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Post #436 – Sunday, December 13, 2009
An Innovative Approach To Managing Through The Recession
Having spent some time working in Europe recently I was struck by the approach taken by two UK managing partners in weathering the recession.
‘How you approach a recession is significantly reflective of your own view of recession’, claimed Peter Martyr, the chief executive of London-headquartered international firm Norton Rose. ‘If you haven’t experienced one before, it’s all too easy to become spooked by events and what’s going on around you. To survive, you need to have confidence, and a deep understanding of your own organization and where its strengths and weaknesses really are.’
Norton Rose chose to ask staff to vote for a flexible working scheme. Their scheme contemplated allowing staff to either work four days a week on 85% of base salary, or take a sabbatical of 4 to 12 weeks at 30% of salary. 96% voted in favor of the plan (partners included). Martyr says: ‘If the recession lasts two years, the overall cost to us of the flexible working program will be neutral, but the social impact will not be neutral. We will have maintained a highly loyal and motivated group that are respectful of what we have done and think we have behaved decently.’
Norton Rose hopes to emerge stronger from the recession as a result, and is not the only firm with ambitious and optimistic intentions.
Another large, London-headquartered firm, Simmons & Simmons, was facing a similar quandary in relation to its trainees. Managing partner Mark Dawkins admited that managing the pipeline of future trainees was becoming challenging, because decisions on recruits have to be made three or four years in advance of their arrival. He saw rival firms asking trainees not to turn up, and in many cases paying them a lump sum to defer their start dates.
To preserve their pipeline of talent the firm decided to develop an MBA program focused on legal services (in conjunction with BPP College of Professional Studies) to occupy trainees for a year and give both sides a tangible benefit. ‘We thought rather than just flinging cash at people and saying go and have a nice time for six months, we could do something more constructive’, says Dawkins. ‘The trainees get a benefit, and have a real MBA at the end of it, and we will get trainees who can hit the ground running, understanding what the law firm does and what our clients need.’
The course is optional, but out of a total of 55 trainees that were due to start in September 2009 and March 2010, 29 have chosen to sign up. As well as having their course fees paid by Simmons, the students receive a £15,000 maintenance grant to cover living costs.
Post # 435 – Thursday, December 10, 2009
Are You Interested In The Asian Legal Market?
 There is now a new LinkedIn group, started last week by my good friend and colleague Robert Sawhney, specifically created for those interested in making valuable contacts and learning more about the Asian legal market.
This group's profile is defined as: A group for law firm partners, executives and other legal professionals from North America and Europe that are interested in learning about the legal markets in Asia. The group will provide news and insight into the increasing business opportunities for law firms from the West interested in Asia.
If you are at a law firm who is interested in exploring the vast array of opportunities in the Asian market, may I suggest that you join this group and participate in the discussions that are going on there now.
Post #434 – Thursday, December 10, 2009
This Storm Is Not Over
I just received an e-mail from my economist friend who helps me interpret and understand what might be going on out there in the ‘new normal’ that we are all experiencing. According to Eric, he tells me that . . .
 If the credit crisis is genuinely over and the economy is genuinely on the mend, someone forgot to notify Capital One Financial, one of America's largest issuers of consumer credit. Yesterday afternoon, at the Goldman Sachs US Financial Services Conference in New York City, Capital One's Chairman and CEO, Richard D. Fairbank, wowed the crowd with a dizzying collection of grim assessments and forecasts. In no particular order, Fairbank observed:
• The storm is not over and we continue to face several significant risks.
• With respect to commercial real estate, I believe we cannot see line of sight to the peak yet. I kind of feel it's going to get worse before it's better. (See my post #427 on November 17th)
• The housing market remains severely dislocated.
Fairbank placed this last observation in the context of an economy that is still wobbling on its feet and unable to generate employment growth.
"Despite last week's modest improvement [in the jobs report]," he observed, "the average time to find a new job remains very high, a sign that the job market is more frozen than in past recessions. Similar to labor markets, the housing sector remains severely dislocated, despite some signs of stabilizing home prices. There is a growing backlog of foreclosures. Inventories of homes in foreclosure or with severely delinquent mortgages are increasing. This is likely to put downward pressure on home prices as the foreclosure inventory hits the market. Continued weakness in housing puts pressure on the broader economy and makes any emerging recovery fragile. And some of the apparent improvements in the economy may not be sustainable. As government stimulus programs like Cash for Clunkers, first-time home buyer tax credits and other direct cash payments to consumers may have only fleeting effects."
During his presentation, Fairbank also sprinkled in a few dashes of optimism about Capital One's ability to "weather the storm." But apparently other company insiders have not shown the same optimism. Ryan Schneider, President of the Card division, sold 31,848 shares of COF during the last four months, and just announced his intention to sell another 84,518 shares. All totaled, these sales would represent more than half his holdings. Over in the accounting department, the CFO just sold $2.3 million worth of COF stock, or about one quarter of his holdings. NEWS FLASH: as a rule of thumb, insiders do not sell when they believe their companies stock will be going UP.
Post #433 – Wednesday, December 2, 2009
Raising The Bar On Transparency
 While I have personally admired (for over five years now) the advances in client transparency provided by a couple of forward-thinking UK-based law firms (and find nothing yet comparable in North America), I am now intrigued to report that Mallesons‘ (Australian Law Firm of the Year for the past four consecutive years) has a new client service tool that raises this bar.
Mallesons Connect is an extranet that provides clients with an unimpeded view showing how Mallesons is working rather than just what Mallesons has done. This system provides information via a direct feed from the firm’s various systems that clearly shows:
• Finances - project estimates, what fees have been incurred to date, aged invoices, etc.
(Work in progress information is an optional feature that is provided as a composite rather than in detail. Clients understand that the financial information is indicative rather than final, and is intended to help avoid surprises.)
• Projects - real-time status of projects and resource availability.
• Personnel - a directory of all Mallesons personnel working on projects for a particular client.
(The directory is tailored for each client to show the personnel organized in a manner that reflects that client’s business units rather than Mallesons’ internal organization)
• Current awareness information - news feeds, client alerts, etc.
• Deal rooms and Data rooms.
• E-mail - a complete real-time collection of all e-mail exchanged between the client and the firm.
(Imagine – your clients can see an organized real-time collection of firm correspondence)
Apparently Mallesons monitors client usage of the service very closely and then adapts the tool to suit each client particular needs. As a result, Mallesons will know, before anyone else, exactly what clients want and will be able to provide it while other firms are debating the merits of increased transparency.
Rumour has it that Mallesons put an extraordinary level of transparency into the process of developing the tool itself. They created a prototype and took it to their clients, only to discover that it wasn’t what their clients wanted. Rather than retreating, they worked closely with clients to develop a tool that met client's needs. This is probably a departure from the way most law firm techies are used to working. And, it will require a change in the way lawyers have come to view the process of developing practice support tools.
Stepping back from the detail, the key to making this work politically within a law firm is probably to start by providing non-controversial information such as prior invoices, completed and current work product, and e-mail the client has already seen. Once this is automated and functioning well, you and your client can then begin to think about what other information would be useful to make your relationship more effective and to help both of you manage the work. Taken from this perspective, it’s a win-win situation.
Here’s MY PREDICTION for 2010: A number of US law firms may yet see the competitive advantages available to them and considering entering this brave new world of enhanced transparency.
Post #432 – Tuesday, December 1, 2009
Are You Ready For The Future?
My friends, George and Margaret Beaton in Australia, have just produced a fabulous 3-minute video on the changes impacting the legal profession that is worth you having a look – here.
 Some of the highlights include:
• The US legal profession is worth close to $200 Billion
• The US has 5 times as many lawyers as India
• LPO professionals in India earn about $6000 US annally
• During the past 3 years, the legal outsourcing industry in India has grown 60% annually
• The India market for outsourced legal work is approaching $200 Billion
• In the US, the LPO industry grew 495% in 2009
• As yet, only 2% of General Counsel’s outsource offshore
• By 2040 India and China will have over 5000 firms, each with more than 100 lawyers . . .
and over 100 million lawyers!!!
ARE YOU READY?
Post #431 - Tuesday, November 24, 2009
Fixing Firm Compensation Models: To Fuel Value Focused Legal Delivery Systems
Following on a series of four articles about Alternative Fee Arrangements and co-authored by a Fortune 500 GC (Jeffrey Carr of FMC Technologies), a Managing Partner (Edwin Reeser), a leading practitioner in alternative fee arrangements (Pat Lamb), and a management consultant (yours truly), in November we set our collective sights to addressing a related issue - law firm compensation models. While there is no one standard framework or precedent to follow, each of these articles is attempting to provoke you to look at this challenge through a slightly different lens.
This PDF below contains our second series of four published articles:
• If You Pay For Hours, You Get Hours
Los Angeles Daily Journal - November 3, 2009
• Partner Compensation and The New Value Reality
Los Angeles Daily Journal - November 11, 2009
• Is your Partner Compensation System A Problem?
Los Angeles Daily Journal - November 17, 2009
• The Partnership Track: A Blind Race
Los Angeles Daily Journal - November 24, 2009
Download and read - Fixing Firm Compensation Models
Post #430 – Friday, November 20, 2009
Law Firm Rate Increases For 2010
As an active member of Legal OnRamp, I just happened to read a rant earlier today, posted by Susan Hackett from the Association of Corporate Counsel. Susan’s comments are extremely timely for those firms attempting to finalize their 2010 budgets. As I suspect that many of this blog’s readers may not have a chance to read what Susan had to say, I thought I would reproduce her comments for you to download and share with others in your firm.
 "I understand that most firms employ the business model of selling rates and hours, and thus the only way to make more money for them is to raise rates or increase hours. Since many are still struggling to secure the hours (even tho the billable "expectations" have not decreased), they'll seek to raise rates for the lawyers who remain working. But are they really that tone deaf? Do they really believe that the path to profitability requires increasing rates in 2010? Do they really not see not only the imperative (for their own survival and for longer-term-profit sustainability), as well as the opportunity, to start moving toward another business model of valuing their legal services based on the worth of what they sell and the efficiency with which they provide their services?"
Read all of Susan’s rant here.
Post #429 – Tuesday, November 17, 2009
Is Your Compensation System A Problem?
 So here’s the question for your next partner’s meeting or retreat: “If we never billed another client by the hour, how would we compensate our attorneys?”
Following up on our series of four articles written on the subject of alternative fee arrangements (see my Post #420), a Fortune 500 GC (Jeffrey Carr of FMC Technologies), a managing partner (Edwin Reeser), a leading practitioner in alternative fee arrangements (Pat Lamb), and a management consultant (yours truly) have now dedicated themselves to a second series of articles.
In this second series, the four of us have attempted to explore how a progressive firm might deal with one of the great impediments to adopting any new change – your firm’s compensation system. And while there is no one standard framework or precedent to follow, each of these articles is attempting to provoke you to look at this challenge through a slightly different lens.
This article appears in today’s Daily Journal. Download and read:
Is Your Compensation System a Problem? 
I will post the complete collection of all four of these articles next week.
Post #428 – Tuesday, November 17, 2009
Alternative Billing With A Yearly Subscription Strategy
 I’ve just heard about a Saudi Arabian law firm, Bafakih & Nassief who offers their clients unlimited advice in return for an annual retainer fee.
Apparently, under the terms of a specific 12-month fee arrangement, clients receive unlimited advice in a number of areas of the law that they choose. The legal advice provided typically covers the corporate, commercial and employment areas, although clients may choose to add other specified areas, such as intellectual property. Only third-party fees, governement fees and the costs of court experts in the case of litigation are excluded.
According to the firm, this arrangement enables them to study the client’s business over a period of time and in turn deliver custom-tailored legal services while the client controls the costs.
The firm claims it has already forged deals with over 10 large companies and fees typically range from $75,000 to $100,000 for a year. For the fee, the client may access the attorneys in the firm as many times as it requires and the firm claims that it guarantees a face-to-face meeting with a lawyer within 48 hours.
Post #427 - Tuesday, November 17, 2009
The Commercial Real Estate Crisis
In my August 2008 advisory entitled Managing Through A Prolonged Downturn, I identified 12 danger signs that when considered collectively would indicate that this recession may be far more severe and prolonged than one might expect. At that time, I suggested, that “if you are sick of hearing about residential mortgage problems, there is yet another potential crisis on the horizon – in commercial property." In my May 21 posting (#388), Listening To Economic Happy Talk, I reported an interesting statistic I just came across – “as a guiding rule, every individual laid off from their job results in 180 square feet of vacant commercial space. So if we’re currently seeing layoffs in the range of 600,000 a month . . . well, you can do the math.”
In 2007, a real estate company paid $281 million for the 42-floor office complex at 333 Bush Street in San Francisco. We all remember that address because the building primary tenant Heller Ehrman filed for bankruptcy and stopped making its rent payments. Well, apparently now the building’s owners have stopped making their loan payments and the lender is expected to begin foreclosure proceedings. So much for the unshakable belief that everyone once had in real estate never going down!
Now, according to the cover article ‘Deep Trouble’, in the November 16th issue of Business Week, commercial real estate prices have plunged 41% from their peak in 2007 (worse than the 30.5% fall in the housing market). The report tells us that the commercial storm is still gathering strength such that between today and 2012, more than $1.4 trillion worth of commercial property loans will come due (ain’t it amazing how the word ‘Trillion’ just crops up everywhere these days?) Banks are anticipating that borrowers will have trouble rolling over as many as three-quarters of the loans they took out in 2007.
Expect more commercial property foreclosures, expect more banks to fail, expect more property companies (like mega-shopping mall owner General Growth who declared bankruptcy in April) to go under; and according to this Business Week report, don’t expect the commercial real estate market to fully recover until about . . . 2020. OUCH!
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