Golden Practices

Marketer to Attorney Ratio is 1:27

Some new legal marketing stats are in. Larry Bodine posted recent survey results reflecting that on average, AMLAW 100 law firms have one marketer for every 27 attorneys.

Don't worry too much about the reported average tenure stats. These are consistent with highly paid marketing exec tenures across all sectors (see my prior post here). Law is no different. Marketers are an itchy bunch to begin with, but together with stakes being high and participation/cooperation (and budgets!) of the firms being a bit lower than other sectors, well, maybe it's surprising marketers stay as long as they do.

I'm not sure of a ratio of marketers to accountants in either the Top 100 accounting firms or all firms in general but I'll dig around to see what I can turn up.

A New Value Based Law Firm (alt: What Pat Lamb is Up To)

Legal blogger and friend Patrick Lamb has been noticably absent from his blog lately (he promises to return when he remembers how to login write).

His absence isn't surprising when you learn what he's been up. Effective today, Patrick launches Valorem Law Group (valorem being latin for value) in downtown Chicago. The firm's placeholder website (at www.valoremlaw.com) will go up later this week.

Pat has been leading Butler Rubin which has stood out among similarly sized firms for its ability to compete with the big guys as a powerhouse litigation boutique. Pat is a believer in value pricing -- something Pat has demonstrated his curiosity and passion about on his blog, In Search of Perfect Client Service, but his collegues wouldn't go where Pat wanted to go with regard to VP.

In his own words, he describes the situation and his motivation to start Valorem, "...while many changes were instituted, the firm remained committed to working by the hour, and like other firms, its hourly rates continued to escalate with no end in sight. [He believes] that fees should be fixed, margins managed, and that performance should be a key factor in pay,"

I'm very happy for Pat who, along with two equally passionate members (and one more coming in April) starts this innovative new firm. They also begin with one full-time contract lawyer, two paralegals and an administrative assistant.

On a call with him yesterday (while he pretended to be sad about getting out of was distracted from moving into his new space) he told me about the 1920's era building they are moving into on Wacker with like-sized offices for all, lots of open collaborating space, a mock courtroom, and an edgy, high-tech set-up. Can't wait to see it!

You can read about his changes on Pat's Linked In profile.

Let's keep our eye on this firm; it will be one to watch as these lawyers set some precendent on the course toward the Firm of the Future. Happy 2008 Pat!!

BlawgWorld 2007 E-Book Just Released!

And Golden Practices is pretty darn excited to be part of it! Download BlawgWorld 2007 (PDF) free.

Technolawyer invited bloggers whom they defined as authors of the "77 most influential blawgs" to hand-select an essay each for this year's issue. The purpose is to help busy practitioners quickly skim to find which blogs are likely to be of greatest interest to them.

This picture from BlawgWorld 2007's launch party features two great blogger-friends I've had the pleasure of meeting personally (unrelated to this event): Adriana Linares of I Heart Tech and Allison Shields of Legal Ease Blog.

Most of the blogs are featured within are those I read religiously although there are a handful that are brand new to me and that I'm happy to discover. I hope you'll take time to discover them, too!

As an aside, the ebook is super easy to navigate as its creators boast readers are never more than 3-clicks from what they seek. It's a well-designed approach to e-books and if you are thinking of developing one, this is a model you'll want to check out.

Male/Female Partner Ratios

Interesting results in the new Accountancy Age Top 50 firm listing (UK):

On average women make up only 9.7% of partners within a firm and the number of female qualifieds has dropped year on year by two percentage points.

Interesting facts and perhaps the latter is a conseqence of the former? Or, perhaps not, suggests the only female managing partner in the Top 50, Linda Richardson of Morley and Scott:

I think it’s a matter of choice, when it comes down to it. It isn’t necessarily a matter of discrimination against a woman, it’s more of a choice that a woman makes in her life.

While UK average women ownership is roughly 9.7%, Mercer & Hole shows the highest woman-owned ratio at 24%. Kudos, then, to Mercer & Hole for being the sort of place where women WANT to stay on and become partners!

In the US, according to a 2006 study that included some 2600 participants, "Women now account for 19% of all firm partners, up from 12% a decade ago." The study credited quality of life initiatives as being responsible for this increase.

The study is known as 'A Decade of Changes in the Accounting Profession: Workforce Trends and Human Capital Practices' and was conducted under the aegis of the AICPA's Work/Life and Women's Initiatives Executive Committee.

This accounting/women study was referenced in comparison to the legal profession when an article hit the front page of the NY Times in March 2006 that caused a huge stir: "Up The Down Staircase: Why Do So Few Women Reach the Top of Big Law Firms?" 

Phyllis Weiss Haserot, of Practice Development Counsel, wrote "Up the Up Staircase: Follow the Lead of CPA Firms." She notes that the AICPA study shows: "A gender gap in the desire for partnership exists; 65% of male and 41% of female senior managers expressed a desired for partnership." This certainly corroborates the comments of Linda Richardson--but there's still a big gap between 9.7-19% who are partners and the 40% that aspire to be...

Phyllis also cites the study in that "Women are choosing smaller firms where their advancement is more pronounced" which makes sense.

Similarly, the Accountancy Age study comments stated that the smaller firms had significantly bolstered ethic minority partners ratios which the Big 4 dragged down. That the 10 largest firms only show only an 11.8% female partner ratio is definitely disappointing.

Getting to the heart of the matter, back in 2004, my friend Wendy Werner wrote an article "Where Have the Women Attorneys Gone." Wendy, like Phyllis in her article, is much more interested in fixing the disparity than in pointing it out. Both articles are very constructive.

I have to say that the really depressing news was in Wendy's article where she referenced:

The ABA Commission on Women also found that men earn twenty percent higher salaries than women, and are twice as likely to obtain a partnership than women with similar qualifications.

Hmmmm. Well, money isn't everything. Nowadays, time (as in non-working time) is a currency.

I say this is where smaller firms will win out. Smaller firms are simply more flexible. And this is a huge advantage for them that will play out in the next decade or so as we see talent flocking to the most flexible organizations. It's not just a generational thing, or a gender thing. It's what all of us want.

And it's what many people need as we tend to aging parents and raise children in a more dangerous society than the one in which we were raised. And we can do it so easily now with technology.

3 Positive Ways to Impact Your Firm

In a heavy conversation the other day with a friend who is also in the consulting profession, we reflected on how lawyers and accountants, through their associations, continuing education, and even with their consultants, have belabored much of the same 'stuff' for more than 20 years.

They (you...we...) worry about, ponder, and hear recommendations about, the same 'ol issues and concerns--yet they still go unresolved. These are things like recruiting, retention, cross-selling, profitability, succession, new business development, etc.

Look at the topics of most conferences, seminars, and roundtables and you'll see the same subjects over and over and over. Year after year.

So, we wondered...

• are firms going to session after session on the same topic in hopes of hearing a recommendation that is "easier" or less painful?
• is it that most firm leaders don't want resolution enough to actually take action? (ah, maybe retirement isn't that far away...and it will be the next generation's problem to solve...)
• how much is just plain overwhelm?
• or, maybe, could it be that the problems discussed are symptoms and not the real illness?

We also agreed there are some big problems that don't get talked about much. They are pooh-poohed or  swept under the rug and avoided all together.

My friend asked, "What do you think could most positively impact firms in the next 10-20 years?"

Not an easy question (and my crystal ball is in the shop) but after thinking awhile, I offered these three things:

1. Morale
2. Forethought and Reflection
3. Differentiation

Though they look small, they are not.

MORALE has dramatic impact on customer service and longevity not to mention its benefit for personnel.

Job enjoyment, magnetizing the firm to attract more and better talent, and energy toward learning and excelling--the desire for people to go out of their way to impress each other--are all tremendous results of great morale.

Much of the delegation problem is trust and training based. Great morale creates the behaviors that increase trust. Don't underestimate this as a core goal for your firm and better!

Lawyer Ad Rules and Blogs

Absolutely ridiculous! NY courts, through state ethics restrictions, are trying to impose a huge "Advertisement" label on legal blogs and ALL electronic communications by or about lawyers.

"This blog is false and misleading (in New York)" Read the post and note, at the bottom, that NY is accepting comments on their proposed changes in rules until Nov 15.

Another case of lawyers who don't "do" marketing and communications trying to stop those who do.

I know the late night ads, radio ads with sports figures, and the "we'll get 'em" yellow-pages ads all embarrass more traditional attorneys. But the way to fight it is not through Court restrictions, it's through demonstrating how you're different.

Those fighting blogs and the very essence of communication should recognize how effective these activities ARE at demonstrating that very difference.

Those who "don't" always jump in when they see marketing techniques that work. The good news is that it appears the verdict is in: lawyer blogs are effective and are posing some level of threat to lawyers who just won't market at all.

Ads With Punch

Dan Hull over at What About Clients? posted about an ad his firm ran in 1998 in three East Coast newspapers for eight weeks.

For professional service firm ads, there seem to be only a few options:

1) all about us (who we are/what we do) serving to establish brand;

2) the tombstone (more "about us"; usually self-congratulatory; less relevant to the reader than type 1);

3) problem/solution (call to action, hopefully) addressing an issue common to a buyer paired with a solution; and

4) testimonial (happy customer; usually high-profile) sharing results gleaned.

In professional services, most ads are types 1 & 2. It is a becoming a little more common to see type 3 ads as firms realize that readers respond to demonstrated understanding and appreciation of their problems. Type 4 ads are fairly common by firms who aren't fearful of flaunting their client list. Type 4 can be very effective if done well.

I cannot specifically recall another instance (before Dan's--especially in 1998) where I've seen a firm advertise, in a print publication, a better "experience" to be had when using them--an approach constituting a 5th ad type: the experience.

Dan's firm, Hull McGuire's ad copy was

IS THIS A GREAT TIME TO CHANGE LAW FIRMS, OR WHAT?

Doing business has changed. But many law firms haven't.

They still charge for "services" and overhead no corporate client should have to absorb. Like associate lawyer training. Duplicative conferences. And senior lawyers who will never understand or care about your business.

The product is disappointing. Service and follow-up are only words. And the bill makes you nuts.

Stop being the equipment in games lawyers play. At Hull McGuire, we focus on clients, and solving their problems. We build lifetime relationships with businesses of all sizes.

IT'S TIME, ISN'T IT?

HULL MCGUIRE PC

I'm not surprised Dan would be involved in taking this approach given his blog's client-centric focus. What were the results of his ad? Dan wrote:

Maybe it was dumb luck, but this very basic and somewhat crude ad produced:

1. some wildly enthusiastic phone calls from people we did not know (in the first week, one GC, apparently sober, congratulated us from an airport payphone during a layover)
2. some catty but entertaining and telling comments from lawyers in Pennsylvania and D.C. we did know
3. firming up for us at least one still continuing relationship with a like-minded company fed up with the lethargy and indifference of its traditional large law firm

Dan's blog should be regular reading for his spunky approaches to being successful doing something different from the "safe" approaches most everyone else takes. I love that he's not only not afraid to be different, but he's proud of it and promotes it well.

Dan also hosted a global-flavored edition (#65) of Blawg Review. Be sure to check out the fantastic work Dan has done compliling global legal blogs. There are some real gems in his list.

Advice for Professionals Considering a Blog

A lot of CPAs and lawyers ask me if they should blog. Why do their competitors blog? Is blogging a silly trend they can ignore until it goes away?

Not so oddly (for people familiar with strategic marketers), my advice is seldom the same from one firm, or one person, to the next. But here are some basic considerations...

For professionals who want "off the hook" where blogging is concerned, here's a list of who should NOT blog:

1. Blogging is not for the professional wanting to be "uninvolved" with his or her marketplace.
2. It is not for the person who doesn't stay informed on at least one particular area of practice (be it a specialty or industry)
3. It's not for someone who's uncomfortable stating a distinct opinion or offering analytical perspective
4. It's not for a professional who only writes in "technical-eze"
5. Blogging is not for someone who won't spend an hour or two a week (at minimum) working on posts.

Blogs do accomplish some things that no other current method of marketing or communications can.

1. A blog gives readers insight into the author's personality and demeanor
2. They can demonstrate actual expertise whereas websites usually claim it but fail to substantiate it
3. They help people and show others what is good about your profession and why you add value
4. Good blogs show young professionals that your firm is "with it" (bad ones, just like bad websites, show potential hires that you're NOT with it)
5. Blogs can lead to publicity, interviews and writing/speaking opportunities for you and your firm
6. They open the door for conversations and relationships with other bloggers, colleagues, and prospects who already know you somewhat through your blog and decide they WANT to know more!

If you are still thinking about blogging, there is some great advice on Seth Godin's blog where he shares over 50 tips on building blog traffic. Some of his tips are contradictory demonstrating that different strategies work for different bloggers for different reasons. My favorite tips are:

• Learn enough to become the expert in your field.
• Be among the first with a great blog on your topic, then encourage others to blog on the same topic.
• Share your expertise generously so people recognize it and depend on you.
• Announce news.
• Do email interviews with the well-known.
• Point to useful but little-known resources.
• Don't promote yourself and your business or your books or your projects at the expense of the reader's attention.
• Don't be boring.
• Write stuff that people want to read and share.

My addition to Seth's list: Remember, it's always about what matters to the AUDIENCE!

Best Law Firm Website Ever

Hysterically funny...a lawyer we work with just pointed us to this wonderful firm site. This "firm" spent a TON of time putting this together. It is in jest, but in many ways, it really is better than a lot of real firm websites.

I think this excerpt from their "Meaning of Life" page conveys more truth than comedy. The whole site does, really.

Our study has revealed, among other findings, that the meaning of life is hard work, performed without rest and without complaint, for purposes often vague and unclear, in concert with people you neither trust nor respect. And that those who seek meaning elsewhere are simply misguided, and in line for a life of failure and disappointment.

And an associate bio (Chicago location) reads:

Notable Experience: Ms. Grimes ("Grimey") provides support to partners who counsel chief executives and corporations on employment arrangements, incentive compensation agreements, and non-compete agreements, with a specialty in determining how corporations can avoid providing benefits to their employees. Thanks for Ms. Grimes' work, at least three dozen children have been orphaned, and seventeen others now live in the park. She is listed in The Best Lawyers in America.

Hobbies/Interests: Spider solitaire; freecell; minesweeper; Snood.

Family: Divorced twice. Non-custodial parent of two children. Elderly mother living in her basement.

Best Experience at the Firm: "I got a paper cut once. It was exciting to feel something."

Worst Experience at the Firm: "Getting suspended for a week without pay because I got a paper cut."

Advice to Law Students: "Don't get paper cuts."

This is the great work of Jeremy Blachman, author of Anonymous Lawyer. He says his site just went live on Tuesday! Check it out.

Under-delegation Hurts Retention, Profitability and Marketing

Professionals understand delegation is beneficial, yet few are compelled to do enough of it. Let's see if some of the thoughts below help create more movement toward delegation behaviors.

In my previous post entitled "The Profitability Problem" I touched on several factors that deserve much deeper discussion. Leverage aka "delegation" is one.

In a comment to that post, David Maister suggested that I skated over the topic of delegation (or leverage)--that I "gave up" and suggested firms just won't get better at this. And he is right, it deserves deeper discussion. I promptly sketched out some thoughts right then and there, but I didn't finish constructing the post until I saw David's post today (which I cite below).

My thoughts fall into 3 major categories:

1. delegation & profitability
2. delegation & marketing, and
3. delegation & personnel retention

What's Behind Exemplar's Approach?

For anybody wondering "what is the deal?" with the rebel firm, Exemplar Law Partners, the Adam Smith Esq. blog features an OUTSTANDING post getting to the heart of it all.

ELP is the law firm that has completely re-engineered the traditional law firm operating and pricing models. Bruce MacEwen interviewed ELP CEO Chris Marston and he tells the story beautifully.

I think MacEwen summarizes it well:

Is Exemplar the most unorthodox law firm I've ever encountered?  Are a passel of the ills besieging our profession to be laid directly at the doorstep of the billable hour?  Do a large cohort of clients prefer fixed fees?  Can, in fact, high-end legal services be priced that way?  Has Chris Marston drawn a line in the sand?   Yes, in spades, to all.

Adventure of Strategy

I bring to your attention a truly outstanding blog: Adventure of Strategy by Rob Millard. He has a fascinating background and is a principal with Edge International.

I've been thoroughly enjoying his writing since I came upon it a couple months ago. I am delighted to add Rob to my Great Blogs list as a high-quality, thought-provoking resource for professional service firms.

Thank you for your excellent insights, Rob.

How Many Non-Professionals in Your Firm?

An interesting post on the Professional Marketing Blog talks about how, in law firms, there are the lawyers and then there is "everybody else."

I disagree with Larry Bodine, though, who says:

No other profession makes this derogatory distinction. Accounting firms don't have "non-accountants" -- they call them "team members." Same goes for consulting, architectural and engineering firms.

I find that in CPA firms, there is what may be an even more derogatory distinction. Some firms do actually use the term "team members" which was significantly popularized by the good folks of Results Accountants' Systems in their famous Bootcamps.

But many CPA firms refer to their accountants as "professionals" and openly refer to everyone else as "non-professionals."

Pretty unfortunate to that the CPAs are, apparently, the only professionals in those offices...

If your firm is still one of those that uses the "non-professionals" label, please replace it with something (like "non-accountant"?) that appropriately credits everyone in your professional service firm as a "professional" of one sort or another.

Golden Practices One of 12 "Strongest Links" by ABA Law Practice Today

We're pretty excited to be listed among the twelve featured by Tom Mighell this year in his Strongest Links column on Law Practice Today, an excellent web publication by ABA's Law Practice Management Section. Mighell addresses the evolution of web-based marketing resources for attorneys and identifies "a new crop of marketing and client service blogs" aimed at lawyers that he identifies as "some of the most useful."

It's really an honor to be in the company of eleven great bloggers including Gerry Riskin and David Maister. Thanks for the attention, Tom. I'll try hard to live up to the mention!

Marketing Salaries Reflecting ROI

An eyebrow raising post today on Larry Bodine's blog posits that the salaries of law firm marketers are dwarfing firm administrators' salaries.

Bodine cites two surveys that indicate median administrator salaries are in the $70-80K range and he references numerous legal marketing job ads offering $100K+ (and some in the over $400K range). The median salaries aren't quite that high, but if you visit his other site's job openings you will, indeed, find many jobs for senior marketers and even writers, editors, and knowledge managers in the over $80K range.

Bodine says:

This is GREAT news for the marketers, because it means they've worked their way out of the "overhead" category in law firms.  The marketers are able to say, "If you invest $5 with my plan, you'll get $20 back.  I can prove return on investment." 

About different roles earning different pay, I'm reminded of a wonderful bit of advice shared awhile back by Julie Lindy, editor of INSIDE Public Accounting, on the Assoc. of Accounting Marketing discussion list. She said:

Nobody is paid what they are worth. They are paid what their *jobs* are worth. As human beings, an NFL player is not worth more than a 5th grade teacher, but in our culture, the NFL player's job is valued more, so therefore, he is paid more....You can't take salary personally: It's all about what the job is worth to the person writing the checks.

I agree entirely with Ms. Lindy.

Beside the law firm administrators discussed in Bodine's post, there's another group paying close attention to the legal marketers' escalating salaries...CPA firm marketers.

I cannot help but wonder what most accounting marketers must be thinking when they see the salaries their legal counterparts are earning. The median salaries remain significantly lower (at least $20K behind) in the accounting industry. Actually, I have a pretty good idea of what accounting marketers are thinking.

Something to the effect of: "Can it be that much harder to work with lawyers?"

Uh, well, yes and no. Totally depends on the firm, the culture, and the support marketing, in general, has within the firm. Overall, lawyers aren't that much different from CPAs. In some ways they are more open about what they think and, ultimately, more open-minded about trying new things. In other ways, they are far more trying because they challenge everything (and for fun, I think!).

So...are the disparities in salary reasonable?

Inside the Firm of the Future

Exemplar Law Partners is causing quite a stir. This is the Boston firm, launched and led by CEO Christopher Marston, that touts "No Hourly Bill, No Hourly Bull."

Many are keeping a watchful eye on this firm.

Some hope beyond hope that Exemplar succeeds because it will mean they lead, in the limelight, the movement away from timesheet-based billing in the legal profession. If Exemplar pulls it off, maybe their firm can, too.

Others speculate (and I suspect even hope) that the firm won't be able to make it work. Surprised I'd say that?

I believe that some people hope the firm will fail as proof that their comfortable-as-an-old-pair-of-jeans hourly model isn't broken after all. And if it fails, they don't ever have to think about addressing such a massive change in their firms.

There's no doubt...changing IS hard to do. It requires forethought and planning. I admit that, having done it myself for a long time, hourly is most certainly the laziest way to price.

There are many skeptics to the concept of value billing. This isn't a casual topic easily dismissed with a subject change. This topic evokes more passion, on both sides of the discussion, than I've ever witnessed in the professions.

Most of those who can nod their head a bit at the idea of value pricing cannot understand or accept that timesheets shouldn't be used in a firm that doesn't bill hourly.

Actually, practitioners who've made the switch from hourly to value are the strongest proponents of ditching timekeeping. They know it keeps them mired in the thinking that time (perceived as cost) should impact price. Read a true tale of the evolving mindset of accountants that made the switch quite successfully.

The purpose of my post is to tell you that Chris Marston of Exemplar has started a blog called Inside the Firm of the Future in order to share his firm's growth in this process.

Exemplar, I admire all of you for what you are doing--especially for your "Believing is Seeing." May you succeed beyond everyone's wildest dreams.

Best Law-Related Blog Reference

Ian Best of 3L Epiphany is a 3rd year law student at Moritz College of Law at Ohio State University who built an enormous public resource.  He developed a nearly complete listing of law related blogs (I say nearly because my blog is missing!) (Thanks for adding me, IAN!) as part of his studies. 

He started a blog to study legal blogging. On beginning this effort, he explained his purpose (emphasis mine as is the comment in red):

First, 3L Epiphany will be a typical, personal blog where I can learn the practical aspects of blogging. I sincerely believe that the skills which I learn from this endeavor will be marketable ones, since blogging is becoming more prevalent and ubiquitous in the legal community.

Second, I plan to utilize 3L Epiphany as a  resource to demonstrate the many potential uses of a law student blog. In particular, I believe that blogging will eventually provide an entirely new model for displaying legal and professional skills to potential employers [and customers, too!!!], and I expect to make 3L Epiphany an example of how this can be done.

Third, I plan to study "blawgs" directly, especially those of legal practitioners. I will tour the legal blogosphere in order to discern the benefits and consequences of blogging. And I will interact directly with lawyers who blog to ascertain their personal observations and conclusions.

Not only has Ian tackled a massive project with terrific big-picture perspective (organizing it very effectively), but he demonstrates his strong sense of the type of thinking that will make him a very successful lawyer!

Understanding the role of blogging -- transparency to, and direct relationships with, your market -- will take him far in his career. Kudos, Ian!

(so...any 3rd year accounting students out there who want to do this in the accounting industry??)

Blogging and the Professions, continued

Related to my post yesterday about blogging changing law review publishing and legal information exchange overall, there is an excellent post today from Tax Law Prof. James Maule entitled: In Defense of Law Blogging.

Accountants, too, should be reading this. The same principles hold true in your profession. The changes will come.

By the way, accountants, if you aren't regularly reading Mauled Again (the blog above) you should be!

WSJ: Blogs Reshaping Law Review

An important story was featured by Kevin O'Keefe discussing the impact that lawyers and law professors using the Internet to broadcast legal trends and opinions is having on traditional (print) law reviews.

He references "Law Reviews Adapt to New Era" posted by WSJ online.

Both of the above posts deserve attention. They validate both the practical application and marketing merit of blogging in the professions.

Lawyers Leaving Hours Behind

I'm pleased Robert Ambrogi and Patrick Lamb posted about Exemplar Law Partners -- a new firm not charging by the hour.

Awesome! This is a better way of doing business that is gaining momentum across multiple professions including law, accounting, advertising, IT and consulting. Even I've been working (for years) toward being 100% fixed price and am in the process of transitioning the last of my hourly buyers to fixed pricing.

But let's talk more about law. Here are 3 more examples:

I had the pleasure of meeting some St. Louis attorneys last week, Simon Passanante, a more than 30-person firm, who are litigating IP matters on a contingency model just as they do product liability cases. Truly not expecting an affirmative answer, I prompted: "Tell me you don't keep time sheets...?" to which John Simon, Tony Simon and Erich Vietch answered, "No, only when we absolutely have to on a class action." I confess, the employees that I saw all looked, um, happy...

David Ambrose runs a small real estate finance firm in Portland, OR, that is moving to a fixed price/no timesheet model. They were featured in CNN Money/Fortune Small Business a couple months ago, here. This is a good story covering his many considerations in the shift.

And then there is Sherman & Jeffries, a family law firm in AL. They have a blog that is really good, here it is. Michael Sherman says their firm works entirely on a fixed price basis and would never go back to hourly billing. (Sherman was at the original LexThink in 2004.)

There are certainly many more who deserve kudos and are worthy of study as they are absolute trailblazers adopting these business practices despite great skepticism from their peers.

CPA Tim McKey (who runs a practice in Baton Rouge, Louisiana with no timesheets and 100% value pricing) is the newest fellow of VeraSage. He said it best when he told Ron Baker: "I'd sleep under a bridge before I'd go back to running my firm under the old method." 

Edu Debt Influences Job Choice

In my (lengthy) post the other day about The Profitability Problem, I cited some average education debt amounts from memory because I couldn't recall where I saw them.

Just found it on Ernie Svenson's blog and my numbers were actually a little conservative.

"About 80 percent of law school students obtain loans to pay for law school, and the average loan debt is $76,763 for private law school graduates and $48,910 for public school graduates."

The Law.com article Ernie points to (that I just now read) further supports my assertion about the state of the profession:

"While law school costs have exploded, associate compensation has not. According to the National Association for Law Placement (NALP), the median salary for first-year associates in private practice in 2004 was $80,000, the last year that figures for comparison were available. The 2004 number represents a 60 percent increase over the median salary in 1990, which was $50,000.

"Between 1990 and 2004, inflation totaled 45 percent, which means that in 2004 an associate would have needed a salary of $72,400 to have the same earning power of $50,000 in 1990, regardless of the much greater law school costs."

More....

"Even at the nation's biggest firms -- those with more than 501 attorneys -- salaries in 2004, which averaged $125,000 (not including bonuses), have risen just 78 percent since 1990, compared with the 267 percent increase in the cost of public in-state education and the 130 percent escalation in private law school education.

"There's a major concern," Sebert said. "If you graduate with average private law school debt and earn something other than the average salary, you are going to have trouble."

"The prognosis also is bleak for new attorneys in smaller firms, who typically earn much less than those at large firms. The median salary for first-year associates in firms with 26 to 50 attorneys was $65,000 in 2004, just 44 percent more than the median salary at those firms in 1990, which was $45,000. Beginning lawyers at law firms with two to 10 lawyers earned $48,000 in 2004, compared with $30,000 in 1990."

And finally....

DEBT INFLUENCES JOB CHOICE

The effect of burdensome student loans on the legal profession is a subject that NALP currently is grappling with, said executive director James Leipold. His group is planning a summit next year with other legal organizations that will explore the ramifications to the legal community of ballooning law school costs and debt. Anecdotally, however, he said that more graduates are entering big-firm practices with the "deliberately stated goal" of paying down debt and then leaving.

So perhaps NALP and firms will conclude that the legal profession should price more similarly to the medical profession. (You have to know how much I hate using HC as an example because of what insurance has done to cloud transparency of how much we are actually paying for what.)

Just look at the fact that you don't pay for the amount of time the doc spends with you, but for all the collective wisdom and tools of their expensive education and environment in which they operate (ha! no pun intended).

Law or accounting...think about it. In most cases, you offer a lot more value than just your hour.

Every hour is NOT equal.

Some hours are rather unproductive. But, in another mere hour, you can provide life altering advice. When you do, isn't it worth more than a few hundred dollars?!

The Profitability Problem

This is my 100th blog post (Is that all?? Feels like a lot more than that!). As a milestone post, I decided this has to be an extra thoughtful one--I hope you'll forgive the length and find it thought-provoking.

What subject is of greater concern to firms than profitability?

I’ve read reports of high-profile consultants recently predicting record high compensation for partners in 2006 and beyond. I’m not sure on which data the forecasts are based, but I foresee the opposite. Here's why:

Employee costs are rising significantly. Firms are reacting, albeit slowly, to the continuing large numbers of non-partner professionals fleeing public accounting and law firms in search of less pressure, more stimulating work, and feeling valued by more enlightened employers. Promotions (some premature) and raises are used to keep key people when talent is at a premium.

For the past 5+ years, we’ve watched with amazement as law associate starting salaries skyrocket, now running between $100-145K/year and more in some top firms in top and even 2nd tier markets.

In return for those salaries, associates are agreeing to meet the demands of unhealthily high billable hour requirements. Many agree to these conditions because they begin their careers with average law school debt of $75K for top schools, and $45K for public universities. The associates hope they will be able to aggressively reduce this debt and pick up some valuable experience along the way.

The associates are probably unaware they walk into the firm already on the receiving end of some resentment from the senior partners who happen to know a few things:

• It wasn’t very long ago that they were making $150K
• These kids have it “a lot easier than we did” and they’re going to make them work hard for their money
• They’ll have a lot of trouble billing the new associate out at the standard mark-up hourly rate because clients won’t pay that much for the limited experience of a new associate. This means more write-offs, or less desire to use these expensive new associates (hmmm, think there will be even less delegation to these new associates when more experienced people can do the work more "efficiently"? That's a bad enough problem already! And how will they ever learn if they don't do the work -- see the catch 22?)
• There will be a lot less money left over for partners once they have raised the pay of all their other associates to get everybody back in-line, sometimes bringing their 4 or 5 year people up tens of thousands to put them appropriately above the new starting rates.

Smaller law firms – those nowhere near this pay amount – are not exempt from these problems. They face the exact same dilemma, just at lower dollar amounts. Proportionately, the impact to profitability is about the same.

CPA firms are some years behind law firms in dealing with this pay issue because new CPAs are nowhere near these starting salaries. But with the recent change in CPA exam requirements necessitating a fifth year in school, accounting grads are now presenting themselves with Masters Degrees meriting higher pay.

Fewer graduates mean everyone is fighting over those who are at all appealing. Rare, also, are qualified lateral hires since so many people are defecting public accounting, more often hired by clients of the firm than recruited by other firms. Headhunters are more brazen than ever.

As mid-sized law firms have been experiencing for years, CPAs are starting to feel the pinch to their profits of the domino effect that occurs when your new hires come in at the pay of your more experienced people. Raising everyone across the board is costly. Add to that the skyrocketing cost of health insurance and other fringes and incentives needed to compete for talent in the aggressive talent marketplace and, well, we have a big hit to the bottom line.

The business of predictions is a dangerous one. But I'm going on record as saying: the cost of the knowledge worker in CPA firms is going to continue to rise rapidly. I believe it is reasonable to expect salaries for mid- to high-level non-partners to double in the next 5 years. Someone receiving $50-60 now, would be commanding $100+. Say I'm wrong and they don't go up quite this much. They're still going to go up a lot.

Though salaries will never grow as much in smaller firms, firms will have to pay more in order to keep their CPAs. Remember, firms aren’t competing so much with each other for this talent pool as they are competing with private industry and other, more lucrative, professions, such as law, for instance.

That’s just the employee component. Then there is the growing cost of marketing and the new HR/marketing cost component for recruiting.

So, with all these costs going up, where is all this profitability – that these other consultants are projecting to turn into partner compensation – supposed to come from?

I don’t see it coming from significant new business development for two reasons:

Hire a Marketer and Substitute Your Judgement for Theirs. Not.

Chicago attorney Patrick Lamb says in his blog that he has been enjoying these discussions on branding--a multi-blog thread initiated by Dan Hull of What About Clients and added to by Tom Kane and me.

In his post, Pat expresses an observation about attorneys that also holds true for accountants:

As a profession, we are conservative, change resistant, risk averse and incredibly unimaginative.  Sheep-like in terms of how we follow each other....

Here's one way these characteristics manifest themselves.  Hire a gifted marketing director, and then try to substitute the lawyer's [sub: accountant's] judgment for the marketing director's.  Because we lawyers know so much.

In the past 12 years, I have seen so many truly gifted marketers suppressed, overridden, and ultimately rendered ineffective because of the accountants or lawyers they work for. Ask any marketer or consultant to the professions and they can name at least several.

As a lawyer or accountant (or consultant), equate it to a customer who refuses again and again to heed your advice. Then imagine that same customer coming to you repeatedly to justify the value you bring to the relationship demanding ROI and results. Yet they haven't taken most of your advice.

The frustration you experience in that situation is only a taste of what a marketer you've hired feels because you are their ONLY customer. 

That's why marketers leave firms in a matter of a couple of years. And that's why results aren't half as amazing as they'd be if you'd listen to your marketer and act on a lot more of their advice.

Thanks, Pat, for saying what you said publicly. I know you think very highly of your firm's gifted marketer and, for that, both you and she are very fortunate and you are both much better positioned for success!

Small Businesses Talk About Their Legal Services

A National Small Business Poll on "The Use of Lawyers" was conducted in May - June of 2005 by the National Federation of Independent Businesses (NFIB). The survey reflects the feelings of over 750 small business employers about their legal services.

As a lawyer, if you serve or want to serve this sector, understanding them as a market and understanding their needs and typical use of legal services will be very helpful.

If you're a CPA, perhaps after reading the following, you will be more inclined to network with your local attorneys.

Over the next days, I'll report what I consider to be much more interesting details (such as the surprisingly high number of customers who paid flat fees for their legal services!!), but in the meantime, here is the executive summary of the survey and a link to it if you are a data hound.

Executive Summary:

>  69% of small business owners say that they have trust and confidence in lawyers and the legal profession compared to 31% who do not.

>  Most small-business owners use lawyers: 65% of small employers (defined as employing 5 to 250 people) sought advice or other assistance from a lawyer in the last year. The figure rises to 78% when the reference period is the last three years.

>  Median legal expenses, of those who incurred them in the last year, were between $4,000 and $5,000. However, 10% or respondents incurred expenses of $25,000 or more. Legal costs in the last year appear to be atypically high.

>  78% percent claim to have an on-going relationship with a lawyer or law firm. Those relationships appear reasonably stable over time.

>  Just 13% changed their primary lawyer/law firm in the last three years. The most frequently cited reason for changing is the need for expertise followed by a lack of legal competence.

>  55% of those who consulted a lawyer in the last year sought preparation of one or more legal documents. Most frequently: letter(s), contract(s), and papers to file, or response to, an actual or potential law suit.

>  41% of those seeking a lawyer’s help (or over one in four in the population) were involved in at least one legal dispute during the last three years. The median number of disputes involved in was between one and two.

>  Overwhelmingly, most disputes are resolved informally out-of-court. Only 12% of legal disputes between small-business owners and other parties are resolved in court.

>  The most frequent topics for legal disputes are debtor/creditor relations and/or debt collection (21%), and contracts (19%). The most frequent party to these disputes are customers (47%) followed by suppliers (25%).

>  The median total legal cost to settle a dispute is about $5,000. Two-thirds of resolved disputes result in no money or anything of monetary value exchanging hands.

Download the NFIB’s 2005 Use of Lawyers by small business survey results (PDF).

Many thanks to Anita Campbell of the Small Business Trends blog for posting about this survey. Anita's post is one of reassurance to attorneys that a majority of small businesses are, in fact, happy with their legal services despite general population surveys (such as the ABA's) that show less positive perceptions.

Large Law Firm Succeeds With Blog: Awarded Legal IT Innovator of 2005

430 attorney firm, Sheppard Mullin, replaced its newsletters with blogs and has realized excellent results.

The winner demonstrated a striking piece of lateral thinking by shifting away from standard e-newletters to the world of Blogging. From an original readership of 10,000, the winner’s ‘blogged’ content now receives 600,000 hits and consistently appears on the first 5 hits for relevant search words in Google and Yahoo.

The winner of Legal IT Innovator of the Year is Tom Baldwin (pictured right), Chief Knowledge Officer at Sheppard Mullin Richter Hampton.

Who says blogs aren't a good solution for large firms? What I, personally, love about blogs is that they level the playing field. Small firms can find experience the same reach and exposure, or even better, with good blogs. Blogs don't have a cost barrier that distributing printed news or information has, nor is it delayed.

Newsletters with their long writing time, design and edit time and then printing, are so far behind the speed-to-delivery curve that they are often old news before they hit the mail.

Seth Godin wrote the other day about "Classifieds Are Next" commenting on how the LA Times is finally cutting their printed stock prices, asking: "When was the last time you looked up the price of a stock in the newspaper?" He's right.

It's the same with information you need your clients to know.

When was the last time you found out critically important information, okay, even slightly relevant information, via a printed newsletter?

Thanks to Kevin O'Keefe at LexBlog for blogging about Sheppard Mullin's award!.