This post is the second part of a whitepaper written by Scott Preston and Ryan McClead. The full paper can be downloaded here.

The Tipping Point

Image [cc] – aimforawesome

There is no longer any doubt that the legal market has fundamentally changed in recent years. Every firm felt the weight of their clients’ demands and responded in whatever way they were able: cutting rates, cutting expenses, making promises, and often begging for work. We believe we, as an industry, have reached a tipping point where client demands for better price predictability, reduction of risk, better communications, and an overall transparency of service will require a systematic and consistent approach to providing legal services. Firms that choose to continue rely only on customer loyalty and brand recognition will begin to lose out to those who open up the process to their clients and embrace the greater consistency and predictability of LPM.

However, LPM is not simply a tool that improves the client experience. It can also ensure that partners needs are more consistently met as well. Partners are concerned with many of the same things they always have been: How to get new business?; How to make the client happy so they’ll return?; How to limit risk to themselves and the firm?; and ultimately, How to make a profit doing it? Legal Project Management addresses both client and partner needs.

Robert Brunson, a partner at Nelson Mullins who has been using Microsoft Project to manage complex litigation for more than ten years, provided his view on using Legal Project Management:

“LPM provides a framework of accountability, transparency, predictability and ultimately less cost.  By creating a plan at the outset, client and counsel are forced to consider the many different paths and outcomes of a particular piece of litigation, including consideration of staffing alternatives such as virtual law firms or offshoring in advance of the work, which could potentially lend itself to these alternative staffing options.  This dialogue often leads to a better engagement by the client in important details early on, details that can be the seeds of unwanted surprises which so often frustrate clients and sour the professional relationship.”  

While the points illustrated above are obviously not the only points of concern between a partner and his or her client, they are central to every engagement and are the points most frequently discussed by General Counsel. Meeting the price is important, but more important is the opportunity to have meaningful discussions with a client about the progress of their matter.  All of the points and discussions outlined above are inter-dependent and when done correctly lead to trust.  

This post is the first part of a whitepaper written by Scott Preston and Ryan McClead. The full paper can be downloaded here.

Legal Project Management, why now?

Image [cc] – “Burning Rubber” Lori Hersberger

Project Management, which has been around since the 1950s, is defined on Wikipedia as “the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals”. Lawyers have been performing these functions as they relate to delivering legal services since the beginning of the profession. They plan matters, delegate responsibilities, mentor their subordinates, and ensure that each legal project is completed in a manner that will please the client.  A select few lawyers have used general-purpose project management software, such as Microsoft Project, to manage their matters for years, but most project management in the legal sphere is still performed by instinct.  Attorneys rely on their vast experience to guide management decisions, which has always worked well.  Or at least, has always worked “well enough”. Unfortunately, the hourly billing model actively rewards inefficiency. If it takes fifteen hours to complete a task that should have taken five, then the inefficient lawyer has just tripled revenues.  In such an environment even those attorneys that are inclined to actively manage their projects have no incentive to improve their management techniques and the profession as a whole has no impetus to evolve.

We may have continued indefinitely down this path with attorneys managing projects “by ear” and raising their rates ten percent annually, but the economic downturn in 2008 provided a much needed wake up call to the industry.  Over the previous decades many of our clients have begun to implement quality assurance and efficiency measures like Six Sigma and LEAN borrowed from manufacturing industries.  When they began to feel the effects of the 2008 downturn, they started to assess their service providers just as they had themselves.  They began to demand the same levels of quality, accountability, and efficiency from their legal service providers in the name of controlling costs.  Many law firms responded in the only way they knew how: they discounted their services.  They took a percentage off of their hourly rates; they wrote off expenses that they had traditionally recharged to the clients; they pretended that the task that had taken them fifteen hours to complete had only taken them five; they laid-off non-essential workers, then less-essential workers, and then, in some cases, attorneys. Five years later many firms still act as if the old way of doing things will return just as soon as the economy turns around.  However, a recent report co-written by Citi Private Bank and Hildebrandt Consulting based on surveys conducted by Citibank and Thomson Reuters Peer Monitor states:

… it is time to let go of any lingering notion that the industry will revert to the boom years before the Great Recession anytime soon. With profit growth and other financial indices reaching lower setpoints in the past four years, we anticipate that the current state of the industry will remain the norm for the foreseeable future.

Gone are the days of one-line billing “for services rendered” and they are never likely to return. In order to survive in this new world law firms must be accountable to their clients, providing greater transparency, price predictability, and open communication.  In this environment the ‘ad hoc’ project management that lawyers have done for years will no longer be sufficient. Practicing law in the “new normal” will require a mature and systematic approach to Legal Project Management (LPM).

You’ve all read/heard my take on aggregators here at 3 Geeks, and how there was a time when having access to information was in and of itself a competitive advantage. Simply knowing what your competitors or market were doing was currency. We all have more access to information today than any of us dreamed was possible even 15 or 20 years ago. Much of that information is readily available and free. In fact, information or data is so accessible that crowd sourcing and gathering of it online in places like Wikipedia is common place, even cited with growing integrity in university term papers and the like (ethics of which is not my topic, though I am sure many of you have ideas on that….feel free to guest post about it!)

I have suggested in previous posts that how we sort or filter the raw data is how we keep from contributing to information overload. Key to this process is determining what is good to know versus need to know versus interesting but maybe I don’t need to know that right now. Even when we’ve filtered that down, we still need to aggregate the relevant information by having Library or Intelligence teams sort and collate it into newsletters, alerts, RSS feeds or other helpful, readable tools. Finally, I’ve suggested that, depending up your resources, the process can be done manually or with any one of the commercially available tools available for purchase that can help us aggregate. You’ve read previous posts (hopefully), where I’ve asked, How Do We Make Them Read, and reviewed a series of aggregators a list that continues to grow and improve and then several months later, I suggested we are Almost There with a new series of product offering.

A recent exercise in my own firm has lead to me understand that aggregating with the help of technology is not enough! I now understand that friends don’t let friends aggregate alone.
Borne out of necessity and fiscal responsibility, when three departments at my firm all asked for budget for an aggregator in 2013, it was suggested that we work together to find one that suits all of our needs rather than to aggregate content – possibly the same content – three times, in three different ways.
On the surface, it seems like an easy and smart solution. But when you start to get down to the specific needs of each department (in my case, Intelligence/Business Development, Knowledge Management and Library & Information Resources), it seemed an insurmountable ask. How each department engages with internal and external information and brokers that information, turning it into intelligence, practice efficiency, current awareness or a business development opportunity and combine those different points of view with the need for Systems and IT compatibility and you start to think that maybe this seemingly obvious task is actually impossible. The sheer volume of information alone is one problem. The rest of the problem is in acknowledging the mandates of the different departments will cause each one to consume and reuse the information in different ways.
Therefore each department needs its own set of tools and distribution methods. Right? Hence the three requests for three different products? Right? Once up on a time the answer would have been yes, but if the last three months has taught me anything, it is the fact that all law firm administration departments really all want the same thing.
We all want our lawyers to be smarter, better, and more efficient at delivering client service and value and for our own departments to be seen as contributing to the bottom line rather than being dreaded cost centres especially since 2008. How we each achieve this goal will be executionally unique, but asking for three sets of tools would be akin to a carpenter, a cabinet maker and mechanic suggesting that what they each describe as a hammer is specific and unique to their line of work. Not true. How they each use the hammer might differ and which type of hammer they use might differ from time to time but at the end of the day, a hammer is a hammer.
So can we find an aggregator that suits all of our needs? I believe the answer, despite our different methodologies and interactions, is yes. That answer does come with some challenges, however, the biggest of which is being open to learning and understanding of what each department needs, wants and is willing to let go. The discovery process will not be easy, nor will building a set of criteria for the “right” tool, but if you are willing to have the conversation, open yourself and your department up to scrutiny among friends, you will find that friends don’t let friends aggregate alone and you may find (as I did) that you can even learn a very useful thing or two about how the different departments think about and use information, which you can leverage toward successfully meeting your department’s goals. By sharing in the in discussions and finding one solution to work for all information providers, you can actually help move the agenda of smarter, better, more client focused lawyers along.
Image [cc] mtsofan

Very interesting story from The Daily Beast over the weekend that talks about the situation we have with public libraries in the United States, and the delimma of cutting services and budgets during a time when demand for these services is booming. In her story, “Can Libraries Survive in an Era of Budget Cutbacks?”, Miranda Green discusses what she refers to as the Catch 22 of today’s Public Library:

Essentially, libraries are closing down just when their communities need them the most.

Public libraries have been in the business of helping those in their community who lack their own resources for nearly as long as there has been such a concept of a public library. When times are hard, the group of people that need the resources provided by a public library increases, while at the same time, the funding structure tends to collapse. For those of us in the legal industry, we see a similar problem with Legal Aid programs.

Green’s article lays out a number of challenges that public libraries face when the economy takes a downturn, or there is a natural disaster that effects the community. If you’re a librarian, you’ve probably heard all of these stories before. If you’re not a librarian, read the story, then read some of the comments below the story, and see the counter arguments. It is interesting to see what those with their own resources tend to see what the library does, and how easily it can be fixed. I think most librarians will agree with me about the common two-pronged answer that commenters (most of whom haven’t used a public library in years) make that say public libraries could easily be fixed if they:

  1. Made it look more like a Barnes & Noble
  2. Added in a Starbucks-like coffee bar

Yes… that’s exactly what someone who is looking for work and having to use a library computer to job hunt because they don’t have a computer or Internet service back at their apartment needs. Public libraries provide services to those that lack the means to obtain those services on their own. Creating a B&N environment and coffee bar may be nice for those of us with means, but it is not the primary driver of the value a public library provides to its community. If the libraries fold, you can believe that Barnes and Noble or Starbucks will not be there to provide those services. It’s no more their job than it is the library’s to provide you with a coffee bar.

Image [cc] Cacau & Xande

A friend of mine pointed me to an article from Quidlibet Research, Inc.’s, Nina Cunningham, entitled “Leveraging the Assets of the Law Library.” I read it… then I read it again… then I read it again. Each time finding different things to agree, and disagree with. I sent it to staff for feedback… then I sent it to peers for feedback. Even after all of this, I’m still not sure what I think of Cunningham’s conclusions on how a Law Firm Library should be leveraged.

On my current read, my synopsis of Cunningham’s article is that Law Firm Libraries should focus on being really good researchers, and shift the managing, operations and vendor negotiations to other departments. Of course, I may read the article a few more times before completing this post, and my understanding of the article may shift once more.

Let me start off by pointing out a couple of sentences that my friend said caught her attention:

…firms of all sizes struggle to supervise law libraries. While libraries are operating departments run by professionals who should be self-supervising, the logical partner of the library is the IT Department.

This statement is backed up with the idea that Librarians are the content managers, while IT Departments are the distribution managers. This fits in with my synopsis that Librarians’ value is in researching and anything not directly related to this shouldn’t be managed by the library.

Cunningham goes on to the next segment of her article and talks about what most of us know as “Embedded Librarians” into law firm Practice Groups. She refers to it as “Subject Matter Experts” and sees it as a way to distribute the strengths of the library staff (researching) across the firm. The interesting part of the Subject Matter Expert analysis isn’t the concept of placing a skilled researcher within the Practice Group, but rather that the Subject Matter Expert should work in a very subtle way. Here’s how Cunningham puts it:

This expert contribution should not be too loudly broadcast. If it is, it could appear as a disruption to SOP and be rejected. But if given a chance, it can serve a disciplined approach to creating strategic support for the growth and development of the practice group. A librarian’s relationship with a practice group can grow naturally this way over time.

One of my peers saw this approach as being similar to creating a quasi-Practice Support Lawyer (PSL), only in this case, a Practice Support Researcher (PSR.) The way it is expressed in the article, you might define it as a Discrete Practice Support Researcher (DPSR.) There was a mention of how “IT enterprise makes for the best use of reference librarians” in this topic of DPSR’s, but I have to admit that I wasn’t exactly sure where the author was going on this. I ran this by some of my peers and they gave me some good feedback that I wanted to share with you.

Librarian:
A common mistake made when discussing embedding seems to be that the embedding researcher will quietly wait until called upon for assistance.  While this model does allow the researcher to be proactive (the proverbial fly on the wall), it also restricts their effectiveness.  As an embed with [a practice group], I ask questions on the conference calls and use my experience to provide guidance to help the group achieve its goals.  There has to be a give and take. 

CI Expert:
In terms of leveraging librarians (with rare exception – present company of course excluded) Librarians would need to be trained and coached to feel comfortable outside of their libraries. It is akin to training associates to be rainmakers and bring in clients.  How much of the literature out there discusses whether or not associates should be trained in BD or leave it to those who are naturally interested/capable. Introverts vs Extroverts. In my experience the theory of the embedded Librarian is great, in practice, it intimidates…. 

CIO:
I have believed for a longtime that law librarians should be leveraged as PSLs. US firms have had little interest in adding PSL headcount, but I believe that law librarians have the requisite skills (at least the ones I know) and interests to perform much of the work of a PSL and most firms already have the headcount. This would require Library Services to rethink their position

Next up on the list was what Nina Cunningham refers to as “so-called technical services activities.” These are the areas where library staff are having to spend time actually managing the firm’s print and digital materials, and how this tends to define the library’s role in the firm:

These activities are administrative in nature and surround the purchase of new print materials, online cataloguing, routing of print or digital materials, and the lending, finding and shelving of books. These activities are relevant to managing physical assets but are too often identified as the only library activity. This undervalues research staff and overvalues book management. In an era of downsizing and cost containment, law firms should be biased in favor of contributions to client value.

How Cunningham argues libraries should handle this so-called technical services role is something that I think she oversimplifies. Her answer (in my interpretation) is that the IT Department can assist and streamline the entire process of managing the collection through a series of list building and records consolidation. I’m thinking that the response from many “so-called” technical services librarians would be that we’ve been doing list building and records consolidation well before there was even such a thing as a so-called IT Department. However, to Cunningham’s credit, she does have a point that the management of the collection is perceived to be a low value to the firm. Of course, the “low value” is relative… try telling a Practice Group Leader that their core materials for researching their practice area are being cut or reallocated through list building or records consolidation and see how low value the service is then.

The pièce de résistance of Cunningham’s article surrounds the idea that vendor contract negotiations are not a value of the law library, and should therefore be turned over to the better negotiators found in the IT Department. Her concept is that the librarians define the content needed from the vendors, but the negotiations should then go to the experts. This leads me to my favorite quote in the article:

…it is a gift to librarians to limit their involvement in contract negotiations.

Um, thanks?

This part got many of my peers talking, and disagreeing with Cunningham’s assumptions on placing negotiations in the hands of IT. Here are a couple of responses I received from peers.

Librarian:
Library Contracts should be negotiated by Librarians.  These services are  not like purchasing a software or SAAS package.   The service needs to meet the content needs of the attys in a way that they are comfortable with.    Librarians also have a deeper understanding of the quirks of the vendors, which as publishers have a different pricing model than software companies do.  I have been involved with IT contracts and they have different set of serviced level requirements than the Library contracts.  Also, knowing these contracts allows the librarian to contribute significantly to cost recovery efforts firm wide.

CI Expert:
Contract negotiations should be done by whomever is best at it and understand the opportunity cost of the exercise with the particular vendor. All admin groups work with vendors and negotiate contracts, – Accounting and Office Services with companies like Xerox and whomever sells your paper and pens, HR with employees, Benefit providers, Marketing with Multinational media outfits, SWAG companies, printers, ad agencies, IT with software and hardware vendors, telecom companies and of course Library with licensed content. There are many more negotiations in between it is a part of management to do take on this role and it may be that while you are a terrific manager of an admin group, you can’t negotiate contracts so you hand that piece off to someone else in your group who can be fierce but fair. To hand it all over to IT, in my mind makes no sense…as non users of the content, they can never understand the negotiation.  

CIO:
I hear what [the Librarian above] is saying about understanding the contracts and how law librarians have a unique understanding of research needs (and I agree), just like IT has unique understanding of IT needs.  Procurement is a disciplined approach to buying – not a skill set commonly found in IT or LS.  The idea is to involve IT and Library Services to the extent necessary to get the right product, but let procurement do the heavy lifting on negotiating the contracts. 

IT/KM Specialist:
No time to read all of this. Busy negotiating contracts on behalf of the Library.  Lazy b*stards.  Why don’t they negotiate their own contracts?

Okay, the last comment was one of my friends having fun with the rest of us.

My own thoughts on vendor negotiations, and what I’m hoping where Cunningham is intending to go with this argument, is that there is some value in negotiating with the vendors in a unified way. Especially in this time where a vendor like Thomson Reuters is selling products to IT, Accounting, Marketing, Library, Records, Conflicts, etc., there is opportunity to leverage that relationship and end up with a better overall deal for the firm by pointing out the large amount of money the firm spends, as a whole, with the vendor. However, I think it is an oversimplification of the process to simply have the different groups define their content needs and then turn the reigns over to the IT Department to negotiate.

The best thing about Nina Cunningham’s article is that it got me discussing this with my peers, librarians and others within the law firm structure. Although I don’t agree with some of the pieces of her argument, there are a few points that are well taken, and hopefully others within the profession will pick up the discussion from here and come back with additional comments and suggestions for how to handle leveraging (and defining) the assets of the Law Library.

Apple gets a lot of flack for creating a closed platform that economically locks its users into their products.  After all, if you’ve already spent $200K on iOS apps, why would you switch to Android or Windows phones or tablets and have to repurchase all of that software?  It’s a reasonable argument, but it totally misses the point.

I told this story at ILTA last year, so if you are one of the ten people who attended, feel free to skip ahead.  It was March 2012 and I was at the first round of the NCAA tournament.  I attended 4 basketball games over the course of about 10 hours and it was the day my new iPad was supposed to arrive. During every time-out I would check the delivery status on my iPhone.  Somewhere in the second half of the second game, I got an email saying the iPad had arrived.  I was excited, but at the same time I had hours of basketball to sit through (good problem to have), knowing my brand new iPad was sitting on the kitchen counter, neatly packaged and waiting to be turned on.  The anticipation was excruciating.

I got home well after midnight and ripped open the packaging.  I entered my iCloud credentials and chose to restore the device from an iCloud backup. The process was going to take a few hours, so I plugged it in and went to bed. In the morning I awoke excited to try out my brand new device.  I unlocked the screen, flipped through the pages, clicked on the camera app to check out the new camera and… nothing.  I didn’t feel anything.  I was kind of already bored with the new device. I went down to breakfast thinking something must be wrong with me. After all, I love new gadgets and this was the greatest gadget of all.

I have plenty of old gadgets that don’t work anymore and I can’t bring myself to get rid of them, they are piled up in closets and drawers, but my old iPad I handed to my wife without a second thought. Maybe I was growing up?  Maybe the allure of the gadget culture had finally passed me by. But during breakfast I picked up my new iPad and launched a couple of news apps, just as I always do.  Everything was just as I left it the day before on the old iPad.  That’s when I realized, this new device was still MY iPad.  It was the exact same iPad in a new shell, with an upgraded processor and a newer camera.  I wasn’t bored with a new device, I was simply using the same device in the same way I had been using it for years.  It was a tool, a friend, a constant companion.  Apple hadn’t locked me in economically, they had locked me in emotionally.  They had given me the gadget that would never go to the gadget graveyard, because it would never die.  It will probably outlive me.

I thought about my ILTA talk again on Monday evening, when I got home from a trip and realized I had left my iPad on the plane.  I logged into iCloud and put my iPad in lost mode.  If it happens to be turned on and walks past a Starbucks it will phone home and tell me where it is. My phone number will pop up on the screen and it will beg it’s current holder to send it home to me. I filled out the airline forms, and went back to the lost and found at LaGuardia.  I even called Atlanta and Pensacola, the airports that my plane was heading to next.  As of this writing, no one has seen my beloved iPad and it’s likely that we will never be reunited.

I stopped by the Apple store on my way into the office yesterday and bought a newer iPad with a little more storage.  I plugged it in, entered my iCloud credentials, and chose to restore from an iCloud backup. By mid-afternoon my friend was back.  All of the quirks and idiosyncrasies that I have accumulated over 3 years of use were back exactly as they had been on Monday. As if I had never left it on the plane.

In similar situations in the past, with say a phone or blackberry, I may have considered the economic ramifications of purchasing another product.  Not this time.  I wasn’t purchasing another product, just a new portable vessel for the product I already have sitting out there in iCloud.

image [cc] Karan Jain

It may appear I am on some Defend BigLaw run with my recent posts. It’s actually not that, but merely some pent up pet peeves I need to air. This one addresses the attack on law firms for how they come up with matter budgets and fixed fees.

The scenario goes something like this: When a client asks for a fixed fee (typically with little to no scope) and the law firm calculates that number by adding up the number of hours and multiplying it by hourly rates, they apparently are committing some act of near-fraud. The audacity of a firm to just add up hours to give a fixed fee to a client. How stupid do they think the client is?

My response: How exactly is a firm supposed to develop a budget or a fixed fee? Should they just make up a number? Or should they put on their value thinking caps and derive a number that way? Even if they look up fees from past, similar matters, those numbers will be based on … hours.

Now I realize the client is attempting to limit the number of hours a firm might utilize in providing a service and shift fee risk to their outside counsel. And that is definitely one of the outcomes of using a fixed fee. But a firm still needs a method for determining what the fee should be. And hours times rate is the most practical method for doing that.

Once you have the fixed fee, or even just a budget, the goal of limiting hours has been met. So why would you attack the firm for using time and materials to derive a budget? If a client has an issue with a proposed fee, they may want to negotiate.

I believe this tension is symptomatic of the market-level breakdown of trust between client and lawyer. This issue is a pet peeve because I think the concern is seriously misplaced. If clients and firms want to better align cost and resources, instead of attacking the number of hours, they should be sitting down,setting strategy and prioritizing resource allocation (can anyone say Legal Project Management?). This type of approach drives a clear alignment of law firm effort with client needs and goals. I suggest fewer hours should be an aspect of the clients’ cost management goals, but not the only one. As my mentor used to say, “If reducing outside legal spend is your only goal, stop hiring lawyers. Just pay the settlements and move on. Your cost will go to zero.”

If you truly want to meet cost management goals while continuing to meet the legal needs of your clients (internal clients for in-house lawyers, external clients for law firms), then: Have The Conversation. Throwing stones only leads to shattered glass.

image [cc] Andrew Mangum

Following on the heels of recent posts on the market value of BigLaw and the behavior of partners as workers, we explore the merge-point for those two topics in discussing partners as equity owners.

The market refers to the owner level of law firm partners as “equity partners.” After giving this term some thought, I came to the conclusion that equity is not the right word. Equity implies a share of ownership (beyond what “partner” implies). And when you own a share of a business, you have certain rights. One is the right to receive dividends based on your proportional share of ownership. Another is having a say (a.k.a. a vote) in the business. This vote is usually focused on choice of leadership or management. Finally, you own an asset which you can hold or sell.

For law firms, and presumably most professional service firms, these rights take different forms. Instead of dividends, partners in firms receive a proportional share of profits. This difference may appear to be nuance, however as we have previously explored, partners are both owners and workers. Yet their pay is based on some sort of modified ownership share that is based heavily on their effort as a worker (ala billable hours) . The point: partner pay is not a dividend like those paid on a share of stock.

The second right to vote on leadership is actually enhanced and expanded in a law firm. Here the owners have a say in far more than leadership selection. Often they have a say in the minutiae of operations. This right makes it difficult for leadership to make decisions and implement them, since the various and numerous owners have the ability to influence, amend and outright thwart those decisions. The impacts of this are far reaching and left for another day’s discussion. Needless to say – this type of ownership right makes it hard for firms to make effective operational changes. And again, this is not like the equity rights of a stockholder.

The final right – to sell your asset – does not apply to equity partners. Most firms have some level of capital buy-in for partners. However, that does not equate to buying a share of the firm. If that were the case, then partners proportional ownership and income would be determined by how many shares of the firm they had purchased or earned as executives. Instead, a ‘modest’ capital account exists. Partners cannot sell their shares from this account but can only withdraw some proportional share when they leave or retire. My guess is most of these capital accounts are pennies on the dollar compared to the annual revenue of a given firm, evidenced by the recent Dewey press, Therefore the asset value of a partner’s ownership stake is negligible to nonexistent. This fits with the concept that BigLaw firms have zero market value, since that is how they are internally valuing the “real” ownership shares.

My epiphany related to this subject came into focus based on a call with a colleague at another firm. It’s partner compensation season at his firm. If you have never lived this experience, you are not missing much. At its foundation, this effort is a battle for partnership share, which determines individual partners’ incomes. The epiphany came when I considered that partners’ incomes go down when their shares are reduced. This can occur on a relative scale or via a direct reduction. When laterals are added to a firm, an individual partner’s proportionate share is reduced. This reduction is similar to a company issuing more stock and technically shouldn’t result in a reduction in income, since the value of the firm should rise at the same time. 

 When the second method is employed, a redistribution of shares occurs. And here’s my epiphany: companies cannot do that. This would be a ‘taking without compensation.’ Taking shares from one owner and giving them to another is not legal. Yet law firms appear to do this on a regular basis when they conduct the partnership compensation dance.

The epiphany in practical terms: partners do not hold ownership shares in the standard business sense. If they were shares, they could not be taken. Borrowing a political phrase, equity partner implies on ownership share, when in reality equity partners are better called Partners In Name Only (PINO). Law firms (and perhaps many professional service firms) have convoluted ownership. Thus my assertion that “Equity Partner” is a misnomer. This odd blend of ownership and compensation drive unique behaviors. Are they good or bad? Is there a better way? 

 I can see the value of a much brighter line between ownership and compensation having value for a firm. Partners could have two distinct rewards pools. Once for driving the success of a practice and thus the firm, much like an executive would receive. The other purely based on share of ownership.

This post is a bit of a rambling since I see no definitive conclusion in the short-run. At its base is yet another question about the business model of a law firm. Law firm business models are unique and evolved out of a certain market circumstance that no longer exists. This equity question is another manifestation of that apparent disconnect. And more evidence law firms need to rethink fundamental aspects of their business.

Image [cc] StockMonkeys

Some recent activity on Twitter got me thinking. People love to bag on BigLaw (me included). Much like taking shots at Microsoft or Blackberry, BigLaw is an easy target for many. Large firms move slow, are managed by committee too often, and appear to have an aversion to decision making (see how I did that?).

But recent comments about how BigLaw has been making too much money have struck me as odd.The crowd appears a bit fickle and hypocritical. We attack BigLaw for not acting like a business, then we turn around and attack them for acting like a business.

From my economics porthole, BigLaw has behaved quite rationally for the last 15-20 years. The market presented a scenario and BigLaw moved to maximize profits in that situation. And unlike Microsoft or Blackberry, BigLaw did not hold some monopoly, or near monopoly on the market. Admittedly, it did have a favorable market with growing demand, but no one firm was in a position to dictate terms and pricing. And based on BigLaw’s performance in this period, any other business would be jealous of its sustained growth in profits over time.

Yet now, not just based on the recent Twitter remarks, but also based on an apparent client backlash, this rational market behavior is being held up to scorn.

The market dynamic has now changed and BigLaw will adapt or it won’t. Last summer I posted on 2012 as the Year of Pain for law firms. It turned out it was less painful than I predicted. I am still reviewing year-end reports and thinking about how that played out, but the bottom-line seems to show BigLaw is not crumbling. Does this mean they are they adapting? Without enough pain it’s probably too early to tell. However, I will say there is significant and growing motivation for change and some really smart people running these firms (for the record I am not talking about me). So I wouldn’t count them out.

Unless making money suddenly becomes socially unacceptable, I expect BigLaw to continue in its rational market behavior, finding ways to maximize profits, likely with a modified business structure.

Image  [cc] calliope_Muse

I’ve been on the ‘value’ bandwagon for quite some time now, but I recently had an epiphany courtesy of Ulla de Stricker during the recent CLA webinar “Becoming Indispensable: The Value Proposition”. It was one of those moments where you understand that you’ve been headed in the wrong direction; a real lightning bolt. I was so affected that I followed up with Ulla for a further discussion.

So, what led to this epiphany? Okay, here you go: accept “what is”. Sounds like a simple concept, right? But in fact, this is the exact opposite of what we’ve been doing for the past few years. Ulla’s theory, in a nutshell, is that we work within the current value perception of our organization and stop fighting to demonstrate our value in areas that it is actually not valued. While this makes perfect sense, it isn’t necessarily what we’ve been advocating. Instead, we try to prove our value using our own definitions, but does any of it align with the value perception of the organization? If it doesn’t, what are we doing besides beating our heads against a wall?

Ulla takes a pragmatic view and says, “it is more productive to work with the existing perception of value” than to create a new one. I believe we have all been blind to this fact and then wonder why we aren’t valued by our organizations. As Greg recently stated in his post on Value:

There’s a fine line between providing value every day and having to explain to those we work with why they should understand why we are valuable.

So, what should we be doing? Ulla suggests a very simple solution: follow the money and you will be able to tell what the organization values. It may not be what we value or even where we think we can contribute at the highest level, but if X is what the organization values, then X is where we must be. This means there is no identical road map for everyone. We must each create our own value within each individual organization based on that organization, and not some preconceived notion of the value of an information worker. That, when you think about it, actually sounds more valuable.

Note: See also Ulla’s recent blog post: Working with Reality: Times Have Changed…So Can We