LMA 2010 - Examining the Current Use of Alternative Fee Arrangements

My second session on Thursday, March 11, 2010 was "Examining the Current Use of Alternative Fee Arrangements," with presenters Lindley J. Brenza, a partner at Barlit Beck Herman Palenchar & Scott LLP and Reed S. Oslan, P.C., a partner at Kirkland & Ellis LLP, and moderator Gabriel Miller, general counsel at Sokolove Law.  Because this is a hot topic in the legal industry, the session was well-attended and spawned some interesting conversation.

Oslan started by saying that Kirkland & Ellis have been doing a lot of alternative billing, and believe there will be even more in the future.  Brenza agreed, saying that at his firm, they do nothing by the hour anymore for new matters.  To clarify for everyone, they put up a graphic of the four types of legal fees - hourly, fixed, contingent and hybrid.  Brenza said that his firm doesn't do hybrid billing arrangements, because they are too problematic.  Interestingly, he added that the ABA considers non-hourly billing more ethically sound and client-focused than hourly billing.  The panel agreed that because of financial constraints in this economy, clients are willing to take more risks with their lawyers on how fees are structured - this was borne out in the general counsel panel the following day by clients who admitted to being reticent to use alternative fee arrangements, but felt pressured to find the most economically efficient way to handle legal work. 

One of the panelists pointed out that despite the industry's seeming fear of moving away from the billable hour, hourly billing rates have only been around for the last sixty years.  When they took an informal poll of the room, most of those present were from firms doing some type of non-hourly billing.  Oslan said that it has taken his firm some time to get comfortable with the idea of alternative fees, and observed that clients aren't always ready to take that route.  Brenza agreed and said that although his firm does work entirely on an alternative fee basis, clients come to them for their skill, and not their fee schemes, and it often takes some time for them to become comfortable with it.  But at heart, the panel said that basically, clients want less expense and more certainty.  Law firms can't say that their work is too unique for a budget - it may be a leap of faith to handle work on an alternative fee basis, but other vendors are already doing it.

That being said, the panel agreed that the discussion over alternative fees is actually a lot bigger than the demand for them.  There are a lot of downsides to discounts, which the attorneys don't always consider as part of alternative billing.  Oslan pointed out that most firms are pyramid-shaped, with the majority of the lawyers being associates, and billable hours are rewarded.  These types of firms can't easily do alternative fees.  Firms built for non-hourly billing are structured differently - more diamond shaped with the greatest number of attorneys being experienced partners.  To be able to do alternative billing at a firm shaped like this, the partners doing it must be supported by the firm. 

The key takeaway from this presentation was that although the demand for alternative billing arrangements isn't as high as it's hyped to be, clients are looking for less expense and more certainty in their billing and firms will have to be able to adapt to best service their clients. 

LMA 2010 - Recovery: Refocusing the Inside Counsel/Outside Counsel Partnership to Maximize Profitability

For the first session of the day, I was in Track One - the Business of Law: Recovery: Refocusing the Inside Counsel/Outside Counsel Partnership to Maximize Profitability.  Presenting was Harris E. Berenson, Esq., the Assistant Vice President/Chief Counsel for Liberty Mutual and Senior Counsel for Liberty Mutual Insurance Company.  His presentation focused on the idea that inside and outside counsel have a partnership, and he started by saying that a partnership, at its core, is nothing more than a relationship.  However, although this is a simple concept, the challenge comes when trying to execute it.  Relationships, both personal and professional, must be built on trust, support, consideration, respect, caring and the mutuality of responsibility.  Inside counsel are looking for a long-term partnership - similar to what people are looking for in a relationship as they get older.  They don't want someone who just wants to be "on the list;" they want a true business partner who knows their business and understands industry issues.  Because of this, they'll often go with their gut instinct and recommendations from trusted friends and colleagues.  Berenson said when looking for outside counsel, he checks with his counterparts, industry peers, and internal teams - when later asked, he emphasized that he does not look at directories and rankings lists for outside counsel and said "they don't matter."   

Once the decision is made to work together though, how do both sides get the most out of the relationship?  Berenson said there needs to be a "mutuality of expectations."  As an example, he said that if the client needs the firm to be available 24/7, the firm needs to be able to articulate how they will do that, not just that they can.  He said there must be "mutual hand-holding," similar to being in a romantic relationship, but he clarified that by "hand-holding," he didn't mean constantly taking people to lunch or asking for their business, but showing the client that you're a valuable business partner.  He also said that lawyers should show their clients that they can do what they said they could do, to suit up and show up, and to keep their promises.  Berenson said that each side comes with their own baggage, and it's up to each side to figure out what that is, and how they can learn from each other. 

A key takeaway that Berenson emphasized is something that I've heard from inside counsel over and over again: "I hire lawyers; I don't hire law firms."  Because of this, he recommended that firms market the people, because that's who builds the relationships.  Along these lines, he cautioned that firms should think about who they're putting forth, because that's who inside counsel look to as the face of the firm.  What "wows" them is an understanding of the business - this is not limited to what the client says to his lawyer, but what his lawyer has proactively researched about his business.  Berenson took it one step further, adding that outside counsel not only need to know their own clients, but also need to know their client's clients, and show a willingness to partner.  Inside counsel want a commitment from their lawyers and for them to be a counselor, not a lawyer. Berenson said that even in this economy, if a firm is giving him service, value, and a good relationship, he doesn't mind paying top dollar. 

He talked a little bit more about his expectations for outside counsel, saying that his main concern is whether an attorney can get the job done, not whether he likes them.  He advised that lawyers should be accessible, respond promptly, learn the business, never say no, and listen to feedback - in Berenson's opinion, outside counsel are just like any other vendor: if he doesn't like you, he'll find someone else.  Because of that, he expects nothing short of excellence from his attorneys.  Like with every relationships, the inside-outside counsel relationship takes work on both sides and doesn't end when you're on the list.  The overwhelming theme I got from Berenson's talk is this: it is even more essential in this economy for outside counsel to sit up and take notice that you need to work at your client relationships or be replaced.

Berenson then took some questions from the audience.  Someone asked how many firms come to him with client satisfaction surveys, and he admitted that it's not as many as he would like.  He thinks that surveys show an interest on the part of the firm in how they're doing and he appreciates that.  There was a final question about what challenges he faces in today's economy, and Berenson said that the cost of legal services is a big challenge, so many of the attorneys he works with are doing more work in-house than before. 

LMA 2010 - Keynote Event - Insights Into the Future

During the first morning session of the conference, the attendees were treated to a presentation by Andrew Zolli, founder of Z+ Partners, curator of PopTech, and exploration fellow at National Geographic.  His Z+ Partners bio says: 

"Andrew Zolli is an expert in global foresight and innovation, studying the complex trends at the intersection of technology, sustainability and global society that are shaping our future. His firm, Z + Partners, helps senior leaders at some of the world's preeminent companies, institutions and governments see, understand and respond to complex change. Andrew is alsothe Curator of Pop!Tech, the renowned thought leadership forum and social innovation network. Andrew serves as a Fellow of the National Geographic Society, where he is leading development of a global initiative to envision new scenarios for a sustainable world in 2030 and beyond. He was also recently named the first Business and Society Fellow of the Boston College Center for Corporate Citizenship."

In a presentation that was "engaging, clever [and] funny," according to Lance Godard, Zolli focused on future trends affecting us both personally and professionally.  Using demographics as evidence, he showed the audience that by 2025, there will be more elderly people and children at the same time than ever before in history.  Additionally, the "Boomers" will be in the workforce even longer, which will cause "intergenerational chafing" between them and Generation X.  Those who were born after 1970 are likely to take care of their mothers longer than their mothers took care of them.  We are also seeing a shift in education, with statistics showing that the most educated man in the United States is 56, while the most educated woman is 28.  These ambitious women are having a hard time finding ambitious men, and there are more single women buying homes. 

This personal side of demographics is important to marketing because knowing your audience is key - their culture, ethnicity, and generation matter.  Zolli pointed out that as legal marketers, we are selling risk insurance and its our job to put a face on that risk that motivates clients to buy.  He said that we're living in a "sea of sameness" in terms of companies and what they offer and how they offer it.  This is the "Tyranny of Choice" - as an example, Zolli said that we can only pay attention to 160 choices in the grocery store and everything else is just noise.  As you add more choices, there is a certain point at which satisfaction does not continue to increase.  Zolli added that because of this, it's possible that you can get exactly what you want, and hate the people who gave it to you.  So it's equally important to look at what consumers say no to, not just what they say yes to. 

Obviously from what Zolli said, the key is differentiation, as it has always been - how do we keep our companies and firms from being just "noise" to potential clients?  And how can we tap into our customers to find out who they are and what they really want?   One tool is social media, but Zolli said that although we have the ability to go after the right people through digital tools, we're getting it wrong because we're "change blind."  We don't understand who the critical people are that we need to talk to, and though social media is "out of the lab," very few people understand networks.  Zolli used a graph to illustrate a network and asked the audience who they would choose in the network to deliver a message to everyone if they could only talk to one person (this graph is an approximation, not an exact copy of the graph that Zolli used):

Almost the entire audience chose #4, the person in the middle of the circle who appears to be the most connected, but this wouldn't be the most effective.  It turns out that it would be person 9, who would only have to tell person 3, 4, and 8 to spread the message to everyone quickly and efficiently.  Understanding your network is one piece of how to effectively communicate your message. 

In addition to knowing how your network works, experience is important.  Zolli used the example of flying Jet Blue versus United Airlines.  Jet Blue has created an enjoyable customer experience, with big leather seats for everyone and slightly more leg room.  This has made flying their airline so appealing that even after they had an issue with their landing gear on a flight, resulting in the landing gear catching fire during the emergency landing, people would still rather fly Jet Blue than coach on United, with its limited room and uncomfortable seating.  He left us with the idea that experience, behavior and communications are equally affecting companies' brands today, whereas in the past, one or two of those factors would have greater importance than the others. 

After Zolli's presentation, he was joined by a panel of law firm experts to give their thoughts on the future.  It included Bruce McLean, the Chairman of Akin Gump Strauss Hauer & Feld LLP, Bruce James, CEO/Managing Partner of Brownstein Hyatt Farber Schreck, LLP, Katherine D'Urso, Chief Marketing Officer for King & Spaulding, and Peter Zeughauser, Chairman of the Zeughauser Group, and moderated by Ashby Jones, the Legal Editor for the Wall Street Journal.  The panel started with discussing differentiation, saying that 15 years ago, marketing a firm as "full service" was the strategy to use.  Today, however, there is a greater focus on marketing core practices instead, though it's a fine line, because firms still want their clients to know that they are full service.  The panel emphasized the importance of firms talking to their clients to ask them why they see their relationship with the firm as special, and why they hire one firm over others.  They agreed that having the skills to handle the work is a requirement, but doesn't differentiate a firm - how a firm handles the relationship is what differentiates them.  Again, it's all about relationships. 

The panelists also agreed on the notion of the "customer experience" for clients, saying that lawyers haven't been able to align what they do with what the firm brand says its customer experience is.  Part of this is because lawyers value independence and trust their own experience over conforming to a firm brand.  Bruce McClean commented that "there is a DNA defect in lawyers to get them marching in the same direction" while another panelist said that it is hard enough to get lawyers to agree on what day it is, let alone a brand strategy.  Law firms are facing a T-shaped branding challenge, having to market vertical industries as well as general broadness.  The panel was asked if they thought the recession had made this harder or forced marketers to reinvent the way they market and think about marketing.  They agreed that it had, in a few key ways.  First, they said they believe that firms will only be able to grow by taking market share away from their competitors.  One of the ways that they can accomplish this is to use social media, which is a more economic way to get specific in your marketing.  Firms need to adopt low-cost, high value communications vehicles and can change the industry by understanding how content flows today.  Firms should build competency in these new tools now so that they don't lose the "first mover" advantage of using them - Nancy Myrland addresses this more fully in her post here.  The panel felt that there are social media "stars" who are "bubbling up" in every industry, and that law firms should follow suit (John Byrne presents some interesting thoughts on why law firms might be slow to adopt these new tools in his post here).  The panel cautioned that those who don't understand Twitter and Facebook now need to know that in the future, decision makers will rely more on social media and Peter Zeughauser commented that if you don't position yourself, the market will position you.  Like any other tool, it's necessary to learn about social media and how it might apply to the firm's strategy or risk missing out on opportunities that are available.  For smaller firms, social media can help to level the playing field with larger firms because it is so inexpensive.

Another way to compete is to understand that opportunities for growth are not in the United States and in Europe, but in emerging markets.  Firms need to be more multicultural, though the panel cautioned that this didn't mean necessarily opening up an office in Shanghai.  It's more that the client face will change, and firms should be more open to opportunities coming in from these new markets.  The panel also pointed out that smaller firms can expand by industry domestically, because they are more nimble and able to re-orient practices to meet the changing needs of their clients.

Two final important thoughts from the panel included advising firms to talk to their clients - to ask how firms can help clients solve their problems and not how clients can help firms; and that consistent, customized and creative experiences for the client will help to distinguish the law firm brand, not just marketing communications. 

It's About Relationships

I just got back from the Legal Marketing Association's Annual Conference and I'm still trying to process the whirlwind of sessions and networking opportunities that I was able to be a part of.  I'll post a series of re-caps from the individual sessions over the next few days, but I wanted to start with my feelings about the conference as a whole.  For me, the main theme of this conference was relationships.  Perhaps I'm biased to look for that as a theme, since that's an essential part of our ILN conferences, but I was struck by how important it was during LMA10.

One of the things that's been drilled into me during client panels since I joined the ILN five and a half years ago is that "clients hire lawyers, not law firms," essentially saying that it's all about relationships.  This was backed up once again by the client panel on Friday morning when the panelists talked about how important chemistry is when choosing a lawyer to hire.  But this principle doesn't just apply to law firms - everyone makes purchasing decisions based on chemistry.  For example, if I'm looking for a new web designer for our group's website, I'm going to want to work with someone I trust, someone who understands my personality and how I work, as well as what I want to communicate through the site.  If I'm interviewing people for that work, I'm already going to weed out anyone I think doesn't have the appropriate skills, so it's assumed that the finalists will all be talented.  So it comes down to chemistry - who can I work with?  That applies both in my personal and my professional life and I've talked to others who feel the same, so when working with my own clients, I always try to think about how I would want to be approached. 

But why wait until you need to hire someone to network and form relationships with people in your own industry?  I have gained and continue to gain so much from the relationships I have formed with other talented, passionate people in the legal marketing industry and last week's conference showed me that very clearly.  Social media also played a large role in enhancing my experience, and was best explained by Heather Milligan over on her blog.  By connecting with people through social media like Twitter, LinkedIn and Facebook and then taking those relationships offline by meeting my contacts in person, I am able to build friendships that inspire me professionally, support me personally, and give me a collective expertise to draw on among people I already trust. 

I've come away with a lot of good ideas and excitement about future projects thanks to the LMA conference and the people I interacted with there.  But overwhelmingly for me, my greatest takeaway was about the relationships - whether you're connecting online through social media, in person at a conference or cocktail party, or over the phone, it's all about engaging people and finding that right chemistry.  Not only can it lead to business (and it doesn't have to), but it enhances my life in many other intangible ways.  Nancy Myrland's video about connecting with legal marketing Twitter contacts does a great job of summing this up. 

I'll also mention that relationship-building doesn't end when you get back on the plane to come home - you've got to continue to connect and follow up with the new contacts that you've made.  Heather talked about that today and has some great tips for what to do when you return from a conference.

**(Photo from Nancy Myrland)

LMA Annual Conferences - Sessions I'll Be At

As I prepare for next week's Legal Marketing Association Annual Conference, I'm revisiting the list of sessions I'll be at and tweeting from.  Heather Milligan over at The Legal Watercooler will be posting a list of which attendees will be tweeting from which sessions if you'd like to follow a certain "tweep" (as people who tweet are referred to) or session.  I'll be attending the following sessions (all times are local to Denver, Colorado) and you can follow me on twitter at http://twitter.com/lindsaygriffith:

Thursday, March 11, 2010
9:00 - 10:30am: Keynote Event
11:15am - 12:45pm: a) Recovery: Refocusing the Inside Counsel/Outside Counsel Partnership to Maximize Profitability and b) Examing the Current Use of Alternative Fee Arrangements
2:30 - 3:30pm: Leveraging Social Networking - Real World Applications of Web 2.0 That Have Led to New Business
4:00 - 5:30pm: Social Media Strategies for Small to Mid-Sized Law Firms

Friday, March 12, 2010
9:00 - 10:00am: Creating and Implementing a Sales and Business Development Culture in Your Firm
11:30am - 1:00pm a) Managing Your Professional Reputation and b) The Digial Firm 2015

I'll also be attending the general session on Friday, "What We Love Most About Our Lawyers - A Client Panel" and may tweet from there as well.  In addition, I'll follow up my tweets with posts about the sessions, so if you prefer not to jump into the twitter stream, you can see the re-caps here.

LMA Attendees

It's that time of year again - the LMA Annual Conference rolls around in just a few short weeks!  It's a great opportunity to make new friends and renew relationships, so I thought I'd keep a list of those attending as I'm advised, as well as their Twitter names (so anyone interested in the conference who can't attend can follow along).  Also, don't forget to follow #LMA2010 and #LMA10.  Heather Milligan will be posting information about a tweetup only on Twitter:

Lindsay Griffiths (@lindsaygriffith)
Nancy Myrland (@nancymyrland)
Heather Milligan (@heathermilligan)
Nat Slavin (@natslavin)
Gail Lamarche (@gaillamarche)
Lance Godard (@lancegodard)
Jennifer Schaller (@natlawreview)
Nathan Darling (@nathandarling)
Megan McKeon (@meganmckeon)
Leigh George (@leighgeorge)
Caroline Baynes (@senyab)
Andre Mazerolle (@redbeardandre)
Russell Lawson (@Russ23229)
Jayne Navarre (@jaynenavarre)
Larry Bodine (@larrybodine)
Gina Rubel (@ginarubel)
John Byrne (@johnmbyrne)
Jeff Yerkey (@JeffBob)
Rebecca Wissler (@rebeccawissler)
Felice Wagner (@felicewagner)
Stephanie Thum (@stephaniethum)
Jennifer Johnson (@jjohnsonnyc)
Jonathan Groner (@jgronerpr)
Brian Pitts (@chicagoprpro)
Lydia Bednerik (@lydiabednerik)
Jill Clark Rako (@aceismyname)
Jon Holden (@holdencalgary)
Sally Schmidt (@sallyschmidt)
Ritchenya Dodd
Josephine Pope (@popejosephine)
Sonny Cohen (@SonnyCohen)
Marc Hollander (@marcthollander)
Nancy Slome (@nancyslome)
Alli Gerkman (@gerkmana)
Lisa Simon (@legalmediagirl)
Adrian Lurssen (@jdtwitt, @jdsupra)
Bill Ferdinand (@zunpartners)
Meghan Freeman (@meghanefreeman)
Corey Garver (@coreygarver)
Betsi Roach (@betsiroach)
Melanie Green (@melaniegreen)
Denise Dewling (@ddewling)
Kate Scoptur (@katescoptur)
Mark Elliott (@elliottmarkc)
Kevin Houchin (@kevinhouchin)
Jamie B. Field (@jaimiefield) *Not attending, but would like to get to know LMA members better!
Susannah BG (@susannahBG)
Alin Wagner-Lahmy (@alinwagnerlahmy)
Craig Levinson (@craiglevinson)
Mike O'Horo (@salescoach)
Patrick DiDomenico (@lawyerkm)
Caitlin Fisher (@caitlinmfisher)
Lindsay Weber (@lindsayweb)
John Stanley (@johnlstanley)
Patrick Fuller (@pjfuller)
Steve Bell (@stevembell)
Tim Corcoran (@tcorcoran)
Paramjit Mahli (@scglprnetwork)
Jeff Roberts (@jeffreymroberts)
Laura Gutierrez (@duetsblog)
Chris Fritsch (@crmsuccess)
Kate Haueisen (@kateh32)
Rachael Loper (@rachaeldc)
Chris Whitmore (@chris_whitmore)
Jenn Bullett (@hubbardone)
Tamara Bigford (@bsocialllc)

I'll add other attendees and their Twitter names as I'm advised of them!