sure he’ll slap me down if I’m off track, but his approach to pricing is all about being sociable. Go to the client first. Talk to them about the problems they are having. Find ways to alleviate their pain. That’s sociability and it’s more important today than ever, but some people, a lot of attorneys, just aren’t made that way.

Over the last decade, I have seen many friendly, approachable, young associates either quickly change into gruff and prickly types, or burn out after a few years and head to greener pastures, or “settle” for a non-partner career track.  It’s a gross generalization, but sociability and friendliness has not historically been a trait that has marked one as firm management material.  With the economic pressure to engage clients in a new way, and the demographic changes in the workplace, that might be about to change. The friendly types who were once pushed into supporting roles, may eventually be recognized and appreciated for their social assets, while the non-people people – who may have once rocketed to the top, promoted by like-minds above them – will be hidden in internal windowless offices, destined to toil away at non-client facing tasks.  That should make everyone happy.

Image [cc] Piecar

In the same conversation that Toby and I had regarding email created a way for lawyers to not talk with their clients, we also discussed how people you’ve ‘met’ via social media sometimes don’t match up to their personalities when you meed them in person. Someone that may be very extroverted on Twitter or Facebook somehow turn into a very introverted person when you meet them in person. I had something like this happen to me when I was in Los Angeles on vacation.

When I was in LA back in January, I caught a concert and loved the local band that opened up the show. The members of the band and I had a great conversation, and said to look them up on Facebook and to let them know if I ever made it back to LA. So, I went home, and had attempted to connect with the three members. I got three very distinct results:

  • Member One (One) instantly followed back and we have had informal chats from time to time since meeting in January.
  • Member Two (Two) connected a few weeks later, but has never really had any substantial interaction since.
  • Member Three (Three) never connected.

As it would turn out, I went to Los Angeles on vacation with one of my daughters and the band just happened to be playing a show. I reached out to One and said I was coming and One gave me all the details on when and where they were playing and that they were happy we were coming out. Other than posting a couple of ‘likes’ on the Facebook event page, and commenting that we were coming, I didn’t have and interaction with Two or Three.

The day of the show, we make our way to the event, an hour or more from our place in LA (which with the way the 101 works, could have simply been ten miles away.) We show up a bit early and notice that the band hasn’t arrived yet. When they do, the reaction of the members didn’t quite match up with what I expected after a long social media interaction.

  • One acted like we were strangers… eventually relenting once I stuck out my hand to re-introduce myself, but remained distant and clearly uncomfortable.
  • Two acted like we were old friends and was happy we’d made the trek out to see the band.
  • Three never connected (at least that was consistant!!)

It wasn’t the first time that I’ve met social media ‘friends’ only to find out that they had an “online personality” and then they had their real personality. I was, however, a little disappointed that someone I thought would be ‘cool’ to hang out with and talk face-to-face turned out to not really be as fun as I anticipated. On the other hand, it was ‘cool’ to interact with someone that turned out to be much more social than their social media personality. Of course, having a third participant who was consistant made this little experiment a wash.

Now that I’m back home, I noticed that things are going back to the online normal pattern. One suddenly has become social again… Two is there, but not all that interactive… and Three still hasn’t connected. It was an interesting experience. I guess I should make more of an effort to get Two to be more engaging online between now and my next LA trip. The next time I’m in LA, I’ll attempt to engage more with One and see if that brings out the online extroverted personality traits. As for Three… we’ll still probably not connect, after all, why break that consistancy?

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:

 “Your 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.