The 2 Critical Questions that Lead to Continuous Improvement

If you want to improve your law practice, your business, your customer service posture, then you need to ask two simple questions, and ask them regularly: What are we doing well and what can we improve?

I believe in reducing complex ideas into bite-sized morsels that can be more easily consumed, particularly when it comes to something so fraught with peril and emotion as gathering candid client feedback to improve your business.

I recently engaged in a vigorous discussion with a consultant whose academic credentials in statistics and market research far exceed my own. She produces exhaustive reports on brand familiarity, relative market position, and statistically precise indexes of client satisfaction. But, she laments, her clients generally ignore her studies, filing them away in the proverbial circular file rather than formulating an action plan. My diagnosis was simple, and it reflects my own approach to assessing client satisfaction and continuous improvement: reduce the complexity and focus on gathering actionable information.

There's a time and a place for complexity and nuance, but it always follows the acceptance of core concepts. If you don't know explicitly what your clients value about your service and if you don't know explicitly what they wish you would do better, then all the charts and graphs and analysis are just so much statistical noise. Sustainable profitability comes from client satisfaction. Client satisfaction comes from continuous improvement. Continuous improvement happens when we regularly ask our clients what we do well and what we can improve.  It's that simple.

When I present these two simple questions, there is always someone who will suggest alternative wording or suggest two or three or ten additional questions to add color or depth to the findings. Sometimes this works. Often it just complicates things. It seems as if we create complexity where simplicity is needed, because complexity pays better, or provides job security. But there is no better job security than channeling the voice of the customer, and this isn't hard to do.

What are we doing well?  Let's not assume that everything -- heck, anything -- we're doing is worth continuing. It's critical to know explicitly and specifically what clients value, why they value it, and that they want us to continue doing it. Here are actual excerpts from client feedback sessions I've conducted, or feedback my clients have compiled. The consistent theme of each is that no one knew the high value the clients placed on the specific action or service, and in some cases we had been debating whether to stop the practice.

"We appreciate the monthly one-page project summary reflecting progress against the original budget and timetable. We may have never mentioned it, but we distribute that report to key executives and they love how we demonstrate that the law department operates like other business functions."  (Deputy GC responsible for Litigation to outside counsel retained for a single high stakes matter)

"I like the detailed time entries on the invoice. I have to carve out time every month to make phone calls to my outside counsel to ask for clarification on the invoices, but with your firm I rarely need to."  (Chief Legal Officer for a small manufacturing company)

"No other vendor salesperson stays involved during the configuration and implementation phase, but [our salesperson] stayed in touch all the way through rollout to ensure we got everything we needed."  (Law firm CIO to a legal technology vendor)

What can we improve?  This is specifically worded to acknowledge that there is always something we can do better. Many of the law firm partners I work with are hesitant to hold annual client satisfaction reviews, let alone end-of-matter reviews, because they cringe at the thought of inviting criticism, or worse the thought of that criticism being shared with a colleague such as a Managing Partner instead of them. Or perhaps worst of all, they loathe even the idea of sharing a client's criticism with their implicated colleagues. The question worded in this way reduces that emotional baggage, because it's clear our intent isn't placing blame or avoiding responsibility. Our goal is simply to identify specific actions that we can improve. More examples:

"I don't enjoy having to wait an indefinite period for a call back. Sometimes I get the sense that you won't call until you have an answer. It's okay if you need time, if it's urgent I'll say so in my voice mail or email. But it would be better for me if you acknowledged receipt of my call or email and let me know when you can get back to me. I'd much rather know that you're in court and can get back to me next Monday than wonder all weekend if you even got my call. In fairness, if it's urgent and you can't get to it right away, I may need to call in someone else. But I will always find another opportunity for those who are good at managing my expectations.  (Associate GC for a clothing manufacturer to a law firm that has received very little work even after a lengthy process to reach the preferred panel list)

"I enjoy attending your dinners at [a major conference] because you invite others that I want to see. But I am uncomfortable with the invitations to ball games and other events. It's not that I dislike one on one time, I'm happy to meet over lunch, but we have a policy against accepting gifts and attending a sporting event in your suite doesn't feel right to me."  (Executive Director for a mid-size law firm to major legal services vendor)

It may come as a surprise to learn that many clients, possibly most clients, don't relish the thought of giving criticism any more than those on the receiving end like hearing it. The questions posed above help avoid the emotional baggage and put the focus where it belongs.  Let's discuss those things we do right and that you believe we should continue, and let's discuss those things that from your perspective we can do better.  Once you master this approach, there's a lot more to help you home in on specific industries or market segments or to help synthesize and prioritize a high volume of disparate feedback.  But let's not get ahead of ourselves. Start simply and grow from there.

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.

Why Big Law Firms Implode

Anyone following the large law firm marketplace knows of the impending demise of another big law firm.  This time it's Dewey LeBoeuf, the several-year old combination of Dewey Ballantine and LeBoeuf Lamb Green & MacRae.  At the time of this writing the firm is not, technically, dissolved.  But by the end of this week some action or combination of actions by the firm's bankers, creditors, partners or departed partners will put the final nail in the coffin.

Yes, large law firm lawyers earn a lot of money, and yes we have an oversupply of large law firm lawyers, but it's nonetheless extraordinarily sad when law firms implode.  Presumably, the remaining partners, even those who haven't yet found a new home, have saved enough money over their careers to tide them over until they join a new firm.  But it's a terrible and swift blow to the many staffers and associates who almost overnight will be left without a paycheck, probably without health insurance, and perhaps even stripped of some portion of retirement funds.

I've had multiple conversations with large law firm lawyers in recent weeks about this episode, and without exception all feel their firm is uniquely situated, collegial and immune from the sorts of shenanigans that led to Dewey's demise.  Sadly, this isn't true. I don't have specific insights into this collapse, as the firm is not and has never been a consulting client of mine and I'm not privy to its banking or financial records. 

As a vendor, some years ago I did engage in a protracted and messy negotiation with the Executive Director when he was in a senior role in a prior firm, and my primary takeaway is that his extraordinary arrogance masked his limited intellect. Still, one blithering idiot who has bullied his way to a position of influence isn't typically enough to take down an entire large law firm.  So what are the likely and repeatable root causes of such a debacle that other law firms should monitor?

When it comes to law firms, bigger is not necessarily better. Sometimes it's just bigger.  Dewey's now embattled chair offered a revealing insight when justifying the Dewey and LeBoeuf merger, insisting that the firm needed to get bigger to compete in a global economy.  I spend a lot of time educating law firm partners about the fundamental financial drivers of their law practice, and I've learned that many are unaware of the hard cap on revenue that the hourly method of billing imposes. 

At any point in time, I can calculate the firm's maximum potential revenue by multiplying the number of timekeepers by their established hourly rate and then multiply this result by the available billable hours.  From this max total, we start deducting unbilled time, unrealized billings, overhead and expenses, interest lost through slow collections, and so on, until we derive a final profit, which we divide over the number of equity partners to find the much heralded PPeP (profits per equity partner).

Given these constraints, most law firm leaders believe the primary way to increase revenue is to increase the number of timekeepers.  But savvier leaders know that revenue is not the same as profit, and there are more lucrative approaches to generating profit than by taking on the huge overhead associated with adding timekeepers through a merger.  (For example, embracing alternative fee arrangements that ensure a project fee while reducing the cost of legal service delivery through better project management.)

If the goal is to generate profits -- which is a lesson every MBA student learns on day one -- then firm size is just one of the many factors to explore.  An examination of numerous law firm combinations that were predictably dilutive suggests that the real catalyst for growth was ego and a poor grasp of what drives profits.

Owners should own, workers should work.  In my consulting practice I spend a lot of time reviewing practice group strategy and finances, and quite often I'm advised not to share these confidential data with partners (partners!) in these practices.  It's startling how many law firms still embrace a closed system in which many if not most of the partners are excluded from the financial operations of the firm.

In today's modern large law firm there is a distinct prestige associated with the title "partner" but in many cases the underlying fiduciary responsibilities of the partnership business form have been lost.  In fact, as Dewey's situation has revealed, many partners are quite content to not get involved in administration and prefer to merely pocket a rich paycheck, which is a shocking abdication of their fiduciary responsibility and poses a significant risk -- if not to the firm, then to their personal net worth!

So why kid ourselves that every pre-eminent lawyer should also have a vote in the firm's operations.  There's a much simpler approach:  When a lawyer has achieved a certain level of success, give him or her the title of partner and provide a rich compensation package that includes profit sharing, but leave firm management to those qualified to do so, or at least those appointed or elected to the role.  There should be far more lawyer employees and far fewer law firm owners once a firm reaches a certain size. Why lawyers adhere to the inefficient partner business form when there are other options offering the same tax and liability benefits is baffling.  Some will argue that the non-equity partner approach has been tried and has failed, but in its prior incarnation it was merely a tool to recruit worthy service partners and not a shift in governance.

Building, leading and sustaining a successful business shouldn't be confused with falling first in an avalanche.  Law firm leadership is hard.  So is law firm management.  Nothing reveals management incompetence moreso than watching the flailing that occurs when a business enters a new and predictable phase of the business cycle.  Corporations are not immune: many founders have had to give way to experienced managers once a certain scale is reached, and others who have successfully led in boom times are incapable of making tough decisions in bust times.  It takes different skills to to manage a law firm when demand is no longer a constant, when unfettered pricing discretion gives way to increased buyer leverage, when critical raw materials become commodities, than the traditional political and consensus-building skill set of past law firm leaders.

I held an in-depth one-on-one conversation with a newly-elected law firm chairman several years ago in order to help him write his remarks for an upcoming all-partner meeting.  He had no platform, no strategic plan, no vision for change, no understanding of the firm's financial position beyond the annual report highlights and he was elected after a contentious and lengthy process in which multiple more qualified but polarizing candidates were unable to garner sufficient support.

So his greatest asset, apparently, was that he was disliked somewhat less than others.  And yet this chairman enjoyed a couple years of success, years that looked a lot like the years prior to his arrival, and probably similar to what would have happened had the firm's partners elected a potted plant to the role.  Until the economy collapsed and he floundered helplessly.  A ceremonial position riding the tide of a generation-long run of near-unlimited demand for legal services is distinctly not what is needed today, and this applies at both the firm and practice group level.

Rather, leaders must be "consciously competent" and know why the firm or practice is successful, what levers and options exist to sustain or generate growth, what pitfalls or costs are associated with each alternative and the risks posed by the competition -- traditional and non-traditional.

It's not "too big to fail," it's "too big to trust."  An unwritten but assumed aspect of the partnership business form is that partners, by and large, know each other and consciously choose to throw in their lot and do business together.  As law firms have skyrocketed in headcount, it is literally impossible to know every other partner, certainly not at a personal level that leads to mutual respect and trust.  If that were true, partner meetings would have 100% attendance, cross-selling would come naturally to those who want their colleagues to succeed, sharing client contact information and evolving single-engagement clients into firm institutional clients would be automatic.

But what every law firm implosion has shown us is that many partners have joined a firm in order to benefit from the brand strength, but have no interest or incentive in sharing clients or helping the firm as a whole succeed.  Too many partners "protect" their clients in order to retain maximum portability should a better offer materialize elsewhere.  And this lack of a common bond poses a challenge in a troubled business climate when the bankers come calling and ask partners to provide personal guarantees to secure lines of credit.

As one DC-based partner spat upon learning he lost an industry accolade to a NY-based colleague, "I'll be damned if I work with let alone congratulate that overpaid clown."  You don't have to like all of your partners, but if you don't trust them enough to effectively cross-sell and collaborate to your mutual benefit when times are good, the likelihood of standing shoulder to shoulder to face a common threat when times are bad is non-existent.

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 tim@corcoranconsultinggroup.com.

The End of the American Way?

Jordan Furlong authored yet another excellent article on his Law21 blog, this time about the potential obsolescence of law firms whose leaders are too clueless to see and react to the changes in the market.  See How to Kill a Law Firm.  He refers to the rapid, but not unexpected, emergence of new competitors to the traditional large law firm. Firms such as Legal Process Outsourcing (LPO) providers, technology vendors, small firms enabled with technology and low-cost structures and access to virtual resources able to compete with global firms, and so on. As Jordan paints the picture, law firm leaders should have something to fear from competitors who employ a rigorous approach to entering new markets, with the discipline to get out if they can't succeed:

"Accordingly, these entities are now sizing up the legal profession, looking for weaknesses and soft spots to exploit. They have several advantages, including financing, business savvy, and patience. But their most powerful weapon is their attitude: unlike most lawyers, they believe there’s nothing natural or pre-ordained about lawyers’ domination of the legal services marketplace, and they believe it can be ended within the decade. Very few lawyers believe this, and very few law firms are taking the Jack Welch approach of both knowing your enemy and adopting its methods."

But are law firm leaders listening? And does the problem lie primarily with the large law firm mindset?

In the past several years I've delivered multiple talks to groups of lawyers on the future of the legal profession. In one notable case, I explained how in a previous executive role I determined that our business could disintermediate hundreds of law firms, save the courts time and expense, and return to defendants millions if not billions of dollars that were otherwise allocated to plaintiff lawyer fees.

How? Well, the details aren't all that important, but suffice it to say that a company routinely hired by plaintiff lawyers to find hundreds, thousands, even millions of potential claimants; assess the eligibility of these claimants; gather, compile and submit documents on behalf of all qualified claimants to the court; receive and safeguard settlement funds; disburse these funds according to court guidelines to all qualified claimants; and provide regular compliance reports to the court; could quite easily add a plaintiff lawyer or two to the payroll and eliminate the need for injured parties to give up 30-40% of an earned settlement by hiring individual plaintiff lawyers to represent them. Our staff plaintiff lawyers could handle the legal work while we would automate the rest. (Patent pending!)

Sure there are some holes, and it's a tad more complicated than it appears, but with time and energy, we knew we could address these issues. After all, when the most successful plaintiff lawyers travel around in their privately-owned jets, we correctly deduced that there was enough financial incentive for plaintiffs/claimants to try a new approach if it meant keeping more of the settlement they "earned" through some hardship.

Now, I have no particular beef with plaintiff lawyers, and I believe they perform a critical role in our society and they deserve to be richly compensated for their efforts. But that doesn't mean as a businessman I like them enough to not find a way to do what they do more efficiently, and in so doing earn some of the proceeds of that efficiency.  I like my Audi too, but on my next purchase I'll still try to obtain the best deal.

One of the plaintiff lawyers in the room where I gave this anecdote, a former leader of her local Bar Association, rose in outrage. She proclaimed that what I described was nothing short of a second American Revolution, requiring the suspension of the rule of law and leading to a complete loss of freedom and the American way. She was dead serious. Her inability to see how technology and savvy business processes were better for her clients than her warehouse full of disorganized boxes of claims and supporting documents led her to perceive that any change to the status quo was tantamount to anarchy.

Similarly, in my large law engagements I'm regularly confronted with partners whose every action shouted "This is the way it is, the way it's always been, and the way it always will be, and I have only so much patience for you little people who suggest I change my ways merely because the clients desire I do so."

Lest I and other pundits like me come across as somehow disgruntled with the legal profession, nothing could be further from the truth. I've spent most of my adult life working to support and improve the business of the legal profession. It's frustrating to see such obvious opportunities for positive change overlooked by leaders of enterprises whose primary focus should be on operational improvements to win and keep business. Instead, I see a lot of hand wringing, hiding in the sand, and cost-cutting masquerading as business process improvement.

I'm hopeful law firm leaders will learn. In some cases, it may be only after they're hired as a salaried lawyer by an entrepreneurial outfit that siphoned off their firm's clients, improved efficiency, quality, and client satisfaction, lowered costs, and increased profitability.  And they'll eventually learn how startling easy it can be, relative to obsolescence.

No reason that entrepreneurial outfit can't be your own firm, starting today.

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.