Nobody wants to be the one to share bad news with the family, but sometimes it has to be done. In this case, the bad news I'm talking about is telling your staff the truth about the health of the legal industry and its impact on their own well being. Unfortunately, there have already been losses and many staff are not paying attention. More telling is that staff have not changed their ways in preparation for the worse, which may be yet to come. It is time to be open about what is happening and how it may affect them. The goal is to share with them the realities so they can develop new skills and behaviors to carry themselves and the firm forward.
Legal spending is down across the industry, and though we have seen some uptick, the futurists claim it will never go back to prerecession levels. There are fewer big deals and even less "bet the company" cases. The American Lawyer website says "in the past ten years beginning in 2004, business legal service revenues fell from $159.4 billion to $118.3 billion." This is a 25.8 percent drop resulting in less work to go around.
What does this mean firms should be doing about staff? First, firm management needs to be honest and share the reality of a different legal industry. Supervisors can be proactive by encouraging staff to be more conscientious about business costs. Help them understand that they too can make a valuable contribution. Teach them the economics of your particular firm by explaining how the billing and collections process impacts the revenue and cash flow cycle. Show them ways to reduce waste and become more efficient. Encourage them through "suggestion boxes" and other means to improve internal processes and to do more with less. In her article Legal Practice: The Suggestion Box, Julian Summerhayes writes suggestion boxes are for "… any forward-thinking, innovative professional practice—anonymous or otherwise." Make your staff aware that they work for the firm and not just the specific lawyers or departments they support. They should be focused on the firm's economic success.
The American Lawyer reports that 60 percent of the Am Law 200 acknowledge offering discounted rates to their top clients. Alternative fee arrangements (AFA) are slowly becoming the norm, as clients want to have more predictability in their legal budgets. It is time to explain to the staff that an AFA can consist of any fee that is flat, capped, fixed, contingent, or value based. They need to understand that the hourly rate model is shifting and why clients are demanding this new model more often. Part of this explanation needs to cover the type of work that is profitable and the type of clients the firm needs. Often it is the assistant or paralegal who contracts with third party vendors for everything from court reporters to translation services. Teach staff how to negotiate and ask for better terms because under an AFA clients are no longer directly paying for these ancillary services.
Law is a reactive industry waiting for clients to call and for things to happen. Typically lawyers do not create needs or products. To succeed in the future, this must change. This is where the business development and marketing staff and even the technology department can step up to add value. Has your firm created any internal tools that could be packaged and offered to clients? Tap the resources of the professional side of the firm to look for business solutions that can assist your clients. For example, if you have created a project management system for monitoring legal work, could it be tweaked for clients to use to manage their legal spending? Often lawyers overlook the skills and abilities of the employees on the professional side. The time is ripe to tap into these assets and look for alternative revenue streams.
Technology continues to change the practice. Everything from e-discovery to client management systems (CRM) has an impact on the speed at which lawyers practice law. Secretaries and assistants need to keep current to remain competitive. Staff to attorney ratios are moving toward a 1-to-1 or < 1-to-1 ratio. This means some tasks will disappear or be outsourced and some staff will lose their jobs. Now is the opportune time to instill in the staff the need to heighten their skills. Firms can offer internal training or external programs in all the software platforms that efficient firms are currently using. Proficiency in Interaction, Relativity, Microsoft Office, and a myriad of other legal tools will become the norm and low performance will no longer be tolerated. High-quality employees will embrace the need to learn new skills so that they can remain employed or have skills valued by other firms.
Alternative law firms like Axiom and Elevate Services take work away from traditional firms. Along with these less conventional companies, consulting and accounting firms are also poaching work traditionally given to law firms. PwC has stated its goal to become a Top 20 legal services provider over the next five years. How can traditional law firms compete? By using their professionals to do more billable work at lower rates. One of the reasons these businesses impact the legal industry is that they use a more profitable model, which spreads the work around to be more efficient. Your staff have skills and abilities that can be more fully utilized especially among paralegals, technical specialists, and project managers. Engage your firm's nonattorney professionals by brainstorming with them ways to create more efficiency at the work product level. For example, many paralegals have the skills and knowledge to do work that first- and second-year lawyers currently do, at a much lower rate. Consider the options at your firm, and then create pilot programs to see what alternative working models are profitable.
As times change in the legal services environment, one thing remains even more critical: client service. We need to work harder to stay connected to the client as we use new and additional technology. Entire deals can be completed without the client and partner ever meeting face-to-face. Firms must continue to differentiate themselves through their client relationships. The 2014 BTI Consulting Group's annual report on client service says, "Only clients can define and measure client service—and as it turns out, not everyone measures up." It is the law firm's responsibility to teach staff, from the receptionist to the tech people running AV equipment, what exemplary client service is and how to deliver it. This includes being responsive, using and sticking to budgets, and communicating regularly with clients. The legal industry could take a lesson from highly successful hotel chains on how to train everyone from top to bottom in quality service. In Beyond Biglaw: Disney Lessons for Lawyers (Part 1) — Customer Service Gaston Kroub, a Biglaw partner writes, "Whether you are in Biglaw or a boutique, learning how to deliver superior client service is of paramount importance, especially in the free-for-all competitive environment we have been dealing with over the past few years."
Law firms have significant sources of data, which could be used to increase efficiency. Data sources are everything from timekeeping software and electronic bills to document management systems storing thousands of documents. All of this and more can be used to create efficiencies provided the firm has the technology and people to process and analyze the data. Lawyers do not have the time or interest to search through piles of data unless it proves their client is not responsible or that the deal documents are faulty in some way. However, if finance or tech staff were properly trained and charged with analyzing the data, there might be some clues on how to improve efficiencies or effectiveness. For example, if a firm charted attorneys who put in time daily against those who did it weekly or less often, they could prove that daily time keeping captures more time ultimately leading to more billable hours. Sharing this data analysis with your assistants can help them influence lawyers to change their behaviors regarding billing practices. In Frederick J. Esposito's piece, Making the Timekeeping Honor Roll, he says, "Wise lawyers know that contemporaneous timekeeping is essential to success ..." Now, who wouldn't want to bill more time?
So what is the point in all this? The lesson is to get firms to realize they need to include their staff in financial discussions, AFA implementation plans, and cost containment initiatives. Law firm leaders need to instill the necessity of becoming more skilled and efficient to benefit both the firm and individuals' careers. When firms acknowledge that the entire other half, the professional side, can and will have an impact on the future of their practice, then firms will be more successful. By embracing the above, leaders can change from the bearers of bad news to solution gatherers.
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