Whither Sales in Law Firms?

Lawyering is a noble profession, not to be confused with the untidy and significantly less elegant profession, if one can call it that, of sales.  I didn't go to law school to learn how to sell.  My clients trust me; they don't want some smarmy sales pitch.  I can see why firms of a lesser reputation resort to such tactics, but my firm is different and that won't work here. Hogwash or doctrine?  Should the modern law firm embrace sales, particularly in light of the changing economic climate where demand for legal services is no longer a given?  Or will sales blow over, like TQM, and branding, and knowledge management, and six sigma, and all the other corporate fads that have no place in the practice of law?  Can we even have a rational conversation about sales in law firms when we don't even call it sales but rather euphemistically refer to it as business development so as not to offend the delicate sensibilities of the timekeepers?

Last week I had the good fortune to share a daïs with several experts in the field of law firm sales.  Steve Bell is, to my knowledge, the first head of sales in a major US law firm, and now the CMO of Womble; Rob Randolph is the director of business development at Midwest power house Bryan Cave, a firm noted for innovation; Jim Cranston is a longtime professional sales trainer now with legal consultancy Hildebrandt; and our moderator was Patrick Fuller, Senior Business Development Executive with ThomsonReuters, the giant in information services for law firms.  The venue was the annual Raindance conference, produced by the Legal Sales & Service Organization and managed by ThomsonReuters.  Our host was the fine Hotel Sax, adjacent to the House of Blues in Chicago (although I would be remiss if I didn't give a shout out to the fine folks at the brand new Hotel Wit just across the bridge at State & Lake).

The first order of business was to question the premise:  Should law firms have a sales force?  The panel was of one mind that no matter what we call it every law firm has an existing sales force whose role it is to bring in new business.  In most firms they're called lawyers.  By the way the lawyers are also the products and the owners.  Whether a firm should add extra folks whose responsibilities are limited to sales is a separate question, and turns out to be the red herring in most conversations of this sort.

I've long contended that the essence of good lawyering is the essence of consultative selling.  Both focus on identifying and understand problems, and finding solutions to overcoming the problems.  Any lawyer who considers himself a good problem solver can also be a good business developer.  And just like there are multiple approaches to solving a problem, there are multiple approaches to generating new business.  There is no one-size-fits-all.

There is a wrong way, of course.  When you watch classic sales movies like "Tommy Boy" and "Glengarry Glen Ross" and "Boiler Room," the sort of movies that inspires poor students with winning smiles and firm handshakes to make a living by coercing others, I certainly hope you realize that this kind of selling is as far from consultative selling as playing your Wii video tennis game is from facing Roger Federer's blistering serve on center court at Arthur Ashe stadium at the US Open.

We discussed the difference between Marketing and Sales.  Marketing generates awareness and leads.  Sales is a process of identifying needs and offering customized solutions.  In this context, "closing" is a natural outcome of good needs analysis and issue spotting, rather than coercion.  When you submit a proposal, if you don't have a good sense of the probability of winning the business, then you've skipped some steps along the way, guaranteed.

Marketing may be all that's needed when demand is high.  After all, the goal then is to direct potential clients your way rather than to an alternative supplier.  Absent high demand, e.g., the state we're in today, sales (okay, business development) becomes more important.  We must differentiate ourselves not by our credentials but by our ability to understand the client's business (not legal!) concerns and identify solutions to overcoming those concerns.  We can differentiate ourselves as much by the use of a consultative and customized process to identify concerns and solutions, not just by the solution itself.

I've recently been called upon by a few large firms to help them sort through their marketing priorities.  In light of the recent slowdown, they are busier than ever trying to win new clients.  My friends in marketing departments are short-staffed and working long hours fulfilling the requests for marketing support, and demanding partners don't like to be kept waiting.  But let's be clear about what are good efforts to develop new business and what is merely posturing.  Asking the marketing department to produce yet another practice or industry brochure or compile a pitch book of deal lists and bios to leave behind with a prospective client after a lunch meeting is not developing business.  Business development cannot be delegated.  Marketing can be, but to generate business you must sit with a client or prospective client and ask the questions that will uncover needs and lead to customized solutions.  Pitch books are busy work, efforts that make it seem like we're making progress toward winning work by showcasing all that we can do.  They have a role.  But this isn't sales.

The panel provided insights into the areas where sales experts can augment a law firm's own lawyers' efforts.  But first, let's understand the math.  No professional salesperson or sales consultant or in-house marketing & business development professional can have an impact on par with the combined strength of every member of a law firm partnership even marginally improving his or her skills at winning new business.  So where can sales professionals add value?

In-house and outside sales experts are catalysts.  Good lawyers, even those who buy into the consultative sales process, suffer from periodic call reluctance.  By contrast, professional salespeople are often eager to pick up the phone to schedule a visit or make an introduction.  Cold calling and setting up meetings with people we don't know is daunting to many people, which is why many corporate sales teams have dedicated appointment setters.  Look to your in-house experts to help arrange initial meetings.

All sales take place on a continuum, where the suspect becomes a prospect becomes a client becomes a repeat client.  Most call this the sales funnel because there are typically far more prospects than clients.  Selling legal services is no different.  If we take the prospective client from initial introduction to pitch within minutes, our probability of success is limited.  Anyone who has dressed up to visit a client with the express purpose of reading the firm brochure to the client (we often call this a "beauty contest")  is familiar with these odds.  However, when we take time to get to know the prospective client, walk him through an organized analysis of his needs, prepare customized proposals that demonstrate an in-depth understanding, help quantify the impact of doing nothing, then when we ask for the business our odds are much greater.  Professional salespeople are accustomed to working a process, and can help lawyers stay focused on the next step.  Left to their own devices, many lawyers will hold an informative initial meeting and then wait for the phone to ring.  It might help to have an expert nudge now and again.

I've hired many former athletes as salespeople, and not because their imposing physical presence convinces buyers to cough up money!  Athletes have a lifelong understanding of how training, repetition and a focus on details lead to success.  Athletes practice fundamentals over and over and over.  Do you think the layup lines and shoot-arounds before the opening tap at professional basketball games are in place merely for show?  Practice leads to muscle memory.  A professional salesperson will never walk into a client meeting without having scripted and practiced what will take place.  Those who believe preparation consists of huddling in the client's lobby deciding who will take the lead and who will say what mere moments before walking in to deliver your pitch have as good a chance as a popcorn vendor who selects 4 teammates at random from the crowd moments before tip-off to compete against the Los Angeles Lakers.

We closed by touching on compensation for professional salespeople in law firms.  The mantra is that fee-splitting is not ethical and therefore not allowed by the various Bar associations.  Once again, the business of law firms is unique and corporate techniques won't work here.  Nonsense.  Every corporation has constraints of a similar magnitude.  How do you compensate the salesperson who made the original sale a year ago when the customer buys an upgrade this year from the service team?  How do you compensate the team serving the customer's west coast office when the decision maker resides in the east coast office?  When we bundle two more services, do we split or overpay compensation?  These specific challenges may not mirror what takes place in a law firm, but should illustrate that finding a way to compensate people who are instrumental in making a sale isn't any more difficult in a law firm than in a corporate setting.  Find some correlation between revenue growth and level of contribution, revisit it periodically for fairness.  And try not to fall into the trap of assuming that since we made the sale, we must have been predestined to make the sale, and therefore let's discount the contribution of those who helped make the sale.

Most lawyers didn't enter law school to become salespeople.  And nothing I've described above requires a change in profession.  Whether the objective is to improve the selling skills of the lawyers or to find the right fit for a professional salesperson on the staff, the real takeaway is that to survive and thrive in today's market requires more than waiting for the phone to ring.  Solving a client's problems shouldn't be all that daunting a task.  What are you waiting for?

Law Firm Leaders and Law Firm CMOs: Stop Whining and Get On With It

The legal marketing community has been abuzz in the last few days after Zach Lowe in the AmLaw Daily posed the question, "How Essential is a CMO?" following the announcement that long-tenured BigLaw CMO Ed Schechter left Duane Morris.  Experts have weighed in, from Heather Milligan's dead-on comparison between an essential CMO and a non-essential CMO, and Mark Beese's list of five critical contributions of a top CMO. Indeed, in this space I have often challenged law firm leaders to take stock of their current organizational structure, adjusting not just compensation and staffing ratios, but finding new and innovative ways to deliver legal services in more cost-effective ways.  Since a seasoned BigLaw Chief Marketing Officer is all-in a half million dollar investment, it certainly makes sense to question whether in today's economic climate this is a wise use of a law firm's capital.  Like most good debates, there are multiple valid perspectives.

A seasoned marketing executive can help a law firm differentiate itself from the pack.  In a world where every law firm claims to be big but offers a personal touch, represents big corporations to small businesses, values diversity, is client-focused and offers leading expertise in dozens of practices, one can readily see the value in standing apart from the crowd.  Don't believe me?  Visit Ross Fishman's Automatic Brochure Generator and tell me if it's indistinguishable from your firm's own copy.

A seasoned marketer can help define the optimal client footprint, i.e., which work do we enjoy, that is profitable, in growth industries, with clients who have needs that span our practice and office mix.  Instead, most of the many firmwide and practice group marketing plans I've reviewed tend to fall into the "We'll chase all new revenue" category.

A seasoned marketer will be able to distinguish between building awareness and generating business, and therefore offer tactical support to move prospects from a wish list to an active client list.  Nearly every marketing plan I've observed includes at least one "unicorn" statement (referring to my daughter's wish for a unicorn on her 3rd birthday):  "We hope to increase revenue from key clients and prospects in our target markets."  This is essentially useless.  What it really means is "We hope the phone will continue to ring as a result of worldwide demand for legal services, despite our inept approach to business generation."  Good marketers don't traffic in unicorns; they take actions and build processes that are designed to generate revenue.

A seasoned marketer will build an operation that performs the above tasks, and many more, in such a way as to optimize the competing constraints of speed, quality, subject matter expertise, available resources, time zones and, shall we say, partner importance.  It's a poor operation that merely reacts to whoever is shouting the loudest at any given moment.

So why don't law firms rush to hire experienced professional marketers?  And why are many eliminating, or considering eliminating, those they have in place, or delaying replacement hires?  It's as simple as BigLaw leaders not understanding the revenue-generating impact of a good CMO.  But the legal marketing community isn't blameless either.

Many of our most senior marketers are hesitant to embrace the financial aspect of the role.  Measuring return on marketing investment is difficult even in the corporate sector, and BigLaw poses additional challenges because annual budgets are a relatively new phenomenon, partners often have great latitude in spending "marketing" funds and expenditures are typically viewed as one-time debits to cash flow and profits rather than investments with multi-year horizons.  As a result, many senior marketers are thankful they aren't given budget responsibility and don't contribute to revenue forecasting when in fact this is a glaring omission.

BigLaw partners operate under the amusing notion that a flat governance model in which every partner is an equal owner with equal authority is somehow a rational business choice, when in fact it's an inefficient, extraordinarily dilutive and disruptive structure that persists due to inertia.  To be clear, the partners can organize their sandbox however they want, but this scenario rewards senior marketers who have learned to please partners above advancing the financial interests of the firm.  Indeed, there are countless examples of experienced marketers from other disciplines stymied by the bizarre world of BigLaw.

As one CMO put it to me without irony, "Success in a large law firm is all about credibility, which means accepting that we don't often do things the right way, we do them our partners' way, but after about a year of serving their needs you should have built up enough credibility to gently make suggestions, most of which they'll discard, but to survive you can't try to do too much too quickly."

And let's not overlook the recruiters in the field who specialize in moving around the same players, or at least the same skillset, because it's the safe approach to placement. I've been approached more than two dozen times for law firm CMO roles and each recruiter plays some variation of the same tune: "This firm is not like all the rest. They have good practices, with loyal clients, and very few toxic partners. They don't need a change agent, what they need is someone to keep the trains running on time. They hired someone in the past who spent a lot of the partners' money (on restructuring, branding, CRM, advertising, or whatever) so now they really just want someone to maintain what's in place."  Or as one BigLaw leader euphemistically declared, "We're picky and we're looking for the perfect candidate."

There is no perfect formula for a law firm CMO, though some have offered useful advice here and  here and here.  Others have offered criticism, here and here.  I am a long-time passionate supporter of the legal marketing profession and its professional association, and I'm a paid adviser to law firm and practice group leaders on how to grow and manage their business.  This experience has led me to these simple conclusions:

• All businesses need a continual focus on identifying targets and pursuing opportunities.  While a law firm shouldn't mimic a traditional corporation in all respects, recent events aptly demonstrate that BigLaw leaders who confused high demand with business acumen should now seek expert assistance to help them create demand.
• BigLaw leaders need to discard the outdated notion of the role of a CMO, hire experts who know their craft, and give them air cover to inform the debate and drive positive change.
• Legal marketing has come a long way but still has opportunities for growth.  The old formulas valuing longevity and loyalty and keeping the peace should make more room for financial acumen, forecasting and planning, business development  and executive presence.  To be sure, people skills are always important, but let's find a way to solve for financial success rather than merely keeping partners happy.

We don't all have to get along. But we do have to recognize that long-needed change is afoot, and with change comes discomfort -- and this applies equally to BigLaw leaders and legal marketers.  Indeed, in my prior corporate life some of our greatest successes came only after forceful debates and significant disruption. The economic downturn has already provided the disruption, so let's not let it go to waste.

Galileo Was Wrong: The Earth Revolves Around Lawyers!

In Biglaw, there's an established hierarchy: Partners are at the top of the heap, followed by junior partners, non-equity partners, senior associates, associates, paralegals and then staff (although some C-level administrators have risen to a more exalted status). Where do clients fit in? It depends. Sometimes they are listed in strategy documents as more important than the partners, but generally we know this not to be true. In actual fact, few law firms rely on client needs as their driving force. Law firms are law firm-centric. In fairness, the legal market is at the tail end of a cycle of near limitless demand for legal services. In a demand-rich market, existing clients and new clients will come calling no matter what you do, so it's hard to expect a change in behavior when it's so profitable to stay the course. But where clients are concerned, there is general agreement that the client's law department, represented by the General Counsel or Chief Legal Officer, is the appropriate focus of attention. By and large this works. Many business leaders aren't sophisticated enough to grasp the nuances of legal issues, so it's best to have a buffer between the businesspeople and the lawyers/counselors. I don't buy it.

I've had the good fortune to lead divisions of publicly-traded businesses, and I can't recall a single instance where I or my colleagues felt insufficiently equipped to address business or marketplace issues and as a result needed to turn to our in-house law department or outside counsel for insights. In fact the opposite was often true. In over a decade of boardroom participation, only a few enlightened colleagues of mine regularly invited the General Counsel or law department liaison to our strategy meetings. These were the same leaders who invited the head of HR to attend as well. The feeling was, it's important for everyone to understand what we're trying to accomplish as a business, and what challenges we face, so everyone can execute their function in accordance with the agreed-upon goals. Very rarely did the HR leader or the lawyers have a speaking role in the substantive discussions, though they were expected to provide updates on their functional areas. This is not a slight to the in-house lawyers or HR professionals. It's merely a fact. In any enterprise there are those who formulate strategy and those who execute. The legal department and the HR departments executed.

On a number of occasions where we gathered with the board or executive team of an acquisition target in a secret location to discuss a business combination, we always invited the lawyers because there were items on the checklist that only they could handle. But they otherwise didn't speak much. When outside lawyers were invited, they sat next to the in-house lawyers and spoke even less. Again, none of this is meant to demean the important role lawyers play in doing deals, but the point is they were there to identify and quantify risks in executing the deal so the business people could incorporate this into the financials, or choose to build versus buy if the risk was too great. We never asked for a go/no-go decision, and we didn't ask for exhaustive explanations of the legal issues in play. We asked about the obstacles, the techniques to overcome the obstacles, and the cost of doing so -- and not the legal cost, i.e., the legal bills, but the cost to proceed. For example, I wouldn't want to know how much the law firm will charge to counsel us on new regulations; I wanted to know how complying with new regulations would impact the cash flow projections. Again, the point is, on the business side we rarely think of things in legal terms, but in terms of how legal issues impact our ability to proceed.

In point of fact, the earth does not revolve around the lawyers.

I met recently with the managing partner of a well-established mid-size firm. I was advised that he was brilliant, an incomparable mind in a firm of brilliant minds, which led to his status as the firm's leading rainmaker for a generation. Indeed I found him charming, engaging and clearly of high intellect. But his "secret" approach to winning business is simple and he knows it: he discusses business issues with his prospects and clients, always looking at things from a business perspective rather than a legal perspective. As a result, he has become a trusted business advisor to his clients, not merely a lawyer. This partner is held in high esteem by his colleagues, but many find his approach mystical and unconventional. I find it to be perfectly in keeping with the sentiment expressed above. Business executives don't need legal advice; they need to identify and quantify how legal issues will impact business decisions. This managing partner is concerned that not enough of his young lawyers get this point. I think he's right.

You may have heard about the brilliant dialog taking place on Legal OnRamp regarding the hoped-for demise of the billable hour, which picks up the gauntlet thrown down by ACC in its Value Challenge to change the in-house counsel/outside counsel dynamic. Along these same lines, a very smart colleague of mine, Ron Friedman, recently wrote a short discourse positing how a corporate CEO and his CFO likely came to the conclusion that finally, after years of waiting for the law department to reign in legal spending, it was time to change the game. It's a clever piece and you should read it. My only quibble is the premise for the conversation:

CFO: We need to talk about how much we spend on legal. Since our fiscal year ends in November, I usually have time over the holidays to do some real thinking. This year, I read up on the legal market. It’s not pretty. And I’m not sure our general counsel is the solution.

CEO: Ok, you catch me at a good time. Yeah, I agree our GC is not controlling costs. What can we do?

CFO: Legal costs keep going up, both in absolute dollars and as a percent of revenue. Other cost centers – HR, Marketing, Facilities, and even my own Finance department – have driven costs down as a percent of revenue. Sure, we face more regulations and law suits. But give me a break. Lots of articles report on in-house lawyers complaining about costs. The GC response? Precious little beyond begging for discounts.

CEO: You’re preaching to choir. I hear lots of complaining about legal costs. The whole legal thing is like that movie Ground Hog Day with an even worse twist. Every day is the same but nothing ever improves, lawyers don’t learn from re-plays. It’s hard to figure out how a whole economic sector got so stuck.

CFO: Actually, it’s easy to see why we’re stuck. Who buys legal services? Lawyers. Where do our lawyers come from? The law firms we retain. Do our lawyers think the same as our outside firms? Yes. Are lawyers trained to manage? No. What do our inhouse lawyers do? Lawyering, not managing. So we’re stuck with buyers who share the same bad traits as our suppliers and who travel in the same circles. The hard question is how to get the system unstuck.

In my experience, it's very unlikely that a CEO and CFO would frame the issue in terms of the evolution taking place in the legal industry any more than we'd investigate changes in coffee bean production when looking for cost savings from the company's hospitality vendors. More likely the annual (more often quarterly and lately even monthly) exercise to identify and reign in uncontrolled costs will eventually paint the legal department as the only function unable to provide and stick to a budget. I've written before about how division heads are required to submit revenues and costs 18 months in advance, incorporating whatever uncertainty we can and notwithstanding exogenous events we're held to these targets, and for acquisition or new product business cases we're often held to 5 to 8 year cash flow projections. However, we routinely receive reports from the legal department indicating that they can't provide even a broad range for legal costs for the usual transactional items, e.g., immigration, employment, real estate, etc., let alone pinpoint complex litigation or M&A costs. So a more plausible premise for the discourse above might be:

CEO: Have we identified the cost centers that have unallocated funding and swept them of all but the costs linked to our strategic priorities?

CFO: All but the legal department. They claim there are too many uncertainties to fix a budget beyond headcount costs, and even these may fluctuate depending on the volume of legal work.

CEO: Hogwash. Give them another chance to establish a budget using a decision tree or Bayesean analysis or whatever methods they feel are appropriate, incorporating the risks and complexity of our strategic priorities. If they can't do it, assign them a fixed reduction percentage and then tie the GC's bonus to achieving the funding envelope.

CFO: Done.

If this conversation hasn't occurred in the board room of most companies in recent months, it will. In a recent interview a colleague conducted with a General Counsel, we learned that the GC was given a mandate by his CEO to reduce legal spending by 70%.  Ouch!  If you're a law firm partner, are you ready to help your client identify and quantify the risks associated with his organization's business strategy? Do you understand that if you are unable to participate in this discussion, there are many other law firms who are gearing up for this exact conversation? What will you be doing instead?

Differentiation

Law Firm Snowmen

I spoke to a legal marketer today who is struggling with how to differentiate her firm from the many perceived competitors of a similar size, in a similar geography, serving similar clients. No question this is challenging. In the legal marketplace we tend to create even more obstacles because we focus inward... What do WE want to be known for? What messages do WE think will resonate with our clients? When we do look outside our four walls, we tend to look at peers or competitors for guidance (and assurance?) that our message is articulate, even if it's the same message everyone else is sending.

Over time, the leading law firms -- whatever their size, whatever their geographic reach, whatever their practice specialty -- will come to realize that it's the client's perception that matters. Their perception of the law firm IS the brand, and we establish these perceptions based on how we act, how we service their needs, how well we align our legal services to achieve their business needs, and so on. Branding and differentiation aren't merely about presenting a different look in our marketing materials or having a snappy tag line, though these tactics can be helpful. It's all about ensuring that when a client or potential client has a particular need, your firm comes to mind as the only possible advisor to get them through it.

Non-Lawyer Ownership in Law Firms

In today's Birmingham (UK) Post, we learn that the law firm of Blackbourn & Bond have appointed a new director of business development.  Law firms hire marketing and business development professionals all the time, so what's newsworthy about this?  Mark Callahan, the new hire, is not a lawyer (he's a "non-lawyer" to BigLaw insiders) but he holds the distinction of now serving as an owner of the law firm. Under the recent UK legislation known as the Legal Services Act, UK law firms may now move along the continuum toward more conventional businesses and may take in external capital and share fees with owners who don't practice law.  Traditionally, as readers of this blog undoubtedly know, law firms operate as a partnership with only practicing lawyers allowed to have an ownership stake and share in the fees.  This is a welcome change, at least to anyone who has worked closely with BigLaw and has witnessed the colossal waste and inefficiency that takes place as very smart, very capable but extraordinarily inexperienced lawyers play dress-up in running a large enterprise.  (We don't mean to offend. Of course there are many fine law firm leaders. But the greatest challenge lies at the practice group level, where managing the business is often treated as a distracting hobby.)

But is it only about operating more efficiently?  Of course not.  The entire point is to better serve clients.  As Callahan points out, “This will also ensure that [the lawyers] concentrate on what they do best; advising clients on business and commercial property law."  Nick Blackbourn concludes, "This will in turn assist us to develop the firm, and become even more commercially focused as lawyers for business.”  Hear, hear.