David Ackert and Tim Corcoran discuss how to unite firm strategy with data-driven decision-making, reverse engineering the financial goals to identify specifically which marketing tactics to pursue to meet our goals and avoid falling into the trap of “random acts of lunch.”Read More
I'm regularly invited to speak at meetings where various members of law firm affiliate networks have gathered. Sometimes these are regional meetings attended by the member firms' key relationship partners and the topics are general; other times the attendees are the managing partners of member firms who discuss best practices in firm leadership; others include lead marketers or operations professionals who collaborate with peers at other member firms. Regardless of the location, the venue, and the participant demographics, eventually one critical question is posed: is our membership in a law firm network a worthy investment? Said another way, how can a firm best benefit from its investment in a law firm network? Many law firm network leaders ask the question in reverse: how can a network deliver the greatest value to its member firms? In a challenging economic climate, it's always sensible to review investments, particularly those with uncertain ROI. The often hefty investment required to join a law firm network requires therefore that firm leaders periodically take a close look and make a go/no go renewal decision, and to identify opportunities for ROI improvement. Based on the perspectives I've gained from my various perches -- as a corporate sponsor, law firm member, regular speaker, and advisor to network leadership -- I offer the following five suggestions for maximizing the investment in a law firm network:
Expand the reach of the network within the firm. If we were to randomly poll partners at many firms and ask them to name their firm's network memberships, many could not. Those who have unaided recall can often name the primary global network, or perhaps a network associated with their own practice, but they would falter naming networks in play with other practices. This suggests that the role of a network isn't considered strategic or differentiating in the same way that, say, quoting how many lawyers or offices we have is perceived to be. The reality is that networks can be a very useful resource for networking, education, information sharing, and cross-selling. But the challenge isn't usually the network, it's the member firms' cultures that inhibit success. In much the same way that partners know cross-selling is good for them but they do little about it ("You're supposed to cross-sell my services before I sell yours!"), many would agree that networks offer significant benefits if only they took the time to learn. Gaining access to subject matter expertise in new, adjacent or even familiar practices and collaborating with colleagues who aren't competitors can be fruitful. Sharing best practices in marketing, business development, finance, pricing, project management, knowledge management, technology, and information security can be extraordinarily useful, particularly when the those sharing with you benefit from your improved performance, and vice versa. When the quality quotient for the entire network improves, all members benefit. It's essential therefore to spread the word, ensuring that all members' partners and senior professionals are aware of the firm's network affiliations and can recite the key benefits of membership. It's even more essential that they participate by attending meetings, following up on leads, and referring business to member firms.
It's about building relationships. Let's talk a bit more about cross-selling. Many network tout the referral opportunities as a critical ROI factor, e.g., "One inbound referral can repay your membership fee many times over." This is true. But this can also be said of internal law firm cross-selling where the rewards, e.g., improved PPP when the firm generates more top line revenue and earns higher profits, accrue directly to the partners involved. And still partners operate against their self interest and eschew cross-selling, or at least don't invest much time in it. The reasons are many and include the psychological, the financial, i.e., a tenuous grasp on the above finance principles, and the practical, including a lack of systems to support the cross-selling effort. I've written elsewhere about the benefits and fundamentals of law firm cross-selling, but summarized it's about relationships. Partners refer work to colleagues they trust, and trust is earned less by reviewing credentials than it is by becoming familiar with each other. Lawyers tend to believe their decisions are rooted in logic, but the reality is that most of us make emotional decisions to do business with people we enjoy, and we often rationalize these decisions only after the fact. Don't believe it? If you do nothing more than put unfamiliar colleagues in a room together periodically for bonding and networking time, the frequency of referrals will increase at a rate faster than what you'll observe from installing an exhaustively-detailed Intranet or Extranet that documents members' accomplishments and capabilities. Networks are ideal forums for establishing and nurturing relationships with colleagues in other regions and practices, the net effect of which can be to expand the services each member can offer to its clients.
Track performance. Relatively few networks have detailed systems in place to track referrals, and the systems that exist often focus on frequency rather than financial impact. If a prevailing benefit of joining a network is that members do not directly compete (though this is harder to enforce as the world shrinks), then we have everything to gain and little to lose by sharing the financial impact of our inbound and outbound referrals. Within firms it's much easier, albeit uncommon, to police the balance of outbound and inbound referrals through compensation incentives, but networks can use financial data and peer pressure to achieve the same outcomes. Yes, it's true that one inbound referral will pay back the network investment many times over, but let's focus on volume of referrals, not size. If firms that generate multiple outbound referrals to other members are lauded publicly, and the financial impact of these referrals is quantified, it can motivate new behavior. Lest it sound altruistic, it is a demonstrable fact that those who work hard to generate referrals for others create a steady stream of inbound referrals for their own practices. Mathematically, I'd much rather have three dozen advocates spotting minor opportunities for me than wait for one monster opportunity to land in my lap. So require member firms to regularly submit inbound and outbound referrals, track financial performance -- some of which may be clear only months or even years after the initial referral -- and create some peer pressure by publicly rewarding positive behavior.
Implement common procedures across member firms. Many networks are challenged to provide demonstrable value by offering unique benefits to members. And so we see education, networking, and buying consortiums as common benefits. Many offer some version of the marketing tagline, "Our global membership allows our members to service their clients globally across a wide range of industries and practices" but few members believe it, or more to the point, even if they believe it few members embed this belief into their individual firm strategy. I once counseled a new chairman of a global law firm. We were working on his remarks to his first firm-wide partner meeting and he wanted to reiterate and tout the benefits of the firm. He listed 25 offices and 1,200 lawyers as a key benefit (Note: these figures have been changed to protect the anonymity of the client). I asked him, "So what?" He repeated the line. I countered that if I was a chief legal officer of a FTSE 100 company, that would be a nice feature, but not a benefit until or unless that global footprint addressed a specific need of mine.
Rather than delve into the difference between features and benefits, suffice it to say that if a network (or a firm) can demonstrate how its expansive coverage is an asset to potential clients, how the many lawyers in many regions in many practices addresses a particular client need, then it's a benefit. Otherwise, it's a feature. The existence of four-wheel drive on a vehicle is a feature to most; but to the buyer who regularly experiences treacherous snow conditions where increased traction and 4WD means the difference between going to work or taking unpaid vacation, then 4WD is a benefit. Some networks are beginning to explore the implementation of common service standards, meaning that clients who do business with one member firm can expect a reasonably similar service posture when referred to another member firm. In today's global general practice law firm, it's a misconception to assert that all partners, practices, or offices operate in a similar fashion, and even two partners in the same office in the same practice may have fundamentally different approaches. (Don't believe it, ask your firm support professionals in IT, Marketing and Finance who specialize in delivering customized support to every partner!) This provides an ideal opportunity for a network to address that unmet market need: Global firms may promise one-stop shopping but the reality is many are silo businesses sharing a logo. A network whose members jointly develop service standards and operational mechanisms can not only compete, but win, against disaggregated bigger firms, particularly when clients seek legal service delivered consistently across multiple jurisdictions.
Consider the network as a differentiator, not a merit badge. For the reasons above, membership in a network that continually strives to deliver member value can be a differentiating asset. Membership should therefore not be relegated to a logo on the firm's website, like a Boy Scout merit badge, but the benefits of membership should be broadcast far and wide, and each member firms' partners should be able to recite why the firm belongs and should himself or herself actively participate in producing, or receiving, the fruits of that membership. It's perfectly acceptable to belong to multiple networks, so long as each addresses a different niche the firm deems strategically important. Some networks are better than others. Put a scorecard in place to identify the success metrics for membership and periodically measure performance against those metrics. But be as diligent in accepting responsibility for the firm and its partners failing to take proactive action as you are about blaming the network for not delivering value. Note that occasionally a client survey will acknowledge membership in law firm networks as a factor in the selection of outside counsel, but for the most part these are secondary sources in the selection process. In other words, a prospective client will create a short list of potential firms through other means, then bounce that list against other secondary factors to help stack rank those on the short list. In this light, it would be unusual for the client to identify the network as referral source, but that doesn't mean it's not essential to the selection process. If your network consistently fails to meet your expectations, despite your best efforts to improve performance, then find another. Finding the right fit may take a couple tries, but once a firm finds the right network community, it can generate significant rewards.
Timothy B. Corcoran delivers keynote presentations and conducts workshops -- including at law firm network retreats! -- to help lawyers, in-house counsel and legal service providers profit in a time of great change. To inquire about his services, contact him at +1.609.557.7311 or at email@example.com.
Related consulting experience:
- Advised law firm network on the development of a new strategic plan after several notable member defections
- Moderated a series of member managing partner roundtables on marketplace changes
- Advised law firm network on implementation of common service standards
- Advised law firm network on creating a buying consortium, developing campaign and recruiting vendors and suppliers to participate
- Multiple speaking engagements related to management, marketing and legal project management best practices (see Speaking page for examples)
In recent months I've spoken and written a great deal about measuring ROI, or return on investment, as law firm leaders continue to face tough choices about where to spend the firm's hard-earned capital. One question I'm asked frequently is whether hosting an event is a good idea for generating visibility with existing and potential clients, or for demonstrating subject matter expertise that will influence a buying decision. Many organizations operate as if the notion of hosting an event is self-evidently a good idea, but some achieve extraordinary results while others can barely fill a room. Our intent here, then, is to provide a framework for identifying the relative benefits of hosting an event. How can we turn an event into a means for generating revenue? What distinguishes a good event from a poor event, or a great event? In many law firms it's not uncommon for several groups to compete for limited resources to support their pet events. Should the seniority of the requestors or the relative investment potential dictate the resource allocation?
It’s All About ROI
Measuring the investment return of any marketing initiative can be an elusive goal. Rarely can we draw a direct line between a marketing activity and a prospect’s subsequent buying decision. Law firm marketing is no less challenged than marketing in other fields in this regard. Consider that few studies have found, and certainly the intelligent among us will never admit, that seeing a television advertisement for, say, a luxury automobile leads directly to our buying decision. When queried, we refer to a reputation of safety and solid engineering; the roominess of the interior and how it suits the number of family members; we quote the gas mileage and refer to amenities such as the on-board computer and heated seats, all of which we scrupulously researched and compared with the features offered on alternative vehicles. Similarly, few of us will admit to finding a doctor or lawyer in a Yellow Pages ad or directory, except perhaps those who have relocated a great distance and have yet to establish a local referral network. Yet there are a lot of television advertisements on every station, all day every day, from these companies and many more purchase newspaper and Yellow Page ads. Are these business owners operating under a mass delusion, throwing their hard-earned money away in a futile attempt to influence our buying habits?
The operative word here is influence. Few marketing tactics summon a call to action so intense that targeted buyers drop everything and rush to make a purchase. Well, maybe late-night infomercials drive this behavior, but that results from a mystical combination of repetition, hypnosis and foreign accents to which none of us is immune! The rest of the time, advertising and other marketing activities are designed to influence our buying behavior, little by little, impression by impression, forming in our minds a good feeling that we come to associate with the product or service offered. We don’t buy the luxury vehicle because we expect this will lure the attractive and much younger companion portrayed in the commercial. We buy, in part, because of the feeling of vigor and youth these commercials conjure in our minds. The more we see of this marketing, the more we associate the product with these good feelings. No single tactic will necessarily have us leaping for our wallet, but the combined impact of many tactics, particularly a coordinated campaign of different tactics over time, will influence our buying behavior. So for our purposes here, we'll look at how to assess the relative influence of one event over another, in order to derive some measure of return on investment, or ROI.
First let's clarify why we’re hosting an event, such as a breakfast briefing on recent regulatory or legislative changes in a specific industry, or an open house for a new office location. In some cases, the objective is merely to increase visibility with a target audience, perhaps existing clients we haven't seen in some time. Sadly, while it’s considerably less expensive and onerous to simply pick up the phone and arrange a catch-up lunch with a valued client, many lawyers will go to great lengths to indulge their introversion and avoid the potential for rejection ... so let’s host an event! To be fair, it's not a bad idea to host a non-business social event merely to stay in touch with clients with no pending matters or to meet potential clients. Sports outings, whether in the sky box or on the links, are often suitable for this purpose. So long as expectations are managed and there isn't a belief that a million-dollar engagement will result from this glad-handing, this sort of event can be helpful. From an ROI perspective, this is an investment in long-term visibility with minimal expected return and a cost significantly higher in dollars than the equivalent in lunch dates. Less expensive lunches that are never scheduled obviously generate a much lower Expected Value than more expensive social events that fill a room.
But what about the business-oriented event, where we unabashedly present some meaningful content designed to demonstrate our domain expertise and influence buying behavior in clients or potential clients who ostensibly need our services? There is a great deal more in play here and there are clear metrics to help distinguish between worthy events and wannabes. Most skilled event planners employ an event project plan that captures all the salient details, expectations, deadlines and costs for the event. The first hurdle is simple: If your event planner operates without a plan and/or if the lawyers are too busy to plan well in advance and provide necessary details, then don’t bother! It is quite obviously a touch more challenging to make such bold statements to law firm partners who are insistent on hosting an event, but only the partners who are foolish with their hard-earned capital will skip, or allow their partners to skip, this critical step. Establish a best practices planning model for your firm and stick to it. If you can't or won't invest the time to plan ahead, then take whatever expectations you have for the event and reduce them by half, and then half again.
A typical event plan will identify the target attendees and the desired demographics. For example, our conference room or hotel ballroom size may dictate that we can host 50 guests, plus a modest number of partners and firm personnel, leaving us a comfortable margin before we reach the fire code limit of 75 occupants. Then typically we identify the right attendees based on the subject matter and we send invitations, tracking RSVPs until we reach the desired number, allowing for the inevitable no-shows. Poor response rates can be indicative of weak marketing, but just as often result from insufficient notice or a topic that's no longer timely. Law firms that regularly present cutting-edge topics operate events like a well-oiled machine and inevitably outdraw those that deliberate and procrastinate until the topic is played out.
Sooner or later a partner will submit a last-minute request to host an event on an aging topic. While it may be politically untenable to simply say no, a review of the event metrics after the fact may prevent repeat offenders. A relative measure that can prove helpful is revenue footprint, or the total revenue associated with the clients (or former clients) in the room. Simply identify the historical, current or expected billing revenue of the audience. Events with a higher revenue footprint typically warrant more time and attention. Events that result in half-empty rooms, with marginal clients on hand, suggest that key clients found more compelling distractions for their time.
But the value of hosting an event is better measured by the realization than by the potential. Through experience, some event organizers will establish a revenue target, a figure that clients or prospects in attendance are expected to generate in the coming months. As we’ve discussed, the event might be just one of several market tactics put forth by the firm to influence a buying decision, but for our purposes here we’ll count it. (More statistically rigorous approaches apply different weights to the various marketing tactics to deduce relative influence.) It’s also necessary to establish a sufficient time horizon, say six months, within which we expect the event to influence the opening of a new matter. Keep in mind that some opportunities take years to materialize, so there's no standard time period within which to track influence. A mid-sized law firm in the southeast periodically presents well-regarded legal updates on the shipping industry, and the firm has taken to assigning a revenue objective for each event. As an example, it might expect the October briefing to generate $250,000 in new matters within six months. Note that this refers to the total expected deal size, not the actual billings by that date.
Establishing a Target
By establishing a revenue target, it becomes a lot more palatable to establish an expense budget. A common lament of event planners is the mandate to produce a high quality event but with a very limited budget for necessary expenditures. Of course it's important to be prudent, but in context the event expected to produce $250,000 in revenue can probably withstand the extra $50 tray of canapes. The key is to identify which expenses improve the potential revenue. Hosting the event at a small, out-of-the way boutique hotel might cost less, but hosting the event in the centrally located downtown University Club might improve attendance by 50%. Good event planners will develop expertise over time as to which variables have an impact on the top line, typically by tracking multiple variables and analyzing which of these variables are present at events which have turned out to be more lucrative.
The mechanics of tracking revenue are fairly simple, though typically not automated. For the clients who were in attendance, the marketing team monitors new matter openings over time. When a new matter is, or appears to be, connected to the topic of a recent event, they will confirm with the billing partner and establish an expected matter value. The team reports monthly on the accumulated revenue generated by each event, highlighting those in which revenue exceeds expectations and revenue falls significantly short of expectations. With each cycle the team becomes better at establishing appropriate revenue targets.
As you might expect, if we’ve established both revenue and expense targets, it's no great leap to establish a profit target. And this can become the great equalizer when comparing the viability of competing events. Should we host a series of bi-monthly events that in aggregate will generate $800,000 in revenue at a cost of $72,000, or should we host a much larger event that costs $150,000 but is likely to generate $2 million? A large West Coast law firm has hosted a very elegant, all-expenses-paid weekend away outing for key clients that combines some business with a lot of recreation, and this event sucks up most of the marketing team’s available bandwidth for months and incurs huge expenses. The return, however, is minimal. As it turns out, the profit margins generated by the firm’s East Coast office for routine breakfast sessions tend to be more appealing, albeit in smaller portions. The firm audited its own performance and determined that it might generate more billables by expanding the breakfast briefing program to more offices and practices and doing away with the gala weekend event. However, firm management hasn’t yet pulled the trigger because it ascribes some of the gala investment to the aforementioned "staying in touch," which has understandably lower expectations.
The Bottom Line
This is the essence of law firm marketing ROI: making informed decisions where previously there were no data. If firm management wishes to deploy limited resources in an efficient manner, it’s helpful to know which events generate revenue, which attract key clients or targets, which are profitable and which are not. If firm culture encourages each practice group to plan its own events without regard to the financial performance, that’s fine too. However, the ability to make strategic decisions with the firm’s capital is fast becoming a competitive differentiator and increasingly business-savvy practice group and firm leaders should be pleased to know that measuring event ROI is not as elusive as it once was.
Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change. To inquire about his services, contact him at +1.609.557.7311 or at firstname.lastname@example.org.
Many organizations do a poor job of measuring the return generated by their various investments. As a result, many initiatives fail to deliver impressive results even while the organizations as a whole are performing well. Imagine a professional sports team that measures only wins and losses and ignores individual statistics such as points scored, penalties assessed or defensive lapses. How do the coaches know who needs help? How does the general manager know who to reward handsomely with a new contract? How do the players know what skills to hone in the off-season? Obviously a quality sports team will focus on a myriad of individual elements that, combined correctly, produce wins, and, combined poorly, tend to produce losses. Measuring the return on investment (ROI) of our various expenditures should be viewed in the same light. After all, if we don't measure how well or how poorly our many initiatives are doing, how can we improve our performance? As the late legendary Coach John Wooden used to say, "Failure is not fatal, but failure to change may be." I conduct workshops on this topic regularly to different audiences, including law firm technologists, marketers, directors of finance, partners and in-house counsel. While the ROI discussion may vary depending on the stakeholder, there are a few common themes.
Measuring ROI may not require heavy math, but it very likely involves stepping out of your comfort zone. The classic example comes from the advertising world where the creative types at agencies devise compelling advertising that catches the eye but may not provoke buying behavior. As one CEO scoffed when presented with a visually rich and quite expensive campaign idea, "I don't care about creating art, I care about moving units." In a law firm, a technologist may feel upgrading to the latest voice-over-IP phone system is long overdue, but given the considerable expense and time needed for a firm-wide upgrade, it may require a financial analysis plotting the cost of maintaining an older phone system against the cost and benefits of the upgrade. A law firm marketer asked to produce a client alert for a news item that every competitor discussed weeks ago may have to (gently!) push back by demonstrating that the optimal window to maximize "click though rates" has long since passed. ROI discussions often involve the mastery of different dialects to make the case to others.
ROI is a relative measure, not an absolute measure. In a basketball game if Joe pulls down 5 rebounds per game and Andre pulls down 6, who gets the coach's praise? What if we learn that Joe is 6 feet tall and Andre is 7 feet tall? If all other factors are neutral, we should expect Andre to significantly out-rebound his shorter peers. In this light his performance is not very impressive. If a law firm hosts a seminar that draws 15 people, is that good? If we invest $2 million in three lateral partners and they deliver $2.5 million in new billings in year one, is that acceptable? There is often not a specific hurdle past which everyone can objectively state that "We achieved a successful ROI." It's only by comparing the ROI of an initiative to alternatives that we can ascertain whether the ROI is acceptable or not. If the 15 attendees of our seminar represent top-level decision makers at target prospects, this might be a much better investment than a larger event with 90 client attendees representing staff lawyers with no input on outside counsel selection. What if we delayed implementation of a key client program by two years in order to invest in our lateral recruitment, but even a conservative estimate of our cross-selling forecast suggests that we could have generated $5 million in new billings from existing clients? Were the lateral recruits such a good investment after all? Good organizations compare the relative ROI of various initiatives and the best ideas must earn the capital investment.
ROI can only be measured over time. Law firms generally operate on a cash accounting basis, which involves counting revenues and expenses one year at a time and distributing excess (a.k.a. profits) to partners annually. This forces a one-year-at-a-time mindset, whereas most businesses operate on an accrual basis, which makes it much easier to consider investments over a longer period. Imagine the junior partner, looking to improve his networking at the country club, who takes a golf lesson. At the end of the lesson if he hasn't dropped his handicap from 30 to 5, he typically doesn't quit in disgust because he recognizes that improvement takes time. Yet this same partner may sit on a cost-cutting committee that votes to "eliminate the trust & estates practice group because last year it wasn't as profitable as other practices." But simple analysis may indicate that 35% of our highest-revenue litigation cases come from companies whose CEOs are T&E clients. And of these CEOs, 60% were T&E clients first, indicating that the T&E practice is an effective feeder for the litigation group. Removing this feeder skyrockets the "cost of sales" for the litigation group, instantly eliminating any savings from disbanding the T&E group. Your mileage may vary, of course, but only by studying trends over time can we make these connections. By viewing ROI as a snapshot in time, we tend to make flawed decisions.
There's so much more to say on this topic and it's particularly needed now, as law firm leaders are scrutinizing expenses across the board and struggling to find the right formula to generate profits. One universal challenge is that measuring ROI forces us to address sacred cows, those pet expenditures that we just know are good ideas but that no one can prove. Telling a partner that he cannot continue to invest in a luxury sports box is a lot more challenging for the executive committee than laying off secretaries, after all. But the bottom line is that measuring ROI allows us to make informed choices about where and how to spend the firm's capital... even if some of the final decisions are dumb ones.
For legal technology readers, feel free to join me as I conduct a webinar with ILTA on August 7, 2013 at 12 PM ET on this topic. For more information and to register, click here. Others can click here to read a recap of a recent presentation I delivered to legal marketers in Chicago, thanks to Sania Merchant and the National Law Review.
Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change. To inquire about his services, click here or contact him at +1.609.557.7311 or at email@example.com.