In a February 29th article for Corporate Counsel titled Big-Firm Associates: Why They Go and How to Keep Them, Ben W. Heineman Jr. and David B. Wilkins discuss associate attrition at the top 250 law firms.   According to the story, firms are losing up to 50% of their associates after three or four years with half to two-thirds of them being the associate's decision to leave.  Heineman and Wilkins talked to students, associates, partners and inside counsel and came away from their discussions with the belief "that for a significant number, their first professional experience after at least seven years of higher education is too unprofessional and demoralizing."

Some of the problems listed:

• Early in their careers, far too many associates are given a steady diet of drudge work: reviewing documents; reading e-mails; organizing schedules for transactions; researching small, tangential issues.
• Associates work on large teams and are not given individual responsibility of any consequence.
• Partners may not take time to communicate the overall issues and strategy in a large matter, but just send younger associates off to till a small part of the North 40. Too often the junior associates have to work for senior associates whose goal in life is their own advancement, not the well-being of their younger colleagues.
• Partners, who have huge workloads and unceasing pressures to produce, do not spend much time worrying about the professional development of young lawyers nor provide adequate mentoring, education and training.
• Firms may not communicate candidly about their finances, their business strategy and the partnership prospects for young lawyers, who are not treated as young professionals but viewed as generators of "rates x hours" for annual revenue models.
• Corporate clients are unwilling to take risks on young associates and unwilling to pay their rates, so associates may not have interesting opportunities such as doing important work, meeting with businesspeople, or traveling to depositions, hearings or arguments.

Wow, this sounds a lot like many small and mid-size firms too.   So how can this benefit midlaw firms?  By correcting the above problems to the extent they persist in your firm, you can get the talent that biglaw firms can't keep.  For those firms who are having a hard time finding associates motivated to work, here's your opportunity.

Change in large corporations and large law firms is slow.  Mid and small law firms can make change occur much more rapidly (though historically no law firm is immune to procrastination when it comes to change).  To the extent that your firm is bitten by any the above problems, take action now to remedy them. Give more responsibility to associates.  Mentor associates and give them more ownership of matters.  Encourage associates to become better "firm citizens" by instituting an "upward review process" and providing opportunities for them to participate in strategic planning.  And, although you can't force a client to take associate work if the client is not comfortable with "taking a risk" with associates, you can help form client perception of the quality of your associates.  Allow associates to be more active in discussions to display the competence of your attorneys.  If you don't feel confident that your associates have the abilities to take on such added responsibilities, mentor them and if that doesn't work, they may not be a good fit with the firm.

According to the article, the attrition is made up of :

1. some just paying off school debt and intended to leave once the debt was satisfied;
2. some who follow spouses taking jobs in different locations;
3. some taking higher paying jobs in banking, etc;
4. some wanting a better quality of life; and
5. some who don't want to work themselves to death only to get denied partnership status. 

An amazing number that was listed in the article was that 25% of the 40,000 law school graduates were hired by the top 250 largest law firms.  10,000 graduates going to the top 250!  The number may be inflated a bit and the article did qualify the number, stating "by some estimates", but that is a pretty high number of recent graduates concentrated into a few firms. 

How many of those lawyers leaving biglaw firms will be willing to take a pay decrease?  With an attrition rate of 50%, just 20% of the 5,000 would provide 1,000 lawyers for mid and small law firms to hire at a better cost than you would when those same lawyers were more expensive and didn't have 3 to 4 years of experience.  Sounds like a deal to me.

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services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

 

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While it isn't May yet, the May 2007 issue of IOMA’s Law Office Management & Administration is already out and it identified four misconceptions about the benefits of law firm mergers:

1. It turns out that bigger doesn’t translate to better or more profitable. The correlation between firm size and revenue per lawyer or profits per equity partner is less than 3 percent.

2. Corporate clients do not always prefer large law firms as indicated by a survey of in-house counsels. Less than 30 percent indicated a preference for firms with a national presence while the remainder indicated that what mattered was value.

3. With only a 1 percent share of US legal spending, being bigger hasn’t given the AmLaw 100 law firms a dominant position in the marketplace.

4. Economies of scale are not realized by mergers or size. As one general counsel put it, “I’ve never seen a law firm merger justified on the basis of reducing cost to the client.” As one DuPont lawyer recently pointed out, surveys consistently show that larger law firms spend more on overhead on a per-lawyer basis than small firms.According to the DuPont representative, costs go up following a merger and higher costs aren’t the only negative. “We have discovered that the larger the law firm becomes, the harder it is for the firm to serve us as well as it has in the past."

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center at 877/377-374, e-mail info@juris.com or go to www.Juris.com.
 

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Mega US and UK firms “…have sacrificed lawyer quality in the past 15 years by expanding like ill-considered hamburger franchises all over the globe."

 

The above is a quote from J. Daniel Hull.  If you are a regular reader of Dan Hull’s blog, What About Clients, you know that the question isn’t “Where is Waldo?”  In the legal community, it is "Where is Dan?”  I am continually amazed when post after post comes from another spot on the globe.  Dan practices international law.  He appears to practice it on location with a globe-hopping voracity that astonishes. 

 

A clue to his remarkable worldwide contact list appeared in the mail this week when I received a News Release from Dan’s firm, Hull McGuire PC.   Hull McGuire is a member of the International Business Law Consortium (IBLC), a clearinghouse of more than 85 corporate law and accounting firms in strategic cities worldwide. 

  

What really caught my attention about the news release was Dan’s observation about the preference among his corporate clients for midrange law firms.  Dan’s complete observation was as follows:

 

Our clients, which are large and publicly traded, often prefer services by IBLC firms as an alternative to using the ultra-large US or UK-based firms which, in our view, have sacrificed lawyer quality in the past 15 years by expanding like ill-considered hamburger franchises all over the globe.  The IBLC offers first-rate and aggressive business lawyers and litigators who choose to be in smaller firms (10 to 130 lawyers).

 

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center at 877/377-374,  e-mail info@juris.com or go to www.Juris.com.

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Providing case-related information to law firm clients has become a weapon to win and secure corporate business.

 

One of the speakers at the 2007 LegalTech conference told his audience that most of the extranets and other similar technology investments by law firms would wind up on the junk pile. Why? Because a corporate law firm can’t continue to go to more and more extranets, each using a different user interface and a different proprietary arrangement of case information.

 

Corporate clients will eventually have to go to a single digital information center and each law firm's information will have to flow into that system, much like electron billing is currently handled. What the speaker envisions would require “standards” like those being developed by LEDES and the development of value-added networks that will receive information fees from multiple law firms and then convert the received information from the standard formats to that required by the corporation. 

 

I suspect it will happen, but the timeline will be longer than the speaker envisions and the road there will be a winding one.  In the meantime, extranets for communicating with a law firm’s clients can provide a competitive edge worth going for. However, before you set out to build your silver bullet for winning a particular client’s business, my advice is to go visit them.  Spend time learning about the reports, charts, graphics, and key performance indicators they use to manage their relationship with outside council and to stay on top of the matters being handled by the law department.

 

Plato recognized that “Necessity Mothers Invention” as early as 360 B.C. Your law firm’s clients are inventive.  They will find a way to piece together solutions that enable them to get the job done.  You are likely to find great ideas that would have been missed in designing things from the view of the law firm.  Here is a secret worth remembering: Rather than offering something that has to complete the solutions your client has already invented, why not make yourself a shoe-in for winning their business—making their idea and approach even better.

 

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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Rees Morrison wrote a must-read article for the Legal Times that is also available on Law.com. When it comes to practices within your law firm, Rees believes your bills read like an open book. Bills tell clients the whole story—the good, the bad, and the ugly. In his article Do the Math on Outside Law Firms, he points out that he is writing about more than “the kinds of billing abuses that third-party bill auditors should ferret out — block billing, differences in amounts billed for the same event, days of more than 10 hours billed, and long, suspicious patterns of hours.” He notes that, “Bill review should not be just a drudgery to be gotten through. In fact, bills can tell you much more about the performance of your law firms and your own staff than most law departments realize. “

While law firms look at their bills as just a record of the billable work and pass through expenses for the period covered, savvy corporate clients are reading between the lines. Here is an executive overview of some of the things a savvy corporate client is likely to read into your bills:

Those 0.2 billable hours added each month read “Partner Sprinkling” and don’t expect me to pay for drive-by billers.

An associate with more than 1000 to 1500 hours on my matter, all in one year, doesn’t have enough to do and is padding their billable time at my expense.

More than 30 percent partner time means I’m paying partner rates for associate and paralegal level work.

If expenses are more than 10 percent of the bill, my guess is that no one in the law firm is looking out for me. They aren’t getting the best price for expenses passed through to clients.

I can tell it’s not a well-run (managed) law firm because their bills included work and expenses more than 30 days old. Sloppy is as sloppy does!

While there can be a good and legitimate reason for all of the red flags listed above, the client-centered law firm will review its bills from the client’s point-of-view to manage the client’s business efficiently and to proactively communicate with the client when billed items, left unexplained, might indicate otherwise.

Rees W. Morrison, co-head of law-department management consulting for Hildebrandt International, hosts the blog Law Department Management.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

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There is an interesting story coming out of the U.K. It often happens that things on that side of the pond find their way here without a long delay.

It seems that the Royal Bank of Scotland and ABN Amro are about to take e-billing to the next level—requiring law firms to provide them, as clients, with a continuous stream of hourly and expense activity. They want to “monitor” their matters and the staffing in “real time”, according to an article titled E-billing: thrilling or chilling? on The Lawyer.com.

Will we see a similar movement in that direction in the U.S. among the corporate consumers of legal services? Yes, but expect it to come with a heavy budgeting requirement imposed on the law firm. To the corporate clients, uncertainty is even more important than reducing legal cost. They want to know the estimated cost and benefit through the conclusion of the matter or case, not just a running tally of cost incurred to date.

For more on the trends in e-billing, see my prior post Corporate Clients to Demand More Electronic Incorporation. In that post I noted that the movement toward continuous information exchange demands is likely to parallel the implementation of the new LEDES XML standard by time & billing software vendors and the e-billing value added networks. Full implementation from time & billing vendors to the corporate consumer is expected by 2010. See the quotation below from that earlier blog post:

“What you can expect is an increase in corporate demands for information. By 2010, you are likely to be submitting budgeting information and regular projected cost updates on work undertaken for major corporations. You are likely to be required to update timekeeper information in real time for any change to that information.”

“Law firms with business and billing software that is not on the leading edge of LEDES developments will find they are at a competitive disadvantage when competing to gain or retain work from major corporations and financial institutions. The following legal business system vendors are on the board of Directors of the LEDES Oversight Committee: Juris, Inc., Aderant, Thomson Elite, and RainMarker.”

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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There are important changes in the works involving the Uniform Task Based Management System (UTBMS) and for the Legal Electronic Data Exchange Standards (LEDES).

If you deal with the corporate world, you are submitting invoices electronically using the LEDES98 standard or some variations on that standard. Likewise, you are coding time entries using UTBMS codes (at least for litigation matters).

First, the group responsible for the maintenance and improvement of the UTBMS code set has merged with the LEDES Oversight Committee. That group has developed new code sets for trademark, patent and project legal work. The proposed new codes sets are still open to comment. The group plans to formally ratify the final code set prior to the end of 2006.

The big news is the move to XML by the LEDES group. This will begin to impact some firms in 2007, but widespread adoption by law firm corporate clients isn’t expected until 2010. Nevertheless, the impact will be significant, equivalent to the initial phase of electronic billing by corporate clients. What does that mean for the law firm? It means you need to be sure your legal business software vendor is one that keeps their software in synch with electronic billing standards.

The LEDES XML as a replacement of the LEDES98 standard will eventually result in demands from the corporate world for the electronic move of an expanded array of information. In addition to the new LEDES XML standard for billing information, the LEDES Oversight Committee had a new proposed standard for budgeting information. Work underway for timekeeper profile will accommodate the electronic conveyance of timekeeper information such as rates, where and when admitted to the Bar, law school dates, etc.

As it becomes easier to provide information and keep the law firm and corporate client information in synch, the hope is that friction cost is removed from the system, benefiting both law firm and client. However, make no mistake; the corporate objective is to reduce legal cost. Steven Levy with Microsoft Corp., who heads more than one LOC subcommittee, commented at a recent LOC meeting in Orlando that Microsoft saves two percent on law firm bills as originally submitted just by auditing timekeeper rates against engagement rules.

What you can expect is an increase in corporate demands for information. By 2010, you are likely to be submitting budgeting information and regular projected cost updates on work undertaken for major corporations. You are likely to be required to update timekeeper information in real time for any change to that information. Don’t be surprised when your corporate client begins to demand variable rates for timekeepers depending on the complexity of the matter or work undertaken.

Law firms with business and billing software that is not on the leading edge of LEDES developments will find they are at a competitive disadvantage when competing to gain or retain work from major corporations and financial institutions. The following legal business system vendors are on the board of Directors of the LEDES Oversight Committee: Juris, Inc., Aderant, Thomson Elite, and RainMarker.

PS: LEDES XML is also a replacement for the inadequately designed LEDES 2000, which while an XML version, was never embraced by the legal community due to its inadequate design.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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All that work by law firms to code time entries using UTBMS codes is largely going to waste—unused by most corporate clients.

Rees Morrison of Hildebrandt International reports that the UTBMS task structure fits best with litigation, which accounts for about half of the spending; the remainder of legal services never lent itself to a taxonomic approach suitable for coding. Even within litigation, the categories could be used very broadly and would not clearly distinguish what timekeepers were doing.

"On the law department side, three punctures let out a lot of UTBMS’ air. One, you need software to sort through the time entries and place them in their appropriate categories. Not every law department had that software. The bigger nail is that most law departments do not have enough similar matters to make meaningful comparisons on performance across law firms. The biggest inhibitor: Law departments do not take the time to analyze the data they could develop from the UTBMS codes."

For more on Rees’ observations about UTBMS, go to his blog Law Department Management.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

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I enjoyed reading Andy Peters’ article recently in the Daily Report. He was reviewing the highlights of a session that placed two prominent law firm attorneys as panelists before 100 in-house corporate counsels. Jeffrey Haidet, Chairman of Long & Aldridge, and William Brewster, the managing partner of Kilpatrick Stockton, took their lumps and served with honor handling such questions as:

• Why are outside firms slow to send invoices…..?
• Why don’t outside lawyers understand the business models and corporate culture of their clients?

Regarding the question on invoices, I am always amazed that law firm’s don’t understand that their corporate clients are not happy about being billed for work done over two months ago. It isn’t even unusual for the bill to be three months behind the actual work by the time it gets to the corporate counsel. That causes problems with their records. People tend not to be very appreciative of work done two or three months in arrears. The average law firm has 78 days of work in process and it takes 60 days to collect once the bill has gone out the door or across the Internet. That is money that is not in the partners’ pockets and it is an irritant to the law firm’s client. So, why not solve the problem? It isn’t rocket science. The steps are clear and simple:

• Require fee earners to track and report time extemporaneously as work is performed
• Give them the tools to do so including the ability to do so anywhere, any time preferably using BlackBerries or other PDA devices
• Use tools with spell check and automatic testing against the engagement standards (pricing and billing rules) required by the client
• Require time entries to be correct as submitted by the fee earner or as edited, throughout the month, by the fee earner's secretary or assistant
• Run bills immediately after month end
• Require billing attorneys to return changes within three business days or the bills go out the door “as is”
• Send bills electronically or by e-mail wherever you can
• If clients will accept it, change your service (billing month) to cover the period from the 26th through the 25th. Doing so means you have a bill in the clients hands by the end of their month even though it is a few days out of sync with the calendar. Many clients will prefer it.

As for the second question—why outside lawyers don’t understand the business models and corporate culture of their clients - I will save my comments for a later post.
 

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Getting ready for the holidays for me has always meant cleaning up things. That includes my pending file and C drawer. I’ll tell you more about my C drawer in a subsequent post.

 

In doing so, I came across an e-mail from an associate pointing out the following quote that appeared in the September 29, 2005 issue of Legal Technology Online.

 

“Technological prowess is such a key factor in corporate clients' hiring and retention of outside law firms, 35 percent of legal departments say they require electronic billing. Some have even fired law firms for lacking technical ability. On a positive note, clients like e-billing's streamlined invoice review and firms enjoy the faster payment turnaround. When it comes to billing, being "old school" is not a way to save money - it's a way to lose business.”

 

The quote first appeared in a National Law Journal article by James Evangelista, Teresa Strange and Kelley Johnston.

 

The more I discuss corporate mandated electronic billing with law firms, the clearer becomes a picture of two different spheres. In one sphere you have the firm's corporate clients. While these clients are motivated by a desire to lower legal cost, they don’t necessarily want to do it on the backs of law firms. They want law firms to become more efficient. They prefer predictability over lower cost and fewer hours over lower rates. They do give something back for the extra cost and effort law firms incur to comply with their electronic requirements. They do pay faster as promised.

 

The second sphere involves insurance companies. This group appears to chase the lowest hourly rate and gives little or nothing back. Firms report that electronic billing has not speeded up payments and, in fact, insurance companies slowed the entire process down by shifting to quarterly billing in many cases.

 

There seems to be give and take in the corporate sphere and all take in the insurance sphere.

 

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