Legal Project Management Q&A

In recent months I've trained hundreds of Biglaw partners on project management principles.  In some of the earlier sessions, a handful of partners would sheepishly acknowledge that they had no idea project management was a term of art, that it referred to a disciplined approach to managing a series of interrelated complex tasks.  Few now will admit to this blind spot, though among those who've heard the term most still don't know what it means for a law practice.  To help demystify the concepts, my colleague Pam Woldow (now with Edge International) and I presented a webinar recently on Legal Project Management.  (Click here to order the CD.)  Of the many webinars I've presented, this session had one of the most active audiences.  The questions were flying in from almost the moment we were underway.  We addressed many of the points during the session, but I'll expand a bit more here.  The commentary below is primarily addressed to those who've viewed the webinar or who already have a basic grasp of the concepts. First, what is Legal Project Management? Legal Project Management, or LPM, is the practice of applying tried-and-tested business practices used in other fields to the management of complex legal matters, both litigation and transactions.  While designing and constructing a large skyscraper is very different from defending a corporation against claims of IP infringement or assisting a private equity firm to acquire a majority stake in a closely-held technology business, in many ways the techniques to manage budgets, to deal with scope change and to communicate expectations among stakeholders during the engagement mirror the challenges faced by lawyers managing these legal matters.

Doesn't Legal Project Management apply only to commodity practices? LPM doesn't reduce the practice of law to a series of rote exercises that can be performed by any low-cost lawyer, ignoring all creativity and years of accumulated wisdom.  In fact, LPM very clearly embraces such experience by ensuring that legal matters benefit from this learning curve, rather than treating each legal matter as if it's the first of its kind.  Of course it's easier to take a systematic approach to legal matters if the matters are routine to begin with, but let's not kid ourselves.  Very few legal matters introduce completely new concepts.  Most law firms acknowledge this themselves by showcasing their lengthy deal lists and league tables.  If they only handled truly new and unique matters and cases of first impression, then little of that past experience would be relevant.

Then isn't Legal Project Management really just another name for Case Management or Matter Management? The concepts are related, but generally speaking Case Management and Matter Management are approaches to keeping track of the many aspects of legal matters with a particular emphasis on tracking costs.  LPM casts a much wider shadow.  The intent of LPM is not merely to track costs, but to control costs, to identify areas of variability in order to get in front of scope change before it happens.  LPM emphasizes performing the right activities to achieve the desired outcome and not more, while being mindful of one's duty of care and the client's risk tolerance.  Doing necessary work that a client will pay for is more efficient than doing unnecessary work that manifests itself in low realization rates.

So Legal Project Management means sacrificing quality for lower cost? Not at all!  We illustrate this challenge in our webinar in more detail, but these graphics are a good start.  Imagine the firm that begins lawyering up when the client initiates a new matter, without properly understanding the client's needs, scope and budget. What results might be the 3-tiered wooden swing when what was needed is a simple tire swing.  At times, clients do a poor job of articulating what they want; at times, chief legal officers don't fully understand what the business leaders want; at times outside counsel leaps to the conclusion that this client's fact pattern looks a lot like a prior and similarly-situated client's fact pattern, so work begins.  To belabor the metaphor, the associate builds a wooden seat, and the senior associate demands two wooden seats, and the partner demands three wooden seats because eliminating risk means doing more work and because "clients hire us to be more thorough than anyone else."  Is it compromising quality when we eliminate all lumber and woodworking from the matter, and instead provide the simple tire that fully meets the client's budget and expectation?

Why would we involve clients? Won't they always demand more for less? That's one way to look at it.  If your client doesn't trust you to do the necessary legal work at a fair price but no more, then of course given the opportunity the client may very well instruct you to do less work and therefore charge less.  This happens all the time.  Does the following sound familar?  "We will not pay for first-year associate time."  When you purchase a Mercedes (or a Honda Accord) do you feel the need to dictate who may staff the production line?  Clients impose their will on the process because they often don't trust that their outside counsel fully appreciate the need to balance legal risk with budgets.  Imagine, though, that the client is involved at the earliest stages and that all parties share common expectations for what legal tasks are necessary, for how long and at what cost (approximately), and imagine the client is fully aware of those areas where scope change of a significant magnitude is likely to occur, e.g., during due diligence, review by the regulating authority, if class cert is granted, and so on.  Clients demand more for less when they believe absent any control we'll do more for more.  LPM helps to manage expectations because everyone is aware of what's necessary in advance.  Of course, we can never eliminate surprise but the client who feels fully informed at all points in the process will be far more tolerant of change than one who's surprised every month when the invoice arrives.

So Legal Project Management means we'll bill less, and be less profitable? I'm a big believer that a financially healthy law firm is good for everyone, and there's nothing wrong with the Biglaw focus on profits if this focus doesn't interfere with the clients' needs.  But let's clear up a few misperceptions.  Just as many of us grew up with the notion that our home values will always increase, Biglaw partners have grown up with the notion that profits only result from high billable hours multiplied by ever-increasing billing rates.  There are even some who believe the ACC Value Challenge will result in lower compensation for outside counsel.  Hogwash!  Every other industry in the world operates under an assumption that another equally viable path to profitability is by lowering costs.  And we're not just talking about eliminating free soda.  If a client were to pay less because the firm put the client's interests first and determined that the legal issue doesn't need as much lawyering, we'd very likely see an increase in realization rates, we'd reduce the opportunity cost of assigning lawyers to tasks that ultimately will not be billed, we'll engender client loyalty and reduce our cost to acquire the next matter (the cost of sales).  These are plenty of ways to apply simple grade school math to illustrate this point.  To be clear, things are changing.  But change doesn't have to mean lower profits.

Does Legal Project Management help or hurt under an Alternative Fee Arrangement? As described above, the new math of law firm profitability means lowering the waste and inefficiency we create by performing legal work that cannot be realized.  Imagine if there's a capped fee in place, then any waste and ineffiency directly reduces the firm's profitability.  While there are many flavors of Alternative Fee Arrangements (AFAs), essentially they all require that the firm operate more efficiently, and absent a disciplined, rigorous approach like LPM then it's likely, bordering on guaranteed, that the firm will experience profit dilution and view AFAs with skepticism.  For my consulting practice, an AFA is a primary catalyst for embracing LPM; but the concepts apply equally as well in a billable hour scenario, even more so in an environment where the competition is creating downward fee pressure.

Do we need certified project managers?  Can our staff do this? The first caution is to understand that LPM is not a technology initiative, it's not something that can be delegated to someone else in the same way that law firms hire experts to handle Public Relations or to update the website or to manage the cafeteria or to tend to the grounds.  So often law firms treat business processes as technology initiatives.  Knowledge Management (KM) is about capturing and sharing knowledge to better train our lawyers and serve our clients, yet most law firms treat it as a database problem for the techies to figure out.  Client Relationship Management (CRM) is about understanding our clients, yet most law firms treat it as a mailing list issue owned by Marketing.  LPM is about better serving client needs by setting proper expectations, by providing the right legal services, and by dealing with change.  These are not tasks to be delegated, but tasks that client-facing partners must embrace.  Of course, when LPM involves creating pretty charts and graphs to show our progress on the project plan, then of course there are qualified people on staff who can do this more efficiently than a partner.  Some firms have hired certified project managers, but by and large their focus is on understanding the historical costs of delivering legal services, an effort designed to inform the partners when making pricing decisions.  LPM tasks can be delegated, but the partners must own the business process.

Legal Project Management

I've been spending a lot of time in recent months conducting workshops in Legal Project Management.  What is Legal Project Management, you may ask?  Simply put, it's the process of adapting business process improvement, resource allocation and predictable budgeting techniques to the delivery of legal services.

Some lawyers believe that the practice of law is not like other professions or business disciplines, and that therefore project management principles which work in other areas do not apply.  These lawyers are wrong.  That's not to say one can manage a complex legal matter as if it were an automotive assembly line.  But every legal matter doesn't have to be treated as a completely unique confluence of steps that has not occurred before and will not occur again.  Each of these steps can be broken down and analyzed, and when the opportunity arises for this step to be included in an engagement, there can be a greater understanding of the cost drivers. 

Understanding the assumptions that influence the cost of delivering legal services is critical to setting fees, and clients understand this.  After all, they go through a similar process when establishing their own cost and revenue budgets. My former colleague Pam Woldow and I have (literally) traveled the world delivering Legal Project Management workshops to law firms big and small, to law departments big and small, to corporate lawyers and litigators, to partners and associates, to finance and marketing staff... and our workload is increasing. 

We will be offering a webinar on Tuesday, March 23rd, 2010 at 1 PM ET to share our insights into Legal Project Management, and to address questions from those who are experienced Legal Project Managers as well as those who are just starting to explore this new frontier.  For more information, click here.

Legal Project Management is critical to managing legal work more profitably, but it's also an excellent way to achieve client satisfaction and to develop associates' skills.  We'll touch on all of this in the webinar.  If you plan to attend and wish to submit a question in advance for us to address, please post it in the Comments below.

Legal Budgets and Corporate Budgets - Why Predictability Matters

I recently met with a group of law partners to discuss the feasibility of increasing the firm’s billing rates for the coming year.  Normally this doesn’t require a discussion; the firm traditionally raises its rates 5-6% every year.  And normally this takes place in January once the prior year's books are settled.  This year, however, and to the partners’ credit, they questioned the optics of raising rates at a time when most of their clients are still suffering from the impact of the global economic meltdown, or the Great Reset, as Bruce MacEwen calls it. As we debated the pros and cons, it was apparent that the partners had very little understanding of the impact an increase to their billing rates might have on a client.   In fact, none of the partners had worked in a corporate setting previously so they had no real insights into the typical corporate budgeting process.  Perhaps a peek behind the curtain may help inform this discussion, as it’s a process full of surprises to law firms that often have rudimentary budgeting processes in place, if at all.

The first surprise is when budget discussions commence.  Assuming the fiscal year corresponds with the calendar year, most businesses start preparing budgets in August.  Yes, in August prior to the budget year.  It takes time to develop a budget from the ground up.  In days past budgeting may have been approached as an exercise in what’s different or, in other words, starting with last year’s budget and merely adding new items and deleting old items.  No more.  Now there’s an expectation that every budget must start at zero, and from this starting point we add in each and every cost until we identify the total budget needed.  And then we start paring it back.

Many lawyers operate under the delusion that the practice of law is inherently and infinitely variable, meaning that unlike other business functions one cannot predict legal costs with any certainty.  This opinion is often held by outside counsel and in-house counsel alike.  Imagine the plight of the General Counsel:  she doesn’t know how many deals the business executives may initiate in advance when even they don’t know.  She has no insight into what product liability suits the company may face, or what type of employment actions will be raised.  For litigation already underway, she can’t possibly predict the next move the adversary may make, so by definition she can’t budget for how she’ll react.  And even acquisition due diligence may reveal complications that are impossible to predict.  These are reasonable concerns, but they fly in the face of the number one rule in business: no surprises.

One can make mistakes when climbing the corporate ladder.  One can make some mistakes again and again.  One can even make colossal mistakes that cost the business money.  But the one mistake anyone aspiring to reach the board room can’t make again and again is surprise.  Corporations, both public and private, thrive on certainty.  Forward-looking statements to shareholders and analysts must be based on a reasonable estimate of future performance, or else the stock price will suffer in the market.  Even private companies that don’t publish earnings must have predictability to properly allocate capital.  For business leaders to establish priorities they must have the facts, and the worst crime is to provide inaccurate information because this leads to making poor business decisions.

Another surprise may be that erring on the side of caution can be as egregious a mistake as overestimating performance.  Imagine the Senior Vice President of Marketing who submits a revenue forecast estimating $275 million in sales, knowing full well that the business is on track to deliver $280 million in sales.  On paper this looks clever, because bonuses increase with overachievement, and everyone looks good when we beat the targets, right?  However, it’s not uncommon for the CEO and CFO to punish the business leader who builds in too much revenue cushion, because we might have made different decisions about our allocation of capital if we knew that we had more to work with.  A critical project with great long-term potential may have been delayed or tabled because we didn’t have sufficient investment available.  (The worst offenders allocate a reserve that benefits only themselves.)  Obviously there’s also punishment for missing the targets, particularly when it results from poor planning rather than external market events.

But how do they do it?  How do corporate executives weigh numerous variables to establish an accurate forecast?  After all, don’t most business functions carry some level of uncertainty?  Think of the head of manufacturing who must predict costs despite the possibility of critical supplies being hijacked by Somalian pirates, or labor unrest in the fields of South America, or political unrest in the Middle East impacting oil prices which in turn have a material impact on the costs of transportation in our supply chain.  And what about the corporate treasurer who has to predict the impact of currency fluctuations or interest rates on the company’s cash flows, in order to hedge against this.  Our head of Marketing has to examine multiple products across the spectrum of the business cycle, use a little game theory to predict what the competition might do in response to our new product launches, potentially even identify which customers are at risk before the customer even begins to explore substitutes, and build a revenue forecast amidst ever-changing market demand.

There’s no magic formula.  These business leaders build their forecasts block by block, inch by inch, starting first with the known – in the case of sales, perhaps we first identify guaranteed revenue from committed customer contracts, or in the case of manufacturing maybe we look at commodity materials where we have multiple suppliers to ensure sufficient flow and predictable prices.  We then move on to the harder calculations, one by one looking at product revenue in each jurisdiction, perhaps customer by customer; or examining links in our supply chain where we have limited redundancy and therefore greater risk.  Piece by piece we establish a forecast that builds from certain to less certain, but even with the less certain we identify the likely ranges and provide confidence levels based on identified risks.

So you can imagine the amused chuckles in the board room when the Chief Legal Officer throws up his hands and tells his colleagues that the legal function contains too many variables to possibly establish a budget, so instead he’ll take last year’s budget and add 20% -- to accommodate law firm rate increases and other variables – and he’ll only come back and ask for more if something changes.  Gone are the days when this was amusing.  Now a General Counsel may be shown the door if he can’t apply some rigor to the legal budgeting process.  This also explains the increased involvement of procurement officers in the selection, and management, of outside counsel.  This is a clear sign that CEOs and CFOs don’t fully trust their lawyers to extract more value at a lower cost from the in-house legal staff and suppliers, so they’re putting someone at the table whose sole objective is to reduce costs.  Or they wish to, as the saying goes, trust but verify.

These budget calculations and conversations start in August, are debated endlessly through September, and begin moving up the approval chain in October.  There are numerous revisions, typically, as you might expect, requiring all cost estimates to go lower and all revenue estimates to go higher.  But there’s a balance to be achieved between optimism and realism.  Newly anointed business leaders tend to believe that they can extract unnecessary costs that their predecessors overlooked, or that they can rally the troops to commit to higher revenue performance.  Entrenched civil servants throughout the corporation strenuously object to these stretch goals, and work diligently to maintain the status quo, with sufficient safety valves in place for when something goes wrong.  This can be invigorating, and it can be confounding, but in the end the corporation signs off on its revenue and expense budget for the coming year, typically by early November.

As my group of law firm partners discussed corporate budgeting, a few light bulbs appeared above their heads.  One corporate partner recalled receiving a letter in late October from a key pharmaceutical client indicating that they would not accept fee increases from any outside counsel in the coming year.  She recalls wondering why the letter was sent in October, months before most law firms issue rate increases, but it now occurred to her that the corporation’s budgets must have been locked by then.  Another partner realized that even when the economy is humming along nicely and law firms have the latitude to increase rates, the fee increase letters are potentially six months out of sync with the client’s budgeting process!  “No wonder clients claim we don’t understand their business,” he observed.  One of the partners added some levity by suggesting that the annual fee increase letters should go out earlier, say in July.  Another had us rolling in the aisles when she suggested that since law firms always raise rates, and clients know this, perhaps it’s the client’s obligation to build in these expected increases in their August and September forecasts.  When we realized she was serious, we ended up rolling our eyes.  In some segments in some industries, the suppliers can set the price and require the buyer to meet the price, or else not get the product.  (Have you ever tried to haggle significant savings on a Mercedes?)  There are a few law firms with such pricing power.  Let’s be clear: despite your desire to occup this space, the odds are your firm is not one of these.

But does this budget process really result in certainty?  After all, we’ve all seen – or we’ve owned stock in – companies that miss earnings forecasts.  In reality, one never eliminates surprise.  But we can get a lot closer by minimizing it.  There’s a formal process to deal with the inevitable changes that occur in most corporations.  It’s called a reforecast.  It may come as a surprise that most companies begin revisiting their revenue and expense budget numbers in early January.  After all, what can go wrong in the first few weeks of the year?  However, think back to when we began compiling our forecasts.  We weren’t even done with Q3, let alone Q4, so many of our assumptions for the coming year relied on assumptions for how we’d conclude the current year.  And guess what, things have changed since we incorporated those assumptions.

A reforecast is a formal process to revisit our assumptions, to look at costs that exceed expectations and revenues that fail to meet expectations.  And vice versa.  In many corporations this process repeats itself several times a year, often corresponding with the quarterly earnings report in public companies, and in recent years this process might happen 6 or 7 or even 12 times a year.  And it’s not simply indicating that revenues are falling short or that expenses are trending high and then receiving forgiveness on the goals.  That would be cool.  No, instead every functional leader has certain levers to pull to meet the agreed-upon expectations even when there are material changes in costs or revenues.  On the revenue side, perhaps we launch a sales contest, or lower prices to increase penetration.  On the cost side, perhaps we seek alternative suppliers, squeeze the suppliers we have, or reduce costs elsewhere by reducing staff.  Often the reforecast process surfaces significant trouble in one division that will be impossible to make up, so other divisions receive an involuntary revenue or cost surcharge to make up the difference.  This can be painful.  No business leader in the midst of stellar performance, overachieving on every goal, or even those barely meeting expectations, likes to terminate valued employees or table a valuable project because some other division failed to meet expectations.  But it happens.

To add more enjoyment to the budgeting process, most corporate executives have a portion of their annual compensation based on their ability to manage to their budget.  For example, the company may exceed its revenue and profit targets, the share price may exceed analyst expectations, the division may have enrolled a record number of new customers, but the divisional leader will lose 30% of his bonus because costs were over budget.  Those running the legal function are late arrivals to this party, but it’s becoming a material factor in their compensation now.

Recently I observed a panel of General Counsel discuss their likes and dislikes with outside counsel.  One GC remarked, much to the amusement of the roomful of outside counsel: “If my legal budget goes over plan, at least we’ll save money on my bonus.”  The GC didn’t laugh.  He was deadly serious.  The message he was trying to convey is that the late invoice, the one you generate only at the end of the billing period, the one that reflects billings 40% over the original estimate, the one that you’ll accompany with a brilliant, well-crafted memo explaining the 58 reasons why costs exceeded your original estimate, may literally cost him his family’s summer vacation rental, or a semester of his daughter’s college tuition, or the swimming pool he planned to install in the Spring.  Just as with the General Counsel who remarked, “If I don’t find a way to manage the legal function with a lower budget and without compromising quality and throughput, they’ll find someone who can,” your client needs you to be part of the team.

Perhaps these insights into the corporate budgeting process will shed some light on why your clients are so darned insistent on predicting legal costs.  In many cases, predictability trumps total spending, or, in other words, you can charge premium rates as long as you ensure that the fees are not surprises.  You may also question whether a fee increase is necessary this year, particularly since your client has fewer levers available to adjust for your increased cost.  Perhaps you can do a better job of estimating legal costs for your next project.  The project management techniques used in other business functions apply to predicting and managing legal costs, but that’s a topic for another day.

As another General Counsel said to me recently, “I know a lot of firms that are capable of handing my legal work.  I’m sure there are many more that I don’t yet know.  What wins me over isn’t always low rates or discounts, it’s finding a firm that really understands that challenges I face in my business – and this includes not just the legal issues I face in my marketplace, but how I have to manage my legal department as a business.  If I can find a firm that understands what life is like in my shoes, that firm will win my loyalty.”

What do you say, are you up for it?

Does Higher Price Suggest Higher Quality?

They say a picture paints a thousand words.  This picture, compliments of the New York Times Freakonomics blog, tells a whole story.  Does your firm offer the 5 ounce bag of Cheetos at 65 cents, or are you a "premium" firm offering the same 5 ounce bag of Cheetos at 75 cents?  So many law firms believe they occupy a premium position in the marketplace, one which justifies higher fees than the law firm down the street.  Yet they fail to differentiate themselves in any meaningful way, except on price.  Which are you?

Addressing the Martindale-Hubbell Question

One of the most common questions I'm asked as a legal management consultant specializing in law firm marketing and business development is whether there's any remaining benefit to participating in the Martindale-Hubbell Law Directory.  It's also one of the most common queries on the various law firm marketing discussion groups (here and here) and a common topic for legal bloggers (here and here) and journalists (here and here).  My expertise in the category comes from having led the Martindale-Hubbell large law and corporate business some years ago.  However, I typically remain quiet on the topic.  I'm told that, as an alum, critical commentary may be discarded as some sort of sour grapes and any positive commentary may be mistaken for misplaced loyalty.  The reality is, I may bring the most objective perspective of any pundit.  And it's from this perpective that I suggest that we're all asking the wrong question. Law firm leaders have an unusual reliance on precedent for decision support.  Invariably when assessing whether to launch or cease an activity, they will look to what other law firms are doing, particularly firms considered to be competitors or in their peer group.  There's strength in numbers, so if other firms are doing X, or discontinuing Y, this provides context and cover for us to do the same.  The problem with such thinking is that benchmarking works best in comparisons between similar entities, and law firms are as different as other businesses, even those in the same space.  (Do you think Mercedes-Benz closely follows what Kia is up to?)  Also, and not to put too fine a point on it, just because a respected competitor is doing something, or stops doing something, doesn't mean it's a smart decision.  The object lesson is that mimicking dissimilar organizations in dissimilar markets and in perhaps dissimilar geographies that offer dissimilar services to dissimilar clients, is hardly an exercise in sound business management.

Whether it's Martindale-Hubbell or any other directory, and there are many players in the space (here and here and here and here and here, to name just a few), the question for law firm leaders isn't whether other firms are participating or not, the question is whether our participation is an effective use of our law firm's capital.

A legal directory is but one component of a law firm's marketing mix, in the same way that a bowl of sugar-coated chocolate lumps (or is it chocolate-covered sugar lumps?) is part of a balanced and nutritious breakfast.  Rely on one component alone and your results may be less than desirable.  In a bygone era a legal directory may have been the only marketing tactic a law firm employed outside its own native market.  But today, there are countless marketing tools available, and the Internet provides potential access to countless buyers.  But access to such tools doesn't always mean they're used effectively.

Recall the appearance in the late '80s and early '90s of word processing and desktop publishing software programs, which provided average computer users with sophisticated tools to rival those of professional publishers.  What resulted was primarily an increase in poorly-designed, barely-readable newsletters produced by anyone with typing skills.  Want an example closer to home?  How many law firm leaders believe that ready access to self-help legal tools has eliminated the need for estate, bankruptcy and real estate lawyers?  Merely having the tools doesn't confer expertise.

This result also occurred when tools for web publishing became more accessible.  Recall the endlessly scrolling HTML pages of yesteryear, complete with blinking icons and spinning globes.  While both the tools and the professionals using them have improved over time, quite a few law firms continue to waste time and money because they deploy their marketing tools ineffectively.  Publishing a website but doing little to drive traffic from qualified buyers is much like printing a pretty, glossy brochure and advising potential clients to visit your office lobby if they want to read it.

Many law firm marketers and leaders focus on the design or even the usability of their firm's website, yet ignore the confusing area of search engine optimization (SEO).  Even many who invest in SEO efforts do so with the underlying assumption that their targeted buyers rely on the popular search engines to inform their buying decisions... it sounds logical, but is it actually true?  But it's not just about websites.  It's not too hard to identify the many associations and events populated by target clients.  Still, knowing this and actually sending lawyers to these events to participate are two very different things.

And this is where legal directories come in.  While law firms can do a lot of outbound promotion of their credentials, it's challenging and expensive to attract a lot of quality, and qualified, inbound traffic on a website.  Similarly, while law firms can send lawyers to mingle with potential clients, they can't send lawyers everywhere.

A sophisticated law firm marketing strategy plan will identify the ideal targets for the firm's offerings.  The subsequent tactical plan will outline specific actions to increase visibility with these targets, to demonstrate expertise and to convert targets to clients.  Reaching the target audience requires being visible in the places they visit, prominent in the publications they read and, of critical importance, being part of the consideration set when the buyer is ready to buy.  Some marketing tools are effective at generating awareness, e.g., advertising, sponsorships.  Others are effective at demonstrating expertise, e.g., speaking engagements, articles.  Some offer a little of both, e.g., websites.

Now let's play this out.  We've identified a target market, consisting of potential clients in a specific industry located in multiple jurisdictions globally.  We've purchased some search engine keywords to drive traffic to our website, we've secured a speaking engagement for one partner on a panel at a leading industry conference, another partner has been invited to contribute a monthly column in a trade publication, we publish a blog of legislative and regulatory changes impacting this industry, we send several lawyers to various industry association meetings, we advertise in multiple trade publications and we sponsor quite a few industry events.  The aggregate cost of these tactics is $250,000 -- assuming our search engine key words aren't in high demand, or the cost could easily reach ten times this amount.  And lest we quibble over the amount of this imaginary investment, trust me when I suggest this is a very conservative estimate.

Now imagine there's a legal directory that also targets this industry.  It offers a monthly e-newsletter containing lawyer-authored articles to thousands of opt-in industry decision influencers and decision makers.  A section of the legal directory website is dedicated to showcasing the unique talents of the law firms serving this industry.  The legal directory search engine allows industry insiders to research law firms claiming industry expertise, and provides users with quantifiable evidence of expertise to help differentiate from those law firms merely aspiring to enter this market.  Imagine that visitors to the legal directory website can click through to the member law firm's own website, and this traffic represents a meaningful portion of overall traffic to the firm's website, with the added bonus that these inbound referrals clearly represent qualified and quality traffic, and not, say, law students trolling for employment opportunities.  And don't forget about the legal directory's ranking of law firms specializing in this industry, compiled by editors who conducted independent and objective research.  In addition, perhaps the legal directory allows clients to provide commentary about the capabilities and service posture of the law firm, so that other interested buyers can make more informed decisions.  And maybe the legal directory forms an alliance with the leading industry association to embed a lawyer search engine on the association website.  Perhaps the legal directory offers online discussion forums where lawyers can contribute to substantive discussions in their practice area and engage potential clients in a running dialog.  And finally, what if the legal directory can provide statistical evidence that the sum total of its efforts influence buying decisions?  Can you quantify the influence that your other marketing activities have on your target clients' buying decisions?

There may not be a legal directory that does all of these things, or at least all of these things for all practice areas and industries.  But some may provide a host of meaningful opportunities to increase visibility and demonstrate credibility to a targeted market.  And that's the whole point.  All legal directories aren't created equal, and just because one doesn't suit your firm's needs doesn't mean another won't.  To be clear, in some cases there may not be any legal directory that meets your needs.

None of the above are unique tactics that a law firm itself couldn't adopt.  However, the scale of the investment to replicate the volume and quality of the traffic generated, to reach such a high number of qualified potential targets, and to sustain this visibility and demonstrate this expertise over an extended period of  time, will generally cost substantially more than the modest investment above.  Imagine if a law firm could obtain access to these benefits by participating in a legal directory for $10,000.  Or $50,000.  Or maybe it's $150,000.  Perhaps it's $250,000.  This price may seem high as a single point statistic on an invoice, but is it?

The point is, the value of such an investment can be effectively measured only by comparison to the alternatives.  If the firm can find a way to reach the target audience in a similarly effective manner at a lower cost, it should run, not walk, to do so.  There's no rule that says a law firm should invest in any legal directory, any more than it should invest in a website or in publishing client alerts or printing glossy brochures.  It's merely a function of how buying decisions are made with the target market, and what tactics influence buyers and buying decisions.  Some firms -- though thankfully fewer than in previous years -- still believe that marketing is about answering the phone in a timely manner.  And for some firms, this may be so.  For the rest, marketing is about investing thoughtfully in tactics that will provide a return.

So what does this mean for the "Martindale question?"  The analysis should contain a disciplined approach to weighing alternatives, comparing the costs of reaching targeted buyers through various means.  If a law firm leader is convinced that the firm's particular target audience can be delivered without investing in Martindale-Hubbell's legal directory, then this is an easy decision.  If the analysis suggests that Martindale-Hubbell can be a multiplier to the firm's own marketing efforts, and through careful negotiations the cost to participate is tolerable, then this is also an easy decision.

Likewise, it's okay to opt out simply because you want to save money and since others are doing so it's seems like a safe decision.  But let's not pretend it's a rational marketing decision when it's merely cost cutting.  It's also okay to invest time and energy in directories that provide little access to clients, but that allow the partners to boast of obtaining a top ranking in their practice category.  But again, let's not pretend we're making a rational marketing decision.

Many pundits will talk about the scourge of legal directories, or the demise of Martindale-Hubbell in particular.  My approach is more circumspect when advising my law firm clients.  Such investments are derived from analysis, not hysteria or conventional wisdom.  Even we supposed experts should be ignored if we enter the discussion with a pre-formed opinion.  I certainly don't feel qualified to advise a law firm leader of the effectiveness of his or her marketing investments until I study what he or she is trying to accomplish and what alternatives are available to achieve these objectives.

Some years ago a law firm hired a chief marketing officer from outside the legal profession, and she had no prior knowledge or pre-conceived notion of the effectiveness, or lack thereof, of legal directories.  At first she was a client but over time we've become friends.  When we first met she relayed that many of her partners and staff encouraged her to drop all directories outright.  Instead, she commenced an exercise to analyze the reach and effectiveness of each of the firm's existing legal directories, and invited representatives of other legal directories to provide quantifiable evidence of their product's reach and effectiveness.  In the end she canceled many, added a couple, scaled back a few, and augmented some, without regard to internal politics or favorites.  She even declined a fully-paid trip to speak at an industry conference, sponsored by one legal directory provider desperate to influence her decision.  Her announcement memo to the partners overseeing her analysis was detailed and disciplined and effectively eliminated any arguments, so everyone could go back to work.

I recently had coffee with my old friend and I asked her how it all worked out, with several years of history to analyze results.  She laughed and said that not every decision has worked out in the long run, but she feels confident that her analysis is as sound as it can be, and certainly more effective than her firm's competition.  She's now earned the credibility to act quickly and without onerous committee oversight, so each time one of her major competitors makes a hasty decision to reduce its spending on sponsorships or advertising or directories in areas her firm targets, she tends to increase her investment in order to capture the traffic the competition has given away.  This works for her, and though it may not work for the rest of us, how many of us are prepared to submit our decision criteria against hers to justify our marketing decisions?  I didn't think so.

One final note: the Martindale-Hubbell discussion isn't complete without acknowledging that the organization and the product offering has changed dramatically in recent years.  Countless wannabe pundits have concluded that "no one looks for lawyers in books any longer!" as if they're the first to offer this startling revelation.  If your analysis of legal directories, whether Martindale or any other, fails to consider the online and in-person components of the value they deliver (or claim to deliver) then your analysis is outdated.

Update:  Based on the many comments this post has generated over time, I'll make two additional points:

(1) Some directories are vanity publications, with no redeeming feature other than the ability for a lawyer to say he or she has achieved some professional distinction, albeit of dubious value.  The various state bar associations have started to look more closely at legal directories in an effort to help consumers distinguish between those that provide a valuable service and those that are mere puffery.  Not all legal directories can withstand such scrutiny.  Sooner or later, every legal marketer is asked to support a lawyer's "nomination" to the "Tall, Blond-Haired, Left-Handed Lawyers of the Upper Midwest" directory.  Nothing wrong with a little vanity press for a needy lawyer, but once again it's important to distinguish between such actions and actual strategic marketing.

(2) A common objection to participating in a directory is what I call the "mall rebuttal" which is usually some version of "We prefer not to advertise or promote our firm any place that our competitors are doing so."  The logic, presumably, is that if we promote ourselves in close proximity to competitors, we risk driving our potential clients to the competition.  If this were actually true, then there would be no malls, or shopping centers, or auto dealer supercomplexes.  In other words, if you can identify a venue where qualified potential buyers in a buying mode are routinely visiting, why would you reject this venue in favor of a isolated outpost on the edge of town than can only be visited by special arrangement?

As I stated above, I'm stridently neutral on whether a legal directory is an effective marketing tactic for a law firm.  I can't positively declare that a given directory is a terrible idea, or a wonderful idea, unless I know what your firm is trying to accomplish with its marketing strategy, and the cost of the alternatives available to do so.  If you conduct this analysis, you may be surprised to learn that some directories will survive the scrutiny, and others will fail the test.  You may also find that quite a few other common marketing tactics, when held to a standard of proving ROI, are not productive investments.  But measuring ROI is a topic for another day...