8 Mistakes Your Law Firm Might Be Making
If you're doing any of these things, you're doing it wrong.
Thanks to y’all for joining us in Dallas to discuss Biglaw firms, corporations, and managed service providers, with a focus on law firm business models in the Texas economy. It was great to see so many of our readers and to spend time inside the beautiful Belo Mansion (where the bullet-riddled body of Clyde Barrow — yes, as in Bonnie and Clyde — was presented for public viewing, back when the building was a funeral home).
Like our Chicago panel, the Dallas discussion was enlightening and entertaining. The panelists talked quite a bit about what firms should not do if they want to succeed in today’s challenging legal market, so that will be the focus of today’s story. The event featured the following participants:
- Brian Dalton, director of research at Above the Law (moderator);
- Craig Budner, administrative partner of the Dallas and Houston offices and firmwide hiring partner of K&L Gates;
- Bruce MacEwen, law firm consultant and president of Adam Smith, Esq.;
- Ed Sohn, global director at Pangea3; and
- Jill Witter, senior vice president, general counsel, and ethics and compliance officer at Novation.
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Here are 8 mistakes that law firms make, as identified by the panelists:
1. Failing to use data adequately.
Law firms possess a large amount of information about how their business works — hours worked, hours billed, top clients, revenue and profit attributable to different representations. But they often fail to use this data to help improve their business operations.
“Law firms are project managers now,” said Craig Budner of K&L Gates. “Data has been underutilized in terms of predictive pricing. We can use data to figure out how to price our services.”
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This is especially true for firms that are experimenting with alternative fees. Jill Witter said she hasn’t seen them used as much because in a good number of cases when they were tried, somebody got burned — either the client or the firm — and renegotiation was required. If firms had a better sense, based on historical data, of how much time a matter might take, they could do a better job of using alternative fees.
As Ed Sohn put it, data is a powerful and underused tool in legal practice. At Pangea3, “we take a Moneyball for litigators” approach, using the wealth of information they have to make smart decisions about how to price services and how to staff matters. After Pangea3 has handled 100 very similar mortgage-backed-securities cases for a given financial-sector client of theirs, pricing the 101st is very easy.
2. Not having a large enough platform.
Whether this applies to your firm will depend on what kind of firm you aspire to be. But for certain large law firms that seek to service large clients, companies with operations around the country or even around the world, being the top local shop — the “king of the hill” in a given city, as Bruce MacEwen puts it in his new book (affiliate link) — is not a winning strategy.
As general counsel Jill Witter, who has practiced law in five different states, put it, “there was a time when you were looking for the ‘local guy’ — but that’s not the way GCs look at matters today. If we’re looking for particular expertise, we aren’t concerned with whether the person is sitting in Dallas or New York or D.C.” (A limited exception might apply for certain types of litigation where local counsel matters.)
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This issue is partly why Hughes & Luce, Budner’s former firm, decided to become part of K&L Gates. As Budner put it, “In 2007 we looked around and saw were losing market share because, say, Jones Day could do things for clients in D.C. and New York that we couldn’t.” He pointed out that lots of companies headquartered in the Dallas area, like AT&T and Exxon, have a global presence. If you want to get good chunks of their business, you need to be where they are.
3. Abusing the verein structure.
We’ve talked before in these pages about potential problems with vereins. We’ll just add a prediction made by Bruce MacEwen at the panel: “One of the big vereins will blow up in the next five years.”
4. Relying too much on a single industry.
The panelists noted how Houston — one of the hottest lateral markets over the past few years, as our friends at Kinney Recruiting can attest — could start cooling down with the drop in oil prices. Dallas, by comparison, has a much more diversified economy.
5. Not listening to the client’s needs.
This sounds a bit obvious — we’ve talked about it ad nauseam here at Above the Law — and yet firms and lawyers still keep making the same mistakes.
“So often firms don’t listen,” said Witter, “even during a beauty contest. They won’t offer us what we are looking for and will try to sell us something else.”
A subpart of this relates to not understanding the client’s business. Former in-house counsel Bruce MacEwen described a beauty contest where three firms came in to present. Two talked about themselves and the impressive credentials of their team members. The third came in, had actually read our 10K and other filings, and identified a potential issue for us that they could help out in resolving. Guess who got the engagement?
As MacEwen put it, “Competence is table stakes. Your pedigree doesn’t impress me. Understand my business.”
6. Not utilizing or respecting businesspeople enough.
Lawyers often have an inflated sense of their own abilities, including the ability to run businesses. MacEwen offered simple, blunt advice: “Law firms need to hire real businesspeople, pay them well, and don’t refer to them as ‘non-lawyers.'” They are important parts of your team and deserve to be treated as such.
7. Being rude.
Jill Witter told a story about a time when she and some of her in-house colleagues went to a firm’s offices to work on a deal for an extended period of time. The whole time they were there, no partner ever stopped by the conference room to say hello. But Witter and her team knew the partner was in the building because “every now and then, the associate would just trundle off to go ask the partner something.”
8. Resting on your laurels.
Biglaw firms face increasing competition from a variety of sectors, including talented boutique firms, often founded by former partners of large firms, and alternative legal services providers (like the ones covered by Ed Sohn, Joe Borstein, and Leigh McMullan Abramson in their alt.legal column). So firms need to keep innovating if they want to maintain or grow their market share.
Some of this innovation might involve partnering with outfits like Pangea3, a leading legal process outscourcing company. As Ed Sohn put it, Pangea3 can help law firms handle discovery issues so that their attorneys can be freed up for substantive, high-level tasks. And the services offered by Pangea3 extended beyond document management. “We tend to be pretty good at legal research at Pangea3, as a Thomson Reuters company,” said Sohn. “You know, Westlaw.”
Speaking of Pangea3, thanks to them for sponsoring the event, and thanks to everyone who joined us! You can flip to the next page to see photographs from the proceedings.
