As we enter 2010, many law departments and law firms are still reeling from the tumultuous paradigm shifts of 2009, and working to bring order to the budget and staffing chaos of the last several months. If 2009 was the year we all scrambled just to get it done for less and with fewer hands on deck, 2010 will either be the year that we all go back to doing things the way we did before, or we decide we’re going to implement practical changes in the way we work together that that will improve the management of our relationships and the predictability of our costs going forward.
While it’s easy to sink back into familiar habits, I don’t know anyone on the client side who is eager to tell their management they’d like to re-institute higher fees typical of the “Golden Age of Law Firm Profitability,” forego new opportunities that were successful in lowering or better managing costs for a number of departments and firms, and return to the unpredictable budget and soaring costs we all abhorred. As you gird yourself for the work of re-inventing and then cementing new ways to work going forward, here are 5 ideas for relationship managers in both firms and departments to consider.
1. Assess the State of Your Union and Meet.Talk.Act: Outside the heat of any particular retention or matter and with your best firms (you shouldn’t try this with everyone before you try it with 3 or so strong relationships and get better at the process): sit down and Meet.Talk.Act. Talk openly and without reproach about how your relationship can improve in terms of budgeting practices; metrics, goals or targets you’d like to set and targets to process efficiencies you’d like to examine; knowledge management systems you might adopt; performance feedback mechanisms you could adopt to drive continuous improvement and team engagement; new ideas for staffing and fee structures; in short, better ways to institutionalize the relationship to create sustainable profitability for the firm and seamless value-based service at a predictable cost for the client.
While there will likely be unique ideas or concerns to address with separate clients, matters or firms, the point is to begin a process that’s not just based on evaluating the relationship one experience at a time, but looks instead at universal “truths” affecting the entire relationship and every matter. And I strongly encourage you to make lists of things you’ll attack immediately and things to work on over time: it’s often too hard to do it all at once, so adopt a realistic and ongoing process to make sure you get it right and folks see how they can succeed; there’ little merit in doing it stupider faster.
Just choose some things to do now and get started before the window of acceptable experimentation closes.
2. For both new and existing matter types, do the hard work up front: Do your “relationship” work in defining scope, expectations, staffing and fee structures and such before the legal work begins: don’t begin work without an mutual understanding of what is and what is not acceptable and “valued” in a matter. It’s too easy for busy people to look at the pile-up on their desk and simply “throw it over the wall” to whomever is going to work on it, without making sure that everyone agrees to and understands the client’s fee expectations and ultimate goals and expectations. (And since the client itself usually doesn’t know what its specific goals/expectations should be for any matter, that’s something you’re going to need to help define, too.)
Scoping work early on is necessary to avoid the problem of spending large amounts of unproductive and even relationship-damaging time managing the bill after the work begins. While you can always amend your budgets or work plans as the project unfolds, be as specific and detailed as possible at the start, and then save your time and money by unleashing the team members to do their work within the defined parameters – it’s now their responsibility to do so or to propose needed amendments.
For folks at firms, try to define what is not covered by the retention’s terms and safety valves for unanticipated (but not unimaginable) exigencies since the goal of up-front scoping is to get in-house counsel out of micromanaging and you best positioned to succeed in delivering what you’ve promised.
Both firms and departments may wish to invest in creating standardized decision trees, process maps, or project management plans for different kinds of work that their clients repeatedly experience, and then reap the benefits of simply adapting or customizing these “form” documents to the specific needs of every new matter that lands in front of you. You will now clearly see which work is operational and which is the “norm” that falls within understood processes and parameters (that’s not to say all such cases are not important, just not unusual), and you will be able to focus on cases that truly are different or present new strategic challenges.
Final note: Make sure you talk about more than fees and timing when setting up your scopes: discuss staffing options, what kind of expertise is needed, what knowledge can be recycled from other work, what new processes might improve the workflow, where non-lawyers can help, etc., since the savings from good advance planning in those areas may be greater than that realized in any other cost-related discussion.
3. Change management is all about the people, not just the process: The most important role you play as a relationship manager is understanding that you can manage processes, but you don’t “manage” people: you lead them. EVERY member of the team – inside the department and inside the firm – must understand what the relationship managers agreed the work is worth, how it should be done, and how it is that the value of the product the team produces will be judged since you can’t lead them and they can’t follow you unless the direction is shared. Change is the hardest part of the process as we look to move toward more efficient or alternative models from those we know.
Remember: people don’t like to change (especially lawyers) … it’s hard work to change (and easier to do the same things, even failed things, over and over) … there’s always risk in new or untried methods … it may be unclear if those who change will be rewarded, and there’s usually evidence that those who simply keep their head down are “safer.” So make the path clear and unambiguous; communicate about what you’re doing with everyone who touches the work, and make change requirements applicable to everyone; enforce the consequences of non-compliance evenly (or apply the rewards of success visibly). To succeed in changing practices, an agreement between two relationship managers to go a new route will not suffice; it must be the first step in a conversation that each team leader takes to every member of their staff and then leads them to succeed in implementing.
4. Define goals and set measurable targets and timelines: Related to this, set targets and goals for matters and people involved in the process (both in the firm and department). Then, measure performance and tie compensation/fees and evaluation to performance-to-goals. If goals and targets are institutionalized, if they include both long-term and short-term measurements and steps, and if they are discussed in advance and frequently reviewed, then the evaluation of performance-to-goals is not as personal or mysterious (but rather, is simply institutional), it’s more approachable and manageable, and will not be as easily excused by a never-ending list of special circumstances to explain away this or that failure or deviation.
No one likes to do performance evaluations – but making them the norm for everyone and a part of the process of working on every matter actually makes them easier and better (as well as more “impactful”). And you shouldn’t be the only one responsible for them; spread the accountability throughout your ranks. Finally, both inside and outside counsel should be subject to the same evaluation processes, even if their goals and targets are different. The ACC Value Index is also a tool you can use to see how other clients evaluate the overall performance of their outside firms to compare how your firms stack up or look for firms that have excelled where your may not.
5. Support the development of (and experimentation with) new skill sets and flexible toolkits: Every firm and department needs a flexible tool kit that allows them to consider a variety of options for how any particular matter or group of matters is accomplished. Some tools may focus on speed of delivery, some on process and improved efficiency, some on cost effectiveness (both in terms of predictability or lowering costs). There should be no presumed “default” mode for doing work unless that is a decision for a kind of work that the department has made and wishes to implement going forward. Once a decision is made that allows the firm and department to select the best method by which to handle a matter (fee structure, alternative staffing, etc.) that creates an alignment and balancing of interests, then clients need to allow firms to profit if they do well (and not ask them to return a windfall when they’ve assumed a risk and “won”), and firms need to get comfortable with the risk that sometimes they’ll swallow the occasional matter that does not return their costs in pursuit of long-term profitability from the relationship.
You will not find value in any relationship founded on a one-off mentality, or by seeking to own one-sided leverage in every matter. If your philosophy is “heads I win, tails you lose,” you are not a partner in a relationship, and you will not enjoy the benefits of a long-term commitment. Indeed, think of your relationship as a marriage, wherein occasional losses or failures are offset by the benefits of an institutionalized, trusted and alignment with people you like to work with who share not only your daily work, but your goals. In such a marriage, the firm can plan to be profitable, train its younger lawyers and derive a satisfying portfolio of work; the client has the confidence of trusted counsel that returns predictable, cost-effective results and doesn’t need to be micromanaged. Value relationships require clients to incent and reward firms to profit by making it their business imperative to maximize efficiency, focus on results through great staffing decisions, institute transparent and meaningful knowledge management techniques, and improve internal process management. This is the essence of client/firm alignment.
Bonus Fundamental: Transparency and accountability are requirements for the personal integrity of relationship managers. The in-house manager must learn to tell his trusted relationship partner what the matter is worth to the company without games, and the firm relationship manager must be willing to stake her reputation not just on the advice she gives and the results she delivers, but the accountability of the firm to do the best it can for the most reasonable price. Firms that get really good at process management and staffing decisions (it’s presumed that they’ll practice great law!) will have totally transparent costs that they will happily and openly shared with trusted clients; clients must not “punish” them for that transparency (especially since there are still so many firms that don’t make the commitment to improved efficiency are nonetheless rewarded with less scrutinized business practices and heftier profit margins).
There are still some lawyers in some firms who do not yet realize that when the bubble burst in 2009, it burst in part because law firm profitability expectations in many big firms were far too often unsustainable, if not ridiculous. Likewise, corporate counsel must respect that fact that the firm needs the incentive of profiting in return for its improved efficiency and value. The “new” aligned relationship is not a zero sum game -- all boats will rise when the focus is on delivering great value and results for the end-client.
