Category Archives: Money and Fees

Best of NBH: Name Your Ten Most Wanted

Here’s another favorite idea from 2012: Identify Your Top Ten “Most Wanted” Clients.  Here’s the post:

A simple idea from Jorge Barba at Game Changer:  Create a 10 Most Wanted Client List.  Who’s on your list, and do they know you want to serve them?

I’ve been doing this for Kendeo and have found it works wonders in focusing your business development and marketing efforts.  Give it a try!

New Client Strategery

I’m often amazed at how little strategic thinking lawyers give to new client selection.  It is one of the reasons I created the Client Worthiness Index, and is also why I’m sharing my New Client Strategy Plan (.pdf).

Client Strategy Plan

 

The New Client Strategy Plan is a worksheet that I’ve been using in law firm retreats for a few months.  It is loosely based on the wonderful Business Model Generation Canvas, and is designed to get lawyers ask client-focused questions of themselves and their peers before signing (or even targeting) a new client.

It is divided into nine areas, each which asks a series of client-focused questions.  The areas (and supplemental questions) are:

Who will do their work?

  • What is the work and who will do it?
  • What support do they need to get it done?
  • Will they need additional lawyers or staff?

What else can we do for them?

  • What other opportunities are there for new work?
  • Are there additional legal services they may need?
  • Who else in the firm should meet with them?

 Where do they need us?

  • Are we in a location that serves them well?
  • Should we be located elsewhere?

What technology do they demand?

What must we get better at?

  • What legal and non-legal skills must we improve?
  • How will we learn those skills?
  • How might we measure our improvement?

How do they pay for it?

  • Do they want to be billed by the hour?
  • Can we price our services differently?
  • How would they design our pricing?

Who are their key decision makers?

  • Who must we convince to hire us? 
  • How will we find them? 
  • What do they want to know about us?

Why won’t they hire us?

  • What are the roadblocks to hiring us? 
  • Who will be our key competitors? 
  • What should we worry most about?

What must we change?

  • What things in our firm must we change?
  • Will our firm structure support their needs?
  •  Does our compensation plan reward the behaviors that serve them best?

If there are additional (or better) questions you think I should be asking, let me know.

And the next time you’re strategizing about serving a new client, print out a New Client Strategy Plan (.pdf) and fill it out.  Even better, complete one with your best, existing client in mind.  You might be shocked to find you don’t have all the answers you thought you did.

What’s Your Big Number?

Bar Chart

This one comes from way back in 2009, but Paul Graham’s advice on starting a new business is as solid as ever — and contains useful tips for long-time business owners well.

He begins by reminding us that “it’s better to make a few people really happy than to make a lot of people semi-happy.” and then shares 13 things every startup should know.  Among his gems are these:

Better to make a few users love you than a lot ambivalent.

Ideally you want to make large numbers of users love you, but you can’t expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It’s easier to expand userwise than satisfactionwise. And perhaps more importantly, it’s harder to lie to yourself. If you think you’re 85% of the way to a great product, how do you know it’s not 70%? Or 10%? Whereas it’s easy to know how many users you have.

Offer surprisingly good customer service.

Customers are used to being maltreated. Most of the companies they deal with are quasi-monopolies that get away with atrocious customer service. Your own ideas about what’s possible have been unconsciously lowered by such experiences. Try making your customer service not merely good, but surprisingly good. Go out of your way to make people happy. They’ll be overwhelmed; you’ll see. In the earliest stages of a startup, it pays to offer customer service on a level that wouldn’t scale, because it’s a way of learning about your users.

And this one that explains much of clients’ dissatisfaction with lawyers:

You make what you measure.

Merely measuring something has an uncanny tendency to improve it. If you want to make your user numbers go up, put a big piece of paper on your wall and every day plot the number of users. You’ll be delighted when it goes up and disappointed when it goes down. Pretty soon you’ll start noticing what makes the number go up, and you’ll start to do more of that. Corollary: be careful what you measure.

Though most firms don’t put a big piece of paper on the wall, that billable hour number is the one measure everyone pays attention to.  And what happens when all firms measure is time?  Lawyers make more of it.

What if the firm’s “big number on the wall” was something different?  How might that firm’s behavior change?

What if the “big number” was:

  • Number of cases referred/shared among the firm’s lawyers? 
  • The percentage of clients who stayed clients of the firm over the last 1, 5 and 10 years?
  • The number of “very satisfied” clients derived from a randomly-surveyed sample?

You get the idea.  Try measuring something different for a few months and see what happens.

Price Check in Aisle 5

I love this advice on pricing from Jason Fried at 37Signals:

The good news about pricing is that you can guess, be wrong, but still be right enough to build a great sustainable business. Maybe you’re leaving some money on the table, but, like my dad always says, no one ever went broke making a profit.

However, you are not allowed to ask people:

  • “What would you pay for this?”
  • “Would you buy this for $20?”
  • “How much do you think this is worth?”
  • “What’s the most you’d pay?”

And these are the questions I hear people asking over and over. You can’t ask people who haven’t paid how much they’re willing to pay. Their answers don’t matter because there’s no cost to saying “yes” ”$20” “no” ”$100”. They all cost the same – nothing.

The only answers that matter are dollars spent. People answer when they pay for something. That’s the only answer that really matters.

So put a price on it and put it up for sale. If people buy that’s a yes. Change the price. If people buy, that’s a yes. If people stop buying, that’s a no. Crude? Maybe. But it’s real.

Too often we are afraid to change our prices (or experiment with flat fees) because we’re afraid we’ll get it wrong — and either scare clients away or leave money on the table.  Of course we will.  More than once, in all likelihood.

But that doesn’t mean we can’t keep trying.  Let’s start small, try lots of prices for similar things, and let the marketplace be our ultimate guide for whether we’ve got it right or not.  Ultimately, we’ll figure it out.

Or, we could just stick with the billable hour …

Pick Two

Some advice for clients that should be on every lawyer’s wall:

You can buy it from Mr. Cup here.

The Age of “It Depends” is Ending

What would happen to your firm if potential customers could easily find out how much your services have cost previous clients?  Would it change their buying behavior?  How about your pricing strategy?

Check out Clear Health Costs, where patients share how much they paid doctors for various procedures.

Never going to happen to lawyers?  For some, it already has:

Train Better Lawyers by Removing the Blame

What do you do when people working for you make mistakes?  At Etsy, they hold a “blameless” post-mortem meeting where the mistake-maker can explain what — and most importantly why — they did what they did, without fear of punishment or retribution.  

Over on Etsy’s Code as Craft blog, they explain:

Why shouldn’t they be punished or reprimanded? Because an engineer who thinks they’re going to be reprimanded [is] disincentivized to give the details necessary to get an understanding of the mechanism, pathology, and operation of the failure. This lack of understanding of how the accident occurred all but guarantees that it will repeat. If not with the original engineer, another one in the future.

And here’s how they view the traditional cycle of name/blame/shame:

  1. Engineer takes action and contributes to a failure or incident.
  2. Engineer is punished, shamed, blamed, or retrained.
  3. Reduced trust between engineers on the ground (the “sharp end”) and management (the “blunt end”) looking for someone to scapegoat
  4. Engineers become silent on details about actions/situations/observations, resulting in “Cover-Your-Ass” engineering (from fear of punishment)
  5. Management becomes less aware and informed on how work is being performed day to day, and engineers become less educated on lurking or latent conditions for failure due to silence mentioned in #4, above
  6. Errors more likely, latent conditions can’t be identified due to #5, above
  7. Repeat from step 1

Instead of assuming the cause of the mistake is incompetence, they decide instead “to take a hard look at how the accident actually happened, treat the engineers involved with respect, and learn from the event.”

How refreshing!  Do you do a “blameless” post-mortem with your employees (or even clients) when something goes wrong?


How Much are You Owed?

From the site The World’s Longest Invoice:

In just one week, thousands of freelancers found out that they’re not alone — and that they’re still owed over $15 million for their work. If you’ve been stiffed by a client, post your story to put a face on the staggering numbers.

Wonder how many unpaid legal bills we could add up in one week?

Be More Pleasant Than Nice

Some great advice on getting and finding (design) clients in this piece from A List Apart.  One of the sections was particularly worth sharing:

Be Pleasant, Don’t Be Nice

We once received a call from a gentlemen who said, “[redacted] referred me to you. He said that you wouldn’t be shy about telling me I was wrong, you’d probably piss me off, and that I should listen to everything you said because it would work.”

I was delighted.

That said, you should aim to be pleasant to work with, as everyone would rather work with someone pleasant than with an asshole. But no one wants to work with someone who’s faking it. Doing good work often requires a few hard conversations.

There’s a difference between being enjoyable to work with and being “nice.” Being nice means worrying about keeping up the appearance of harmony at the expense of being straightforward and fully engaged. Sometimes you need to tell a client they’re making the wrong call. Part of client services is being able to do that without coming off as a dick. But being afraid to do it because you’re too invested in being “nice” is worse than being a dick.

No one is hiring you to be their friend. They’re hiring you to design solutions to problems. But if they can get the same solution from someone who’s pleasant and someone who’s a jerk, they’ll go with the former.

Check out the entire article.  It is an excerpt of the book Design is a Job by Mike Monteiro (his presentation F*uck you. Pay Me. is NSFW, but worth a listen).

Rethinking the Retainer Agreement

Over on SLAW, Mitch Kowalski suggests that lawyers rethink their retainer agreement from their client’s perspective.  He includes several suggested clauses (taken from one used by a large multi-national corporation) including this one:

Legal services are expensive, reflecting the skills of the professionals involved and the quality of the work delivered. We respect your knowledge and expertise, and we genuinely hope to be a profitable client of your Firm. At the same time, we must ensure that we receive good value for the money we spend on law firms. In our view, the best way to achieve both fair payment and good value is to manage every matter closely, emphasizing communication and shared responsibility. We look forward to working in partnership with the Firm’s lawyers. Together, we can provide excellent legal work that meets our needs and that adds value to us and your Firm.

To achieve this goal, it is essential you understand the issue behind our legal project and the financial impact of that issue. This means, for example, that we expect the Firm to avoid overstaffing a matter, premature or peripheral legal or factual research, and discovery requests or other projects that are “what we always do” instead of what is appropriate for the particular matter. We will evaluate outside counsel on effective control of costs, as well as on the quality and effectiveness of your advice and work product.

The entire post is worth a read and contains several great client-centered retainer clauses — specifically the ones on expenses.  How would your retainer agreement change if your clients wrote it?

Gamify Your Firm Goals

I just spent the weekend facilitating a law firm retreat with 100+ partners and associates.  One of the goals of the retreat was to generate new ideas on better ways to increase firm revenue (without raising rates).  We came up with dozens of good, actionable ideas that will percolate through the firm and turn into specific action plans for each practice group and individual lawyer.

One thing we didn’t do — but that I’ll be suggesting in short order — was to “gamify” the revenue generation goal.  This article on gamification in Computer World talks about how a company used game theory to encourage employees to work out more in the company gym:

For example, Charlie Kim, CEO of NextJump, wanted to encourage his employees to use the corporate gym because he felt it would better their health and lead to improved productivity and a happier workforce. NextJump began by offering a $20,000 reward to the five employees who used the gym the most in one year. The incentive program boosted gym use from about 3% of the workforce to 12%.

Then Kim made a game of it, and challenged teams of employees to hit the gym with the promise that they would split the same $20,000 pot. The social value in being on the best team raised the number of employees using the gym to 85%, Zichermann said. 

For a firm with multiple practice groups, perhaps the best method to drive behavior change is to stop rewarding individual lawyers for increasing their business, but rather to collectively reward the practice groups (or client teams) with a common incentive.  Driving group behavior through a team-based reward — whether it is based on revenue generated or client service scores — could build a more collegial workplace and deliver real benefits to firms and clients.

Multiply Your Price by 10

How much, on average, do your best clients pay you in a year?  If you were to give them a flat rate for all the work you could do for them in the next twelve months, what would you charge?  Is it just a bit more than they spent last year?  Is it less?

Steve Shapiro, in this post aimed at professional speakers, suggests that your all-inclusive price is probably too low — way too low.  Steve suggests we think bigger, and gives an example:

Are you a plumber? Maybe your typical project generates around $2,000. You may be tempted to offer a lower-cost option, perhaps a do-it-yourself kit, for only $200, which is valuable.

But what if, instead of $2,000 being the high-water mark for your services, you created a $200,000 offering? This would certainly get your creative juices flowing. Maybe, instead of selling your services to individuals, you target condominium associations, selling them an all-inclusive deal for every unit. It would challenge you to think bigger than you have thought before.

How could you earn ten (or even a hundred) times more from each of your Ideal Average Clients over the next year?  What needs do they have that you’re not addressing?  What do they value that you could provide?  What would they pay extra for?  Speed?  Certainty?  Convenience?

Take 10 minutes and make a list of everything that comes to mind.  Even if you can’t actually multiply your fee by ten, you’re certain to uncover things you could do (and charge for) that your clients would value and gladly pay extra for.  I’d love to hear what you come up with.

On Pricing Strategically

This is a tremendous article on Pricing Strategy for Creatives (written by the Chief Innovation Officer of an accountancy firm) that is spot-on for everyone struggling with pricing their services (including lawyers).  Please read it.

Here are some excerpts on becoming strategic about pricing:

1. Price by the service, not by the hour. Though very normal for the creative professions, one of the most non-strategic things you can do is to charge by the hour. Why do you charge by the hour? You may have read about charging by the hour in a book, seen your previous firm do it, or heard a friend say that’s how you were supposed to do it. 

2. Slow down your sales process. Slow down how, when, and who you take on as clients. You need time to determine a client’s needs before you price their projects. You must know what outcomes they desire. Diving into a project with a minimalist contract that speaks to your hourly rate will not let you know when your client is truly ecstatic about your work. And the only reason to serve clients is to bring great value to them and make them extremely happy!

3. Inject value into your client’s experience with your service. You simply have to charge more. That is a totally strategic move, and one you can’t do unless you have the guts to do it. But you can’t charge more for crap. It’s a little known secret that you can charge not only for your creative work, but for the client experience around the work you deliver. In essence, you can price things that have nothing to do with design, but have everything to do with the experience your client encountered throughout the process of engaging with you on their project.

There’s more in the article about establishing a better client intake process and charging what you’re worth.  My favorite part, though, the author’s discussion on how to have the “value vs. price” conversation with your potential client:

For example, you can ask a client “what is the greatest outcome you can imagine from my work with your company?” Maybe they’ll say “I want your work to be so effective that we sell 15 to 20 percent more products compared to this same time last year.” Now you can attach your price to their outcomes. So you might say, “My base price is $50,000, but if you sell between 15 and 20 percent more products than this time last year, then I will receive a bonus payment of 5 percent on your additional sales.” This links what you get paid directly to outcomes. And the clients won’t mind paying if you helped them sell more stuff. Everybody’s happy!

A great read.

Make Money Instead of Chasing It

There are some good tips in this article on taking charge of clients who want free work, but the best one is focused on collections:

There are many ways people try to recover money owed to them for services and products delivered. Don’t get yourself too involved in these tricks. Keep everything you do professional and don’t waste time chasing money. You are far better off making it. Leave the chasing to the experts, even if it costs you something in the process. Eventually you will be able to add this cost to the prices you charge.

Brilliant advice too many lawyers are guilty of not taking.

Perform a File Autopsy

Remember the television show Quincy?  Jack Klugman played a Los Angeles medical examiner, and in every episode, his autopsy would reveal that the decedent (who’d seemingly died of “natural” causes) was a victim of foul play.  Using the clues he’d gained from his examinations, Quincy would convince the police a homicide had occurred, and then manage to singlehandedly finger the killer.  In a pre-CSI world, it was pretty compelling stuff.

So why all this talk about an obscure 70′s crime-drama?  Because if you’re really interested in identifying the work you love to do and learning how to serve your clients better, you may want to spend some time each week playing Quincy.  Instead of investigating foul play, however, you should closely examine those things you’ve given up for dead in your office:  your closed files.

Perform a File Autopsy.  Here’s how:

1.  Grab at least five old files that have been closed for at least a year.  Though you can choose files randomly, it works better if you’ve take some you liked and others you’d rather never touch again.

2.  For each file, complete the LexThink File Autopsy (pdf) form.  Be brutally honest with yourself as you answer questions, which include:

About the file:

  • In hindsight, should I have taken this file?
  • Were there any “red flags” I should have noticed?
  • What lessons did I learn from handling this file?
About the work:
  • Did I like the work?
  • Was I good at it?  How could I have been better?
  • If I didn’t like the work, how could I do less of it?
About the client:
  • Does this client have any other legal work I could be doing?
  • How would this client describe me to their peers?
  • How could I have served this client better?

About the money:

  • Was this a profitable matter for me to handle?
  • Did the client feel my fees were fair?
  • How could I have priced this matter differently?

3.  Every week, grab a few more files and repeat the exercise.  If you have staff, ask for their input as well.

4.  If you’re seeing common themes (either positive or negative) throughout the files, make sure to note them as well.

5.  Once you’ve performed 20-50 “autopsies,” you’ll have a better sense of the kinds of work you like to do, clients you enjoy serving and alternative ways to price your services.  Perhaps most importantly, you’ll understand the kinds of work you don’t want to do and learn to avoid taking matters and clients better passed on to your competition.

Rethinking Your Firm’s Bills

If your clients designed your bills, what would they look like?  Would they be easier to understand?  Contain useful case status information?  How about upcoming dates or milestones?  Would your bills include information about the people who worked on the case that month?  How about a report card seeking monthly feedback about how you’re serving your clients?

 

I decided to take a crack at designing a new kind of legal bill.

The bill begins with a “Case Update” that includes a brief summary of the month’s work, upcoming dates and milestones, as well as things the lawyers are waiting on from others — including the client.

There’s a page with pictures, names and contact information for all the lawyers and staff who’ve worked on the client’s matter that month:

There’s also, of course, a list of the work done that month, along with the price owed:

Finally, there’s a survey form attached at the end, with a list of client commitments and a place for the client to give the firm a grade:

The entire version is here.  Let me know what you think.

 

 

Create a Menu for Your Practice

Do you know all the kinds of things your firm does?  Perhaps you should take a page (literally) from the restaurant industry and create a “menu” of your services.  Though you may not decide to use it with clients, merely deciding what goes on the menu — and what gets left off — makes you think a bit differently about your practice and the kinds of matters you regularly should say “yes” to.

And if you’re looking for some menu inspiration, I highly recommend the blog Art of the Menu.  It has dozens of creative menus from around the country, and is sure to give you some ideas if you decide to make your “menu” a regular part of your practice.

I just created a  Menu for LexThink (.pdf) that I’m going to print up on heavy card-stock like an actual restaurant menu .  It is still in early draft stage, so I’d love to know what you think.

BigLaw Associate Economics

From the ever-perceptive Jessica Hagy:

“Gameify” Your Monthly Bills

 

Mashable shares Seven Wining Examples of Game Mechanics in Action.  The article talks about “Gameification,” which is defined as:

the use of game thinking and game mechanics to engage audiences and solve problems. In other words, it means taking the best lessons from games like FarmVille, World of Warcraft and Angry Birds, and using them in business.

My favorite example in the article was this way game thinking can be applied to common problems, like getting drivers to slow down on the roadways:

[The] innovative Speed Camera Lottery idea rewards those drivers who obey the posted limit by entering them into a lottery. The compliant drivers then split the proceeds generated from speeders. Richardson used gamification concepts to turn an negative reinforcement system into a positive, incremental experience.  When tested at a checkpoint in Stockholm, average driver speed was reduced by 20%. If the plan were scaled across the U.S., the results could mean thousands fewer injuries, millions of dollars worth of reduced costs and substantial environmental benefits.

Could you use a similar theory with your monthly bills?  Instead of just offering the traditional discount on bills paid within 30 days, offer much larger discounts to the first handful of your customers who pay.  For instance, give the first customer to pay their bill a 20% discount, offer a 19% discount to the second customer to pay, and so on.

Instead of hounding customers to pay, you may instead be faced with judging which of your clients paid first — a tremendous problem to have!

Watch Your Time Like Your Clients Do

Next time you’re chit-chatting with a client over the phone, head on over to Lawyer Clock and watch how fast your “burning” your client’s cash — they certainly are.

Lawyer Clock


Cognitive Dissonance and the Low-Cost Lawyer

This interesting Wired Magazine piece, titled Why We Love Our Dentists, explores the unique relationship between price paid and perceived value.  According to a recent study, two dentists will reach the same conclusion when looking at an identical x-ray only about half the time.  Yet despite the fact that dentists are so frequently wrong (they can't both be right, can they?), people love their dentists more than any of their other medical providers.

The reason, according to the article, is due to cognitive dissonance, "the human tendency to react to conflicting evidence by doubling-down on our initial belief."  The study's author Dan Ariely attributes our irrational love of dentists to the pain they inflict:

 

I think all of this pain actually causes cognitive dissonance and cause higher loyalty to your dentist. Because who wants to go through this pain and say, I’m not sure if I did it for the right reason. I’m not sure this is the right guy. You basically want to convince yourself that you’re doing it for the right reason.

The article has a few more examples of irrational behavior influenced by perceived value.  Consider this study:

[R]esearchers supplied people with Sobe Adrenaline Rush, an “energy” drink that was supposed to make them feel more alert and energetic. (The drink contained a potent brew of sugar and caffeine which, the bottle promised, would impart “superior functionality”). Some participants paid full price for the drinks, while others were offered a discount. The participants were then asked to solve a series of word puzzles. [T]the people who paid discounted prices consistently solved about thirty percent fewer puzzles than the people who paid full price for the drinks. The subjects were convinced that the stuff on sale was much less potent, even though all the drinks were identical.

What does this mean for lawyers?  Know that your clients hold deep-set beliefs that the value of your advice is tied (even if subconsciously) to the price they pay for it.  In other words, if you're the lawyer offering the lowest prices on your services, understand that your clients believe your advice is less valuable than the same advice offered by your higher-priced peers.

An unanswered question: do lawyers offering that low-cost advice believe they're less competent than their higher-priced peers? Just as their clients expect to get what they pay for, do lawyers expect to deliver what they charge for?  What do you think?

 

Communicating Value and Price

I’ve been a big fan of Merlin Mann for several years now.  As I was checking out his website yesterday, I found his pricing page cheekily titled: Do You Charge Money to Do Things? Here’s how Merlin describes his pricing scheme:

For most all of my speaking, consulting, and advisory work, yes: I do charge a fee, plus expenses. And, candidly, I charge kind of a lot….  I learned a long time ago to only work for or with people with whom you have mutual admiration and respect—and who already think you’re valuable and great at what you do. In my experience, the folks who expect you to make a case for your own value make for terrible clients. They may be good negotiators and nice people, but working for them is a gut-wrenching travesty. And I don’t do travesties.

With all that said, I do a fair amount of (private, unpublicized, non-ribbon-based) work with non-profits and other deserving groups. And, no, I normally do not charge for this work. So, If you’re working for a good cause or represent an organization that’s trying to do something you know I care a lot about, please ask me. No promises, but I’ll do what I can with what I have.

So, yep. “Expensive” or “Free.” It’s a fee schedule that works.

I think it would work well on a firm website, and provides an important reminder every lawyer should have on their desk: “The folks who expect you to make a case for your own value make for terrible clients.”

Profit by Giving Your Fees Away

I saw this little blurb on the Church Marketing Sucks blog:  

WaterFront Community Church says, “We’re going to give away 100% of our offering to help build and beautify our community.”

What would the impact be if your firm did the same thing, and donated one day’s fees a year (or month) to make your community better? 

I think it is a great idea — and could be even better if combined with a contest (like Pepsi’s Refresh Project) that sought entries from school children or community groups.  What do you think?

How Much Should Legal Fees Be?

Lawyers, do you think clients would use a service that describes itself as follows:

We are an independent, unbiased resource designed to deliver legal fee and price transparency and the expert information legal clients need. Our team of expert lawyers has helped us comb through a mountain of flat fee and billable time data to ensure you have the information you need when it’s time to hire a lawyer.

Well, that service doesn’t exist for legal clients just yet (as far as I know), but it does for people with car trouble.  It is called RepairPal, and it gives people pricing advice (including printed estimates) for various auto service repairs.  Here’s how it works:

RepairPal takes the mystery out of car repairs with a simple tool that will tell you the average price you should be paying for a repair in your zip code.  You just pop in a few details about your repair and car, and it will do the rest.  It breaks down the estimated repair cost in a few ways, showing you the range to expect depending on whether you go through a dealer or independent repair shop, the cost of labor and parts, plus the parts usually needed and how much they cost.  The result?  You can feel better about making an informed repair decision, and you don’t have to scramble to get your friend the “car expert” on the phone to ask a dozen questions.

Imagine a world where your clients’ expectations of the cost of your services is driven less by the facts of their case and more by an “estimate” they got from the internet.  A brave new world is coming.  Are you ready for it?

Measure Time the Way Your Clients Do

Just a quick thought: Are you measuring time the way your clients do? 

Are you keeping track of the days (not minutes or hours) between when you first promised something and when it was finally delivered?  Are you measuring the time between your last client update and the next one?  Do you know how long — in calendar time, not billable time — that the average __________ takes? 

You should, because even though your clients see every moment you spend working for them on their bill, I bet they wish you’d pay the same attention to their calendar as you do to your stopwatch.

A/B Test Your Alternative Fees

All too often, firms view alternative pricing as an “all or nothing” proposition.  They fear a wholesale move away from the billable hour could drive their firm to financial ruin if they get the “pricing thing” wrong.  However, instead of rolling the dice with a firm-wide implementation of an unproven and untested pricing methodology, firms should take a lesson from the web design industry and do A/B testing.

What is A/B testing?  In The Ultimate Guide to A/B Testing, Smashing Magazine defines it this way:

At its core, A/B testing is exactly what it sounds like: you have two versions of an element (A and B) and a metric that defines success. To determine which version is better, you subject both versions to experimentation simultaneously. In the end, you measure which version was more successful and select that version for real-world use.

This is similar to the experiments you did in Science 101. Remember the experiment in which you tested various substances to see which supports plant growth and which suppresses it. At different intervals, you measured the growth of plants as they were subjected to different conditions, and in the end you tallied the increase in height of the different plants.

A/B testing on the Web is similar. You have two designs of a website: A and B. Typically, A is the existing design (called the control), and B is the new design. You split your website traffic between these two versions and measure their performance using metrics that you care about (conversion rate, sales, bounce rate, etc.). In the end, you select the version that performs best.

If you’re thinking of moving from the billable hour to alternative fees, don’t do it all at once.  Instead, identify two similar matters or clients (we’ll call them A and B).  Keep serving (and charging) “A” the way you always have.  However, with “B,’” change your pricing structure.  Give “B” a flat fee for the work you’re billing “A” for by the hour. 

Pay close attention to the metrics that matter to you and to your clients.  Measure time to complete tasks (not in minutes, but in days).  Keep track of the people and resources used.  Watch what folks are doing (and how they do it) instead of just asking them at the end of week or month how much time they spent.  Most importantly, measure both client and attorney satisfaction with the work and results.

If you do enough A/B testing across your client portfolio, you might find that alternative fees aren’t as scary or hard to implement that you thought they would be, but that they make your clients and attorneys happier and make your firm more money.

For the Low Monthly Cost of …

File this one in the "If Doctors Can Do It…" file.  Qliance is one of a number of medical startups that aim to deliver high-quality care directly to consumers for a monthly fee — without involving insurance providers at all.  From the website:

We're using a monthly membership approach to health care, cutting out insurance and going directly to our patients to provide the most comprehensive, high quality primary care out there. The Qliance membership approach means you can see your doctor whenever you need to – even after work and on weekends. By eliminating the hassles of insurance, we are able to put our patients first and return control of your health care to you and to your doctor.

What services could you offer to your prospective clients on a monthly-fee basis?  Before you dismiss that question out of hand, check out the Qliance site.  If doctors can deliver high-quality medical service to patients (whenever and wherever they need them) for a set monthly fee, surely lawyers can do it for their clients.  Right?

The Creative Counsel

Here’s the slide deck from my presentation to the Association of Corporate Counsel’s meeting in St. Louis last month.  The audience was (mostly) in-house counsel, and the presentation was geared at getting them to think a bit differently about their relationship with outside counsel.  I hope you like it.

KickStart Your New Practice

Want to start a new law firm, but lacking the cash to make it happen?  Check out KickStarter, a really unique way to "fund creative ideas and ambitious endeavors" by reaching out to others who want to help.

Would-be entrepreneurs post an idea, and set the amount of money it would take to make it happen.  Site visitors agree to contribute a portion of the startup price — though no money changes hands unless the project is fully funded. 

If you want to see how it all works, check out how a few entrepreneurs are using Kickstarter to raise money to expand their Snow Cone Stand.

Some Great Advice from Design Pros

I ran across this article titled I Wish I Would Have Known: Answers From 11 Top Freelancers, where several design professionals share their hardest lessons learned.  Here are a few of my favorites:

  From Steven Snell:

I wish I would have known that clients tend to not take a project very seriously if they are paying low rates. When I started out I knew that learning and getting experience was more important than making money at that stage, so I did some very cheap projects. I worked with several people who wanted a website, but it seemed that since they were investing very little into it financially, they just didn’t take it seriously and put in the effort on their end that is needed to have a successful web presence. Not only did that make it more difficult for me to do a good job, but it really did a dis-service to their business because their websites weren’t as effective as they could have been.

  From Sean Baker:

You’re closing up your meeting with a potential client. Everything went smoothly and you think you’re about to land the job. Said client asks for your hourly rate, in which you give and explain. Unless you’re underselling your talents greatly, their next question will almost always be: “Great, and how long will it take you?” Suddenly you’re in a corner… and you’re panicked. You don’t want to scare them away, so you feel implied to answer immediately, usually shorting yourself on time simply to appease. Congratulations, you’ve just pigeonholed this project. From here you’ll either be doing some free work or you’ll run the client off once they see a higher rate than you originally gave.

  From Brian Yerkes:

You have to ensure that you don’t take it personally, ever. This is the biggest thing that I personally struggle with. When a client emails to tell me that they aren’t happy with a design, it puts me in a bad mood for a few hours. It’s the number one thing that I try to deal with better every time it happens. Fortunately, 99% of the time, my clients are happy with my work, but you can never win them all.

  From Kostandinos:

Don’t be afraid to say “no” to a project. If I could only pass along one small piece of advice to kids starting out, and even to those who’ve been at it for a while, that’s it. Sometimes it’s really not worth it… in more ways than one. Have a bad feeling about a client? Trust your gut and walk away. One more thing: Sometimes the most important and best projects are the ones you do for yourself, including working on your portfolio and re-branding yourself. The devil is in the details… get out your pitchforks.

This advice could have just as easily be given by (and to) lawyers.  Remember, your clients, peers and friends often face the exact same challenges in their (non-legal) businesses.  Engage them, learn from them, and don’t make the same mistakes they have.

Audit for Obsolescence

Jordan Furlong suggests lawyers and firms conduct an Obsolescence Audit, aimed at identifying aspects of your business that won’t survive the next ten years.  Here’s his checklist of things to look for:

1.  Any offering that’s the same no matter who buys it.
2.  Any offering essentially the same as your competitors’.
3.  Any offering not optimally designed for client value.
4.  Any offering that really, truly doesn’t require a lawyer.

Read the entire post for Jordan’s elaboration on each point.  A fantastic idea!

Resolve to Let Clients Set Your Price

IMG_4828

I’ve been using my “You Decide” fill-in-the-blank invoice, for over a year now.  In that time, I’ve found time and time again that my clients pay me more than I would have charged them.  And, in situations where clients demand a fixed price, I’m quoting them much higher prices (coupled with a money-back guarantee) than I would have before my invoice experiment.

Even though I’ve been doing flat-fee work for almost a decade, I used to (even subconsciously) focus on the time it took me to do something.  Now, everything I do is focused on delivering the biggest “bang” for my clients, knowing that the “bucks” will come.  I don’t track phone calls, preparation time or limit meetings, and I don’t charge for materials, travel, meals or other expenses.  In short, I trust that my clients will take care of me if I take care of them — and they always do.

In 2010, I’d encourage you to resolve to let your clients set your price — at least once.  Ask a trusted client to list all the services they’d like you to provide for them.  Suggest unlimited phone calls, regular meetings, document reviews, etc.  Provide all these services to them for a month’s time.  Then, ask them what they’re willing to pay for all the work you’ve done.

You may find your clients value your services more than you do.

Why Lawyers Procrastinate

Can the source of lawyer procrastination be traced to law school?  Joel Spolsky, in his always-insightful Joel on Software Blog, takes on colleges teaching computer science, and squarely blames them for turning out students poorly prepared to tackle time-based, collaborative projects. 

College students in their final year have about 16 years of experience doing short projects and leaving everything until the last minute. Until you’re a senior in college, you’re very unlikely to have ever encountered an assignment that can’t be done by staying up all night….

Students have exactly zero experience with long term, team-based schedules. Therefore, they almost always do crappy work when given a term-length project and told to manage their time themselves.

If anything productive is to come out of these kinds of projects, you have to have weekly deadlines, and you have to recognize that ALL the work for the project will be done the night before the weekly deadline. It appears to be a permanent part of the human condition that long term deadlines without short term milestones are rarely met.

Lawyers, does this sound familiar?  I’m doing some more thinking on this, but it seems to me that law students not required to meet deadlines (and work collaboratively) are ill-prepared to become good lawyers.  Your thoughts?

Bonus Your Staff Before Your Attorneys

In this great TED talk by author Dan Pink, he argues that while incentives improve people’s performance on routine tasks, just the opposite is true when creativity or problem solving is involved.  Incentives not only fail to improve performance on creative tasks, they diminish it.  What’s more, the larger the reward, the worse the performance.  Might be something to think about when deciding just how to motivate lawyers. 

Watch the entire talk (it is roughly 18 minutes), it is worth your time.

Clients Care About Price, Not Cost

Last week, I posted a Q & A on Flat Fee Pricing.  Just as I've finally found the time to respond to the comments, Jay Shepherd does me one better in this thoughtful piece titled Hourly Billing: The End of the Beginning.  Please read the entire piece, but I'll share here Jay's response to lawyers who argue that time determines price (even in flat-fee models) and should be tracked:

The price depends on only one thing: the amount the customer will pay at that time. You can prattle on all you want about costs and budgets and efficiencies and inefficiencies, but it doesn't matter a whit. It's up to you to set a price that is less than or equal to the value the client places on your service. If you do, you'll be hired for the job. If the value to the client is high enough, you should be able to charge enough so that your revenue exceeds your costs, giving you a profit. But don't expect your client to care about your costs or your profits — that's not their job.

Q and A on Flat Fee Pricing

I was recently interviewed by the Minnesota Lawyer newspaper for an article on flat fees that grew out of my Twelve Truths of Time presentation in Duluth, MN.  We did the interview as a series of questions, which I’m reproducing below.  Once I get a link to the actual article (if it isn’t behind a subscription firewall), I’ll post that here, too.

In what types of cases does flat fee billing work best?

There’s no one type of case where it works best, but there are certainly cases where it works easiest: ones with a certain beginning and ending that fall squarely within the lawyer’s expertise.  However, any case can be priced on a flat fee basis provided the attorney has the experience to properly evaluate the matter and has the systems in place to handle it economically.

The key thing to remember is that a lawyer doesn’t need to make the same money on each case as they’d have made by billing hourly.  Instead, so long as lawyers price right on average, they’ll win in the aggregate.

Is it possible to do flat fee billing in litigation matters? If so, how does that work?

Litigation is really no different than other complex transactions — such as building a sky scraper — that are handled on a fixed-price basis every day.  The key is to enter into a mutual understanding with the client that accounts for the unexpected.  Much like “change orders” are used by contractors, lawyers, too can utilize them to account for a case that takes an unexpected turn.  The key is to define ahead of time the kinds of things that are truly out of the ordinary and make certain the client understands that when circumstances change dramatically, so too can the price.

Another simpler way to begin down the road of fixed-fee pricing is to assign a price to each discrete service (such as depositions, interrogatories, days in court, etc.) that the client agrees to before the representation begins.  Then, in partnership with the client, a lawyer can map out a strategy for litigating the case and give the client a pretty accurate picture of the costs before they are incurred.

Can/are large law firms also using flat fee billing? If so, in what kinds of cases?

Large firms should have an advantage in flat fee pricing, because they’re not only able to absorb better the “one bad guess” on price, but should have a far greater amount of date from which to accurately estimate what their costs are in each matter.  The irony is that while large firms have a significant advantage in doing flat fee work, they are the least likely to adopt it as a primary method of pricing their services.

What are the advantages of flat fee billing?

There are so many, but the principal one — and the one clients embrace, too — is that the lawyer’s and client’s interests are now aligned.  Both now desire to handle the case in the most expeditious way, and law firms are now driven to embrace client-friendly innovative practices instead of eschewing them.

What are the disadvantages?

The key challenge in implementing flat fee pricing is that because so many lawyers don’t have accurate records of their cost per case or client, they often guess wrong on price.

Are clients demanding other options to “billing by the hour”?

Not all clients are demanding options, because many don’t know options exist.  I do know from personal experience that my lawyer clients who are introducing flat fees to their customers are receiving an enthusiastic response.

Any final thoughts/tips for practitioners when it comes to flat fees?

Don’t be afraid of flat fees or other alternative pricing methods.  So long as you know your business and know your clients, you can implement alternative ways of pricing your services that can make you more money and satisfy your clients.  And if you’re not sure about how to go about developing a flat fee pricing model, ask your clients.  They’ll love to give you some advice for a change.

Some Tips for the Suddenly Solo

The fellas at Lawyerist caught up with me in Duluth after one of my presentations at Minnesota CLE’s “Strategic Solutions for Solo and Small Firms” conference. Sam Glover asked me to share some tips for the “Suddenly Solo” lawyers out there.  Here’s the video:

Interview with Matt Homann from Lawyerist Media on Vimeo.

Because You Can Do It Doesn’t Mean You Should

A quick tip that popped into my head while speaking in Minnesota earlier this week:

Tape the telephone number of your IT/Tech professional under your desk near the tangle of cords coming from your PC (and on your server, router, etc.) so you see it when you’re most likely to try to work on your tech stuff yourself.

Still tempted?  Next to the number, write your billable rate and write theirs.

Culture Lessons from NetFlix

Netflix recently released a "Reference Guide" titled "Culture" on Slideshare, giving everyone a chance to peek "behind the curtain" at the values the innovative company expects from its employees. There are some real nuggets in the presentation.  Here are a few of my favorites:

The "Keeper Test" for managers:

Which of my people, if they told me they were leaving in two months for a similar job at a peer company, whould I fight hard to keep…"

The irrelevance of "hard" work:

It is about effectiveness — not effort — even though effectiveness is harder to asses than effort.  We don't measure people by how many evenings or weekends they are in their cube.  We do try to measure peole by how much, how quickly and how well they get work done — especially under deadline.

The refusal to tolerate "Brilliant Jerks" in the workplace:

For us, the cost to teamwork is too high.

The preference of "Rapid Recovery" from vs. Preventing error:

You may have heard preventing error is cheaper than fixing it … not so in creative environments.

The entire policy for expensing, entertainment, gifts and travel:

Act in Netflix's Best Interests.

Please read the whole thing, and while you do, imagine how a law firm would thrive (or fail) if it adopted a similar culture as Netflix's.

Culture
View more presentations from reed2001.

Thanks to the Emerging Leadership Circle blog for the pointer to the presentation!

Twelve Truths About Time

In early August, I’m headed to Duluth, Minnesota to speak at the Strategic Solutions for Solo and Small Firms conference. One of the presentations I’m giving is called the Twelve Truths About Time. In it, I share twelve reasons why attorneys should abandon the billable hour. Here’s the slide deck for that presentation. 


It is still in “draft” form, and I expect to tweak it a bit before I use it live, so please let me know what you think. My friend and artist/designer, M. Jason Robards, drew the clocks. We’re working next on a “Real Innovation for Real Lawyers” slide deck.  I’ll share that as soon as it is done. Thanks!


Let Your Clients Pick Your Next Associates

Seth Godin shares how he narrowed down 27 finalists for his “Alternative MBA” program to just ten participants: he let the applicants decide. Here’s how he describes the process:

More than 48,000 people visited the page that described the program and 350 really cool, talented people applied. I picked 27 finalists and all of them flew out to New York to meet each other. This was the most fun I’ve ever had at a cocktail party (it helped that it was at eight o’clock in the morning).

The conversations that day were stunning. Motivated people, all with something to teach, something to learn and something to prove. I asked each person to interview as many other people as they could. After three hours, I asked everyone to privately rank their favorite choices… “who would you like to be in the program with you?”

After they left, I tallied up the results. It was just as you might predict: nine or ten people kept coming up over and over in the top picks. I had crowdsourced the selection, and the crowd agreed. (It turns out that the people they picked were also the people I would have picked).

On January 20th, the most selective (one in 40 got in) MBA program in the world got started. Since then, they’ve never failed to live up to my hopes.

What if your firm choose its associates this way, by letting the applicants choose the others they’d like to work with? Or be even bolder, and bring your applicants in to spend a day with a mixture of your best clients — and let the clients decide!

100 Tweets: Thinking About Law Practice in 140 Characters or Less.

I really like Twitter.  For those who follow me, you know that I try to share lots of legal-themed tips, thoughts and ideas.  In fact, most of my Ten Rules posts started out on Twitter — where I’ll test 15-25 “rules” to see which ones work best before picking the ten favorites.

However, there’s lots of stuff that lives on Twitter now that used to live here on the blog.  And since I don’t expect everyone reading this to follow me there (or go back and read through my 2000+ Twitter messages), I decided to compile a “Best Of” list of my favorite tweets.

So, here (in .pdf form) is a little e-book I’ve titled:  100 Tweets: Thinking about Law Practice in 140 Characters or Less.  It contains my favorite 100 tweets, in no particular order, and should give you a sense of what I share on Twitter that you don’t always see here.

If you enjoy it, and would like to follow me on Twitter, I’ll see you there.

Selling Through a Slump E-Book

I had the privilege of contributing the legal chapter in the new Selling Through a Slump:  An Industry by Industry Playbook

Oracle and The Customer Collective co-sponsored the guide, which contains great advice for selling in multiple verticals, including accounting and consulting, retail, the public sector, health care, insurance, telecommunications, services, technology, media and manufacturing.  The author list reads like a who’s who of industry experts, and I’m honored to be in such great company.

Check it out here.  Registration is required, but the download is free.

Get a Life — In Only Two Days

I’ve been spending some time talking to the organizers of the Get a Life Conference, after connecting at Techshow and on Twitter.  It looks like a great event, and I’m really working hard to figure out a way to make it — and perhaps do some cool LexThink-like unconference stuff with them if I do.

Lots of great speakers, including the incomparable Gerry Riskin, are on tap.  Expect lots of talk about practical ways to make your law practice a more profitable business.  From their site:

In this two-day workshop, you’ll learn how manage all the moving parts of a successful law practice and still have a life. But there’s one very important thing missing – you! One of the greatest challenges you have is making time for what’s personally important to you – your hobbies, friends and family.

It happens May 27th and 28th in Chicago.  Check it out, and if you’d like to go, here’s a link to a 25% discount (Enter INSIDER upon check-out).  I hope to see you there!

Let Your Clients Decide Your Price

One of the biggest barriers lawyers must overcome when contemplating alternative pricing models is understanding just how customers perceive the value lawyers provide. 

One of the ways I've combated this in my consulting practice (and at LexThink Innovate) is I let customers set the price of the work I do — after it is done.

Below is a copy of my "You Decide Invoice" that I use for all my consulting work.  The relevant provisions read:

YOU DECIDE: Your absolute satisfaction with LexThink isn’t just our goal, it’s the measure of our worth — and the determination of our fee. The rules are simple: you pay us what you feel we were worth to you. You decide, no questions asked. The only rule? We want to know why you paid what you did, and how we could have done better.

and

WHEN TO PAY:  While we leave our fee in your hands, we can’t leave it there forever. Please send us  your payment and feedback within 21 days after you get this invoice.  Please send a copy of this along with your feedback and your payment.  Thank you for your business.

On the second page (not shown), I ask for feedback from the customer:

Tell us, in as many words as you want, how we did. Think about your expectations, the result, and how it felt to work with us. Also, let us know if we can share your feedback with others — and if we can give you credit. Attach more sheets if you need to.

That's it.  I explain to the customer before they engage me that they'll set my price, and then give them the invoice as soon as the engagement's done.  So far, I've always received at least as much as I've expected — and most importantly, usually more than I would have charged if I'd set my price before beginning. 

I also know that when I will ultimately receive less than I expect (or not get paid at all), it will tell me I need to learn lessons from the engagement, and improve my services (or be more selective with my clients) so it doesn't happen again.

What's keeping you from experimenting, and letting a few (trusted) customers name your price? 

Ten Rules for the New Economy

This economic downturn provides a tremendous opportunity for lawyers to look at their practices in a new (and different) way.  Here are ten “rules” for lawyers facing an uncertain economic future.  I hope you find them helpful.

1. Your best response to bad economic times is to become indispensable to your clients.  What can you provide to them that they can’t do without?  If you can’t answer that question, it is unlikely your clients can either.

2.  Never assume your current clients know all you can do for them.  Never believe your former clients remember all you did for them.  Reach out to both and remind them.  New business will follow.

3.  “Advertise more” is the advice you’ll get from the yellow pages salesperson.  “Blog and Twitter more” is the advice you’ll get from social media consultants. “Serve more” is the advice you’ll get from your clients.

4.  In a bad economy, you can be proactive, reactive or inactive.  Chose the first, knowing most of your competitors will pick the other two.

5.  Don’t lower your rates, increase your terms.  The easier you make it for people to pay you, the more likely they will.

6.  There’s a fine line between compassion and pity.  Your clients aren’t paying you to feel sorry for them, they are paying you so they’ll no longer feel sorry for themselves.  Instead of saying “I’m sorry,” tell them the six words all clients long to hear: “I’ll help you get through this.”

7.  When your worst clients use the economy as yet another excuse to not pay you, use it as an excuse not to keep them.

8.  Though you might earn less of your clients’ money, never deserve less of their trust. 

9.  Your clients never hired you because they wanted a lawyer, they hired you because they needed one.  When they leave you, it isn’t because they suddenly need you less, they just need other things more.  Don’t take it personally, you’d choose food and heat over advice, too.

10.  Remember all those rainy day, practice-improvement projects you’ve put off ‘til “someday” because you’ve never had the time to do them?  Guess what, today is someday.  Now is the time for you to make big changes in your business.  What are you waiting for?

If you enjoyed these, check out my other posts in the series: Ten Rules for New Solos, Ten Rules of Legal InnovationTen Rules of Legal Technology, Ten Rules of Hourly Billing and Ten New Rules of Legal Marketing

Also, if you’d like to get more ideas like these in real time, follow me on Twitter.

Ten Rules for New Solos

As our economy sours and the legal job market dries up, there are lots of lawyers looking at solo practice for the first time.  As a former solo myself, I’m sharing these ten “rules” for new solos.  There are more to follow, and please share yours in the comments.

1.  The good news:  As a solo, you are your own boss, can do whatever you want and answer only to yourself. That’s also the bad news.

2.  Your solo practice is far more likely to fail because you’re a bad business person than because you’re a bad lawyer. 

3.  If you are a bad procrastinator, you’ll be a terrible solo.  Nothing will impact your ability to succeed as much as your inability to manage your time.  It is unimportant how great you are at lawyering when you don’t send your bills out on time.

4.  Never underestimate the value of the water cooler.  You can find many “co-workers” online in Solosez, Blogs, Twitter, etc.  Just don’t spend all your time there.

5.  Would you let your plumber appear in court for you?  Remember your answer next time you’re fiddling with your phone system, computer network, etc…  You can’t expect someone to appreciate your expertise if you fail to appreciate theirs.

6.  If you’re looking for a guru, you can have Foonberg.  I’ll take Elefant.

7.  If you’re thinking of opening a “general” practice, remember this: Your clients don’t have “general” legal problems, they have specific ones.  They’ll hire you because you’re able to help them, not everyone else.

8.  Your friends, family and business contacts may hire you eventually, but they’ll rarely do so right away.  They have to need to hire you, not just want to.

9.  Never tell prospective clients that being a solo makes you cheaper to them.  Show them that being a solo makes you better for them. If your clients hire you because your rates are low, they will fire you as soon as your rates are no longer low enough.

10.  There is no shame in going solo.  Your clients don’t care that the legal market tanked, that you got laid off from BIGLAW or that you “wanted more time to spend with your family.”  They have their own problems, and are looking to you solve them.  When you do, you’ll both profit.

If you enjoyed these, check out my other posts in the series: Ten Rules of Legal InnovationTen Rules of Legal Technology, Ten Rules of Hourly Billing and Ten New Rules of Legal Marketing

Also, if you’d like to get more ideas like these in real time, follow me on Twitter.

Ten Rules About Hourly Billing

After the great response I got to yesterday’s Ten New Rules of Legal Marketing post, I’ve decided to share a few more “Rules” of Hourly Billing I’ve culled from my blog and my speeches.  Enjoy!

1.  Ask your clients what they buy from you.  If it isn’t time, stop selling it!

2.  Imagine a world where your clients know each month how much your bill will be so they could plan for it.  They do.

3.  If you don’t agree on fees at the beginning of a case, you’ll be begging for them at the end of it.

4.  Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.

5.  When you bill by the hour, your once-in-a-lifetime flash of brilliant insight that saves your client millions of dollars has the same contribution to your bottom line as the six minutes you just spent opening the mail.

6.  Businesses succeed when their people work better.  Law firms succeed when their people work longer.  Your clients understand this — and resent you for it.

7.  Every time your clients jokingly ask you, “Are you going to charge me for this?” they aren’t joking — and they’ll check next month’s bill to be sure.

8.  The hardest thing to measure is talent.  The easiest thing to measure is time.  The two have absolutely no relationship to one another.  Your law firm measures talent, right?

9.  Would you shop at a store where the cost of your purchase isn’t set until after you’ve agreed to buy it? You ask your clients to.

10.  There are 1440 minutes each day.  How many did you make matter?  How many did you bill for?  Were they the same minutes?  Didn’t think so.

If you’d like to get more ideas like these in real time, follow me on Twitter.

If Lawyers Didn’t Exist

I know, the title of this post sounds like the beginning of another lawyer joke, but it comes from a very thought-provoking article from Indi Young on A List Apart titled Look at it Another Way.

Indi suggests several ways we can “step out of our problem-solving role.” This is important because:

Whether we’re improving what we make, how we make it, or how we share it, we normally take the perspective of the creator by default. We can’t help it. We’re drawn into decisions about all sorts of details. We love the minutia—solving problems, finding a way around a limitation. We don’t try to see past our own role in the process.

Instead of trying to improve our businesses (or our processes/outputs/etc.) from the inside, she suggests we drop our problem-solving role completely, forget about our business’ existing limitations and become the person we serve.

Pretend you and your organization do not exist, and study what this person does with all the resources available in her life. For example, what does a citizen need from her town government? She needs a way to get from her house to the grocery store, the library, the post office, her workplace, etc. These could be roads, bike paths, public transit, and sidewalks. She needs utilities like water and electricity to be delivered to her property. She needs assurance that her property will be defended from fire, protected from floods, and accessible during a disaster. She wants to feel safe from assault, whether by a human, an animal, pollution, noise, or disease. This list goes on.

Like governments, lawyers (though some might argue) exist to fulfill a need. Here’s a way to identify those needs: Think about your clients for a moment. But, as the article suggests, don’t think of them as a “user” of the thing you provide. Instead, “think about how and why they accomplish what they want to get done.”

So, who are your clients? What do they look like? Where do they live? What do they need? What do they want to get done?

Most importantly, what wakes them up at 2:00 am the morning before they call your office? Would they say it is because they wanted “estate planning” or because they want to make sure they can “take care of their family” when they die?

Put another way, if lawyers didn’t exist, what unmet need would your clients have? And if you were the only one to recognize that unmet need (in a world without lawyers, remember), would you invent your firm as it exists today?

Would your client?

Would Steve Jobs?

Free Fee-Setting Advice

From my friend Gerry Riskin comes a link to this Report on Fee Setting for Professionals. In it, an all-star cast of legal innovators and business gurus answer the question: What one piece of advice do you need to know to get the fees you deserve?

I’d highly recommend reading Gerry’s post to get a peek at what’s in the report, and then downloading it (sign up required).

What’s your practice plan?

Michael Hyatt shares the importance of having a “Life Plan.” He talks about why it is important, and openly shares quite a bit of his own. Under the “My Colleagues” category of his plan, Michael writes:

I want my colleagues to remember my servant-leadership, my integrity, my humility, and my commitment to having fun. I want them to remember how much they learned and grew as a result of knowing me. Most of all, I want them to remember how I empowered them to accomplish far more than they ever thought possible.

When you read his post, think about the things you’d include in a Life Plan for your practice. The quote above would be a great start for the “My Clients” section. Give it a try.

Using Instant Messaging in your firm? You should.

Here’s an article from Science Daily that suggests that Instant Messaging (IM) reduces workplace interruptions. If you’ve been avoiding IM in your workplace because you believe it saps productivity, think again:

The study challenges the widespread belief that instant messaging leads to an increase in disruption. Some researchers have speculated that workers would use instant messaging in addition to the phone and e-mail, leading to increased interruption and reduced productivity.

Instead, research showed that instant messaging was often used as a substitute for other, more disruptive forms of communication such as the telephone, e-mail, and face-to-face conversations. Using instant messaging led to more conversations on the computer, but the conversations were briefer, said R. Kelly Garrett, co-author of the study and assistant professor of communication at Ohio State.

Worth a read.

Managing Partners, Report to the LAB

My friend Patrick McKenna has been working hard on a Leadership Advisory Board (LAB) for Managing Partner magazine. Though populated with large firm lawyers, the LAB is shaping up as a pretty amazing resource for managing partners for all sized law firms. Here’s a description:

The LAB was formed as a resource to provide pragmatic advice to assist new managing partners with their critical burning issues and help them succeed. The LAB is comprised of the following distinguished current and former law firm leaders: Angelo Arcadipane (Dickstein Shapiro LLP); John Bouma (Snell & Wilmer LLP); Brian K. Burke (Baker & Daniels LLP); Ben F. Johnson, III (Alston & Bird LLP); John R. Sapp (Michael Best & Friedrich LLP); Keith B. Simmons (Bass Berry & Sims PLC); William J. Strickland (McGuire Woods LLP); Harry P. Trueheart, III (Nixon Peabody LLP); together with Patrick J. McKenna (Edge International).

Check it out, and keep on eye on Managing Partner Magazine for more.

Charge $297 per hour and not $300.

Here’s a fascinating article in Scientific American titled Why Things Cost $19.95 that discusses the psychological impact certain prices have over others. If you’ve always wondered why we see odd prices so often ($19.95 vs. $20.00), the article gives the answer. Two University of Florida marketing professors studied how consumers relate a ticketed price to the perceived wholesale “cost” of a good or service:

There were three scenarios involving different retail prices: one group of buyers was given a price of $5,000, another was given a price of $4,988, and the third was told $5,012. When all the buyers were asked to estimate the wholesale price, those with the $5,000 price tag in their head guessed much lower than those contemplating the more precise retail prices. That is, they moved farther away from the mental anchor. What is more, those who started with the round number as their mental anchor were much more likely to guess a wholesale price that was also in round numbers. The scientists ran this experiment again and again with different scenarios and always got the same result.

Why would this happen? As Janiszewski and Uy explain in the February issue of Psychological Science, people appear to create mental measuring sticks that run in increments away from any opening bid, and the size of the increments depends on the opening bid. That is, if we see a $20 toaster, we might wonder whether it is worth $19 or $18 or $21; we are thinking in round numbers. But if the starting point is $19.95, the mental measuring stick would look different. We might still think it is wrongly priced, but in our minds we are thinking about nickels and dimes instead of dollars, so a fair comeback might be $19.75 or $19.50.

I’d really recommend you read the entire article, but the initial takeaway for me is this: If you want clients to believe your rate (or set price for a given service) is close to your actual cost, price in odd numbers.

Bill before the ‘moneymoon’ is over.

The Urban Dictionary’s Word of the Day today is Moneymoon, defined as:

The time after your purchase of a good or service and before ‘buyer’s remorse’ happens. “The moneymoon is over, I realzie now that buying that boat was a waste of money.”

Made me think of the number one rule of small business cash flow: Bill your clients before the moneymoon is over.

Are your customers, or your employees, always right?

For another worthwhile read this morning, check out the Top 5 Reasons Why "The Customer is Always Right" is Wrong from the Chief Happiness Officer Blog.  Reason Number 4, it results in worse customer service:

[W]hen you put the employees first, they put the customers first. Put employees first, and they will be happy at work. Employees who are happy at work give better customer service because:

  • They care more about other people, including customers
  • They have more energy
  • They are happy, meaning they are more fun to talk to and interact with
  • They are more motivated

On the other hand, when the company and management consistently side with customers instead of with employees, it sends a clear message that:

  • Employees are not valued
  • That treating employees fairly is not important
  • That employees have no right to respect from customers
  • That employees have to put up with everything from customers

When this attitude prevails, employees stop caring about service. At that point, real good service is almost impossible – the best customers can hope for is fake good service. You know the kind I mean: courteous on the surface only.

Do you put your customers first, or your employees?

How to Run Your Law Firm Like a Startup … or Not.

Jason Calcanis heads up Mahalo, a human-powered search engine.  In this post, widely circulating around the tech/startup blogosphere, Jason gives 17 tips on saving money while running a startup that will (I didn’t say should) surely resonate with some BigLaw managing partners.  Some of his “really good” ideas (since toned down a bit in an update to the post):

  • Buy everyone lunch four days a week and establish a no-meetings policy. Going out for food or ordering in takes at least 20-60 minutes more than walking up to the buffet and eating. If you do meetings over lunch you also save that time. So, 30 minutes a day across say four days a week is two hours a week… which is 100 hours a year. You get the idea. 
  • Don’t buy a phone system. No one will use it. No one at Mahalo has a desk phone except the admin folks. Everyone else is on IRC, chat, and their cell phone. Everyone has a cell phone, folks would rather get calls on it, and 99% of communication is NOT on the phone. Savings? At least $500 a year per person… 50 people over three years? $75-100k
  • Buy your hardest working folks computers for home. If you have folks who are willing to work an extra hour a day a week you should get them a computer for home. Once you get to three hours of work a week from home you’re at 150 hours a year and that’s a no brainer. Invest in equipment *if* the person is a workaholic.
  • Fire people who are not workaholics… come on folks, this is startup life, it’s not a game.  Don’t work at a startup if you’re not into it.  Go work at the post office or stabucks if you’re want balance in your life for realz.
  • Get an expensive, automatic espresso machine at the office. Going to starbucks twice a day cost $4 each time, but more importantly it costs 20 minutes. Buy a $3-5,000 Jura industrial, get the good beans, and supply the coffee room with soy, low fat, etc. 50 people making one trip a day is 20 hours of wasted time for the company, and $150 in coffee costs for the employees. Makes no sense.
  • Stock the fridge with sodas—same drill as above.

Sound like BigLaw to you?  Well, except for the awesome coffee machine.  That’s not a cost like copies that you can pass on to clients.

New Research Explains Billable Hour’s Staying Power!

Well, not exactly, but this article in the Telegraph discusses an experiment exploring humans’ preference for a familiar (though less efficient) path, and found:

most of us are happy to play follow-my-leader, even if we are trailing after someone who does not know where they are going and taking the most meandering route.  Even more striking, even when we are shown a faster route, we prefer to stick with the old one and tell others to take the long road too, a finding that could have lethal implications when it comes to evacuating a building or ship in an emergency.

In the study, participants were led from one room to another. When asked to return to the first room, almost all took the familiar path back, even when they were aware of a shorter path:

All but one person took the route they had been led. What we were surprised by was how strong this effect was, even when the alternative route was much shorter …. They preferred the long route even when the experimenter had drawn attention to the alternative route, or when the experimenter took the long route solely to pick up a fallen poster, eliminating the possibility that participants thought the experimenter had a good, but unknown, reason to take the long route. By asking participants to collect the next guinea pig in the experiment, the scientists observed that each person in the chain copied the route of the participant before them: a simple tradition that meant the alternative route was never discovered.

Interesting food for thought, don’t you think?

Don’t Forget the List

My friend (and XPLANE co-worker) Bill Keaggy put together The Ultimatest Grocery List that you should check out and modify for your office.  Create a list of all the things you regularly buy — even once a year — for your practice and add each item to the list.  Check off the boxes when things are getting low, and you’ll save at least one or two trips to Office Depot or Best Buy each year.    

Tags: , ,

Kill Your Projects, Not Your Clients

Here’s an interesting idea from Scott Young that may just help with your growing to-do list:  Set up a Project Kill Day. In short, you schedule a distraction-free, off-site day to “kill” off one of your projects.  Check out the entire post for his step-by-step guide.

Not sure which projects you have that merit an entire day?  Try writing down the first client-related task you think of in the morning and the last one you think about before bed.  If it is the same one for more than a day or two, kill it before it kills you!

A You-Tube for Legal Docs? Check out DocStock

Here’s a profile of DocStock, a site allowing people to find and share professional (including legal) documents. 

The profession is changing, my friends.  What are you doing to be ready?

15 Thoughts for Law Students: A Mini-Manifesto

I’ve written a few mini-manifestos for clients and lawyers before and remain quite enamored with the format.  Here’s one for law students with some random (semi-related) thoughts on law school and the legal profession.  Let me know what you think, and feel free to add your own in the comments.

1.  Law school is a trade school.  The only people who don’t believe this to be true are the professors and deans.

2.  Want to piss off your professors?  Ask them if they’ve ever run a successful law practice.

3.  Being good at writing makes you a good law student.  Being good at understanding makes you a good lawyer.  Being good at arguing makes you an ass.

4.  You can learn more about client service by working at Starbucks for three weeks than you can by going to law school for three years.

5.  Law school doesn’t teach you to think like a lawyer.  Law school teaches you to think like a law professor.  Believe me, there’s a huge difference.

6.  You can get through law school without understanding anything about what it is like to be a lawyer.  That is a terrible shame.

7.  The people who will help you the most in your legal career are sitting next to you in class.  Get to know them outside of law school. They are pretty cool people.  They are even cooler when you stop talking about the Rule Against Perpetuities.

8.  Your reputation as a lawyer begins now.  Don’t screw it up (and quit bragging on Facebook about how drunk you got last night).

9.  Law is a precedent-based profession.  It doesn’t have to be a precedent-based business.  Be prepared to challenge the prevailing business model.  Somebody has to.

10. Experienced lawyers work with clients.  Young lawyers work with paper.  You like working with paper, right?

11. You are about to enter a world where getting your work done in half the time as your peers doesn’t get you rewarded.  It gets you more work.

12. Except for prosecutors and public defenders, nobody tries cases anymore.  Especially not second year associates.

13. You have a choice:  You can help people and make a decent living, or you can help corporations and make a killing.  Choose wisely.

14. There are plenty of things you don’t know, and even more things you’ll never know.  Get used to it.  Use your ignorance to your benefit.  The most significant advantage you possess over those who’ve come before you is that you don’t believe what they do.

15. People don’t tell lawyer jokes just because they think they are funny.  They tell lawyer jokes because they think they are true.  Spend your career proving them wrong.

Outsource Your (Non)Legal Practice

I’m a big fan of Tim Ferriss’ book The 4-Hour Workweek, though some of his suggestions are a bit impractical for an office-dwelling professional.  That’s why I really liked this post on 43 Folders that gives several realistic examples of ways to outsource your personal and professional life.  Well worth a read, if only for this fantastic advice for those to whom “delegation” is a four letter word:

It’s easy to tell yourself that it would take too long to figure out how to explain a project to someone else than to do it on your own.  After all, you’re the only person who has the grand picture, understands the purpose of the work, and is familiar with the details. But with a bit of pluck and a capacity for seeing projects for what they truly are (collections of discrete actions,) you’ll be astonished at how much you can rid yourself of.  I have often found that what at first seemed daunting to explain to someone else actually just required a few moments thinking about how the problem needed to be approached—which is a process I was going to have to go through anyway if I were ever going to complete the task in the first place.

 

The Mobile Lawyer 2.0

It has been a long while since I’ve been so WOW’d by a business model as I’ve been this morning.  Simply put, this is the BEST template I’ve seen for building a home-based practice from, of all people, a physician.  Dr. Jay Parkinson, MD is building a web-based medical practice.  From his website:

  • I AM A NEW KIND OF PHYSICIAN.
  • I strictly make house calls either at your home or work. 
  • Once you become my patient and I’ve personally met you, we can also e-visit by video chat, IM and email for certain problems and follow-ups.
  • I’m based in Williamsburg, Brooklyn.  My fees are very reasonable.
  • I’m extremely accessible.  Contact me by phone, email, IM, text, or video chat.  Mon-Fri 8AM-5PM.  24/7 for emergencies.
  • I specialize in young adults age 18 to 40 without traditional health insurance.
  • When you need more than I provide, I make sure you wisely spend your money and pay the lowest price for the highest quality.
  • I’ve gathered costs for NYC specialists, medications, x-rays, MRIs, ER visits, blood tests, etc…just like a Google price search.
  • I mix the service of an old-time, small town doctor with the latest technology to keep you and your bank account healthyl

How much for this service?  According to the "How it Works" on his site, his fee is "far less than your yearly coffee budget but a little more than your Netflix."  His web site also provides "Real Life Examples" that describe, in plain English, how you’d use his service.  Oh, and he’s blogging, too.

Lawyers, if you are looking for a real dose of inspiration (or a glimpse to the future of mobile practice) you HAVE to check this Parkinson’s site and business model.  Simply brilliant.  Great idea, great web site, amazing copy.  If I were still practicing, I’d steal it in a heartbeat.  Look at it now.

Via: Zoli’s Blog.

To Make More Money, Charge More Money

Reluctant to raise your fees, check out this article from CNNMoney.com on how to raise prices while keeping customers.  Worth a read.  Here’s a taste:

Many business owners assume that any price increase will drive customers away. But consultants who work with small companies say they often under-estimate their pricing power. Those owners know their costs are rising but sometimes forget that fuel prices are soaring worldwide and that workers are demanding higher wages even in China, India, and other developing countries. Many small U.S. manufacturers, in particular, become so focused on price competition with larger rivals or foreign ones that they don’t appreciate the value of the added quality they offer, their fast and reliable delivery, or other superior services they provide – or could provide – to justify higher bills.

Hat tip to Barry Moltz.

Thoughtful Law Blog

David Bilinsky has a great new blog:  Thoughtful Legal Management.  Check it out!

Remind Yourself It is Your Money You’re Not Earning

Just got back from the American Immigration Lawyer’s Association annual convention.  I presented twice there, hosted an Idea Market and an Idea Gallery (more on those later) and hung out with a bunch of cool immigration law practitioners.

One tip I shared at a round table discussion that really resonated with a practitioner who had a mountain of accounts receivables is this one:

Every month, when you print out your bills and your accounts receivable statement, clip a family photo to the top of the stack.  Whenever you are tempted to write down a bill or not try to collect on one, look at your family before you make the decision.  While there are dozens of great reasons to reduce a bill or not collect upon an amount owed, every dollar you don’t collect is a dollar your family doesn’t get to spend on something important, or you don’t get to donate to a worthy cause. 

Forget Big Associate Salaries

My friend Kareem shares the best three-step compensation scheme ever (from Alfie Kohn):

  1. Pay people well.
  2. Pay people fairly.
  3. Do everything possible to take money off people’s minds.

Law Firm Economics in a Nutshell

From Hugh:

Extreme Outsourcing

I just happened across Timothy Ferriss’ site (blog) and saw this article on “Outsourcing Life” that I’d like to share.  If you are experimenting with outsourcing work in your firm, check out some of the extreme suggestions on outsourcing a few other things.  Timothy has a book coming out.  I’ve asked for a review copy and will share my thoughts if it comes my way.

Unlimited Vacation?

Once lawyers get past the billable hour and are judged on the quality of their work, perhaps their firms may implement a vacation policy like Netflix’s:

When it comes to vacation, Netflix has a simple policy: take as much as you’d like. Just make sure your work is done.

Employees at the online movie retailer often leave for three, four, even five weeks at a time and never clock in or out. Vacation limits and face-time requirements, says Netflix Chief Executive Reed Hastings, are “a relic of the industrial age.”

“The worst thing is for a manager to come in and tell me: `Let’s give Susie a huge raise because she’s always in the office.’ What do I care? I want managers to come to me and say: `Let’s give a really big raise to Sally because she’s getting a lot done’ – not because she’s chained to her desk.”

Thanks to Creative Class for the link.

Who is Going to Pay for Those 18 Minutes?

NYT article on the perils of multitasking.  The money quote:

In a recent study, a group of Microsoft workers took, on average, 15 minutes to return to serious mental tasks, like writing reports or computer code, after responding to incoming e-mail or instant messages. They strayed off to reply to other messages or browse news, sports or entertainment Web sites.

There are some other good studies mentioned in the article.  Worth a read — if you’ve got the time.

The Bonus Boost: Better Peformance

File this one away in the “things that make you go hmmmmm” department.  This article in Science Daily (hat tip: Guy) suggests employee bonuses work WAY better then pay raises in motivating employees:

Giving a 1 percent raise boosts employee job performance by roughly 2 percent, but offering that same money in the form of a bonus that is strongly linked to a job well done can improve job performance by almost 20 percent, finds a new Cornell study on the relationship between pay and performance.

Full study here.

Building the Perfect Innovation Retreat – Call for Help

Readers, I need your help.  I’m designing an intensive, two-day, innovation-focused law firm retreat that I can sell to medium and large firms.  Before it goes “live” I need to do it at least twice to iron out the kinks and make it hum.

Here’s what I’d like to do:

  • Do the retreat for a firm of 10-20 lawyers, their staff and selected clients (yes, I said clients).  The cost to the firm will be my travel, lodging and retreat materials.  I’ll also ask the firm to pay me an amount commensurate with the “value” of the retreat to the firm — but only if they thought it was the best retreat they’d ever done.
  • Assemble a group of 10-20 small firm or solo lawyers for a two-day innovation retreat here in St. Louis in early June.  Because most solo and small-firm lawyers don’t get the benefits of a law firm retreat, I want to bring several of these lawyers together to collaborate with one another and to bring innovation into all of their practices.  Also, I want to see if the concept of a solo/small firm “retreat” will work.  If I get enough people, I’ll set the fee at an amount sufficient to cover my costs (probably at $250 per attendee or so).  Each attendee will be on their own for travel and lodging.

Let me know if you are interested.  You can e-mail me at Matt@LexThink.com if you or your firm would like to participate.  Thanks.
 

Start Wine-ing in Your Business

Hugh at Gaping Voidingvoid recaps some “lessons learned” in his first two years of working with Stormhoek winery.  Just a few of his points should resonate with anyone (including lawyers) trying to build an amazing business:

14. We can make this as lucrative and as intellectually stimulating as we want to. The ball is in our court.

16. What’s driving innovation and sales on our end is not a technological issue, it’s a cultural issue. Get the right culture going, and the tech looks after itself.

17. When I started working in the advertising business as a young buck in London, back in the late 1980s, Bartle Bogle Hegarty were considered the best game in town, even if they were not the biggest agency. Every young advertising student aspired to have a gig there one day, everyone daydreamed of one day having John Hegarty return their calls. The were considered the Praetorian Guard. Within two years from now, I want every smart, driven young person in the wine trade to be thinking the same way about us. That to me would be a far more worthy definition of “success”, than how many cases we sell.

Make Tomorrow E-Mail Free

How about implementing “No E-Mail Fridays” at your office?  Check out this ABC News article to learn why it may be a good idea.

Office Motivation Hack: Complete a Puzzle

Here’s another fantastic Parent Hack that could work wonders in an office setting:

My 7 year-old son can be particularly stubborn and no matter how much we beg, plead, or reason with him, he stands his ground. Sometimes I resort to bribery. He likes puzzles so I came up with puzzles to help him do certain things.  It started the summer before Kindergarten — he already knew how to tie his shoes, but claimed that he “forgot” how over the summer since he wore sandals all summer.  So I found a pair of running shoes that he wanted online (I used Zappos.com) and printed out two full-sized  pictures.  One was in color and the other black and white.  I then decided that I wanted him to tie his shoes for two weeks on his own before I would buy him the shoes he wanted so I cut the colored picture into the appropriate number of “puzzle” pieces.  Then every time he tied his shoes on his own he earned one piece that he could tape onto the black and white picture in the correct spot.  When the puzzle was complete we ordered him his shoes.

What are the goals for your office, and what is an appropriate reward when the goals are met?  Can you make a huge "puzzle" for your workers to complete as they reach appropriate milestones?

Send Your Staff to the Store with Gift Cards

Quick tip from Parent Hacks that would work for office personnel too:

Our nanny does a lot of our food shopping for us. It’s something for her to do with the baby, and she likes helping out. Usually, I give her a chunk of cash that seems like enough to cover things, and then she gives me the change along with the receipts. Last week it occurred to me that I should just pick up gift cards for her to use! She usually goes to Trader Joe’s and Whole Foods. Both of these places sell gift cards (as do most supermarkets). I can put a big lump sum on each card, and then she no longer needs to worry about keeping my cash separate, etc.

Relationship Economies for Professionals

I highly recommend this essay by Doc Searls on “Relationship Economies.”  In it, he recounts a conversation he had with a Nigerian pastor about markets and transactions:

“Pretend this is a garment”, Sayo said, picking up one of those blue airplane pillows. “Let’s say you see it for sale in a public market in my country, and you are interested in buying it. What is your first question to the seller?”

“What does it cost?” I said.

“Yes”, he answered. “You would ask that. Let’s say he says, ‘Fifty dollars’. What happens next?”

“If I want the garment, I bargain with him until we reach an agreeable price.”

“Good. Now let’s say you know something about textiles. And the two of you get into a long conversation where both of you learn much from each other. You learn about the origin of the garment, the yarn used, the dyes, the name of the artist, and so on. He learns about how fabric is made in your country, how distribution works, and so on. In the course of this you get to know each other. What happens to the price?”

“Maybe I want to pay him more and he wants to charge me less”.

“Yes. And why is that?”

“I’m not sure.”

“You now have a relationship”.

Though price still matters in the developing world, the pastor suggested, relationships matter more:

It’s a higher context with a higher set of values, many of which are trivialized or made invisible when viewed through the prism of price. Relationship is not reducible to price, even though it may influence price. Families and friends don’t put prices on their relationships. (At least not consciously, and only at the risk of cheapening or losing a relationship.) Love, the most giving force in any relationship, is not about exchanging. It is not fungible. You don’t expect a payback or a rate of return on the love you give your child, your wife or husband, your friends.

Read the entire essay the next time you are deciding whether to focus your energies on attracting new clients vs. building stronger relationships with existing ones.

What About Billable Hours?

John Moore passed on the Jack Welch Quote:

The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, your global market share is sure to grow, too. Employee satisfaction gets you productivity, quality, pride, and creativity. And cash flow is the pulse—the key vital sign of a company.

If Jack Welch ran a law firm, do you think he’d abandon one, two or all three to focus on measuring billable hours instead?

Join Me March 8th for a Teleseminar

I’d like you to join me for a teleseminar on March 8th, titled: Think Real BIG — Ten Creative Strategies for Building an Innovative Law Practice.  It is part of the online-only Career & Practice Development Conference

I will share ten unique and easy-to-implement strategies to help you create an innovative, service-centered law practice that you’ll love as much as your clients do.

The teleseminar takes place from 1:00 – 2:00 pm EST and the cost is $59.00.  You can register here.

Define Your Firm’s Rules of Engagement

Guy Kawasaki shares some “Rules of Engagement” from a company called SuccessFactors.  Here they are:

Rules of Engagement

  1. I will be passionate—about SuccessFactors’ mission, about my work. I will love what we do for companies and employees everywhere.

  2. I will demonstrate respect for the individual; I will be nice and listen to others, and respect myself. I will act with integrity and professionalism.

  3. I will do what it takes to get the job done, no matter what it takes, but within legal and ethical boundaries.

  4. I know that this is a company, not a charity. I will not waste money—I will question every cost.

  5. I will present an exhaustive list of solutions to problems—and suggest actionable recommendations.

  6. I will help my colleagues and recognize the team when we win. I will never leave them behind when we lose.

  7. I will constantly improve Kaizen! I will approach every day as an opportunity to do a better job, admitting to and learning from my mistakes.

  8. I will selflessly pursue customer success.

  9. I will support the culture of meritocracy and pay for performance.

  10. I will focus on results and winning—scoring points, not just gaining yardage.

  11. I will be transparent. I will communicate clearly and be brutally honest, even when it’s difficult, because I trust my colleagues.

  12. I will always be in sales and drive customer satisfaction.

  13. I will have fun at work and approach my work with enthusiasm.

  14. I will be a good person to work with—I will not be an asshole.

I agree to live these values. If my colleagues fail to live up to any of these rules, I will speak up and will help them correct; in turn, I will be open to constructive criticism from my colleagues should I fail to live by these values. I understand that my performance will be judged in part by how well I demonstrate these values in my daily work.

Any professional service firms out there with similar “Rules” for their employees?

Don’t Be Later, Aligator

Joyce Wycoff shares an interesting strategy to keep employees from being late to work:

On Monday morning, my CEO and I stood at the company’s entrance lobby at 8:30 am sharp, the time employees were supposed to report for work. There was a constant stream of latecomers. As people strolled in, my CEO and I gave a warm smile and shook their hands, greeting them with a hearty ‘Good morning!’ … then we handed each a slip of paper … still smiling.

It read, “Thank you for coming to work today. I was here at 8:30 am to welcome you. Would I have the pleasure of greeting you tomorrow morning at the same time? Signed, CEO”

After a few days, there were no more latecomers. And we saved a big chunk in production costs.

This would be a lot harder in those law firms where 2000 billable hours is the norm.  In those firms, the managing partner may need to stay in the firm’s lobby and keep people from going home. ;-)

Some Times You Just Have to Bucket.

Michael McDerment writes about the benefits of pricing services in “three buckets” (tiers) compared to a totally customized pricing strategy:

[W]hat is better: buckets or custom pricing?  Buckets.  How do I know we learned this?  Since changing the pricing page on our site, our sign-ups/trails have increased 30%.  We had VERY good conversion rates prior to that.  This bump is great.  What’s amazing is our actual prices are identical, but just by presenting our pricing in three easy to understand buckets, conversions of first time visitors to trials have increased about 30%….that will affect our bottom line from here on in…Amazing the power of a single web page, no?  You know what I find weird?  The exact same number of people exit our website on the Pricing page as they did before.  Had the redesigned page not been the only site change, we never would have been able to be certain about the BUCKET FACTOR.  That is why we try to make on design change at a time and track the results.  (See the pricing page he is talking about here)

I have long believed lawyers and other professionals can implement a tiered pricing plan that would make it easier for clients to buy our services – in fact, I’m working with a firm right now to do just that.  What “buckets” could you offer?

Put The Higest Price Items First On Your Menu

Found this link via The Church Relevance BlogA-Z Retail Tricks to Make You Shop. If you can get past the annoying graphics on the page, there are some interesting tips that may make you rethink your office’s design.  Here’s something I didn’t know that has multiple practical applications:

Order Of Price- Shops will often be laid out in order of price with the most expensive items being encountered at the beginning of your visit and the cheapest at the end. This is done to play on our sense of comparion, we are much more likely to spend money on accessories etc if we have just agreed to buy an expensive item, as in comparison they will seem cheaper than had we encountered them first.

If you are offering a “menu” of prices for multiple levels of service (estate planning, for example) try placing the more expensive services at the beginning of the menu, instead of the end.

And continuing down my trail of links, from the Retail Tricks site, I found ConsumerPsychologist.com that has some great articles on consumer behavior.

Don’t Worry, Hire Crappy

Bob Sutton has written a thought-provoking article called Crappy People versus Crappy Systems that discusses the importance of good systems and the misguided emphasis on hiring great people as the panacea for all of a company’s woes.  In other words too many businesses:

focus excessive energy on hiring stars and weeding-out mediocre and poor performers, and insufficient energy on building a great system that enables most competent people to succeed.

The system, not the people, matter most.  As he explains:

some systems are so badly designed that when smart people with a great track record join them, it seems as if a “brain vacuum” is applied, and they turn incompetent. Jeff often jokes that this is what happens to many business school deans, and indeed, these jobs have so many competing and conflicting demands that they are often impossible to do well.

The entire post is worth a read.

The Thirty Day Rule for Technology Purchases (and Irrational Client Demands)

I liked this idea from Get Rich Slowly:

The 30-day rule is a simple method to control impulse spending. Here’s how it works:

  1. Whenever you feel the urge to splurge — whether it’s for new shoes, a new videogame, or a new car — force yourself to stop. If you’re already holding the item, put it back. Leave the store.
  2. When you get home, take a piece of paper and write down the name of the item, the store where you found it, and the price. Also write down the date.
  3. Now post this note someplace obvious: a calendar, the fridge, a bulletin board. (I use a text file on my computer.)
  4. For the next thirty days, think whether you really want the item, but do not buy it.
  5. If, at the end of a month, the urge is still there, then consider purchasing it. (But do not use credit to do so.)

I can think of so many places this would work.  First, for those firm technology and gadget purchases or upgrades, sit on the impulse for a month.  If you still think you need it, make the purchase.

Second, if you have an irrational client demand you do something that you don’t think is particularly prudent (like filing that motion to compel to get the lawnmower back from their neighbor in the middle of winter), suggest that you wait 30 days, and if they feel it is still important then, you’ll do it.

Office Design for Employees

Designing your firm’s new space?  Take a look at this post about a printing company in Montana.  Some of the unique office features:

  • Day Care and ‘family’ is built in; there are no other options!  The first thing you see when you come walk the parking lot to the front door are little kiddos playing under the Montana sky.  All employees pay a pitance to have their young kids on site with them.  It’s a fundamental.  Andrew made it a key design driver.  And the # of Baby Bjorns in the office was an indicator that for many of the employees, a family ‘quality of life’ decision was made without compromising their careers.  And its a spectacular daycare.  Small adult/kid ratio.  Healthy environment.  Kids loved.  And obviously very happy teachers and parents on site.  It wins all visitors over the second they come into the building.
  • The main floor is designed for humans, not executives or administrators.  Andrew had been told by the design team at first that a ‘traditional’ executive/client floor was needed.  Sends the right message.  Fits the design.  Tradition.  Andrew felt that didn’t match the company’s feel.  Instead, the upper floor does have all of those elements — like a typical ‘entry’ to a school — but for any visitor, the real sense is that it’s an open series of collaborative spaces that are designed for all team members (regardless of rank) to relax, create, rest, and connect. 
  • Every space is a learning space.  Man, there just weren’t any spaces in the building that didn’t suggest learning, collaboration, experiment, and team.  Sure, business had to be done and things were divided up by tasks and teams, but the real take-away had to do with energy and collaboration.  I’d have given anything for teachers/administrators and school designers alike to have spent time on the bottom floor (ground level, due to the slope that building sits on) where the teams were moving at full speed, serving clients around the nation, and providing rigorous real-time design/printing solutions.  Spaces were vibrant.  Team members were free to work in a variety of settings. And the place had a learning buzz about it.
  • All workers are humans, learners and team members first.  I was struck by one programmer/service expert that had forgone the chair entirely. He used a yoga/exercise ball as his chair — not only did it help create a different dynamic, but it also had a huge impact on his back problems.  I also liked that it allowed him to move.  To bounce.  To fidget.  To shift.  Mmmm….imagine if kids were given the same option.  Imagine. We talked about this a bit, but what really struck me was that the ‘trappings’ of professionalism were tossed out the window with a grand investment being made instead to support ‘how’ people worked, created, succeeded, and collaborated.  Every team member looked happy/healthy.  And the spaces reflected that — not choosing expensive design but instead being creative and letting the teams be able to gravitate towards what worked best for them.  Solo. Small groups. Large groups.  Formal.  Informal.  Inside. Outside.  In other words, every space a learning space.  Even hallways.  Very little wasted…and a far more vibrant learning organization because of it!
  • Check out the entire post for more.

    The Key(s) to Attorney Motivation

    Here’s an idea to motivate law firm employees:  Give the “Employee of the Month”  the keys to the company car.  From Autoblog:

    [At Infusion Software], if you’re deemed the month’s top performer, you get the keys to the “Infusion Z,” the company’s silver Nissan 350Z. The car sports the Infusion logo on the door, so they get some free advertising wherever the Employee of the Month drives. That’s a fair trade if you ask us. When you’re cruising in the Z, it’s not like you can see that from the cockpit, anyway. Oh, and should an employee get into an accident with the car, he or she has to pick up the insurance deductible.

    What kind of car should law firms use?  A Mercedes, a BMW, or perhaps a Bentley?  What kind of car would motivate you to bill those 220 hours this month?

    Tick is Slick: Time Keeping the Web Way

    All right, we all know the name of this blog is The [Non]Billable Hour, but you’ve got to check out Tick, a really cool Web 2.0 application for tracking time (and measuring it against budgets).  Very slick, and free (for now).  Are any of the legal technology vendors making anything this cool, intuitive, and pretty?

    Tick is Slick: Time Keeping the Web Way

    All right, we all know the name of this blog is The [Non]Billable Hour, but you’ve got to check out Tick, a really cool Web 2.0 application for tracking time (and measuring it against budgets).  Very slick, and free (for now).  Are any of the legal technology vendors making anything this cool, intuitive, and pretty?

    What Start-Ups Want in a Lawyer

    OK, so Andy Lark is talking about hiring a PR agency, but I think he could just as easily be talking about hiring a lawyer:

    But I don’t want $15,000 dollars worth of service. I don’t even know what that is!

    I want results. I don’t care what it costs or whether an agency has to under or over service to deliver it. I just want results against the agreed budget. You commit, I commit, we all commit together.

    What is more troubling to me as a Valley CMO is:

    1) finding a great agency is bloody hard work. They are few and far between. At any billing rate. Few CMOs I know get the value of PR or AR, let alone the value of a good agency… I accept we are part of the problem, but…

    2) finding an agency that gets your business and has a real enthusiasm for contributing to the growth of the business – harder still

    3) finding an agency that understands that great ideas get funded – near impossible. They are caught in the conundrum or belief that ideas require budget prior to being generated. Bullshit. (and I am talking about real ideas, not those regurgitated from the last pitch)

    4) finding a team that can explain why they should get paid more and then associate some kind of outcome with the result – well, if you find them, let me know. The most common justification – “we’ve been over servicing your business for six months now, you need to pay us more” – is nuts. Nuts!

    5) finding an agency – the word is a bit of an oxymoron. It implies some kind of powerhouse of ideas and execution – the strength of a team. What you generally end-up funding is one very dedicated individual surrounded by some other folks – generally you aren’t quite sure what they are doing but they all arrive for meetings and scribble madly into notebooks.

    What is needed is a new kind of agency. One not built on billable hours and 10k budgets. Maybe one built on the power of ideas to drive a startup’s growth curve? One with the courage and conviction to articulate a value proposition that resonates with the CMO of a start-up and ability to explain what the budget should be.

    You see, we live less in the conceptual world of brand and reputation and more in the real world of qualified opportunities, pipeline growth and time to sale.

    Until then, 10k sounds like a nice round number to start with. Agencies shouldn’t let it end there. We will pay more. And I am willing to put my money where my mouth is.

    If you want to serve this market, listen closely to Andy’s complaints.  Make it your number-one priority to contribute to the growth of your clients’ businesses, not to extract the maximum amount of money from their coffers.  Build client-centered teams — and make sure your client meets everyone on the team BEFORE their time shows up on a bill.  Finally, start your representation by focusing on the goals of the client and the results they desire.  Then agree upon a budget (or, gasp, a fixed price) to meet those goals and achieve those results.

    Get Your Lawyers to Use Technology

    Here’s an interesting tip to spur firm-wide adoption of  new technology:  Cut Off Non-Adopter’s E-Mail

    Make Someone Else’s ‘Employee of the Month’ Yours

    Gerry Riskin and Michelle Golden have been talking about the importance of having a great receptionist.  Having had two amazing secretary/receptionists (Janelle and Sandy, thank you!) in my last two jobs, I second (third?) this sentiment. 

    Now, how do you find that perfect receptionist?  Here are some tips on recruiting great retail employees, from a blog I’ve just moved from “probation” to my regular reads called Just Looking, that may give you some ideas:

    Find the Employee of the Month wall in the retailer.   Normally this is back near the offices in a hallway that is accessible by the public.   Write down the names of the last 6 people who won, and then go find them in the store.   Walk up and congratulate them on winning and ask why they got the award.  You might have a great conversation that could end with “Here is my card, if your interested in examining other opportunities give me a call”

    Look at stores that are not in your industry.   Too often, sales managers will only recruit from of retailers like themselves.  I found great luck recruiting in retailers outside of my industry.   Blockbuster Video was a great place to recruit entry level sales and customer service reps.     Anyone who walked out from around the counter to ask me if they could help me find something, got my attention and my card.    

    Always Be Recruiting.   Don’t ever stop, because you never know when you might run across someone that would be a great member of your team.   I can remember two instances of this happening.  One was when I was out to dinner with some friends.   The waitress was amazing and during our chatter I found out she was looking for a part time job.   I ended up hiring her for for the holiday season and we both were very satisfied with her 4 month stay.  The other instance was when I answered the phone and a telemarketer began his pitch on the other end.    It was one of those telemarketers that didn’t give up at the first no, but kept the tone very light hearted.   He came in and interviewed for a full time position.

    Recruit for the right traits not just sales skills.     There is no way you will ever be able to evaluate a potential recruits selling skills effectively but you can get a good feel for their passion and enthusiasm.    My goal when recruiting is to find someone who is outgoing, passionate and enthusiastic about what they are selling.     I can’t teach passion but I can teach someone with passion how to channel it into selling better.

    Set a Recruiting Goal when you go out.     If you head out to go recruiting without a goal, all you will get is 2 to 4 hours of walking around.    Set a goal of coming back with 4 to 5 names to call and at least 2 business card drops.   A business card drop is when you introduce yourself and give them your card with a suggestion they call you.     The list of names are of people who you will call later that day and invite them to come in for an interview.

    Keep a People Pool.   Don’t toss out information from old interviews.  Make a file and keep it around for later job opportunities.   You never know when a position will open that might be perfect for someone you didn’t consider before.

    Network with other Sales Managers.   Find sales manager in other stores that do not compete with you directly.    They might be interviewing a candidate that needs more hours or income then they can afford, that might be perfect for your job.    A lunch, once a month with a few of these other sales managers could help you locate the people you need.  Who knows, maybe they might have a current employee who is looking for a change that is the perfect recruit.

    Charge Late Fees for Missed Appointments?

    What do you do when clients don’t show up for scheduled appointment?  Rob May’s new doctor has a pretty good idea:

    A few weeks ago I started going to a new doctor, and was made to sign a document explaining their late fee policy. It was unique. If you miss a scheduled visit, you are charged a $20 fee. If you are late by more than 10 minutes, that qualifies as a missed session. But the doctor’s office doesn’t keep the money. All money from late fees is donated to the local children’s hospital.

    I haven’t missed a visit, but if I did, I can’t imagine arguing with the penalty. I think it’s brilliant. It turns the debate from a me vs. them fight for my money to a decision about whether to give money to a third party charity. In essence, it diffuses customer anger while still imposing a penalty. It reminds me that innovative solutions to business problems do exist, but they sometimes require you to step a little bit outside the lines of conventional wisdom.

    Make Money by Specializing? Bank on it.

    In an interview in the New York Times, the Chairman of ING Direct shares explains why his company specializes and avoids cross-selling:

    Q. Does the question simply become one of pricing, of being able to offer the highest return?

    A. In every country where we are, we have competitors offering higher rates than we offer. But you’ve got to be very careful, because, you know, consumers are smart. We have a product offering that has no commissions, no minimum, no tricks. Does the competition offer any tricks, like ties to something else that you have to do to be there, or a minimum balance, or a minimum usage? We have to be better than the next most comparable alternative.

    For us, cross-sell is not what we want to do, because we want to keep it simple. We know that out there, the largest pool of earnings in the retail banking world comes from savings and mortgage — those are the only two things that we want to do. If you try to cross-sell too many products, you confuse the clients about what you are and your costs escalate exponentially.

    Here are three questions every small business person should be able to answer: 

    1.  What is your most pofitable service or product?

    2.  If you focused exclusively on selling that service or product, could you sell more?

    3.  What’s stopping you?

    I’m not suggesting that small business owners abandon their passions to concentrate on making the most money possible, but I do believe that most business owners — and this goes double for lawyers — don’t even know what their most profitable service or product is.  Answer the first question, then the second, and finally the third, and you may be on your way to a more profitable business.  And if not, at least you’ll understand the trade-offs you are making in your business and your life.

    Your Customers Don’t Want to do Business With You

    Mark Cuban said something Friday that really struck home for me.  Writing about the struggles of promoting movies through traditional newspaper and magazine channels, he tells those industries:

    Each of us is looking for the  holy grail of promotion.  A way to leave you as a customer.

    How scary is that ? A huge customer of your industry would prefer not to do business with you.

    I think the same can be said for most people who deal with lawyers.  If there is a real alternative to using lawyers, how many of our clients would jump at the opportunity?  What are we going to do about it?

    Mark’s advice to the magazine and newspaper businesses:

    So its time to buck up. You either squeeze what you can and cry when it happens, or you step up and create cost effective alternatives.  The days of a movie review and the ad for the movie wont cut it for much longer. 

    So those of you in the entertainment sections and sales groups of newspapers and magazines have two choices, come up with new ideas, or a new version of your resume…

    I have some more thoughts on this issue and will share them soon.

    Do You Value What You Do?

    Sean D’Souza gives some more advice on pricing.  What stood out for me was this quote:

    First you must value your own stuff.
    Then they’ll value your stuff.

    What’s Your Premium Plan?

    The folks at 37 Signals share a pricing lesson:  Don’t forget the premium plan.  Here’s what they have to say:

    We launched DropSend (a service for sending large files you can’t email) last November and it’s been ticking along nicely, picking up about 3,500 users per month. 

    We always planned on offering a premium version for businesses that was brandable and multi-user, but we couldn’t get it done in time for launch, so we decided to launch that feature later. 

    Well, two weeks ago, we finally finished the new DropSend Business Plan. It’s $80 more than the Pro plan ($19 vs. $99), and we were worried that it might be a bit too expensive. Holy crap, were we wrong.

    In two weeks, we’ve increased our total revenue by 30%! Two weeks. As I write this, I’m still finding it hard to believe. The Business Plan is now responsible for the lion’s share of our revenue from DropSend. 

    What we learned from this is that people will pay for quality. Offer them something really good, and they will go for it. Our premium plan is aimed at businesses who have the need for a high-end solution, and of course, they are the ones who can afford it.

    If you are struggling with pricing, think about a “premium” plan that includes extras your “regular” plan does not.  Give your clients a choice.  You may be surprised at the plan they choose.

    Training for Big Law Management

    This is tounge in cheek, of course, but if your goal is to run a MegaFirm, then I humbly present to you The Evil Overlord List.  There you’ll find 100 tips, tricks, and bits of advice for the Dr. Evil wanna be.  Here are a few of the more serious ones: 

    When I’m an Evil Overlord …

    12.  One of my advisors will be an average five-year-old child. Any flaws in my plan that he is able to spot will be corrected before implementation.

    24.  I will maintain a realistic assessment of my strengths and weaknesses. Even though this takes some of the fun out of the job, at least I will never utter the line “No, this cannot be! I AM INVINCIBLE!!!” (After that, death is usually instantaneous.)

    27.  I will never build only one of anything important. All important systems will have redundant control panels and power supplies. For the same reason I will always carry at least two fully loaded weapons at all times.

    40.  I will be neither chivalrous nor sporting. If I have an unstoppable superweapon, I will use it as early and as often as possible instead of keeping it in reserve.

    45.  I will make sure I have a clear understanding of who is responsible for what in my organization. For example, if my general screws up I will not draw my weapon, point it at him, say “And here is the price for failure,” then suddenly turn and kill some random underling.

    46.  If an advisor says to me “My liege, he is but one man. What can one man possibly do?”, I will reply “This.” and kill the advisor.

    48.  I will treat any beast which I control through magic or technology with respect and kindness. Thus if the control is ever broken, it will not immediately come after me for revenge.

    50.  My main computers will have their own special operating system that will be completely incompatible with standard IBM and Macintosh powerbooks.

    52.  I will hire a team of board-certified architects and surveyors to examine my castle and inform me of any secret passages and abandoned tunnels that I might not know about.

    60.  My five-year-old child advisor will also be asked to decipher any code I am thinking of using. If he breaks the code in under 30 seconds, it will not be used. Note: this also applies to passwords.

    61.  If my advisors ask “Why are you risking everything on such a mad scheme?”, I will not proceed until I have a response that satisfies them.

    74.  When I create a multimedia presentation of my plan designed so that my five-year-old advisor can easily understand the details, I will not label the disk “Project Overlord” and leave it lying on top of my desk.

    85.  I will not use any plan in which the final step is horribly complicated, e.g. “Align the 12 Stones of Power on the sacred altar then activate the medallion at the moment of total eclipse.” Instead it will be more along the lines of “Push the button.”

    90.  I will not design my Main Control Room so that every workstation is facing away from the door.

    There are a lot of good lessons here.  Of course, there are just as many like these:

    63.  Bulk trash will be disposed of in incinerators, not compactors. And they will be kept hot, with none of that nonsense about flames going through accessible tunnels at predictable intervals.

    72.  When my guards split up to search for intruders, they will always travel in groups of at least two. They will be trained so that if one of them disappears mysteriously while on patrol, the other will immediately initiate an alert and call for backup, instead of quizzically peering around a corner.

    89.  After I captures the hero’s superweapon, I will not immediately disband my legions and relax my guard because I believe whoever holds the weapon is unstoppable. After all, the hero held the weapon and I took it from him.

    Are Your Best Clients Those Who Pay Fastest?

    Wells Fargo’s Small Business Roundup Newsletter features an Albuquerque printer APC, recent winner of a SBA award.  One of the best pieces of advice I’ve seen in a while comes from APC’s owner, Pedro “Tony” Fernandez.  Mr. Fernandez explains how his business focused on cash flow to stay in business after 9/11:

    To regain momentum, Fernandez turned to his customer base. “Rather than concentrating our marketing on high-revenue or high-volume clients, we went after our best payers,” he notes. “We looked at those who paid their bills consistently and quickly. Revenue dropped, but the method helped us strengthen our cash flow, which brought us back to pre-9/11 profit levels by 2004.”

    Your biggest clients aren’t always your best.  If you are looking to focus certain marketing efforts on your existing clients, think about trying APC’s approach.  Focus on your best payers, not your biggest accounts.

    More Smart Moves for Business

    Here’s a list of Ten Smart Moves to Improve your Business that had a few gems:

    On writing: 

    … take a topic that everyone has already written about but add a new twist to it. Children and Accessibility: It Matters was one such piece for me. It was well received and got some attention, which has ultimately led to people contacting me for other work because they saw something different.

    On expanding:

    Stay as small as you logically can: Small is flexible. Small can change direction in an instant if needed. I’m sure at some point my company will get bigger, but it won’t happen without good reason. Small is where it is at, baby (at least that is what all the other small companies are saying)

    On pricing:

    Raise prices every year: Just do it. Tell people about it beforehand so that they are expecting it. I’ve heard before that if you have never had push back from your clients telling you “that’s too much” then you aren’t charging enough. I’m not sure how true that is, but I look at it this way: I get better every year, and with more experience I can provide more value. Higher value = higher rates. Just do it.

    Reading for Managing Partners

    This Harvard Business School Working Knowledge article, titled Why Your Employees are Losing Motivation, is a must read for anyone who manages employees.  According to the article, most employees are enthusiastic when they start a new job, but in most companies, employees morale declines dramatically after their first six months — and continues to decline.  Sound like any business you know?  Check out the great tips.  The article is definitely worth a read.

     

    Only Make Smart Mistakes

    Steve Pavlina sets out 10 Stupid Mistakes Made by the Newly Self-Employed.  They are a worthwhile read (go to the post for his explanation of each), even if you’ve been self-employed for a long time.  I know I still make a few of these stupid mistakes.  How about you?

    1.  Selling to the wrong people.

    2.  Spending too much money.

    3.  Spending too little money.

    4.  Putting on a fake front.

    5.  Assuming a signed contract will be honored.

    6.  Going against your intuition.

    7.  Being too formal.

    8.  Sacrificing your personality quirks.

    9.  Failing to focus on value creation.

    10.  Failing to optimize.

    Does More Time Equal More Money?

    Here’s How to Have a 36 Hour Day.  Now, for you lawyers out there, leave in the comments section your suggestions on How to Bill a 36 Hour Day.

    Price like a Professional

    Sean D’Souza gives some advice on raising prices in The Price is Never Wrong.  A comment to the post caught my eye:

    Adam Kayce writes:  Darn good point. Every time I’ve raised my prices, not only do I make more money (which is nice), and not only do I seem to get more business (also very nice), but two other things rise, too: what you call “respect”, and “business self-esteem”.

    People see me as more of a professional, the more my rates increase. It’s all perceived value.

    But also, as I charge more, I give more – and I see my work as more valuable. That’s the business self-esteem rising. I believe it, so I embody it, and the value of the work increases. Great cycle.

    I’d never thought about how pricing relates to business self-esteem before.  What do you think?

    Technorati Tags: , , ,

    Risk Aversion and the Glass Ceiling

    I pass on this interesting survey (pointed out by Rob May at BusinessPundit) that suggests that one reason women earn less may be because they prefer the “sure thing” of a fixed salary instead of a riskier (but potentially higher paying) performance-related pay package.  What does this say about the partner compensation model in law firms?

    Technology does not equal productivity.

    Here’s a must-read article from Wired, that shows how technology has made us less productive.  Some quotes from the story:

    Workers completed two-thirds of their work in an average day last year, down from about three-quarters in a 1994 study, according to research conducted for Day-Timers, an East Texas, Pennsylvania-based maker of organizational products.

    The biggest culprit is the technology that was supposed to make work quicker and easier, experts say.

    “Technology has sped everything up and, by speeding everything up, it’s slowed everything down, paradoxically,” said John Challenger, chief executive of Chicago-based outplacement consultants Challenger, Gray & Christmas.

    “We never concentrate on one task anymore,” Challenger said. “You take a little chip out of it, and then you’re on to the next thing. It’s harder to feel like you’re accomplishing something.”

    Is the Bottom Line the Bottom Line?

    Russell Beattie reminds us to focus on the bottom line:

    But say you do have something cool, and your new innovation has that 10x improvement that a new service needs to really take off. Not that there’s a lot of this out there, but still. You can create a new website, fill it with all the goodness in the world, be good to your users, and be a good netizen and use every open standard there is while you’re at it, if at the end of the day your users didn’t put money into your bank account, it’s a useless waste of time for everyone involved. I mean, hey, if you want to create the next non-profit service like Wikipedia, all the more power too you. But if you want to get VC cash, an office in downtown Palo Alto, do a bunch of development, attract lots of users and pretend you’re a business? Then act like one, create something of real value and make some real money from it.

    Twenty Questions to Build Your Business

    Sam Decker shares Twenty Questions to Develop Your Business that every small business should be able to answer.  Really worth a read.

    Technorati Tags: ,

    KM for Law Firms

    Jack Vinson summarizes the two days of a legal KM (knowledge management) conference he attended.  Check out his posts about Day One and Day Two.

    Technorati Tags: , ,

    Billable Hour Resources

    Here’s a great list of billable hour resources from my friend Lisa Solomon at The Billable Hour.

    If you must bill by the hour …

    Here’s a cool utility that could help you recapture some of that lost time.  From the TimeSnapper website:

    With TimeSnapper you can play back your week just like a movie. You can play it at any speed you like, and jump in at any time you like.

    When it’s time to fill out that dreaded timesheet, TimeSnapper is a savior. No need to tear your hair out trying to remember where all the time went.

    Via Lifehacker.

    Best Management Ideas

    Lisa Haneberg posts the winning entries in her Best Management Ideas contest.  All are worth a read.

    ROI through the client’s eyes

    I’m completing my “Beyond ROI” presentation for ABA’s Techshow and have come up with a theme I like a lot.  Let me know if you like it too:

    The only “Return on Investment” that matters is the return your customers receive on their investment in you.

    Be a Master

    Hugh MacLeod on the billable hour:

    The thing about consulting I hate is, you just get paid by the billable hour. So the minute you stop tapdancing, you’re dead.

    A Journeyman gets paid while he works. A Master gets paid while he sleeps.

    Attorneys Aren’t Knowledge Workers – Ron Baker

    Attorneys Aren’t Knowledge Workers by guest blogger Ron Baker

    In light of my last post titled Your Employees are Volunteers, this one is sure to cause some cognitive dissonance.  My VeraSage Institute colleague Dan Morris thinks I’m wrong about professional firms being filled with knowledge workers; he believes the majority of them are more akin to factory workers.

    Now I know this is a heretical view, but Dan assembles a very powerful argument to support his assertion.  He doesn’t deny professionals have the potential to be knowledge workers.  His argument is they are not largely because of the incentives and structures of the firms in which they operate, which function like sweatshops of yore.

    Now this is a powerful argument, and it made me pause to reexamine my core assumptions about automatically asserting that just because someone is a credentialed professional they are automatically a knowledge worker.

    There’s no doubt they can contribute a certain amount of creativity and innovation to the jobs they perform and the customers they serve, but being a knowledge worker also requires that the leaders of your organization recognize and treat you like one.

    Stephen Covey writes about exactly this in his latest book, The 8th Habit: From Effectiveness to Greatness:  “It’s the leadership beliefs and style of the manager, not the nature of the job or economic era, that defines whether a person is a knowledge worker or not.”

    When you consider the metrics used by most firms to measure their team members, they all come from the Industrial Revolution’s command-and-control hierarchies (realization, utilization, billable hours, etc).  Yet as I discussed in my posts on The Firm of the Past and The Firm of the Future, the metrics we use to measure a knowledge worker’s effectiveness are woefully inadequate.

    Dan further supports his argument by stating that true knowledge workers:

    • Don’t have billable hour quotas.
    • Spend at least 15% of their time innovating and creating better ways to add value to customers (this destroys efficiency under the old metrics!).
    • Understand that judgments and discernment are far more important than measurements in assessing performance.
    • Are focused on outputs, results and value, not inputs, efforts and costs.
    • Don’t fill out timesheets accounting for every 6 minutes of their day.
    • Are trusted by their leaders to the right thing for the firm and its customers.
    • Are passionate and self-motivated, and don’t need constant supervision.

    If the above describes your firm, congratulations — you are a true knowledge organization.  Perhaps nothing illustrates the value knowledge workers can add to a business than last week’s purchase of Pixar by Disney for $7.4 billion in Disney stock.

    Disney will have to respect Pixar’s culture and continue to let it make quality movies at its own pace, in its own way.  Otherwise, if Pixar’s creative talent leaves, “Disney just purchased the most expensive computers ever sold,” according to Lawrence Haverty, a fund manager at Gabelli Asset Management.

    Unfortunately, most professional firms we’ve come into contact with around the world do not fit Dan’s criteria, which is why he makes such a strong case they function more like manual laborers than knowledge workers.

    UPS founder Jim Casey remarked in 1947:  “A man’s worth to an organization can be measured by the amount of supervision he requires.”

    The moment you feel the need to hover over your knowledge workers, either physically or metaphorically with the Sword of Damocles — the timesheet — you’ve made a hiring mistake.

    Until professional service firm leaders begin to grant their team members autonomy — Greek for self-governance — and treat them like self-respecting knowledge workers, I think Dan’s argument trumps mine.

    What do you think?

    Technorati Tags: , , ,

    Thirty-Nine Cents per Happy Client

    Are you including self-addressed stamped envelopes when you send your bills to your clients?  You should be.

    Your Employees are Volunteers – Ron Baker

    Human Capital (not Cattle) by guest blogger Ron Baker.

    In the knowledge society, the most probable assumption for organizations–and certainly the assumption on which they have to conduct their affairs–is that they need knowledge workers far more than knowledge workers need them.
    -Peter Drucker

    The term human capital was first used by Nobel Price-winning economist Theodore W. Schultz in a 1961 article in American Economic Review.  His basic thesis was that investments in human capital should be accounted for in the same manner as investments in plant and machinery. 

    The obvious challenge is that investments in tangible, physical assets can be counted and comprehended, but those in people cannot.  It is as if accountants would value the average human being at $50 since that is the approximate worth of our various chemical components.  Human capital is like the dark matter of the cosmos, we know it’s out there but we can’t measure it. 

    Once again, Peter Drucker was at the forefront of thought when he coined both the terms knowledge society and knowledge worker in 1961 and positing it was the G.I. Bill of Rights–which made available higher education to some 2,332,000 veterans and was certainly the largest single investment in human capital up to that time–which caused the shift to a knowledge society. 

    Presently, less than one-fifth of the labor force is employed in blue collar occupations, and approximately two-fifths are “knowledge workers”–those who work with their heads, not their hands.

    Knowledge Workers Have Nothing to Lose but Their Chains

    Knowledge workers are not like workers from the Industrial Revolution who were dependent on the employing organization providing the means of production (factories and machines).  Today, knowledge workers themselves own the firm’s means of production in their heads.  This has been a tectonic shift in our economy, the ramifications of which we are still trying to comprehend. 

    For example, how does one measure the productivity of knowledge workers when what goes on inside their heads cannot be observed, let alone objectively measured?

    In a factory, the worker serves the system; in a knowledge environment, the system should serve the worker.  Knowledge work can only be designed by the knowledge worker, not for them.  Unlike work on an assembly line, knowledge work is not defined by quantity but by quality.  It is also not defined by its costs, but by its results. 

    It may be possible in a widget factory to work harder, but in a knowledge factory working smarter is the only option.  The traditional metrics of productivity need to be replaced by judgment, and there is an enormous difference between a measurement and a judgment:  a measurement requires only a stick; a judgment requires knowledge, insight, wisdom and discernment.

    Knowledge Workers are Volunteers

    There is a Chinese Proverb that teaches the beginning of wisdom is to call things by their right names.  Your people are not assets, resources, or inventory, but human capital investors seeking a decent return on their investment. 

    In fact, your people are actually volunteers, since whether or not they return to work on any given day is completely based on their own volition.  Consider for a moment how people decide which volunteer organizations to contribute some of their talent.  It’s usually based on a desire to contribute to something larger than themselves.  They work hard–some would say harder than at their jobs–for these organizations because they are dedicated to the cause, they have the passion, the desire and the dream to make a difference in the lives of others.  All for zero pay.  Why? 

    This is not just an economic decision, it is a psychological and emotional decision.  With all this evidence of human behavior, many firms still treat their people as if they will slack off if they’re not held accountable for every six minutes of every day.  Is this any way to inspire people to be their best?  Is this any way to instill a spirit of service, creativity and innovation?

    Or is this nothing but antiquated thinking about the nature of man being lazy and slothful unless forced to work, redolent of Frederick Taylor’s time-and-motion studies?  Your people may hang their hat at your firm, but where is their heart?

    Becoming A Lightning Rod for Talent

    It doesn’t make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do. – Steve Jobs, Founder, Apple Computer

    Attracting, hiring, developing and retaining talent are the most important jobs to which everyone in the firm can contribute input and ideas.  Partners spend more of their time–or at least they should–making people decisions than any other.  No other decisions have as many repercussions throughout the firm, or have lasting significant effects than who to hire. 

    Typically, a firm is batting 0.333 on its hiring decisions–that is, one-third turn out to be good decisions, one-third are minimally effective, and one-third are abject failures.  It is rare in any other area that firm leaders would accept this level of performance.

    The issue of attracting Human Capital investors is a marketing issue.  As in all marketing, it does not look inward and ask, “What do we want and need?”  On the contrary, it looks outward and asks, “What do you want and need?”  There is an enormous difference between these two approaches. 

    In effect, firms have to do the same to win over people as they do to gain new customers–show them why the firm is their best competitive alternative. 

    Because knowledge workers are investing their Intellectual Capital with firms that will pay a fair return, the question should not be, “How much is this person worth to the firm?”  The real questions are:  “How much is the firm worth to this knowledge worker?  How can the firm add to this person’s Intellectual Capital, and develop it even further?”

    A New Order of the Ages

    Characteristics like passion, desire, obsession, motivation, innovation, creativity and knowledge may not show up anywhere on a firm’s financial statements or timesheets, but they are the traits that will ultimately determine the fate of your firm.  Knowledge work is non-linear and not subject to the cadences and rhythms of an assembly line; rather it moves by iteration and reiteration, a process of the mind. 

    My favorite one dimensional test for creating a culture worthy of the respect and dignity of the people you are trying to attract is simply this:  Would you want your son or daughter to work in your firm?

    My colleague Dan Morris flies a flag over his firm’s office building with its name and logo in three colors.  It is interesting to me because when I first saw it, I recalled those who first called themselves liberals–in the classical definition of the word–had in mind three liberations (which explains why the appropriate liberal flag is always tricolore).  

    They intended, first, to liberate humans from tyranny and torture; second, to liberate humans from poverty; and, third, to liberate humans from censorship and other oppressions of conscience, intellect, and art.

    It is time we hoist a new flag over The Firm of the Future and usher in a new order of the ages, one that respects the dignity, and earns the rewards, of its Human Capital investors.

    Constraints for Lawyers?

    Here is a good practical introduction to the Theory of Constraints from the Juice Analytics blog.  The author is going to try imposing these constraints on his company:

    • Create artificial deadlines with teeth. Something real and bad has to happen when a project extends beyond a deadline. What if a team had to write a document describing why a deadline was missed?
    • Limit design freedom with less space, fewer colors, fewer tabs and buttons. At Juice, we recently found that we had some fairly radical limitations on the space available to create a web interface. What started as an annoyance helped us take some great steps forward.
    • Cap team size. What if you limited every team to five or fewer people? Just imagine the efficiencies and focus — and all the people you could legitimately exclude!
    • Try without money. What if you had no marketing budget for a new product? I bet most of the companies that succeed with viral marketing are those that need to. Big companies admire the power of using customers as a salesforce — but advertising is so much more well understood.

    As the author notes, “There is pain in fitting into constraints. And it isn’t always worth it. But there can be pay-offs in innovation, efficiency and focus.”   Where can you utilize the Theory of Constraints in your practice? 

    Technorati Tags: ,

    You Are Your Customer List – Ron Baker

    You Are Your Customer List by guest blogger Ron Baker

    You’re really not in business to make a profit, but you’re in business to render a service that is so good people are willing to pay a profit in recognition of what you’re doing for them.  – Stanley Marcus (1905-2002)

    The purpose of your firm is to add to your customer’s wealth.  By focusing on what customers really buy-expectations-and how important it is to exceed them, you will be well on your way to continuously delivering on that purpose at an increasing rate each day. 

    Your firm’s value proposition is a combination of price, quality and service, which come together to create a unique offering for your customer in order to offer a superior alternative in comparison to your competition.

    Since the 1980s, the Total Quality Management movement arose as a way for firms to increase their quality, moving towards a Six Sigma, or zero defects, standard.  The flaws in this strategy for an professional firm are obvious, since to err is human and rather than focusing on zero defects, I propose a zero defections standard, along with an effective customer complaint recovery strategy.

    The most successful firms in the world today turn away more customers than they accept because they have a rigorous pre-qualifying process and they understand that, ultimately, bad customers drive out good customers. 

    In my last post, I suggested the metaphor of your firm’s fixed capacity as a Boeing 777 airplane, in conjunction with the concept of the Adaptive Capacity Model, in order to segment your customer base by the value they place on your offerings.  I believe The Firm of the Future is just as diligent in forecasting this capacity-in terms of its yield and load factors-as the airlines are today.

    Customers will continue to patronize businesses where they are invited and remain where they are appreciated.  Your firm will get the customer behavior it rewards.  Customer loyalty is worth rewarding.

    Of course, that does not imply you need to accept all customers, or keep low-valued customers within your firm.  Since you cannot be all things to all people, it is important to work with only those individuals and businesses you enjoy and who have personalities you get along with. 

    In surveys conducted by David Maister, he found professionals spend between 55% and 80% of their time working with people they are either indifferent about, or just don’t like.  Why do professionals do this?  As Maister pointed out in his book True Professionalism:

    Supposedly, professionals are among society’s most bright, educated, and elite members–people who are supposed to have more career choices than anyone else.  Yet they seem to be willing to accept a work life made up largely of “I can tolerate it” work and clients, and they feel that they cannot safely do anything about all that.

    The fact is, you can do something about it, and you do have a choice of whom you work with and whom you accept as a customer.  There is no justifiable reason for accepting–or retaining–customers whom you or your team members personally do not like.  Toxic customers can have a negative effect on team member morale, which will ultimately have a deleterious effect on the firm’s wealth-creating ability. 

    If, on the other hand, you work with people you enjoy, not only will you do better work, be a more effective marketer, cross-sell more services, and attract like-kind customers, you will be a better professional and have a better quality of life.

    Indeed, you are your customer list.  How does that make you feel?

    Technorati Tags: , , ,

    Baker’s Law: Bad Customers Drive Out Good Customers – Ron Baker

    Baker’s Law:  Bad Customers Drive Out Good Customers by guest blogger Ron Baker

    We hold these truths to be self-evident, that all men are created equal,…
    -Thomas Jefferson, The Declaration of Independence, July 4, 1776

    Whenever anyone quoted those immortal words from the Declaration of Independence — all men are created equal — Federalist Fisher Ames, an ardent opponent of Thomas Jefferson and a superb congressional orator, would retort:  “And differ greatly in the sequel.” 

    While Fisher’s admonishment might not be the best way to administer a country’s laws — where all should be treated equally — it is profound when it comes to understanding no two customers are equal.  A German Proverb teaches, “He who seeks equality should go to a cemetery.”

    Maximum vs. Optimal Capacity

    All firms have a theoretical maximum capacity and a theoretical optimal capacity.  From a strategy perspective, it is essential to see how that capacity is being allocated to each customer segment.  Your maximum capacity is the total number of customers you firm can adequately service, while the optimal capacity is the point at which customers can be served adequately while maintaining your competitive advantage and pricing integrity. 

    Insuring a proper amount of capacity is allocated to various customer segments, while offering a differentiating value proposition within each segment, is an essential element of implementing value pricing strategies.  It also prevents bad customers–those who are not willing to pay for the value you deliver–from crowding out good customers. 

    The Adaptive Capacity Model

    Think of your firm as a Boeing 777 airplane, similar to the one below: 

    777-2003-1

    When United Airlines places a Boeing 777 in service, it adds a certain capacity to its fleet.  However, it goes one step further, by dividing up that marginal capacity into five segments:

    A. First class
    B. Business class
    C. Full fare coach
    D. Coach
    F. Leisure, Priceline.com, and Bereavement fares

    The airlines — and hotels, cruise lines, golf courses, car rental agencies, and other industries with fixed capacity — are adept at managing and predicting their adaptive capacity to maximize profitability. 

    Lessons from Yield Management

    The airlines understand it is the last-minute customer who values the seat the most and hence they reserve a portion of each plane’s capacity for their best customers.  They do this even at the risk the plane will take off with some of those high price seats empty — and that revenue can never be recaptured since they cannot inventory seats. 

    Why do they take that risk?  Because the rewards of reserving capacity for price insensitive customers comprise the majority of their profits.

    Airlines allocate only so many seats to coach, leisure, Priceline.com (or bereavement) seats, which they offer well in advance of the flight.  However, no airline adds capacity in order to accommodate these customers

    This point is noteworthy, as too many firms will, in fact, add capacity — or reallocate capacity from higher-valued customers — in order to serve low-valued customers.  This is the equivalent of the airlines putting the upper deck in the back of the plane rather than the front.

    Furthermore, many companies will turn away high-value, last minute work from its best customers because it is operating near maximum capacity, usually at the low-end of the value curve for price sensitive customers.  This is common during peak seasons; the lost profit opportunities are incalculable.

    Many worry about running below optimal capacity and cut their prices in order to attract work, especially in downturns or slow cycles.  This strategy is fine, but you must understand the tradeoff you’re making.  Usually, that capacity could be better utilized selling more valued services to your first-class and business-class customers, who are less price sensitive than new customers. 

    This way, the firm does not cut its price and degrade its pricing integrity in order to attract price sensitive customers, sending a signal into the marketplace it is willing to engage in this strategy and affecting the perception of its value proposition.

    The conventional wisdom is you have to be at maximum capacity — where demand exceeds supply — to raise prices.  But since when do you have to wait to be fully booked to demand a premium price?  Do not confuse working harder (supply-side capacity) with working smarter (demand-side pricing).

    Prices are determined by value created for the customer, not the internal capacity constraints of your firm.

    How much fixed capacity are you allocating to each customer class?  What will be the criteria you use to ascertain where in your airplane each customer sits?

    By viewing your firm as an airplane with a fixed amount of seats, you will begin to adapt your capacity to those customers who appreciate-and are willing to pay for-your value proposition.

    Technorati Tags: , , , ,

    The Marketing Concept – Ron Baker

    The Marketing Concept by guest blogger Ron Baker

    There is only one boss:  the customer.  And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.  -Sam Walton, founder of Wal-Mart (1918-1992)

    I miss Peter Drucker.  He was one of the few management consultants who had original insights, could write without making his readers feel like they were watching a fly ascend a drape, and has taught me so many lessons there is no way I can even separate his thinking from my own.  He deserved a Nobel Prize, and it’s a shame he didn’t get one (they are not given posthumously).

    One of his lessons was you are not in business to make a profit.  Profit is merely oxygen for the body; it is not the reason for being.  Profit is nothing more than a lagging indicator of what is in the hearts and minds of your customers.

    He indefatigably pointed out that “there is only one valid definition of business purpose:  to create a customer.”  This is known as the marketing concept

    The purpose of any organization–from a governmental agency, non-profit foundation to a corporation–exists to create results outside of itself.  The result of a school is an educated student, as is a cured patient for a hospital.  For a law firm, a happy and loyal customer who returns is the ultimate result.
     
    The only things that exist inside of a business are costs, activities, efforts, problems, mediocrity, friction, politics, and crises.  There is no such thing as a profit center in a business; there are only cost and effort centers.  In fact, Peter Drucker said in a 1997 interview, “One of the biggest mistakes I have made during my career was coining the term profit center, around 1945.”

    The only profit center is a customer’s check that doesn’t bounce.  Customers are absolutely indifferent to the internal workings of your firm in terms of costs, desired profits levels and efforts.  Value is only created when you have produced something the customer voluntarily, and willingly, pays for. 

    For example, cosmetic companies, as Revlon founder Charles Revson pointed out, sell hope.  What makes the marketing concept so breathtakingly brilliant is the focus is always on the outside of the organization.  It doesn’t look inside and ask, “What do we want and need?” but rather it looks outside to the customer and asks, “What do you desire and value?”

    Your firm exists to serve real flesh and blood people, not some mass of demographics known as “the market.”  In the final analysis, a business doesn’t exist to be efficient, to do cost accounting, or to give people fancy titles and power over the lives of others. 

    It exists to create results and wealth outside of itself.  This profound lesson must not be forgotten.

    Thank you Mr. Drucker.  R.I.P.

    Technorati Tags: , , , ,

    Why Customer, Not Client? – Ron Baker

    Why Customer, Not Client?  by guest blogger Ron Baker

    Customers are people; consumers are statistics.
    –Stanley Marcus [1905-2002], Quest for the Best

    Stanley Marcus was the son of one of the founders of Neiman-Marcus.  I believe he understood customer service better than almost anyone, and I have learned many things from his books.

    One of his favorite sayings was:  “No ‘market’–or ‘consumer’–ever purchased anything in one of my stores, but a lot of customers came in and bought things and made me a rich man.”

    Words mean things.  The words we use and the language we adopt, as a firm and as a profession, take on certain meanings over time.  They become part of our culture, the way we do things.

    When I began researching the Total Quality Service (TQS) and customer loyalty movements in the late 1980s, it struck me how many organizations have tried to call their customers something other than a customer. 

    The word client, when you look at its etymology, is an inappropriate word to describe the relationship between a professional and the person he or she serves in today’s marketplace.  Client is derived from the Latin word cliens, which is a follower, retainer, one who follows his patron.  In other words, a person dependent on another, as for protection or patronage.

    According to my Dictionary, “among the ancient Romans a client was a citizen who placed himself under the protection of a patrician, who was called his patron; a master who had freed his slave, and retained some rights over him after his emancipation; a dependent; one under the protection or patronage of another.”  Are these the type of images you want to project? 

    The Problem with the Contemporary Meaning

    I realize words change in meaning, and they adopt contemporary usage and generally accepted definitions, and client is no exception.  The Dictionary also describes client as “a person or company for whom a lawyer, accountant, advertising agency, etc. is acting; loosely, a customer; a person served by a social agency.” 

    But visit any governmental agency that dispenses aid to individuals, and you will soon discover they too use the word client.  A social worker may have clients but I do not believe this describes the relationship we have (or want) with our customers.

    What has happened to the word customer, and why do so many businesses attempt to describe the people they serve as something else?  After all, customer is derived from the word custom, which is something done regularly.  Therefore, a customer is a person who buys, especially one who buys regularly.

    Why is it when you see the doctor, you’re a “patient,” when you board an airplane, a “passenger;” when you get into a taxi, a “fare;” to your utility company, a “ratepayer;” to your insurance company, a “policyholder;” and to a newsletter, a “subscriber.”

    What’s going on here?  Why not call customers what they are?  Why do businesses develop a special terminology to describe what is, in essence, a commercial transaction?  It is as if professionals believe we are not subject to the laws of supply and demand along with everyone else. 

    Partially, it’s arrogance, a way for us to feel superior about ourselves relative to our customers.  After all, one doesn’t “sell” to a client; one doesn’t pander in the marketplace with non-professional advertising to attract clients; rather they rush to seek us out for our expertise, experience, guidance, etc.  Does this sound like the current environment in which we operate?

    The customer is sovereign, period.  We may not like it, we may wax nostalgic for the good old days when customers lined up like passive sheep to be fleeced, but those days are gone, forever.  Professionals can no longer place themselves above the “crass marketplace.”  We must participate in it, and we must differentiate ourselves from the competition if we are to succeed.

    Walt Disney insisted his customers be called “guests.”  His attitude, which still permeates the entire culture of all Disney theme parks, is that the role of employees (“Cast Members”) is to entertain the guests and show them a good time.  The words used to describe the people served by a business are a good indication of the attitude of the firm.

    I’m not suggesting if you change your vernacular you will automatically instill a culture committed to the customer.  Far from it.  But the words you use to describe the people you serve says an enormous amount about the attitude of your firm–and it is the attitude and actions of your people that ultimately determine your firm’s culture.

    I don’t expect many professionals to adopt the word customer.  And that’s a good thing, for you.  After all, you’re reading this Blog for the purpose of differentiating yourself from the competition, because competition really is conformity.  Start referring to your clients as customers, and you will discover it has a salutary effect on your attitude, firm culture, customer loyalty and respect, and ultimately, your bottom line.

    Technorati Tags: , ,

    The Firm of the Future – Ron Baker

    The Firm of the Future by guest blogger Ron Baker

     

    In my last post, I exposed the predominant practice equation for The Firm of the Past, and dissected the problems with it, how it does not explain the success of professionals (because it is far too focused on hours, efficiency, and inputs, rather than results, output and value), and why it no longer comports to the intellectual capital economy professionals inhabit today.

     

    The New Practice Equation offers a viable and proven alternative to leveraging the real critical success factors of The Firm of the Future:

    Profitability = Intellectual Capital x Effectiveness x Price

    The Market Share Myth

     

    This theory has many advantages over the old one.  First, rather than focusing on top line revenue, the firm is forced to think about the profitability of each customer.  Business is a game of margins, not market share, and growth for the sake of growth is the ideology of the cancer cell, not a profitable business.

     

    Further, not all customers are equal, and many firms could stand to lose up to 40-60% of their customers, and they’d be more profitable if they did so.  Marginal customers may contribute revenue, but they also absorb precious, fixed capacity that is better allocated to more valuable customers.

     

    Mind Over Matter

     

    Second, professional firms don’t sell hours.  They create and sell — and their customers buy –– Intellectual Capital (IC).  This is a far broader view than thinking about leveraging people and hours.  Microsoft didn’t create the wealth it has by pricing by the hour, and I doubt Bill Gates keeps a timesheet.

     

    A firm’s IC consists of three components:  Human Capital (its people); Structural Capital (its systems, proprietary software, checklists, resources, etc., that enable it to perform its work); and Social Capital (customers, vendors, suppliers, referral sources, alumni, and alliances).  These components are the real levers of profitability in any professional service firm, not people hours.  You can’t leverage an hour; time is simply time, and all businesses –– indeed, all living beings –– are constrained by it.  So what?

     

    There are so many more ways to leverage the three components of IC, but it requires a radical change of mindset to get away from the notion that “billable hours” drive a firm’s profitability.  As Archimedes said, “Give me a lever long enough, and I shall move the earth.”  The real lever in a professional service firm is its IC.

     

    Doing the Right Things

     

    Third, the Firm of the Future will focus on effectiveness, not efficiency.  There’s not much the average firm can do to squeeze another 15-20% efficiency from its Human Capital, which are only fallible human beings.  The focus on billable hours has hindered professional firms from focusing on being effective with their customers.

     

    If you study surveys of how customers select –– or fire –– their attorneys, efficiency is never mentioned.  It is always because of outstanding service, or lack of service –– issues such as they don’t ignore me, they are proactive in looking after my interests, they are aggressive in helping me pursue opportunities, etc.  You can’t do all of these things if you are focused on nothing but billable hour quotas.

     

    Therefore, the Firm of the Future will measure and judge team member effectiveness by utilizing Key Predictive Indicators (KPIs), which are leading indicators of performance.  Timesheets are lagging indicators, and don’t offer firm leaders a relevant, or timely, measurement of the right things (effectiveness); instead, they attempt to focus on doing things right (efficiency).  And they do a lousy job of it, since one can look great on a timesheet while having a lousy service attitude, or upsetting colleagues, or performing sub-quality work.

     

    I will take effectiveness over efficiency any day in a knowledge environment.  Let me be clear:  The Firm of the Future does not have timesheets.

     

    Pricing on Purpose

     

    Last, Firms of the Future recognize they are a business just like the airlines, hotels, rental car companies, etc.  Businesses have prices, not hourly rates.  You’d never fly an airline that tried to charge you $4 per minute.  The idea is simply ludicrous.  In fact, professional firms need to start pricing up-front for everything they do, period.  No more excuses.

     

    To retort a firm can’t do that because it doesn’t know exactly how long it is going to take is specious.  The customer doesn’t care how long it takes, they only care about the price relative to the value, and they want to make that comparison before they buy, not after.  Do you care how long it took Toyota to build your car?

     

    Besides, from the firm’s perspective, it is much better to know the customer doesn’t agree with the price before you do the work, which helps you prevent committing precious firm capacity to customers who don’t value the work.

     

    Pricing earthquake and other disaster insurance is far more complicated than legal services, yet my insurance company gives me a fixed price, before I buy (and before they know what their costs are going to be).  It’s called risk, and it is where all profits come from.  The professions are going to have develop pricing competency if they are serious about capturing the value they create, and if that means they have to hire pricing professionals, including actuaries, then so be it.

     

    Pricing is the number one driver of profitability in any business, and is far too important to leave to people who lack the creativity, imagination and self-esteem to price based upon value.  You know who the mediocre and wimpy pricers are in your firm.  They are severely handicapping your profitability by leaving money on the table, since they are far too focused on costs, hours, and efforts to think clearly about results, outputs and value to the customer.

     

    Lawyers are subject to the same laws of economics, and consumer psychology as every other business.  It is time they learned to Price on Purpose, and stop hiding behind the veil of billable hour. 

     

    Do Professionals Hate Change?

     

    Other consultants will tell you professionals won’t take this journey to become a Firm of the Future because they hate change.  In fact, the physicist Max Planck once said “Science progresses funeral by funeral.”

     

    I reject this line of reasoning.  I don’t think a profession progresses by shooting its elder members.  It is not change, per se, lawyers fear, it is the uncertainty of the effects of the change they fear.  That is a much different issue to deal with.

     

    If I was Lloyds of London, and I could insure a firm’s losses for a given period of time if they were to try my theory and it failed, I think many more would change.  Unfortunately, I’m not Lloyds and can’t do that.

     

    I have to convert my colleagues based upon the logic of my arguments and ideas, through the use of words.  I am optimistic I can do that –– I have a fairly good track record so far –– which is why I will continue to write, lecture, educate, and disseminate my ideas into the national conversation, through our think tank, VeraSage Institute.

     

    In fact, the Fellows at VeraSage are so committed to this process –– a group of 14 dedicated professionals world-wide assembled in order to better the professions and quality of life –– we offer any firm assistance, in the form of e-mail and telephone consulting, if they are truly serious about making the transition.  They can learn from our collective experience –and from other firms –– and this will help them avoid the mistakes others have made, thereby lowering their risk.

     

    A Paradigm Worthy of a Proud Profession

     

    Professional firms are Intellectual Capital organizations, and it is time for them to begin acting as if they understood this fact, rather than trying to constantly enhance efficiency by treating their Human Capital as if they had no mind of their own, redolent of the days of Frederik Taylor’s time-and-motion studies.

     

    Humans are not simply machines that exist to bill hours, yet the old practice equation keeps us mired in this mentality.  No one entered this profession to bill the most hours; it is simply not a relevant metric to judge the success of an attorney.  I believe we can –– indeed, must –– do better than the one-dimensional opportunities presented by an antiquated model.

     

    When I first publicly presented and contrasted The Firm of the Future with The Firm of the Past, a CPA explained to me at the break why she thought the new equation was so superior to the old.  She said, and I’m paraphrasing here, “Your equation presents so many more factors that enable a firm to achieve its objectives than the old one did.  It is like being freed from a cage that has restricted our firm for decades.”

     

    I have offered you a testable hypothesis, one that is subject to the falsification principle of the scientific method.  I hope someday this theory will be replaced with an even better one, as that is how all knowledge creeps.  I only hope to live long enough to see it.

     

    Clare Boothe Luce used to say, “The only difference between an optimist and a pessimist is the pessimist is usually better informed.”  When it comes to the professions, I certainly hope she was wrong.  But the road not yet traveled is long, and it seems the professions, to paraphrase Winston Churchill’s exhortation of America, will do the right thing –– once they have exhausted the alternatives.

     

    Despite this, I remain optimistic.  Milton Friedman tells a wonderful story that may illustrate what we need:

    A young nun was out driving a car down a superhighway and ran out of gas.  She remembered that a mile back there had been a gas station.  She got out of her car, hiked up her habit, and walked back.  When she got to the station she found that there was only one young man in attendance there.  He said he’d love to help her but couldn’t leave the gas station because he was the only one there.  He said he would try to find a container in which he could give her some gas.  He hunted around the gas station and couldn’t find a decent container.  The only thing he could find was a little baby’s potty that had been left there.  So he filled the baby potty with gasoline and gave it to the nun.  She took the baby potty and walked the mile down the road to her car.  She got to her car and opened the gas tank and started to pour it in.  Just at that moment, a great big Cadillac came barreling down the road at 80 miles an hour.  The driver was looking out and couldn’t believe what he was seeing.  So he jammed on his brakes, stopped, backed up, opened the window, and looked out and said, “Sister, I only wish I had your faith!”

    The Firms of the Future must lead the profession by following a model worthy of its proud heritage.  If we reinvigorate and revitalize the professions, begin to understand and leverage the Intellectual Capital it creates, there is no limit to what we can achieve, as long as we do not lose faith in ourselves.

     

    Technorati Tags: , , , ,

    The Firm of the Past – Ron Baker

    The Firm of the Past by guest blogger Ron Baker:
    Nothing stops an organization faster than people who believe that the way they worked yesterday is the best way to work tomorrow. To succeed, not only do your people have to change the way they act, they’ve got to change the way they think about the past.

    ––John Madonna, former Chairman, KPMG International

    Nothing fails like success. Professional service firms have been operating under a predominant theory of the firm since at least the 1940s, which has served lawyers, accountants, among others, quite well.
     
    The problem is, this theory is no longer relevant to the intellectual capital economy. We need a new theory of the firm. All learning starts with theory, since a fact, measurement or assertion not illuminated by a theory is absolutely sterile––we might as well read the phone book.
     
    Why Theory is Important
     
    There is also nothing more practical than a good theory, since it allows us to predict, control, or prescribe. We are ruled by our theories, whether we admit it or not. Professionals bill by the hour––and keep timesheets––because of a theory.
     
    Yet theory is a dirty word in most business books and seminars. Usually the author will state something like:  “This book is not based on ivory tower theory, but on real world examples you can use Monday morning.” I recoil when I hear that, because I know I’m about to be bored silly with checklists and a plethora of platitudes that rarely rise to the level of common sense.
     
    The scientific method originated in Europe in the 16th century, and is one of the creations that has significantly bettered the human condition and shaped the world we now inhabit. It is one of the fourteen meta-inventions Charles Murray documents in his fascinating and scholarly book, Human Accomplishment.
     
    The concepts of observation, hypothesis, falsification, parsimony, and the experimental method are all components of the scientific method. All science progresses through dissension, not agreement, and being able to falsify theories and posit better ones is the catalyst needed in order to gain a deeper understanding of what we are studying, whether in the hard sciences, economics or business.
     
    The Old Practice Equation
     
    What is the theory of the professional service firm that has created the success we’ve enjoyed? If you were to think deeply about it, I believe you’d end up with an equation that looks like this:
    Revenue = People Power x Efficiency x Hourly Rate
    In Greek language, analyze means “unloosen, separate into parts,” which we will proceed to do with this theory to expose its many weaknesses.
     
    First, since most firms have a relatively high contribution margin (revenue less direct labor costs), it gives them a false sense that any revenue is good. This in turn leads them to accept customers who are not as valuable to the firm as others, since marginally valuable customers take up a firm’s precious capacity, and keep it from reserving capacity for its most valuable customers. 
     
    Second, the way most firms were built in the last century was by leveraging people, literally building a pyramid structure. As technology came on the scene––and especially when the computer hit the desktop––the pyramids began to flatten and firms started to leverage technology. Most firms, however, will put revenue before capacity, always playing catch-up to the workflow and customer demand, and working their people at full tilt. Most other businesses––think of FedEx, Intel, etc.––will put capacity before revenue. 
     
    This constant full capacity utilization seriously hinders a firm’s ability to attract top talent, valuable customers and cross-sell additional services to existing customers, not to mention innovate. It also makes the partners and firm leaders believe the way to prosperity is to leverage people, and worse, billable hours. What David Maister calls the donkey strategy –– prosperity by carrying a heavier load.
     
    Third, most firms focus on efficiency by measuring such things as utilization rates and billable hours. Yet, if you study statistics going back at least fifty years, you’d find utilization rates and billable hours are within a very tight range.  In other words, whether professionals are using a quill pen or a laptop computer, they can only charge so many hours in a year and realize so much on those hours.
     
    Yet the theory leads partners to believe efficiency is the be all and end all of running a profitable firm. This is demonstrably false. I’m sure the buggy whip manufacturers were a model of efficiency before they were replaced by the automobile. What if you are efficient at doing the wrong things?
     
    A business doesn’t exist to be efficient. It exists to create wealth for customers. The relentless focus on efficiency is misplaced in a knowledge environment, where we do not even have proper metrics to measure the output of a knowledge worker, let alone to value it. Yet we cling to our 100+ year-old metrics––designed for manual laborers––because they give us a false sense of security. 
     
    I’d rather be approximately right than precisely wrong, by making subjective judgments about the right things not precise calculations of the wrong things. We simply do not know how to measure a knowledge worker’s “efficiency,” because it’s not a simple matter of looking at inputs and outputs. No one would suggest tallying the cost of canvases, paints and the hours Rembrandt took to create his paintings in any way measures his efficiency, let alone the value of his output. 
     
    Was Einstein on budget for his research? Would you care?
     
    No efficiency expert told Bruce and Jim Nordstrom to put pianos and piano players in their department stores. It certainly decreases efficiency, lowers sales per square foot, etc. Yet, how effective––in terms of customer service and competitive differentiation––has this strategy been? The legal profession has let efficiency retard its effectiveness, innovation and creativity.
     
    I would suggest the most innovative firms––from Intel, 3M, and Disney, to FedEx, Apple and Microsoft––are not the most efficient. They are, however, amongst the most innovative, and profitable. Consider 3M, which provides its employees up to 15% personal time to work on whatever projects they desire. 
     
    It’s not the most efficient scenario, but if they didn’t offer that type of personal time for people to create and innovate, we wouldn’t have Post-It Notes (and think of the wealth created in that market). I think most partners would be horrified to implement a similar policy. Hence, professional firms are not hotbeds of innovation and creativity. If professionals brought the same methods and metrics they use in their firms to the computer industry, we’d have Vacuum Tube Valley, not Silicon Valley.
     
    Last, the Almighty Hourly Rate. The profession has taught approximately two generations of lawyers the only thing they sell is their time. This is unadulterated nonsense, for a very fundamental reason––no customer buys time. How can you sell something the customer doesn’t buy? 
     
    Look at how any customer judges the success (or failure) of their attorney. Customers buy expectations, results, sleep, peace of mind, etc, not hours. The focus on hourly rates has held the profession back from getting paid for the value it creates, and that has to change before another generation is corrupted.
     
    Alternative to a Flawed Theory
     
    It is one thing to light a candle in the darkness and shed light on the obsolescence of a reigning theory; it is a valuable undertaking in order to complete the falsification step in the scientific method. The harder work is constructing a better theory, one that comports to the realities professionals find themselves in today––an intellectual capital economy, where wealth is created from mind, not matter. Where ideas and knowledge––what economists term human capital––comprise 75% of any nation’s, or law firm’s wealth-creating ability.
     
    Stay tuned for the next post, where I will present the new theory: The Firm of the Future.

    Technorati Tags: , , ,

    Introducing Ron Baker – Guest Blogger

    One of the coolest things about blogging for me is that I have gotten to know some really amazing people.  One of those folks is Ron Baker.  When I first started blogging, I called him an absolutely amazing visionary and called two of his books, The Firm of the Future (with Paul Dunn) and The Professional’s Guide to Value Pricing “absolute must reads.”  Ron left a comment to that post, and since then he and I have grown to be friends.

    Ron and I were talking about his new book, Pricing on Purpose, and I asked him if he’d like to promote it on this blog.  Instead of a quick Q&A, he’s written several provocative posts for my readers.  The first will follow today.

    I can’t tell you how excited I am to have him here on the [non]billable hour this week.  I hope you enjoy what he has to share.

    For those of you who don’t know Ron, here’s his bio:

    Ronald J. Baker started his accounting career in 1984 with KPMG Peat Marwick’s Private Business Advisory Services in San Francisco.  Today, he is the founder of VeraSage Institute, a think tank dedicated to teaching Value Pricing to professionals around the world.

    As a frequent speaker at events and conferences, and a consultant to professional service firms on implementing Total Quality Service and Value Pricing, his work takes him around the world.  He has been an instructor with the California CPA Education Foundation since 1995 and has authored eleven courses for them.

    He is the author of the best-selling marketing book ever written specifically for the professions, Professional’s Guide to Value Pricing, Sixth Edition, published by CCH, Incorporated.  Also, Burying the Billable Hour; Trashing the Timesheet; and You Are Your Customer List, published by The Association of Chartered Certified Accountants in the United Kingdom.  His book, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services, co-authored with Paul Dunn, was published in April 2003 by John Wiley & Sons, Inc., and is in its fourth printing.  His latest book, Pricing on Purpose:  Creating and Capturing Value, was published in February 2006 (John Wiley & Sons, Inc.).  His next book, The Canary in the Coal Mine:  Why Your Company Needs Key Predictive Indicators, is due out in the latter part of 2006 (John Wiley & Sons, Inc.).

    Ron has toured the world, spreading his Value Pricing message to over 70,000 professionals, including leading a seminar series of Value Pricing seminars for the American Association of Advertising Agencies in 2005.  He has been appointed to the American Institute of Certified Public Accountant’s Group of One Hundred, a think tank of leaders to address the future of the profession, named on Accounting Today’s 2001, 2002, 2003, 2004 and 2005 Top 100 Most Influential People in the profession, and received the 2003 Award for Instructor Excellence from the California CPA Education Foundation.
       
    He graduated in 1984 from San Francisco State University with a Bachelor of Science in accounting and a minor in economics. He is a graduate of Disney University, Cato University, and the University of Chicago Graduate School of Business course:  Pricing:  Strategy and Tactics.  He is a member of the Professional Pricing Society and presently resides in Petaluma, California.

    Technorati Tags: , ,

    Buy a New Desk Every Week

    Don’t know if you can bill all this time, but this is interesting:

    Studies have shown that a person working with a messy desk will spend, on average, one and a half hours per day either being distracted by things in their view or looking for things. That’s seven and a half hours per week.

    Let’s see, at $250.00 per hour, you could buy a new desk every week.

    Get Coached Up!

    If you want to make meaningful changes in the way you manage your employees, you have to check out my friend Rosa Say’s Managing with Aloha Jumpstart program

    Oh, and did I mention it’s free.

    Temping in BigLaw

    Temporary Attorney writes about temping in BigLaw.  The blog’s author, Tom the temp, has been thinking a lot lately about how law schools report their employment numbers:

    Isn’t the legal profession and the law schools one big “Enron” kind of scandel? Think about it. Every year thousands of college graduates decide whether or not they want to “invest” in a legal education. (often a $100,000 proposition). They decide the feasibility of this investment not by relying on a 10(k), but rather by relying on the career statistics put out by the schools. The career statistics are standardized not by the SEC but rather by something called the NALP.

    Whether law schools “outright lie” on their NALP forms Tom the temp wouldn’t know. This did get Tom the temp thinking about something he heard recently concerning a recently unemployed 2004 tier 2 law school graduate. Supposedly this woman was unemployed after passing the bar exam. Her career center wanted to know what she was up to because it was time to file their annual NALP employment report. At the time she was working a two day temp job stuffing envelopes in a law firm for four hours a day. Guess what the school reported? They took her hourly rate multiplied it by 2000 and claimed that she was an attorney in a 20-30 person law firm making a “projected” income of $50,000-60,000 dollars per year. Wow! Talk about an arithmetic trick. Under this mathematical model maybe Tom the temp isn’t doing so bad after all. If only the mathematical illusion matched the reality of Tom the temp’s unfortunate existence.

     

    Entrepreneurial Lessons Learned

    Rob May at BusinessPundit has given up entrepreneurship (for now) and gone back to a regular pay check.  He shares some of the lessons he’s learned in this fabulous post.  Here are a few of my favorites:

    Know how you make money. Ideas are great, and I’m all for doing cool things, but cash is still king. How do you get cash?

    Your estimates are wrong – Yes, even your worst case estimates.

    You aren’t your own boss – Your customers are way more demanding than any corporate boss could ever be.

    Nobody cares that you are smart or knowledgeable (and you need to know if you really are) – Why not? Because everyone thinks they are smart and knowledgeable. Everyone is convinced they are good at business. Everyone thinks they can hire a talented team. Everyone thinks they can sell. Everyone thinks there is something special and different about them that will make them successful. But accruate self-evaluation skills are critical to entrepreneurial success. You have to know what you are good at, what you aren’t good at but can learn, and what you will probably never be good at. I think this is a major reason businesses fail.

    Doing Business with Friends and the Cost of Creativity

    As the New Year begins, I admit I’m still in a bit of a reflective mood.  Here are some brilliant insights in this post from Speak Up:

    Art and commerce have an uneasy balance in all of our lives. Costs and figures and negotiating have a way of blurring the focus we should have towards the work. It is why pro bono work can be so fun. It is why creative directors have so many other things to do during their day besides create.

    The stresses. The paperwork. The bad dogs, sick kids, missed busses and fights with our significant other can all factor into a job. Every job brings with it a new set of challenges. Some of which will not come from the work.

    Just like there is a cost of doing business, there is a cost of creating. I am still learning how to put a price on that.

    Should You Give it Away?

    Continuing with the pricing theme for today is this post from Presentation Zen that discusses the differences between giving away services and discounting them:

    I may be naïve, but my philosophy concerning public speaking has long been to remain open to non-paid opportunities, outside the business world, if I can actually be of help. Doing “free gigs” does not lower the value of what I usually “sell.” In fact, doing the unpaid work outside of business probably adds value to my “brand” so to speak. My thinking is that discounting my services, say, to an investment firm, may indeed cheapen my brand. So I don’t do that. However, I do not think doing some (sometimes more) work 100% free of charge cheapens what you have to offer, depending on the circumstance. Discounts cheapen, but free is free — and some of the best things in life are free. (They don’t say, “Some of the best things in life are…discounted 50%”). Selling yourself (too) “cheap” is different from “giving it away.” For example, Starbucks is not going to discount their drinks, but maybe they’ll give free hot chocolates on Christmas Eve evening in certain stores for tired, procrastinating shoppers.

    Set Your Billing Rate to $10,000 per Hour.

    Steve Pavlina  has an interesting take on hourly billing:

    The big problem is that when you tell yourself your time is worth $50/hour, you’re simultaneously telling yourself that it isn’t worth $75/hour or $200/hour or $10,000/hour. You’re programming your subconscious mind to limit the range of opportunities you will notice. Because you won’t be on the lookout for $10,000/hour ideas, you’ll overlook them completely. If you tell yourself you earn $50/hour, you’ll think in terms of $50/hour opportunities.

    Thinking in terms of an hourly rate may help limit your downside, but it also severely limits your upside. And that’s a really bad trade-off, bad enough that it requires me to dismiss this whole paradigm as utterly stupid. There’s no way the upside of turning some $20 hours into $50 hours can compensate for missing those $10,000 hours. That’s penny-wise, pound-foolish.

    One $10,000 hour is worth 200 $50 hours. That’s more than a month of full-time work! You don’t need too many of those huge payoff hours to pick up the slack of some of those less productive $0-20 hours, but if you miss out on even one of those $10,000 hours, it’s a crippling blow that overwhelms all other thoughts about financial productivity.

    In the long run, your greatest financial risk isn’t whether you made the mistake of succumbing to doing $20/hour work when you could have done $50/hour work. Your greatest risk is missing those $10,000 hours. And most people miss out on them completely. It’s ironic that people think of being a salaried employee as being low-risk and being an entrepreneur as high-risk. The reality is just the opposite. One of the reasons I chose the entrepreneurial path is that it’s just way too damn risky to be an employee. I’m not kidding. It’s easy to hit a good number of those $10,000 hours as an entrepreneur, but it’s a lot harder to do so as an employee.

    How many $10,000 hours did you enjoy this year?

    Go ahead and read the whole post.  Really thought provoking.

    Price like Wal-Mart?

    Will Keller has a great post up on his Accounting Blog disecting WalMart’s pricing strategy:

    WalMart goes to great lengths to have an alluring and unbeatable opening price point item in each category- from TV sets to cosmetics to bathing suits. These are the “unbelievable” prices that the company has become famous for (for example, a microwave oven for $14.67). The psychological impact of this opening price point is huge- consumers are led to believe that all of WalMart’s prices are this low. However, the reality is quite different. As confirmed in interviews with former store managers, WalMart does not have the lowest price on every item in every category. In fact, the company often has higher prices than other big retailers (i.e. you might get a better deal down the road at Target). However, in most cases the game is already over because consumers believe that WalMart’s prices are lower across the board. Furthermore, evidence shows that most shoppers don’t even buy the opening price point item. Instead, the low price lures them into the department, where they end up buying a brand name or higher quality item that they are more comfortable with. (emphasis added)

    That’s pretty powerful stuff.  The price gets customers in the door, but they don’t even buy the products whose price brought them there.  Anyone out there using this strategy with success among professional service providers?

    Friday Time Waster

    Who thought reading an encyclopedia could be fun?  Well, now with Wikipedia (and WikiQuote) on the scene, you can’t go wrong with a little bit of encyclopedic knowledge on a Friday afternoon.  Don’t say I didn’t warn you (see title of the post):

    Simpsons Quotes, Simpsons Neologisms, and finally Bart’s Chalkboard Gags.

    Value Does Not Equal Cost

    Lawyers who struggle with pricing their services (and I think that includes all lawyers) should check out this post on the Loud Thinking blog:

    The inability to price at value instead of cost is what separates nice (or niche) businesses from great businesses, what fizzles good ideas, and what turns would-be entrepreneurs into “starved artists”.

    This is naturally what attracts me to simple problems. What’s the least amount of work I can do that ends up having big value? Before I’ve cleared all the simple problems of high value, it’s just not for me to engage in solving hard problems. Too much risk, not enough ratio.

    And remember this: “value” is measured from the customer’s/client’s perspective, not yours.

    Money ain’t Nothin’

    Barry Moltz points out this Entrepreneur.com article by Mark Diener about Mastering the Six Laws of Money.  Write these down and keep them in front of you.  A sampling:

    1. Money sooner is better than money later. Eliminate the risk of not getting paid by getting your money upfront. This also tests whether the other side is serious.

    2. Go to the source. Paul could wait until John gets cash from Peter, but if I were Paul, I’d rather call Peter myself. The names may be confusing, but the lesson’s simple: Go upstream.

    6. Get the right to offset. Savvy buyers won’t pay everything when a deal closes. They insist on the right to hold back money to cover against future problems

    The Printable Partner – For Solos?

    David Seah introduces his Printable CEO (remixed here), that he developed to help him in his solo business:

    What I need is executive focus from a leader that understands how to grow my business, a manager that knows how to motivate me. I once read that the most effective executives ask themselves a simple question: What can I do to add value to the company? If the task at hand doesn’t add value, then screw it! Do something else that does!

    Hiring my own personal CEO would be great, but who has the time and money to do an executive search? I’ve got MP3s to sort! So I did the next best thing: I designed a printable form to motivate my business development activities.

    I really like this idea.  Keeping track of billable time is one thing, but David’s idea forces you to keep track of business-building time as well — all with an easy scoring system.  Simply brilliant.

    Idea x Execution = Value

    Derek Sivers does some “entrepreneurial” math:

    AWFUL IDEA = -1
    WEAK IDEA = 1
    SO-SO IDEA = 5
    GOOD IDEA = 10
    GREAT IDEA = 15
    BRILLIANT IDEA = 20

    NO EXECUTION = $1
    WEAK EXECUTION = $1000
    SO-SO- EXECUTION = $10,000
    GOOD EXECUTION = $100,000
    GREAT EXECUTION = $1,000,000
    BRILLIANT EXECUTION = $10,000,000

    To make a business, you need to multiply the two.

     

    WiFi While Your Customers Wait

    Christopher Carfi pointed me to a great article from Noel Franus titled Building the Better Guest Experience.  Noel suggests four small things that could make a big difference for your customers:

    • Provide a comfortable space. A couch or coffee table is the first step you can take in shifting the mood from annoyed to relaxed. (Relaxed customers usually shell out more money than annoyed ones.) Investment: $2,000 (furniture).
    • Do you have any coffee? A little java goes a long way toward making customers feel like valued guests. Get a decent coffeemaker and good beans. Or outsource the opportunity to a local brandofcoffeebucks that people know and enjoy. Investment: $1,000 per year (coffeemaker and supply).
    • Dish up the fishwrap. For less than a buck a day, you can give them something to read or watch while they pass the time. Newspapers and magazines can keep those rambunctious customers under control. Investment: $100 per year (daily news and magazines).
    • Nothing but net. Most people are missing out on work while they’re in the store. Give them wi-fi, give them access to information, give them back their productivity, give them back their time. Investment: $700 per year (wireless router and high-speed Internet).

    Noel continues:

    If you’re responsible for your customers’ happiness, chances are you have an opportunity to create your own best-imaginable, rich experiences that need not cost an arm and a leg.  Whatever you do, don’t just sit there with limited-profit space, focused on today’s numbers rather than tomorrow’s viability. Providing memorable moments will help your brand become one that customers truly appreciate. With an investment this tiny, there’s so little to lose.

    I think Noel is right on.  How many doctor’s offices (and lawyers offices and accountants offices …) have you been stuck in for longer than you expected to be?   If you knew there was WiFi (or at least a desk to work on) the wait wouldn’t have been so memorable. 

    I’ll gladly repay you the second Tuesday of next week.

    My newest issue of Brainmail appeared in my inbox this week, and as usual, it is full of interesting tidbits, most that make me say, “huh?”  Here is one that struck me like a ton of bricks, not because it was odd, but that it made so much sense:

     Here is interesting story about human behaviour. A   childcare centre in Israel was having problems with parents that were picking their children up late. As a result they introduced a fine for lateness. The result was that lateness increased. Why? Because the fine normalised the behaviour.

    Makes me wonder: if you include a late fee provision on your bill, does it make your client more likely to pay late?

    The Best Business Advice for Professionals

    Tom Asacker, guest blogging for Fast Company’s Blogjam shares this tremendous insight into building a business:

    Today the game is all about going deep, with highly relevant products and services and particularly information, into a unique subculture. Forget about things like reach and frequency. The future of branding is collaboration with — and for — a passionate subculture of like-minded people. It’s no longer wise to be famous for fifteen minutes. Mass market celebrity is fleeting. Instead, become famous to fifteen people.

    I think Tom is right on here.  Because small-firm lawyers, architects, accountants, and other professional service providers will never be able to serve the mass market anyway, it is important for them to take Tom’s advice to heart.  Identify 15 people/businesses you want to serve.  Now, how can you be famous to them? 

    Put your clients on the honor system?

    Rick Klau reminds us about:

    a donut vendor in NYC who put his customers on the honor system, and in the process doubled his customers per minute (as compared to other, similar donut vendors).

    What if you clients were on the honor system?  What would they pay you?  Next time you send out your bills, leave the total blank.  Let your customers determine the worth of your services.  What they pay may be more instructive than what they’d say.

    Flat Fee Pricing for Decorators

    An interior decorator describes the benefits of flat-fee pricing in this Inc.com article:

    “To be honest, I did it for my own convenience. The paperwork you have to do when you’re working on commission is miserable. You have to hire people to handle the billing, the collections, the problems with customers wanting to do exchanges or turning things back in. You have to keep track of all the bills. Do I leave a few dollars on the table? Probably. But it doesn’t matter because I can take more jobs, and I’m just working on the parts of the business I love.”

    Read the entire article for her client’s perspective as well.

    Economics of Software Design

    Every once in a while I run across something that I want to share with you, though it may not have anything directly to do with improving your business.  I encourage you to read this essay by Joel on Software  titled Hitting the High Notes.  In the essay, Joel riffs on productivity, the weakness of groups, the economics of software development, and iPod design.  It is worth five minutes of your day (or should I say six minutes, since you lawyers out there will round up to the full tenth of an hour).  Here’s my favorite quote: 

    Essentially, design adds value faster than it adds cost.

    Serve the Rich

    Roy H. Williams shares 5 Tips for Reaching the Rich on Entrepreneur.com.  Though Williams is talking about getting your “product” in the hands of the rich, much of his advice makes sense for service providers as well.  His five tips (read the article for explanations) are:

    1. Hang out in their hangouts.

    2. Become useful to them.

    3. Put your product where they can see it.

    4. Target through copy.

    5. Pull, don’t push. 

    At the end of the article, Williams suggests that selling to the rich isn’t as important today as it once was:

    Today a middle-income office manager may save her money to buy a single luxury item, like a Chanel jacket, the same one worn by a wealthy woman who has a dozen others like it in her $2.5 million house. While it may feel good to have the truly rich woman as a customer, you don’t want to lose sight of the fact that for every one of her, there are at least 250 of those middle-income managers anxious to buy that same Chanel jacket.

    Remember that last sentence.  Are you better off in the long run working your tail off to land that one huge client, or looking at ways to become indispensable to small yet growing businesses?

    Assess your firm culture.

    Arnie Herz points out this Firm Cultural Assessment that’s worth looking at.  The only problem is that those who will ignore the assessment are likely the firms most likely to benefit from it.

    What your clients want to tell you.

    Michelle Golden, in her blog Golden Practices relays some great advice for CPA’s from a panel of “A-List” accounting firm clients.  The entire post is required reading because there is some really great stuff on it.  Here are just a few favorites:

    • Be there when we need you. A great example is when my accountant was on vacation but was able to be reached and even came in, off the beach in his shorts, to the attorney’s office to help us finalize a critical deal.
    • I feel like my firm sees me as a “nobody.” I just can’t get good service. My firm checks in with my CFO who thinks things are fine but I’m going to fire my firm in the next few weeks because they aren’t meeting MY needs. I may go back to a sole practitioner.
    • I don’t appreciate when a firm acts like they can be all things to all people.
    • Collaborate WITH us. Talk to us and tell us what you’re doing. Our accountant recodes/reclassifies things, redoes budgets, etc, and it seems duplicative. They should be teaching us how to do it better so they don’t have to re-do it.
    • Don’t nickel and dime us with a bill for $100 or so.
    • Even though I know I’m being charged $100-200 for a single phone call, I don’t really want to see it broken out on the bill!
    • I’d rather have a “package” price then one based on hours.
    • I love to have an idea, say within 10% or so, of what my monthly bills will be.
    • The firm has never yet put me in front of another client with whom my business has something in common. I cannot figure out why…
    • Offer to be on my board–don’t charge for the time…it’s an opportunity for you!
    • It flabbergasts me that no one has called to offer me another service — even as my business is changing/growing so rapidly.
    • I had no idea of the other services our CPA firm offers. I had to ask my CFO who used to work for the firm so that I could answer questions today about other services I might be interested in. I thought it was neat that they offer to help interview and screen financial people I would hire.
    • It’s best when you talk to me in person. Maybe a yearly meeting where we talk about what’s going on for the next year, touch base, share updates and tell me about additional services.

    Lawyers, are you listening?

     

     

    Make a Million Dollars

    Marshall Brain (what a great name!) has a cool article titled, How to Make a Million Dollars.  He has some pretty sound advice, but what made me laugh out loud was when he was talking about one way to do it:

    Or there is the well-worn path to a lawsuit. The problem is, a lawsuit can take a long time and you have to spend most of that time talking to lawyers. I’m not sure the rewards outweigh the pain.

    Are Professional Service Fees Heading for Collapse?

    Dave Pollard looks into the future in his thought provoking post about the Wal-Mart Dilemma, File Sharing and Lousy Service.  He has some sobering things to say about professional services providers:

    Providing good service is expensive, and large corporations are trying everything they can to force customers to a ‘self-service’ (i.e. no service) model. Those in industries where they can’t just tell the consumer “Throw it out and buy a new one” are in especially deep trouble. Examples: the news media, professional services (legal, medical, financial etc.) are all under fire for their skyrocketing prices for less and less service time and value.

    Dave predicts:

    The price ‘bubble’ for services will collapse, just as it has for products and just as it will for stocks and real estate. This will also be bloody. Public corporations in service industries will be crucified by shareholders as those incumbent service providers who break ranks drive service industry ROIs down to more reasonable levels. Large-firm ‘professionals’ who would faint at the unheard-of idea of salary cuts will see cuts in double-digits, which, on top of the incredible hours they already work, will probably lead to massive strikes by people you would never expect to see striking. Companies which make shoddy products and which try to shove off all service to outsourcers or offshorers, like the big computer hardware and software makers, construction companies and lawn tractor makers (according to Consumers’ Union, these industries’ products have the highest failure, repair and complaint rates, and none provides quality service) will face a consumer revolt, and demands for government regulation to improve or offer free replacement for defective products and work — which these industries will fiercely lobby against.

    To call Dave’s viewpoint a bit left of center is an understatement. Nevertheless, Dave makes some compelling arguments.  Take a look at the full post, if only for Dave’s explanation of the ‘Wal-Mart Dilemma’ — one of the best I’ve read.

    Price Shoppers

    Craig Arthur has an interesting take on responding to Requests for Proposals (RFP’s) that should resonate with every lawyer who has had a prospect call and ask the question, “How much does you charge for X?”  Here are some excerpts from Craig’s post:

    … [Y]ou should respond by sending a letter politely explaining why you don’t answer RFPs or bids and why it isn’t appropriate for either party to do business this way. The letter should make it very clear that you would like to talk with them to explore the full range of their issues to determine if you may be of service to them. If they choose not to do this then that is their choice.

    After all, at some point you must eventually get face to face with them if they are to become a client. Why not start that process early? Do this and you will eliminate a lot of wasted time.

     

    Another argument against hourly billing

    Mike McLaughlin continues his great tips with Tip #8: Get Paid What You’re Worth.  Here’s just a bit of what Mike has to say:

    Want to know the fastest way to earn less than an entry-level consultant in a medium to large consulting firm?

    Start your own consulting business and charge by the hour.

    According to a recent study by Kennedy Information, Inc., the average salary offered to consultants from top business schools will hit $109,000 this year, and that will be accompanied by five-figure signing bonuses and annual bonuses ranging from $5,000 to $30,000. The total, first year compensation package for a newly-minted consultant could reach over $150,000.

    An independent practitioner charging an hourly rate would have to work awfully hard to match that newbie’s salary.

    Not to be tedious, but do the math: There are 261 days in a year–once you subtract the weekends. If you take a month off for vacations, holidays, and the like, you’re starting from a base of 230 billable days, give or take a few.

    Research shows that firm owners will burn about 110 days a year on non-billable activities like marketing, administration, education and traveling, leaving about 120 days of billable time.

    Assuming you’re able to bill for 70% of those 120 days at $2,000 a day, and your overhead is a measly 20% of revenue, your annual, pre-tax earnings would be roughly $135,000. Not a bad day’s pay, but you’re carrying all of the business risk, and making less than an inexperienced consultant.

    Mike is right-on, and goes on to make the argument in favor of charging based upon value instead of time.   

    Solo lawyers face the same dilemma.  Using Mike’s math, you’d still have to bill ten hours each day at $200.00 per hour to make the $135K he suggests.  This is why there aren’t many solos making the kind of money new grads from top law schools make their first year in practice.  Part of the problem is that solos tend to devalue their own services, setting their hourly rates far below their big firm colleagues because they feel compelled to compete on price.  The marketplace also discounts the experience and expertise someone working out of a storefront can bring to a complicated transaction. 

    So why don’t we all move away from hourly billing?  Some of our clients demand it, but the more pervasive reason is that while lawyers are thirsting for information on how to move away from hourly billing, so few are willing to take the risk (and spend the time) to incorporate value pricing into their practices.  

    One solution:  Approach five of your best clients (ones that really like what you do) and ask them how they’d feel about “beta testing” your new value pricing packages.  Ask them what they’d want from you and how much they’d be prepared to pay.  Agree to limit the “test” for 90 days or so, and meet with them regularly to evaluate how things are working. 

    Alternatively, if you have a practice with non-repeating clients, offer a value pricing alternative to every 10th client and see how it goes.

    Remember, unless you try to change the way you charge for your services, you’ll be tied to your timer as long as you practice.

     

    A quick quality of life quiz.

    Anita Sharpe has this quote (which I’ve edited just a bit) from a book she just read:

    Of course, everyone spoke ill of his profession, but, basically, it was all a question of selling his time, like everyone else. Doing things he didn’t want to do, like everyone else. Putting up with horrible people, like everyone else. Handing over [ ] his precious soul in the name of a future that never arrived, like everyone else. Saying that he still didn’t have enough, like everyone else. Waiting just a bit longer, like everyone else. Waiting so that he could earn just a little bit more, postponing the realization of his dreams; he was too busy right now, he had great opportunities ahead of him, loyal clients who were waiting for him. . .

    What profession?  Take a look here to find out.  Or read the book.

    Take Five and be a Better Boss

    Rosa Say has another great tip in her post titled The Daily Five Minutes.  She suggests that each day, managers give five minutes of “no-agenda time” to at least one employee.  Here are some benefits to the managers:

    In the process of developing this habit, they greatly improved their own approachability. They had nurtured a circle of comfort for their employees to step into and talk to them——whenever time presented itself. The Daily Five Minutes itself soon became a more personal thing. Employees started to share their lives with them——what they did over the weekend, how their kids were doing in school, how they felt about a local news story. Managers began to know their employees very well, and their employees began to relate to them more as people and not just as managers. They were practicing the art of ‘Ike loa together. 

    Managers ceased to judge employee situations prematurely, for they had built up a relationship that demanded all be allowed to speak first——and they wanted to speak with their employees, sure they’d receive more clarity. The Daily Five Minutes became a “safe zone” where employees felt they could talk story with their manager “off the record,” and managers learned to ask, “Are you venting, or asking for help? Do I keep this in confidence, or do you expect me to take action?” It became clearer who was responsible for following up on things.  Managers had less and less of those “if only I had known about this sooner” surprises.

    Think about doing a Daily Five Minutes with all of your employees.  Then extend it to your clients and see what happens!

    Billable Hour Calculator

    Joshua at JD Bliss alerted me to their new “Attorney Work Life Balance Calculator” that will (according to the site) help you determine:

    • how many hours you must spend in your office during the week (Monday through Friday) in order to meet the billable hour requirements of your firm (taking into account vacation, personal and other “days off”), and
    • the amount of time you’ll need to spend working at home after work or on weekends if you can’t meet your firm’s billable hour requirements solely from your time in the office during the week.

    Pretty cool little application, in a kind of fun/scary sort of way.  I did an interview for a profile in JD Bliss that should be coming up in a few weeks.  I’ll alert you when it is posted on the site.

    Managers should Manage

     Rosa Say, in her Talking Story Blog,  has a really great explanation of what I believe is the biggest mistake managers make.  In Work World Myth #8: Managers Should Know How To Do Everything, she says:

    This is one of those old fallacies about what it takes to be a “good manager.” You often hear it voiced something like this: “Don’t ask an employee to do anything you can’t do yourself.”

    There is so much evidence surrounding this to the contrary, that it astounds me this myth is still around. Even worse, mediocre managers are hiding behind it. They are not working ON business health, innovation, and vibrancy because they are “safely” ensconced IN business tasks that should be delegated and assigned to someone else.

    If you want to be needed, be needed as a productivity maximizer: an inspiration, visionary, and compelling leader, not as another worker bee. And please, I mean no disrespect whatsoever to the worker bees you manage and lead; I’m just asking you to better understand what your own role is if you are their manager and a leader.

    I’ve just started to regularly read Rosa’s blog, and it is really great.  Check out the rest of her Work World Myths.  Well worth your time.

    Sage Advice from Ed Poll

    Ed Poll, law firm management guru and author of the LawBiz Blog, has some really good advice about how lawyers can respond to a client who demands a lower price:

    When you have to bend on the price you quote a client, be sure you first list the things you do for the client for that price. Then, when you lower your price in order to respond to the client’s request (based on your competition), take some of those things off the table. Thus, you are not really “lowering the price.” You’re adjusting the price to fit the appropriate level based on the service to be delivered.

    What, you might ask, are the components of an hourly fee? Well, how about returned phone calls within 2 hours. That’s now part of your regular hourly rate. Thus, if you lower your hourly rate in response to your client’s request, take that response time off the table … tell the client that your response time will be 24, or even 48, hours. He’ll get the point that he’s not really lowered the price, but changed the value composition of what he’s buying.

    The analogy is buying a car at the base price vs the same car with options at a higher price. You’ve merely unbundled (the current fad term) your services.

    Kill the Billable Hour Before It Kills You?

     Jim Logan weighs in on the billable hour:

    I’m more convinced than ever the next great opportunity in professional services is value-based billing. In my own business, we don’t bill for time – never have, never will – and the results are impressive, both for us and our clients. Billing customers based on results, defined from their business purpose, is a Win-Win business proposition that creates fierce customer loyalty and ultimately more revenue for both the customer and consultant. Once your combined goals are aligned, the opportunity for mutual success increases.

    Amen. 

    Edit Your Selection

    Andrea Learned writes about how women appreciate an edited selection:

    Not every laptop known-to-man needs to be available at your consumer electronics store.  Rather, do some research and reflect that you know your customers: deliver the top 10 sellers or the ones about which your customers requested most information in the past few years.  …   If your camera store, clothing store, appliance store or computer store has done its work, you will have discovered the “top 10″ of your women customers’ favorites and those will be the ones you provide and the products for which you train your customer service staff to know EVERYTHING about.

    For me, the takeaway quote for professional service providers:

    Sometimes limits aren’t bad.  In a retailer’s situation, narrowing product selection can just reflect an excellent understanding of the store’s core customers.

    Getting the Budget from a Client

    Jason at 37 Signals shares this tip he received from his friend Carlos:

    First you should just ask them for it. Be blunt: “What’s your budget or budget range for this project?” If you have a good client they’ll tell you (and trust me, you want good clients — finding the right clients is 90% of this business). If you have a reticent client they may say “we don’t have one yet” or “we’re just looking right now” or “we want you to tell us how much it will cost.” Truth is, everyone has a number in their head. They have a good idea of what they can spend or they wouldn’t be shopping in public. If they don’t then they shouldn’t be asking you to invest your time in writing a proposal — and you most certainly shouldn’t provide them with one.

    So, how do you get the number when they won’t tell you? Try this: When they tell you they don’t have a number say, “Oh, ok. So a $100,000 solution would work for you?” They’ll quickly come back… “Oh no, probably something more around $30K.” BINGO: That’s the budget.

    I couldn’t have said it better myself

    Will Keller tells us Why Hourly Billing Sucks.

    Some business-building lessons

    Dan at Starting It shares some lessons he’s learned building his business into a great company. 

    First, the company must have a never-ending commitment to being the best. Every decision must be bounced up against the question – “What would a truly great company do on this issue?”

    Second, you’ve got to say you are going to be the best right from the start – when it sounds funny to do so. Then, you’ve got to say you are the best before most people can even see that it has actually happened.

    Third, you’ve got to be committed to measuring how good you really are on a regular basis and then putting a plan in place to improve the weaknesses. We recommend an annual survey. It can certainly be painful to learn the truth about how you are doing – but that’s the only way to get better.

    Fourth, you’ve got to have a core set of principals that you follow on a day-to-day basis.

    At Dan’s company, Digital Grit, those principals are:

    1) A clear and compelling vision for the future and a demonstrated willingness to make the tough decisions required to turn that vision into a reality.

    2) Action vs. inaction – make things happen.

    3) A culture of excellence – success, growth, innovative “want to change the world” solutions, hard work, attention to detail, refuse to lose, planning, financial management, and fun.

    4) An unwavering respect for each individual. Loyalty, commitment to diversity, accountability, empowerment, recognition.

    5) A never-ending desire to learn and a true willingness to be humble.

    6) Open, honest and frequent communications at all levels in multiple forms.

    7) A commitment to hiring only the best.

    What are your company’s core set of principals?

    One Way to Raise Prices

    John Jantsch has a great tip in this post titled You’ve Got to Sing Like You Don’t Need the Money.  Here are some excerpts:

    Generate more leads, more opportunities, more clients than you can possibly serve, and then raise your prices.

    Here’s the theory – If I have more demands on my time than I can meet. I can look someone squarely in the eye and name my price, because I don’t “have” to get the order.  …  Too many business owners find themselves enslaved by maniac clients that rob them of their value. Just say no can apply to marketing too.  Lastly … nothing is more appealing than security. If a potential client sniffs even a whiff of desperation, your selling effort will move away from your terms and you won’t have the guts to name your price.

    Now, I don’t advocate raising prices all the time for all of your clients, but if you are serving those "maniac clients" or feel totally overwhelmed by your work load, why not take John’s advice and see what happens?

    If I had a Hammer …

    Andy Havens has this great post (a rant, really) titled "When Your Only Tool’s a $115k Hammer" about how the management at large firms justify the huge associate starting salaries as a benefit to the client.   Speaking of this law.com article, Andy pulls a quote from Howard Scher, managing partner of Buchanan Ingersoll’s Philadelphia office — one of the firms that has just bumped starting salaries from $105 to $115K — who says,

    We have clients who want first-class legal representation, so we have to compete for the best people. While I don’t think that $5,000 or $10,000 should be the basis for making a career decision, it is for people at that stage of their careers.  So we hope this shows law students that Buchanan Ingersoll is a first-class firm.

    Now, Andy’s take:

    Look at the quote above: "We have clients who want first-class legal representation." No offense to Mr. Scher and his firm, which is a very nice joint (especially since I’d love to consult for him; call me, Howard — 614.395.4134), but I have a question; is there a firm out there with clients who want second-class legal representation? Is there a general counsel out there who wakes up thinking, "You know what? My outside representation is too damned good. I’m going to fire them and hire some hacks."

    Second point. Do you care what any service provider in your entire world of purchasing behavior has ever paid any of their workers? I want you to think very, very hard. Have you ever thought to yourself, "I should check and make sure that my surgeon (dentist, mechanic, kids’ teacher, banker, insurance agent) is the HIGHEST PAID PROFESSIONAL IN HIS INDUSTRY!!??

    No. You never have. Ever. You care about the quality of service. Period. And in many cases, quality of service does NOT track on a 1-to-1 basis with what employees are paid. It more often equates to the level of respect they are provided, the amount of feedback they have in their organizational systems, how well they are managed, their level of personal mentoring, etc.

    But, just as the billable hour is the only measure by which law firms seem capable of judging productivity, associate pay is the only measure by which they seem capable of esteeming quality, rewarding it and (this is the huge disconnect) communicating the same to both clients and associates.

    I’d love to just copy the rest of his post word-for-word, but you owe it to yourself to check out the rest of it here, and read the rest of Andy’s terrific blog while you are at it.  I can’t resist this one more snippet, though: 

    You are sending them a bad, wrong, unhealthy and, ultimately, self-defeating message. If the only way you can get "the best" students to come to your firm is to pay them $10k more a year… Let them go to other firms. Take the "Tier-2" kids who want to work somewhere with heart, guts, moxie, brains and staying power. I guarantee that in a few years your clients will love those kids way, way more than they ever would any shiny, greedy "A-Team" gold-diggers.

    Free Consultations Don’t Work

    Sean D’Souza, in his PsychoTactics blog, writes about the Myth of Free:

    I’m not convinced FREE works. So I decided to put my money where my mouth was.

    And I dedicated 16 weeks of educating customers free to find that the only ones that signed up were those that had already paid.

    Free is fine. It works.

    But paying customers buy more. And it’s mainly because free customers don’t understand value. I’ve tested free extensively at workshops by giving away gifts free. I’ve tested it by giving away teleclasses free. I’ve tested by giving away complimentary articles and reports. And free speeches at the corner coffee house. And we tested in the US as well as New Zealand…And everytime we made customers pay, the results were better.

    The more I’ve restricted the terms, the more people are eager to sign up. To give you an example: We closed our membership to 5000BC (our membership site). As a result we’ve had more people write to us directly, wanting to get in at any cost. These very people are hungry for more and they post more on the forum, they ask more questions and they’re more keen to buy products. I’m not convinced about free.

    The customer is right. But doesn’t always understand the value when it’s free. Value between two parties is what makes a relationship a relationship.

    I can’t agree more.  Once I stopped giving free consultations to prospective clients, I found that the potential clients were more likely to show up on time, be prepared for our meeting, and retain me as their lawyer far more often then before.

    Why not ask the client?

     As I said the other day, I’m in New York for LegalTech next week.  I’m coming in Sunday the 30th and leaving on Wednesday.  If you would like to get together, drop me a line.

    I was looking at the list of presentations and found this gem:

    Cost Recovery: How To Effectively Recover Client Costs:
    As costs associated with Internet- and equipment-based client services continue to pile up for law firms, technology is keeping pace to help firms recoup these costs and prevent an adverse effect on profitability. Effective cost recovery systems must manage these billable charges – everything from Internet research to printer, fax, phone and copier activity – from the minute they’re incurred all the way through billing and reimbursement. This session explores what law firms should look for when selecting a cost recovery system, with an emphasis on intuitive, easy-to-use hardware options, seamless integration with financial systems and elimination of administrative headaches.

    In my firm, we don’t charge for copies, faxes, or phone calls.  Maybe at this presentation, I’ll learn how to turn my normal overhead into thousands of dollars of profit.  I’m sure my clients will love me for it — especially if I tell them I am using “intuitive” and “easy-to-use” hardware that “seamlessly integrates” with my financial systems and “eliminates my administrative headaches.”

    More Billable Hour Hell

    I’ve been wanting to write something insightful about this article and the lessons lawyers should take from it, but I am totally swamped right now, so just go read it: 

    The Tyranny of the Billable Hour

    I’ll be back on Monday with some great new LexThink! news.

    What will you say “no” to?

    Sam Decker has this absolutely amazing list of things he resolves to say “no” to:

    1. What strategies, initiatives and activities will you say no to?

    2. What measurements will you not pay attention to?

    3. What customers will you not target?

    4. What people will you not keep?

    5. What competitors will you not follow?

    6. What will you remove from your web site?

    7. What money will you not spend?

    8. What meetings will you decline?

    9. What trips will you not make?

    10. What slides will you not create?

    11. What will you not say?

    12. What thoughts will you not entertain?

    Read Sam’s entire post — especially the comments under each “resolution” — and resolve to not do some things yourself this year.

    When a client demands hourly work.

    In his Entrepreneur’s Blog, Scott Allen discusses using a retainer instead of just billing clients on an hourly basis.  He includes this question and answer from a PR discussion list he belongs to:

    Q:   I have a new prospective client that wants to buy hourly rates instead of a retainer. What reasons would you give a client why a retainer is better for them and why hourly services are not a good option for them?

    A:   What’s the problem? Give him your hourly rate along with the minimum number or hours he has to purchase — in advance — every month. (Answer comes from list member Rob Frankel)

     

     

    Pricing Dilemmas

    I’ve run across some really interesting conversations about pricing design services here, and a new software product here.   Don’t just read the posts, read the comments.  Some great insights into pricing and value.  It seems lawyers aren’t the only folks who have a hard time with pricing.

    It really isn’t about price.

    David Young, on his Branding Blog has this interesting post pointing to an MIT Sloan School of Management Study that shows slightly more than half of consumers are willing to pay more for a product (while shopping online) if it comes from a well-known vendor.

    The study, which ran from early 2003 to early 2004, monitored 10,000 searches by shoppers looking for books that were among the 100 most popular titles. The searches took place on DealTime.com, an Internet comparison-shopping service that lists several dozen retailer offers at a time. The listings include pricing and shipping information, product ratings and more.

    Researchers chose to monitor book shoppers because the products they buy are exactly the same.

    "We went in thinking a book is a book," Erik Brynjolfsson, director of the center for e-business at Sloan, said Wednesday. "But we found out that people care a lot about who they buy from, even if what they’re buying is a commodity."

    Fifty-one percent of the shoppers scrolled down from the lowest priced books at the top of the list to the better-known retailers, paying several dollars more to buy their tomes from a vendor they knew. The hardcover books monitored in the study cost an average of $42.

    Of course price made a difference to many, given that 49 percent of the shoppers bought the lowest-priced book. But Brynjolfsson and his fellow researchers expected closer to 100 percent of the shoppers to choose to pay the least possible for the same product.

    "The vicious price competition predicted (on the Internet) by retailers and economists is not what we found," Brynjolfsson said.

    The lesson from the study, according to Brynjolfsson, “Don’t think that price is all the consumer will care about.”

    What should we take away from this study?  Remember, it is not always about price.  It is about trust, competence, and convenience.

    Keep Sick Workers Home

    Have employees who are feeling a little under the weather?  Are they still at their desks hacking and wheezing away trying to get through the work day?  Next time, make them stay home — or so says this article from HBS Working Knowledge:

    Employers worry a lot about absenteeism, but new research suggests a bigger threat to productivity is “presenteeism”: sick workers who show up at work but are not fully functioning. U.S. companies may lose $150 billion (yes, that’s billion) annually because of presenteeism, according to some estimates.

    Now, tell them to go get that bowl of chicken noodle soup.

    Getting More Money from Clients

    I just ran across Andy Havens’ Legal Marketing weblog and this post about announcing price increases to clients.  Andy has a great blog, and I’ve added it to my list of daily reads.  Here are my favorite passages from his post:

    One thing I will caution against, and that is the “spread the pain” message. I’ve heard of several firms that basically say, “We’re gonna jack rates by 10%, but as a favor to you, we’re going to do it slowly; 5% this year, and 5% next year.” That’s the most dumb-ass customer communications gaffe I’ve ever heard of. If you’re going to screw somebody, do it and get it over with. Or do half now, and half again next year… but don’t telegraph it ahead of time. It’s like telling somebody, “I’m going to punch you in the mouth now… and then, in a second or two, I’m gonna punch you in the gut.” No, no, no, no, no, no, no, no, no. Just don’t do it.

    PS: Better yet, switch to project-based billing. You’ll make more money, you’ll keep 10-15% more because of the time-value of money that ain’t in the WIP for 6 months and your clients won’t be worried that every time they call to ask a 10 second question that they’ll be getting a bill for 1/10 of an hour.

     

    To work at home — or not?

    From Arnie Herz’s Legal Sanity comes this link to an ABA Journal article titled, “Home Alone. Using Available Resources, Working at Home Can Pay Off,” that suggests that working at home is a viable alternative for some small firm practitioners.  However, this BBC News Article seems to point to an opposite conclusion.  According to a study quoted in the article:


    Less than 50% of people who work from home are satisfied with their home office space, with a quarter of them forced to work in the kitchen, 37% in the spare room and 10% “hotdesking” it to anywhere they can find.  [In fact over] three-quarters of home workers have found themselves working in a cramped and cluttered space, and over 50% of those surveyed said they did not have enough room to work effectively.

    What does this all mean?  Make sure the productivity gains you experience by losing your commute or gaining convenience are not offset by a bad work environment.  Just because something feels like it is more productive, does not make it so.

    More on Pricing Legal Services

    I recently signed up for the free MarketingExperiements.com newsletter.  According to the site:

    MarketingExperiments.Com is a member of the MEC Labs Group and a division of Digital Trust Inc. MEC is an online laboratory with a simple (but not easy) five-word mission statement: To discover what really works. The Lab tests every conceivable marketing method on the Internet.Our experiments range from three to eighteen months, and they involve budgets ranging from $4500 to $50,000+. We are often surprised, and sometimes embarrassed to discover just how much we DON’T know about marketing.

    In a recent experiment, they worked with a leading psychiatrist and author to determine how to maximize online sales of a new book.  They tested three price points ($7.95, $14.00, and $24.95) and measured the effectiveness and total revenue produced by each.  Their results are a bit surprising.  The lowest price point generated the second-lowest number of orders and the lowest amount of total revenue.  The middle price point generated the highest number of orders.  The interesting nugget (for me at least) was that when the book was priced at $24.95, the smallest number or orders still generated the highest amount of revenue.  In fact, both the $14.00 and $24.95 prices generated more than twice the revenue of the lowest price.

    While the lesson for lawyers might not be to change your billable rate to $1,000.00 per hour (and only work one hour per day), it is interesting to note that lower prices (rates) don’t necessarily translate into more sales (clients).   We’ve been playing with some pricing strategies here at my firm for our value-based billing mode and I’ll share some year-end results with you soon.  Until then, the MarketingExperiments.com newsletter is a worthy read.  I highly recommend checking it out yourself.

    The Psychology of Pricing

    I ran across this interesting article in the November 2003 edition of Design:Business newsletter.  Though written for design professionals, there were some really good insights into the pricing of all professional services.  Just some snippets:

    Although there is no question about the overall importance of pricing to the success of a design business, overemphasizing it is a common mistake. Many designers assume that pricing is a very important factor in success, which it is not.   Surveys of buyers of professional services consistently show that cost is never even among the top reasons clients give for choosing a supplier. Typically, the surveys show that cost ranks around tenth in importance. It is always lower than quality, service, dependability, flexibility, convenience, etc.  Creative Business knows of no similar surveys specific to the buyers of design services, but our experience among better clients with good projects is that cost ranks fifth in order of importance. Ahead of it are “chemistry,” or how much the client likes the individual(s) he or she will be working with; degree of relevant experience; portfolio quality and creativity; and service. Also relevant is that the more creatively challenging the job and more sophisticated the client, the less importance cost takes on. And vice versa.  Additionally, our experience is that skill in pricing ranks fourth in importance among the reasons some studios and freelances are more successful than others. Again, not number one. Higher in importance are the desire and motivation to succeed, the everyday working procedures that have been established, and marketing programs and efforts.

    Understanding the psychology of design pricing is important because most clients accept that quality, results, and price go hand in hand. The higher the quality, the better the results, the more something is thought to cost.   This belief is especially relevant to the design market because clients place orders without seeing what they’ll be getting. They make purchasing decisions on the anticipation of quality and results based on little more than samples of similar projects and their confidence in a firm or individual.   Similarly, once the work is produced it will usually be subjectively evaluated before any market feedback is received. Here, too, client satisfaction depends mostly on perceptions of how well they believe their needs have been met.   Aggressive (low) pricing in such situations sends the wrong signal. It can lead clients to expect a reduction in quality and results. It can also lead to a destructive pricing cycle: the more price-competitive a design firm is seen to be, the less their work will be valued; and the less their work is valued, the more competitive they will need to be in the future.

     

    Clutter is Never Free

    Knowledge@Wharton has this great article with a conversation with one of the authors of Conquering Complexity in Your Business.  Some excerpts:

    Complexity is a systemic effect that accumulates over time. So while you may have a perfect portfolio today, your customers’ tastes are changing—what’s good today is probably not good tomorrow. Many businesses respond by expanding their portfolio and placing more goods or services on the market. Each innovation may represent a source of customer value and profits at the time that it is introduced, but unless you have some mechanism for rebalancing that portfolio, complexity will creep into your processes, tax internal systems, and drive up costs. Even worse, you might strangle growth in the name of pursuing customer value.

    Also, it consumes resources and can impede growth. If you have a portfolio of 4,000 products, you’re spreading your marketing resources across all those products, when you should be concentrating on core brands. We also find in our work that companies with a complex product or service line have a significant gap in their understanding of what truly drives their profitability. What’s important is that companies understand the relationships between complexity, cost, efficiency and growth, which we captured in a concept called the Complexity Equation. Management can then make rational decisions with these relationships being explicit, instead of implicit or unknown.  

    As a general practitioner, this article hits a bit close to home. 

    Dumping the Billable Hour (Again)

    Jay Conrad Levinson and Michael W. McLaughlin, authors of Guerilla Marketing for Consultants write about one of my favorite topics:  abandoning the billable hour.  Some excerpts:

    It’s time to dump the hourly rate once and for all.

    To begin with, the hourly rate is a totally bogus number. It’s computed using very broad (and sometimes flawed) assumptions about a firm’s costs, volume and profit. And, many consultants toss those assumptions out the window and discount their hourly rates when they believe doing so will improve their chances of winning a project.

    By charging a client for time alone, you completely undermine the expertise you’ve spent years building, and you limit the profit you can justifiably earn. Dozens of pricing alternatives exist that don’t rely on the hourly rate. Look for alternatives that lead to discussions with clients about the outcomes they want to achieve.

    When pricing your next project, think results, not effort.

    Thanks to Dana VanDen Huevel for the link.

    Tom’s Rage Against the Medical Profession

    Tom Peters is taking on the medical profession/industry in this post.  The money quote:

     The “system”—training, docs, insurance incentives, “culture,” “patients” themselves—is hopelessly-mindlessly-insanely (as I see it) skewed toward fixing things (e.g. Me) that are broken—not preventing the problem in the first place and providing the Maintenance Tools necessary for a healthy lifestyle. Sure, bio-medicine will soon allow us to understand and deal with individual genetic pre-dispositions. (And hooray!) But take it from this 61-year old, decades of physical and psychological self-abuse can literally be reversed in relatively short order by an encompassing approach to life that can only be described as a “Passion for Wellness (and Well-being).” Patients—like me—are catching on in record numbers; but “the system” is highly resistant. (Again, the doctors are among the biggest sinners—no surprise, following years of acculturation as the “man-with-the-white-coat-who-will-now-miraculously-dispense-fix it-pills-for-you-the-unwashed.” Come to think of it, maybe I’ll start wearing a White Coat to my doctor’s office—after all, I am the Professional-in-Charge when it comes to my Body & Soul. Right?)

     

    Decker on Growth

    Sam Decker has just written 7 Keys to Company Growth.  Really great stuff and worth the complete read.  Here are the basics to his P.A.S.S.I.O.N:

     Push the organization with big vision.

     Account for big goals.

     Seek out new ideas.

     Show wins along the way.

     Ignore distractions.

     Ownership must be clear.

     Neutralize negativity.

    Why has ketchup stayed the same?

    Malcolm Gladwell, author of The Tipping Point and the upcoming Blink (which I can’t wait to read), wrote an article titled The Ketchup Conundrum for the September issue of The New Yorker.  In the piece, he discusses how Grey Poupon paved the way for the hundreds of varieties of mustard we see in our supermarkets today, and suggests that ketchup may be next. 

    However, my favorite part of the article is Gladwell’s explanation of how Prego (the spaghetti sauce) developed their extra-chunky sauce:

    Standard practice in the food industry would have been to convene a focus group and ask spaghetti eaters what they wanted. But Moskowitz does not believe that consumers–even spaghetti lovers–know what they desire if what they desire does not yet exist. “The mind,” as Moskowitz is fond of saying, “knows not what the tongue wants.” Instead, working with the Campbell’s kitchens, he came up with forty-five varieties of spaghetti sauce. These were designed to differ in every conceivable way: spiciness, sweetness, tartness, saltiness, thickness, aroma, mouth feel, cost of ingredients, and so forth. He had a trained panel of food tasters analyze each of those varieties in depth. Then he took the prototypes on the road–to New York, Chicago, Los Angeles, and Jacksonville–and asked people in groups of twenty-five to eat between eight and ten small bowls of different spaghetti sauces over two hours and rate them on a scale of one to a hundred. When Moskowitz charted the results, he saw that everyone had a slightly different definition of what a perfect spaghetti sauce tasted like. If you sifted carefully through the data, though, you could find patterns, and Moskowitz learned that most people’s preferences fell into one of three broad groups: plain, spicy, and extra-chunky, and of those three the last was the most important. Why? Because at the time there was no extra-chunky spaghetti sauce in the supermarket. Over the next decade, that new category proved to be worth hundreds of millions of dollars to Prego. “We all said, ‘Wow!’ ” Monica Wood, who was then the head of market research for Campbell’s, recalls. “Here there was this third segment–people who liked their spaghetti sauce with lots of stuff in it–and it was completely untapped. So in about 1989-90 we launched Prego extra-chunky. It was extraordinarily successful.”

    What untapped market is there for your services?  Can you find the unserved segment and be its “extra-chunky” Prego?

    Life Laundry for Law Offices

    I don’t get BBC America at home, but have heard about the show Life Laundry, and thought it had an interesting premise:

    In Life Laundry, storage expert Dawna Walter helps people streamline their internal and external lives by cleaning out their clutter and offering advice, insight and top tips – while antique dealer Mark Franks help turn junk into hard cash – all in 48 hours.

    But this is more than just a home makeover show. For some it’s an incredibly emotional experience as they struggle to come to terms with the past.

    Faced with rooms too full of junk for their owners to use, to broken computers and washing machines that have sat idle for years, Dawna and Mark take drastic action, emptying the offending rooms on to the closest outside space.

    Step-by-step they take the homeowners through their belongings sifting, sorting, and slinging out the clutter that has taken over their homes – and in some cases their lives.

    From people who have allowed their possessions to take over as a result of trauma, to sentimental hoarders, over-zealous collectors and people and families whose relationships are under strain from the amount of junk cluttering their homes – the Life Laundry experts are on hand to help.

    What would the Life Laundry experts find in your office?  Old computers, printers that don’t work, dozens (hundreds, thousands) of books that you don’t use anymore?  Piles of trade publications and legal magazines that you’ve set aside to read someday? Get rid of all of that stuff and be amazed at how little you really needed any of it.

    Ergonomics for Everyone

    I’m pretty happy with my actual working environment.  I alternate between my Aeron and Leap chairs, have a cord-less keyboard and mouse, and use two monitors.  Though the ergonomics of my situation could be improved slightly (maybe by throwing in some feng shui ), I feel comfortable when I work. 

    It seems that work comfort was on the mind of New Zealand’s Occupation Safety and Health Service when they passed these ergonomic guidelines for the workers in the nation’s now-legal sex trade:  

    • Beds and workstations should support the worker’s back and allow for services to be performed without strain or discomfort.
    • Beds and massage tables should be adjustable to allow employees to use them without strain.
    • Employees should be trained for safe use of equipment and techniques.
    • Workers’ clothing should be comfortable and should not affect the employee’s posture.
    • Workers should take breaks between shifts and clients to avoid stress and fatigue.
    • Workers should alternate between repetitive and non-repetitive activities.

    Certainly some good tips here for all us workers in the “service” business.

    Warmer Workers = Better Workers

    Via FastCompany Now comes a link to this study that shows that warmer workers are better workers.  According to the article:

    When the office temperature in a month-long study increased from 68 to 77 degrees Fahrenheit, typing errors fell by 44 percent and typing output jumped 150 percent. Hedge’s study was exploring the link between changes in the physical environment and work performance.

    “The results of our study also suggest raising the temperature to a more comfortable thermal zone saves employers about $2 per worker, per hour,” says Hedge, who presented his findings this summer at the 2004 Eastern Ergonomics Conference and Exposition in New York City.

    Now excuse me while I crank up the thermostat.

    Tips for Better Invoices

    From A List Apart comes these tips for creating better invoices. The article contains advice on invoice contents, terms, delivery, timing, and aesthetics. Some really good advice for any business person who sends out invoices on a regular basis (Lawyers, are you listening?). My favorite part is the section on invoice content:

    1. The word “invoice.” Obvious enough, but don’t let the client mistake it for anything other than a bill that needs to be paid. Make it big and bold and put it at the top of the page.
    2. Your Employer Identification Number (EIN) or Tax ID Number. This will be important come tax time, when the client starts putting together W-2s.
    3. Similar to the EIN, some clients may assign outside contractors a unique Vendor ID. This practice is usually found in larger companies. If you have been given one, be sure it appears conspicuously.
    4. Names and addresses of both client and contractor. Make a clear distinction between the “to” party and the “from” party.
    5. Date everything. Date the invoice (the day it goes out, not the day you write it) and list the dates of when items on the invoice were completed. In the terms, list the due date and penalty dates. If something ever goes to small claims court, the judge will look favorably on your scrupulous attention to detail.
    6. A clear, itemized list of services rendered. Descriptions should be short and to the point, and all delivery dates indicated. Next to each item, list the hourly rate, hours worked and subtotal amount.
    7. The total amount owed. On the bottom, labeled explicitly, bolded if needed.
    8. The terms of the invoice. At the very least, this should include when the invoice is due; for instance, if you expect payment within thirty days (fairly standard), simply put “30 Days.” (You could also put “15 Days” or even “Immediate” if you don’t particularly like the client.)

    As I read the tips, I remembered the hours and hours I’ve spent on my office’s legal accounting programs trying to get good-looking, informative invoices to print with the information I needed. PCLaw’s prepackaged invoices were absolutly awful (I’ve not tried versions 6 or 7), and the template “editor” was an exercise in futility. We’ve moved to Quickbooks and are rolling out a new invoice design, which incorporates most of the tips from the article. I’ll try to post a sample soon.

    Keep your employees happy.

    Thanks to The Small Business Blog for pointing me to this My Business article profiling ways Service Net Solutions keeps its employees happy. Some of the fringe benefits:

    Fun Money. $100 per year to spend on any fun family-oriented activity. Employees get reimbursed if they bring in a photo documenting the event, says Callahan.

    Health Care for the Home. Home warranties, covering everything from kitchen appliances to plumbing.

    Community Outreach. Eight hours of paid time annually to volunteer in the community.

    Computer Purchase Plan. Up to $400 every three years toward the cost of a new PC.

    A Five-week Paid Sabbatical. Available every seven years.

    None of these things can cost much to implement, but go a long way towards keeping employees happy. I’d love to hear from some the readers of this blog about the kinds of things their businesses/firms do to reward employees. Alternatively, I’d be just as interested in horror stories.

    It’s the Cash Flow, Stupid

    I’ve been following Will Keller’s The Accounting Blog for a while and found this post today with Will’s Advice for Managing Cash Flow. From the post:

    Now please listen up because we’re getting to the important part. For most companies, the key cash flow drivers are as follows: pricing, sales volume, credit terms, inventory management, supplier terms, and expenses. In other words, the specific things that your company does in these six areas- from your pricing strategy to your payment terms to the amount of inventory you carry- will directly impact cash flow. That may not sound very glamorous, but the results can be exciting.

    The advice in the article is (or should be) obvious to all lawyers, but it bears repeating from time to time.

    Ain’t Big Firm Life Grand

    Anonymous Lawyer, (whom I once thought was faking it, but may be the real deal) writes about the big firm rat race and answers the question posed by one of his partners, “Why do my kids hate me?”

    They hate us because we’re never home. They hate us because we’re pulling out our Blackberries all weekend while we pretend (and they can tell when we’re pretending) to enjoy being around them. They hate us because work is #1, and they’re #2 — or #3, or #4. It’s sad. Because it’s not like years from now we’re going to regret not checking the Blackberry more often. It’s sad because time passes really quickly and it starts to feel like “too late” very quickly. That’s what keeps people here. By the time, maybe eight months into your first year, maybe a year a half — but not much longer than that in most cases — by the time you realize what this job is doing to you it feels like you’re stuck. “It’s too late.” And so you hope it gets better. And you hope, and you hope, and you work, and you work — and then it’s no better, and even more so, “it’s too late.” And then you may as well stick around and try and make partner, and then if you’re lucky enough and skilled enough and effective enough at what you do, and the right people know it, you make partner, and you think it’s all going to change. And a lot does change. But the hours are still long, and there’s still a hierarchy so you’re never really at the top of the totem pole, and the money jumps but the pressure doesn’t really slow down, and the people you compare yourself to change, and you aren’t really relaxed about it… and it really is “too late” now, because this has gone from a job to a career, and you’re stuck. And you never see your kids. And they hate you. And then you don’t even want to go home, and so you stay at the office, and the spiral continues…

    Read the full post and the comments too.

    Longer Hours = More Malpractice?

    An article in Ergonomics Today references a study claiming Error Rates for Nurses Increase With Length of Shifts. According to the study conducted by researchers at the University of Pennsylvania, nurses who work for more than 12 hours straight could face error rates as much as three times higher than their counterparts working shorter shifts. Makes you wonder if the same goes for lawyers trying to meet that 2400 billable hour requirement.

    So That’s How Big Firms Get All The Top Students…

    There is a fascinating conversation going on right now at Anonymous Lawyer’s Blog over this post where Anonymous Lawyer writes about how his large firm recruits and retains top students. Read the full post, and then go to the comments for a great give-and-take between an attorney at a “Lifestyle” firm (lower billable hours, time for a real life, lower pay) and a bunch of law students and associates who’d like to work there.

    Partnership for Profits?

    Todd talks about the book The Partnership Charter on the 800CEOREAD blog. Todd really liked the book, and I’m going to pick it up based upon his recommendation (it will be my first order from the 800 CEO Read site — how’s that for the power of blogging evangelism). In his post, Todd quotes the following passage from the book:

    “Researchers from the Center for Study of Entrepreneurship at Marquette University investigated a sample of nearly two thousand companies and categorized the top performers as ‘hypergrowth’ companies and those at the bottom as low growth companies. Solo entreprenuers founded only 6% of the ‘hypergrowth’ companies. Partner founded a whopping 94%, and many of those had three or more founders.”

    I’m still digesting what this might mean for solo lawyers, but now that I have a partner, I can see how a good partner can make a business hum.

    Pricing New Services

    My partner and I have been struggling with pricing our new services. We are offering a monthly price to clients for a set range of services, including unlimited phone calls and weekly meetings (if requested by the client). I’ll post more on our full business plan later, but this article on pricing really resonated with me. From the article:

    How much should you charge for a new product? Charge too much and it won’t sell — a problem that can be fixed relatively easily by reducing the price. Charging too little is far more dangerous: a company not only forgoes significant revenues and profits but also fixes the product’s market value position at a low level. And as companies have found time and again, once prices hit the market it is difficult, even impossible, to raise them. In our experience, 80 to 90 percent of all poorly chosen prices are too low.

    Companies consistently undercharge for products despite spending millions or even billions of dollars to develop or acquire them. It is true that businesses and private consumers alike are demanding more for less; the prices of personal computers, for example, have been pushed downward despite their higher processor speeds and additional memory. Global competition, increased pricing transparency, and lower barriers to entry in many of the most attractive industries have contributed to the trend. But these are not the only problems. Many companies want to make a quick grab for market share or return on investment, and with high prices both objectives can be harder to achieve.

    These concerns encourage companies to take an incremental approach to pricing: they use existing products as their reference point. If a new offering costs 15 percent more to build than the older version does, for instance, they charge about 15 percent more for it. Particularly in consumer markets, they might set the price slightly higher or lower than that of their main competitor.

    The incremental approach often underestimates the value of new products for customers. One of the first makers of portable bar code readers, for example, calculated how much more quickly its customers would be able to assemble their own products if they used portable readers. The company then took the price of the older, stationary readers and raised it proportionally, solely to account for the time savings. This strategy also fit in with the company’s desire to penetrate the market quickly.

    But by using an existing product as the reference point, the company undervalued a revolutionary product. The portable reader not only improved existing processes but also enabled companies to redesign their supply chains. Portability and instant access to information prepared the way for real-time inventory control, vastly improved logistics planning, and just-in-time deliveries, thus eliminating the need for large inventories. Buyers quickly recognized a bargain and flocked to the low-priced product. The company, which couldn’t keep up with demand, not only failed to capture the full value of its reader but also set the market’s price expectations at a very low level. A single bad decision easily erased $1 billion or more in potential profits for the industry.

    There is some really great stuff here. I’m not suggesting raising prices is always the right course, but if you offer a revolutionary service or product, don’t sell yourself (or your service) short.

    From CFO.com via this post from Rob at BusinessPundit.

    Will there be a Wal Mart Law Firm?

    Jeremy Wright at Ensight writes about how Wal-Mart is trying to commoditize the web design and web hosting industry. His advice to web designers includes these nuggets:

    You can’t service everyone. If this is your client base, and Wal-Mart serves them better than you, you can either change your client base or differentiate. If it isn’t your client base, it hardly affects you. . . . This move may expand the segment more than crowd it. . . . Whether you want the clients who are willing to go after 5$ websites is up to you.

    Jeremy cautions that focusing in areas where big businesses like Wal-Mart shine (doing it better, faster, cheaper) will lead to failure. Instead, he tells his readers they should:

    1. Provide more value.
    2. Have more skills.
    3. Have a better relationship.

    Reading his post, I wonder if legal services are capable of being commoditized. The large firms in the best position to work better, faster, and cheaper have squandered the opportunity to cut their costs because of their ties to the billable hour. A firm that bills by the hour has no incentive to decrease the amount of time it takes to do a given task or provide a given service. Until large law firms begin to approach their practice with the single-minded focus on efficiency that the “big box” stores like Best Buy, Wal-Mart, and the Home Depot do, perhaps us in small firms can be both “better, faster, and cheaper” and be more valuable, more skilled, and more likely to have a better relationship with our clients than the big firms can.

    Entrepreneurial Development for Lawyers

    From Kirsten Osilind’s re:invention blog comes this post about the Women’s Venture Fund (and Martha Stewart’s proposal to work for them in exchange for reduced jail time). The Fund has a 6 Stage Entrepreneurial Development Model that Kirsten summarizes thusly:

    stage 1: Desire – a woman entrepreneur has an emerging idea, with no clear sense of what needs to be done.
    stage 2: Friends and Family – the entrepreneur has developed a product or service, but they only serve a limited market (friends and family members).
    stage 3: Indigenous Neighborhood Market – the entrepreneur continues to evaluate the market opportunity through personal preferences and shopping experiences but begins to extend their product and services sales to strangers.
    stage 4: Local Market – the entrepreneur begins to encounter an objective market that has no affiliation to her.
    stage 5: Trade Show and Conventions – the true beginning of a stabilized small business coupled with critical evaluation of the entrepreneur’s marketing concept, the larger competitive industry, and larger scale opportunities.
    stage 6: Mass Market – the last and final developmental step when an entrepreneur recognizes a mass market and chooses the final form product or service she will supply based upon market demands.

    The stages mirror what most lawyers go through when deciding to hang out their own shingle. Take a look at the WVF site. There is some great stuff there.

    Can Lawyers Innovate?

    Quick, in the last decade, what has been the most significant positive change in the way lawyers do business? How about over the last twenty years?

    Seriously, apart from technology making us available 24-7, I can’t think of one way the legal business model has changed in a positive way for lawyers, their staff, or clients. Do lawyers work fewer hours? Are working conditions better now than in 1995? Or 1985? Is the average second year law firm associate encouraging everyone they know to become a lawyer? How about the clients? Are they happier with their attorney now than fifteen years ago? Have legal services become cheaper? More widely available? As a profession, are lawyers more respected now than a dedade ago?

    How can an industry populated with as many intelligent and clever people not implement positive change? Profitability has risen, but is that a positive change when so many lawyers hate what they do and how long they have to spend doing it?

    Lawyers can innovate. Look at how amazingly brilliant and imaginative lawyers who do estate planning, M&A work, intellectual property, and criminal defense can be on a daily basis. Why don’t those same lawyers apply their vast talents and creativity towards changing the fundamental way we lawyers practice? Is it because time spent on the practice — as opposed to time spent on clients — does not have an immediate, tangible financial return?

    Since I’ve started my new firm, I’ve fallen victim to the same pressures that keeps all of us from innovating. I’ve been so overwhelmed by the time I need to serve my clients and get my new firm off the ground that I’ve failed to move forward on the innovation front. I know I need to get back on track and thinking about my firm’s future, so here is my weekend agenda for renewing my creativity and recommitting myself to making my practice better:

    Friday:

    Buy a magazine I’ve never read before (courtesy of Eric Heels).
    Use the Sentence Completion exercise from The Nub to answer the following questions:
    If I were a client I’d want my lawyer to…
    My business would be more fun if only I could …
    My office would run more smoothly if we …

    Cook something for dinner I’ve never made before.
    Write down twenty five ideas.

    Saturday:

    Get up early, and spend the first hour brainstorming with my KnowBrainer cards.
    Take a walk with my daughter.
    Go pick strawberies.
    Write down my ideal scenes.
    Take a nap.
    Finish The Seven Day Weekend by Ricardo Semler

    Sunday:

    Help my dad barbeque. My father has a commercial smoker and he bbq’s for the entire neighborhood at least twice a year. We’ll be smoking ribs, chickens, and hams for nearly 30 people. We’ll start around 5:00 a.m., because the hams take nearly 11 hours to cook. Mmmm good. As far as I’m concerned, you can’t innovate on an empty stomach.

    Monday:

    Install MindJet’s MindManager on my Tablet PC and learn how to use it.
    Write down twenty-five more ideas.
    Complete my firm’s guarantee and give it to my seven year old neighbor to see if he understands it.
    Relax, have fun, and get psyched for Tuesday morning.

    If you have ways you innovate, let me know and I’ll post some more ideas on Tuesday.

    Great Stuff from The Nub

    The guys over at The Nub picked up my post the other day about Value Billing, and added their thoughts:

    One can take the question further and ask: How much have we helped our clients succeed? And get the client to determine this. Then build in some sort of payment that is dependent on how much the solution helps the client achieve success. For example, I’ve been paid the final 25% of my fee upon hitting performance targets. Other times I’ve received an extra % upon my client’s satisfaction.

    The Nub also has a pointer to a great excerpt from the John C. Maxwell book Today Matters.

    Are you doing too much busy work?

    Duct Tape Marketing is one of my daily reads. In this post, author John Jantsch argues that marketing is your highest payoff activity. John writes:

    I don’t know about you but most small business owners are do-it-yourself types and get sucked into doing the littlest silly work faster than you can say “Oh look, the copier is jammed again.” If you want to achieve any of your goals and finally start making what you are worth then you’ve got to stop doing $5/hr work. Period.

    John suggests that you calculate what your time is actually worth per hour (your Personal Average Yield, or PAY) and delegate everything that doesn’t contribute to your business’ growth. John continues:

    So I ask you. Is fiddling with the copier, chatting with the mailman, running to the office supply store, making deliveries, or returning meaningless email paying you $72/hr? For that matter, doesn’t mowing your own grass, washing your own car, cleaning your own windows take you away from marketing your business? I know, now I’m asking you to give up most of the fun things you like to do everyday but hey, if you can get the neighbor kid to mow your grass for anything less than $100/hr, therefore giving you 3 hours to write a killer sales letter – it’s probably a steal

    Figure out your PAY number, paint it on the wall in your office, and then go about setting up your business in a way that allows you to focus on the only things that can really pay that kind of money: marketing, innovation, and customer service. – cause everything else is just a cost.

    Ron Baker is in the House

    I have written about Ron Baker before, the author of several books on value pricing. This morning, Ron left the following (edited) response to some of the give-and-take in the comments to a recent post. To get a flavor of the debate, and to whom Ron is responding, read all the comments. Here are some choice excerpts:

    Hourly billing is not the cheapest way for a client to buy legal services, since the lawyer always has an incentive to bill more hours. There is no correlation between inputs and activities, and output and results. To think otherwise is to fall prey to Karl Marx’s Labor Theory of Value. Many large companies now insist on fixed prices up front, and when “scope creep” occurs change orders are used. Houlry billing is not here to stay, it’s only being kept in place by the apathy of the professions.

    How do actuaries price earthquake or flood insurance? The answer, of course, is they are pricing risk, so are lawyers. Clients don’t buy time, and to think they do is the problem with the professions. Do you care how long it took Porsche to build your car? Do you fly on an airline that charges you $4 per minute? They operate under uncertainty and risk, too, but so what? Who better to scope the project than the lawyer. If you think you are being paid for your time, you have put an automatic ceiling over your earnings. Do you think Tiger Woods has this attitude? You are being paid for your Intellectual Capital, not your time. Time is useless, and you certainly can’t leverage it. It’s the results you create customers are buying. All living beings, and all businesses, are subject to the constraints of time, so what?

    Value Pricing doesn’t mean price gouging, it means charging a price agreed upon up-front, BEFORE you do the work, JUST LIKE EVERY OTHER BUSINESS ON THIS PLANET. To deny this, and claim professional’s aren’t subject to the laws of economics, boggles my mind. How many things do you purchase as a consumer that you don’t know the price up front? Why do you think clients of lawyers are any different? Humans tend to avoid risk and uncertainty, and yet when you price by the hour that’s all they get.

    I think highly of Ron’s theories and his books. He has kindly agreed to answer a Q & A here at the [non]billable hour. If you have questions, submit them to me and I’ll edit them and get them to Ron.

    Value Billing by Architects

    I found this great position paper (PDF) on the web from an architurcture firm Van Mell Associates titled “Why We Don’t Bill by the Hour.” Some excerpts:

    To value each hour of work equally and to price and manage each hour is as corrosive a policy as any creative group of professionals could devise. To pretend that each hour is worth the same as every other is ridiculous. A brilliant insight can come in a flash, and save a client from disaster or find him millions. Other hours are dull or wasted and lead nowhere. It’s clear that billing by the hour is unfair to everyone.

    Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor’s honesty to price and record their work effort fairly. Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor’s honesty to price and record their work effort fairly.

    Of course, we still need a way to manage our time, both for efficiency and for estimating the work needed in a new assignment. Our solution: a Good Day’s Work. This unit avoids false precision and is based on our honest judgment of worth using even increments of 10%. If we honestly feel we put in 10% of the day working hard on a client’s problem, that’s what we record. If we honestly felt we worked hard, but only for a few minutes, we don’t record it. If we see we’ve helped the client enormously, frankly, we round up.

    This is the best articulation of the benefits of value billing by a company I’ve yet seen on the web. Read the whole PDF to learn more about the Good Day’s Work and the innovative ways this Company treats its relationship with its clients.

    Gaming Strategy = Business Strategy?

    Angie McKaig has a brilliant post titled On Game Theory and Entrepreneurship equating her computer game play strategies with her business methods:

    I realized something about myself last night. I realized that I play games the same way I manage my business. … Truth is, I’ve always played games the same way; for the strategy. I just never realized it. And over the last twelve hours I’ve come to realize that I can understand the way I do business more clearly by looking at the way I play. I can also learn how to do business better by keeping in mind the way that I play.

    Angie’s lessons (read her post for her explanations):

    1. Short term sacrifices are sometimes made to pursue long term goals.

    2. Cooperation is preferable to hostile competition.

    3. Build quietly and carry a big stick.

    4. Amass only good resources.

    5. Invest in your people.

    6. Avoid conflict and keep successes tactical rather than bloody.

    7. If I could win the game without decimating my opponent, I would.

    8. In choosing between overtaking an opponent through brute force or your own skills, choose your own skills.

    Angie muses, “Makes me wish I could play Master of Magic with my competitors. What a great way to quickly determine how my competitors do business. Is this why “good old boys” play golf?”

    Primer on Value Billing

    Ronald J. Baker is an absolutely amazing visionary. He is the accountancy profession’s guru of “value billing” and is the author of two of my favorite books: The Firm of the Future (with Paul Dunn) and The Professional’s Guide to Value Pricing . Anyone who is thinking about moving from the billable hour absolutely must read those books.

    For an introduction to Baker’s ideas, read his Burying the Billable Hour (PDF). I guarantee that you it will give you incredible insights into pricing your services and provides the best indictment yet of hourly billing (from both the consumer’s and professional’s perspective). If you read this blog and are at all interested in what I write about, you must read it this weekend.

    Billable Hours

    Scheherazade posts about billable hours at Stay of Execution.

    Okay, let’s unpack these numbers a little bit. Let’s use 2000 hours for THEM and 1600 hours for my life now. That’s a difference of 400 hours. Billable hours. Okay. What’s that mean? Well, remember, my average is about 35 billable hours per week. And I’m here about 50. 8 to 6 daily, or maybe 8:30 until 7ish, give or take, in the office, M – F. That means a BIGLAW lawyer needs to work the equivalent of more than 11 weeks more than me, just to get to 2000. Or they could make it up with every single Saturday, billing 8 hours. I haven’t been tuned into BIGLAW enough to know where 2000 hours falls in the heirarchy, but I have a hunch it’s not considered that high

    A Harvard 2L, at Waddling Thunder, mach 2.0 responds:

    Obviously, I’m not a lawyer yet, so I defer entirely to her sharp observations. However, unless we’re going to assume that billable hours were created by the American Law division of what I like to call France’s secret Committee on Economic Illogic (responsible for their 35 hour work week, for example), there must be some reason that managing partners of law firms use the system. Whatever we might think, I don’t really believe they enjoy torturing their associates. Torture isn’t all that profitable in the long run.

    Read the full posts for some interesting insights into the billable hour dilemma from someone who is there (Scheherazade), and someone who hasn’t gotten there yet.

    Some more billable hour stuff:

    Yale Law School’s The Truth About the Billable Hour

    The ABA Commission on Billable Hours Report

    The Billable Hour:  Putting a Wedge Between Client and Counsel from the ABA’s Law Practice Today.

    The New Firm Begins

    It’s official. As of May 1, 2004, Homann Law and Mediation officially becomes “The Silver Lake Group.” The biggest news is that another lawyer will be joining me as I officially leave the land of solo practice. My new partner, who is now winding up his present partnership (on good terms), will be formally announced here next week. There are over one hundred things on my “to-do” list, so my blogging may be a bit sporadic, but here are some highlights of our business plan that I’ll flesh out in individual posts on this blog.

    1. No client will be billed by the hour. I’ll unveil our Service Pricingsm plan in more detail next week.

    2. We will guarantee each client’s satisfaction with our service or refund their money.

    3. We will hire a “client concierge” who will be responsible for one thing: keeping our clients happy. The client concierge will contact every client weekly, organize monthly seminars of interest to them, write topical newsletters, send birthday and holiday cards, solicit client feedback, and manage our firm’s master client to-do list.

    4. We will set up the “Silver Lake Small Business Foundation” and contribute ten percent of our profits to it. The money in the foundation will be used to teach entrepreneurship in local schools, donate books to public libraries, encourage people to start small businesses (with micro-loans), establish mentoring programs, and fund scholarships and work-study programs for local students.

    5. We will share our methods, forms, letters, and experiences with others to encourage all of us in the legal profession to move away from the billable hour and toward a saner, customer-centered way of practicing law.

    6. We will have a hell of a good time.

    To say that I am excited is a massive understatement. I started this weblog to write about transfoming my practice, and I feel that I am almost there. Look for more details here over the next two weeks.

    Administrative Professionals Day 2004

    April 21st is Administrative Professionals Day 2004 (also called Secretary’s Day, Administrative Assistants Day, or Exceptional Assistants Day). Instead of the traditional gift you have given your administrative assistant, how about one to make him or her deliriously happy: let your assistant fire one client.

    Several years ago, I told my secretary she could fire one client, no questions asked. After she picked herself off the floor, she chose a client that surprised me. Turns out that this client, while perfectly cordial to me, was consistently rude to her on the phone and made inappropriate comments to her when he came into the office. I sent the client a nice letter telling him I would be unable to represent him any longer, and my secretary told me it was one of the best presents she had ever gotten.

    The moral to this story is that there are clients who, if they treat your staff badly, don’t deserve your hard work. Every day you work for them sends a message that you value their business more than the happiness of your staff. The trouble is that you probably don’t even know who these clients are. So ask your assistant, and go ahead and give yourself a little bonus and fire your least-liked client too.

    Of course, flowers are also nice.


    UPDATE:
    Seems like Evan and I are on the same wavelength. I hadn’t read this post when I wrote mine. I wonder if we’re talking about the same client?

    Another problem with hourly billing.

    A pretty insightful post from BeckyTuttle, an anonymous law firm associate blogger:

    I sometimes feel sorry for the partners. It’s because the savvier clients, even though they like the partners, will go to one of the associates with five or six years of experience to do a lot of the work. One, it’s because they can often get us on the phone quicker, and two, it’s because they know they’re getting something nearly as good for a lot less money. I mean, a partner might write a better letter than me on behalf of the client, but it’s not going to be THAT much better, and it might not be better at all. And I don’t care whether you’ve been practicing law twenty five years, writing a decent letter is going to take a partner about the amount of time it’s going to take an upper level associate. But it’s going to cost the client $200 or $300 more for your letter than for mine. Wierdly enough, the further along you go in the profession, sometimes the less you are able to give your clients a really valuable service.

    Trust makes a holiday.

    Saw a link to this article on The Nub about how the concept of “trust holidays” has been imported to Britain from this country, “where accountancy, law and advertising firms have all adopted the idea.” Now I don’t know how many law firms have adopted the idea, but according to the article, firms that have instituted the scheme:

    allow staff to decide among themselves how much time they want off, so long as between them they get their jobs done. Each employee’s performance is assessed at the end of the year to ensure that they are performing up to standard.

    One firm (with 30 employees) allows “everyone from the cleaner to the managing director” to take part. There are only two conditions: customers must not suffer and all holidays have to be agreed by their immediate colleagues.

    This certainly has some merit. Define your employees’ roles, duties, and responsibilities — and reward them for the work they do, not the time they spend. Sounds kind of like value billing.

    Top 10 reasons.

    I just found the “Top Ten Reasons to Work at Google” on the company’s web site. They are:

    1. Lend a helping hand. With more than 82 million visitors every month, Google has become an essential part of everyday life—like a good friend—connecting people with the information they need to live great lives.

    2. Life is beautiful. Being a part of something that matters and working on products in which you can believe is remarkably fulfilling.

    3. Appreciation is the best motivation, so we’ve created a fun and inspiring workspace you’ll be glad to be a part of, including on-site doctor and dentist; massage and yoga; professional development opportunities; on-site day care; shoreline running trails; and plenty of snacks to get you through the day.

    4. Work and play are not mutually exclusive. It is possible to code and pass the puck at the same time.

    5. We love our employees, and we want them to know it. Google offers a variety of benefits, including a choice of medical programs, company-matched 401(k), stock options, maternity and paternity leave, and much more.

    6. Innovation is our bloodline. Even the best technology can be improved. We see endless opportunity to create even more relevant, more useful, and faster products for our users. Google is the technology leader in organizing the world’s information.

    7. Good company everywhere you look. Googlers range from former neurosurgeons, CEOs, and U.S. puzzle champions to alligator wrestlers and ex-marines. No matter what their backgrounds Googlers make for interesting cube mates.

    8. Uniting the world, one user at a time. People in every country and every language use our products. As such we think, act, and work globally—just our little contribution to making the world a better place.

    9. Boldly go where no one has gone before. There are hundreds of challenges yet to solve. Your creative ideas matter here and are worth exploring. You’ll have the opportunity to develop innovative new products that millions of people will find useful.

    10.There is such a thing as a free lunch after all. In fact we have them every day: healthy, yummy, and made with love.

    I’ve got to get working on the top 10 reasons to work at my firm — or just chuck this whole law thing and check out the new job postings.

    Reinventing your firm.

    Frequent readers of this weblog know that I am reinventing the way that I practice law. Jennifer Rice, responding to this Harvard Business School Working Knowledge article suggests her twelve ways to revive a brand here. They are:

    1. Listen to customers and understand what they want.
    2. Determine how your customer experience measures up to what they want.
    3. If it doesn’t measure up, fix it. If there’s a list of things to fix, start with what’s most important to customers.
    4. Do you have a meaningful point of difference from competitors? If not, create one using the understanding from #1.
    5. Create a focused, durable brand position that meshes with the previous 4 items.
    6. Communicate that brand message consistently over time throughout every customer touchpoint.
    7. Break down internal silos to ensure that all departments are working together to build the brand.
    8. Create mechanisms to gather ongoing feedback from customers.
    9. Make sure your employees understand how they can build the brand, and make sure they’re happy. Happy employees make happy customers.
    10. Happy customers generate referrals. Measure your buzz factor.
    11. Now that you’ve built your brand from the ground up, it’s worth spending more money on advertising.
    12. Have discipline to follow – and continually reevaluate – all the points on this list.

    As I move away from time-based billing and towards service-based billing, I will keep this checklist front and center. You should too.

    The joy of lawyering.

    Another anonymous lawyer blogger who claims to be the “hiring partner at a large firm in a major city,” at the aptly titled Anonymous Lawyer. I know he/she is truly a large firm lawyer because you just can’t make this stuff up:

    I hate Fridays. Everyone else in the world loves Fridays because it means the weekend is here. I hate Fridays because it means another weekend when I should be home but instead I’ll either be at work, thinking about work, or wondering if I should be at work. Saturday at least. Sunday I don’t work. Well, 80% of the time. Sunday is help my family spend my paycheck day. Anyone want a pony?

    Or this:

    A kid that I interviewed this past fall — I can’t remember exactly which one — commented on all the stacks of paper in everyone’s office. It was just idle small-talk, it wasn’t like he asked a question about the paper, or made a big deal of it. He said he’d have thought so much more would be electronic. And a lot of what we do is electronic — I certainly don’t print out every e-mail I get — but you can’t mark up a document on the computer, you can’t carry it down the hall and wave it in someone’s face and ask them what they were thinking when they left out the comma on page 17. I never thought about it before, but I can’t imagine ever getting to a point where there wasn’t all this paper. You just can’t walk into an associate’s office, slam your laptop on his desk, and scroll down to the place where he made a mistake. You need to have that brief printed out, you need to be able to tear those pages right in front of eyes, to scatter them wildly across the room, to fill the sheet with red lines and crosses and corrections, to crumple those papers up, toss them in the trash can, light them on fire, and watch them burn. Sure, we could probably afford to destroy a couple dozen laptops a day just to make a point that we demand perfection — but paper just works so much better for that.

    And finally:

    Someone, and I think I know who, keeps “borrowing” my stapler and never returning it. So I have to get my assistant just to come in here and staple some papers for me. Or if it’s 7:30 in the morning, and my assistant isn’t here yet, I have to go wandering the halls looking for someone else’s stapler, so I can steal it, and bring it back to my desk. I shouldn’t have to go combing the halls for a stapler. I’m a hiring partner. Staplers should be lining up at my door, begging for me to use them. Like summer associates. The hiring process is very rewarding, but having thirty insufferable law students here for 10 weeks every summer is a real chore. None of them know how to do anything, but they don’t realize it and just end up making everyone else’s lives more difficult. There are two types of summer associates that bother me the most. The first are the ones who half-ass everything and turn in memos that my five-year-old niece could write. The second are the ones who are hell-bent on finding a “mentor” and follow me around all day. “Can I look over your shoulder while you read a three-hundred-page contract?” No! If I like the work you’re doing, I’ll come find you and take you to lunch and, if you’re lucky, make you feel like you actually belong. But if you make yourself my shadow, the only thing you’re doing is making me wish we never gave you an offer. Those stakes really aren’t high enough. We need to fire more summer associates. That would make the summer fun again. I need a stapler.

    From the senior partner, with love.

    From the And What Thanks Do We Get blog from one of the anonymous firm partners, complaining to/about his associates:

    And while I’m on the subject, who is the “us” you refer to when you moan about how much the client is paying us? The “us” that I am thinking of is my partners and me. You figure into the equation as overhead. I don’t hear the desks and chairs complaining about what our clients pay. The nonprofessional staff is blissfully unaware of what our realization rate is. Be more like that. The day may come when you are asked to participate in the discussions that the partnership has on these matters. I assure you, these meetings are much less about oysters and caviar and lighting cigars with $20 bills than you think. Be glad that you are presently spared from the grind of partners’ meetings– I do not know a single partner in a law firm anywhere that enjoys that aspect of what we do, and you will be no different. For now, you are called upon to work enough to justify what we pay you, and the work we have is what enables you to fulfill your part of the bargain.

    I wish the firm partners weren’t anonymous so I could find out if they are seeking additional “overhead” and send them a resume:

    HELP WANTED: Traditional law firm seeking qualified, blissfully unaware, overhead. Flexible hours — work enough to justify what we pay. Challenging work with partners and the support of nonprofessional staff. Apply by sending resume to …

    I hope I get the job.

    The Problem with Competing on Price.

    Rob at BusinessPundit has a great post on the dangers of competing on price — especially with Wal Mart (as learned by Toys R Us). Rob says:

    Blame it on Wal-Mart. Toys R Us should have seen it coming. Maybe they did, maybe they didn’t, but rule number two for leaders is embrace the inevitable. Competing on price is, in my opinion, not that great of a strategy. Toys R Us needs to give people a reason to come to the stores other than just cheap toys. People can go to WalMart for that.
    Competing on price is almost always dangerous. If you are able to offer your clients competent legal representation at a price lower than your competition, that’s great. However, matching the lowest-priced lawyer in town can be a risky strategy — unless you can match his or her low overhead, staffing costs, etc. If you can’t, offer something that lawyer can’t — better service, quicker turnaround time, higher competence — and charge accordingly.

    I am reminded of the time I started working with another lawyer as his associate. He advertised “free consultations” in the yellow pages, believing this would bring in business, and then delegated to me most of the initial client meetings. I liked the work and enjoyed meeting a number of people, but found that at least 60% of the people I met did not retain the firm. When I opened my own office, and continued the free consultation policy, I tried to find out why. I first thought that I had somehow failed to communicate my competence or answer the potential client’s questions. Instead, I found just the opposite to be true — in many cases I had managed to answer the potential client’s questions and/or solve their problems in the initial consult. They often felt that after the initial meeting, they no longer needed a lawyer any more. Since then, I have charged for initial consultations (though other lawyers in my area still do them for free) and have never had anyone complain about the cost of the consult. Most people want to talk to a lawyer and they appreciate one who will take the time to listen to their problems and offer suggestions for solving them. After all, nobody goes to the dentist for a checkup and expects to get the service for free, even if they have no cavities.

    Getting Paid.

    Great collection of articles on “Getting Paid” here from Inc.com. If you are a small firm practitioner, getting a handle on your accounts receivable is an essential part of your success.

    Maybe the billable hour isn’t so bad after all.

    David at ethicalEsq notes that competition is coming to Chicago law firms.

    The Law.com Daily NewsWire says that major competition over lawyer fees is coming soon to Chicago, as Detroit’s largest firm, Dykema Gossett, is acquiring a 78-lawyer Chicago firm (bringing its total to over 400 lawyers) — and, “says it plans to keep average partner rates near $300 an hour — about half of big firm rates” in Chicago.

    Tongue planted firmly in cheek, David says, “This warms my antitruster-consumer-advocate heart. Any chance of trickle-down competition for the masses?”

    Gee, if I could get $300 per hour and convince my clients that it was a good deal, this hourly billing thing wouldn’t seem so bad. On the other hand, if we were in India, then that $300 buys the whole day (and maybe even the week), at least according to this article on outsourcing legal research to India attorneys. (Thanks to Carolyn at MyShingle.com for the India story).

    Motivating Legal Employees II

    This post from The Nub relates how the managers of a BMW Mini Plant in England have saved nearly twenty million dollars in the last two years by listening to their employees:

    Every employee has a target of implementing three ideas a year to improve the business. 11,064 ideas were put into practice from a total of 14,333 submitted in 2003, an 80% implementation rate.

    When is the last time you asked your employees for an idea to improve your practice?

    Motivating Legal Employees

    I think I am a pretty good boss. I have one full-time employee, and my mother works for me on Fridays. My secretary is great at what she does, but she doesn’t have the time to do all of my legal-related work and pay the bills, deal with vendors, etc. Therefore, in the next two months I will be hiring at least two more part-timers, including a business manager to help me run my firm, and a customer-relations/marketing manager to help me keep my clients happy. I do not want to hire any more full-time staff only because I can attract a higher-caliber person if I am able to be flexible with work hours and scheduling. I told this to my secretary (who has become a close friend) last week. Though she seemed OK with the idea, I worry that she will feel a bit shoved aside when I delegate some of the tasks she is presently performing to someone better suited to do them.

    Here are some tips on motivating employees that I ran across in an article on Training Zone (registration may be required).

    Step 1: Set achievable targets. Targets must be realistic, fair and relevant to the individuals’ job responsibilities. If a significant uplift in performance is required, it must be justified. The best way of setting targets is often to ask individuals to set their own. This frequently results in figures greater than originally specified by the director. This approach means that commitment to achieving the target is greater because the figures are ‘mine’ not ‘yours’. They actually become ‘ours’.

    Step 2: Have lots of winners. Nothing succeeds like success. Being able to recognise and reward all those who have succeeded provides a more positive environment than one with lots of losers

    Step 3: Make rewards frequently. Make awards frequently throughout the programme. If the campaign is for a year, shorten the payout horizon to monthly or quarterly. The award values need not be huge, but the motivation value is. This keeps interest levels high.

    Step 4: Have a ‘most improved’ award. A participant who has a poor performance in a month or a quarter, can be re-vitalised by the opportunity to qualify for an award in the next period, based on improvement. This method encourages participants to keep trying,

    Step 5: Have an employee of the month. In a sales environment, it might be for the most orders taken or new accounts opened. This allows Mr/Mrs Average to compete more fairly.

    Step 6: Encourage sustained effort. Nothing de-motivates Mr/Mrs Average more than to see Mr High-Flyer streaking ahead from the start, leaving all in his wake. However, if everyone starts afresh each quarter, or each month, with plusses and minuses wiped out, everyone has a chance to compete on equal terms.

    Step 7: Present the awards with style. Do not under-estimate the power of public presentation. Mr/Mrs Average will value the experience of being recognised by you and his peers.

    I hope that I can keep everyone happy. One thing that I will be doing is letting my secretary sit in on the interviews. I will solicit her feedback before making a hire. Thanks to The Nub for the link.

    Trading Up

    Ran across the Business Evolutionist Blog today and found this post on Trading Up, the book by Michael Silverstein and Neil Fiske. John Strande highly recommends the book and has gotten me to order it. I’ll let you read his post, but one of Strande’s readers suggests that the lessons in the book seem equally applicable to selling both goods and services. I’ll post my thoughts on the book (and applying its ideas to legal practice) once I finish it.

    Time to make the donuts.

    Found a new weblog today — Cracked Cauldron Spillings — which is kind of an on-line diary from a mother/daughter tandem who are opening a bakery in Oklahoma. In this post, the bakers hit upon a fundamental business truth:

    Having discovered the most wonderful donuts in town, we will not provide donuts in our bakery. It seems – redundant – to try to make donuts when someone else makes really really good donuts. Especially since they are located just down the street from the locations we’ve been investigating. . . . Like any other sensible people, we will buy our donuts from The Best Donuts Shop. . . . So, it will work out well. Their donuts are soooo good. Yes, we could probably make donuts every bit as good (or better), but why? It’s not part of our menu, equipment purchase plans, or business plans. I don’t think there is any point at which we will be offering donuts.

    As a general practitioner, I still find it very difficult to stop trying to help everyone who comes through the door, and instead focus on that small segment of legal consumers I can help most (and best). However, I have reluctantly come to recognize that other lawyers in my area can do many things better and more efficiently than I can. I now know that offering a novel way to deliver legal services to my core customer is the way that I will achieve my goal of becoming a more satisfied (and more successful) lawyer. I just wish that I would have realized five years ago that I didn’t have to make donuts when my competition was already making great donuts.

    Top Ten Business Ideas, 2003

    In his How to Save the World Blog, Dave Pollard sets out his list of 2003′s Ten Most Important Business Ideas. Dave’s weblog is always an interesting read, and this is some of the best business writing I’ve seen on the net in a while. Very cool.

    Quote of the Day

    “Swim upstream. Go the other way. Ignore the conventional wisdom.” Sam Walton

    An Employee’s Perfect Law Firm

    I’ve been giving a lot of thought lately to the question, “What is the perfect law firm?” As I work to change my practice, I admit that I have been looking at the firm from my perspective as the lawyer, and not from the perspective as a firm employee. In this article in Information Week the authors point out ways to motivate employees in uncertain times:

    Focus on satisfying fundamental needs first, such as workload relief and compensation, then move on to higher-level motivators such as empowerment, creative work, and advancement opportunities.

    The authors also suggest eleven factors to take into consideration when designing a job:

    1. Direct feedback that is prompt, objective, constructive and actionable
    2. New learning and skills that are valued by the employee for his growth or security
    3. Efficient work processes and scheduling to alleviate deadline pressures
    4. Control over scarce resources, i.e., mini-budgets
    5. Open communications to counter the rumor mill
    6. Accountability
    7. Elimination of unnecessary threats and punishments
    8. Tasks and group missions that are related to both personal and organizational goals, and that pay off in results
    9. High levels of trust, respect, and encouragement
    10. Recognition of accomplishments and
    11. Re-matching people to jobs based on the new vision and direction

    I am going to be hiring at least two new employees in the next twelve months. I am already planning on offering flexible part-time schedules and competitive pay, but these factors will be good for me to keep in mind when preparing the job descriptions and interviewing the candidates. However, the factors strike me as something all reasonably competent bosses/managers should do already — then I remembered big law firm life.