Victims Of Our Own Success

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My wife went to high school with Dan Quinn, who is the current defensive coordinator for the Seattle Seahawks. Dan is widely regarded as a talented coach who should be running his own program. Indeed, just one week ago, the day before the Division series weekend, Dan was touted as one of the top 3 prospects for head coaching vacancies. Luckily for Dan, there were four spots available.

By all accounts, the reason there were 4 spots available was because the Lions, Titans, Browns, and Vikings were all waiting for Ken Whisenhunt to finish his season as the offensive coordinator for the San Diego Chargers. Under NFL rules, a team cannot hire a current coach or coordinator while his team is still active in the NFL season. 4 spots, top 3 candidate, and the Division Championship games to be played. Well, the pundits were right, at least in part. All 4 teams were apparently waiting for Whisenhunt. The Chargers lost to the Broncos last week, and within days, Whisenhunt had accepted the Titans job.

Here’s the problem. The Seahawks won, and now 3 teams with head coaching vacancies were left without their top coaching prospect. As the week progressed, more of those vacancies were filled, leaving the Cleveland Browns as the only current head coaching vacancy. Interestingly, Dan Quinn is no longer the only name being talked about. Indeed, he’s not even listed as the front runner on everyone’s board.

The Seahawks played a great game, and are now on their way to the Super Bowl against the Denver Broncos. The Browns job remains available, and it appears that it may be down to two names now: Dan Quinn and Mike Pettine, both of whom are reported to be scheduled for second interviews. But whether Dan gets the Browns head coaching position or not, the fact is that Dan Quinn was in line for a number of different positions that may have fit him and his coaching style better. But because he and his team continued to win, his choices have been limited to either one head coaching position or staying where he is for another year. We’re seeing a lot of the same on both sides of the current legal services industry. Both clients and firms are exhibiting classic signs of being victims of their own prior successes. While the ever-increasing rates and ever-increasing profitability of the Golden Age of law firms continued, there seemed to be no end in sight. Needed to increase profitability? Raise the rates or bill more hours. Or both. Critics of the system are quick to say that this is nothing more than padding the bill, but it isn’t necessarily that. (Although it may be.) After all, assuming counsel is only doing work that is necessary, the fact that the firm accelerates the pace of that work is not padding the bill. It is simply compressing the time in which that billing is getting paid.

On the client side, service as it was rather loosely defined during that period was consistent and satisfactory. From the client: “we’ll send the file, and they’ll tell us when it’s done or when something big happens.”  From the partner: “I assigned it to the associates, and they’ll tell me when it’s done or when something big happens.”  To the associate: “here’s the file, and here’s your billable hour requirement. Let us know if you need more work.”  This is certainly not management by any reasonable definition of that term. And the bigger issue is that last part, which incentivizes waste and inefficiency.

Well, the New Normal is here. And those who subscribe to it on the client side will no longer tolerate the way things have always been done. On the firm side, both non-law firm competitors and law firm competitors who are embracing this change are positioning themselves to increase profitability without fleecing the clients, because they are going to continue to parse out larger and larger pieces of the pie. The ultra-profitable work is getting compressed into the top, and the rest is being divided and fractured even more than it has been.

There is a law firm with which I am familiar, and which I will not name for reasons that will quickly become apparent, that has a very profitable business model. The concept behind the model was the brainchild of one of the original name partners: undercut everyone, bill at rates that are exorbitantly low, and then get good results by billing the blazes out of every single file that comes in the door. If that firm is in the case, you can be sure of several things. First, they will take lead on every single deposition and appearance. Second, they will target anyone and everyone in the case to split liability as best they can. And third, you are in for many depositions, because they will notice anyone whose name is in their file.

sunk costsThe firm targets a specific industry, and they have, by all accounts, been pretty successful. The patriarch of the firm learned a key metric and exploited it: all of the members of this industry looked at rates, but none of them looked at total spend (defense cost plus settlement/judgment). As long as someone in procurement or on the business side asks “how can we reduce these exorbitant legal fees?” and then accepts as an answer “we can’t, because the firm we hire has rates that are $40 per hour cheaper than everyone else”, nothing will change. And because that has been the measure of success, those clients will continue to flail away at inconsistent legal spends that are higher than they should be.

As I said, change is here… but it is slow to come. There are more and more clients paying attention to the great work coming out of the ACC Value Challenge and so many writers and bloggers who are active on this subject. My own anecdotal information is that the change is becoming more ubiquitous, crossing lines of industry, company size, and historical savviness. On the firm side, small boutiques are fairly well known and written about, as are the early adopters like Seyfarth and Dechert. But more large firms, even some of the largest firms, are coming around. And still others, like my own, are entering into new and exciting opportunities to provide access to new ways of providing superior legal services. Still, those who refuse to fall victim to prior success will turn this corner more quickly than those who simply survive the change. And as more behemoths go the way of Dewey and Howrey, the work will continue to fall to those who are most poised to take the legal industry into its next century…..you know…..THIS one.

Topics:  Business Development, Law Practice Management

Published In: Firm Marketing Updates, Professional Practice Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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