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Discount On Aisle Affidavit? How to Use Pricing Metrics to Win and Keep Legal Clients

This month at CVS, ExtraCare savings include $0.50 off Dove Chocolate Dipped Fruit, $0.25 off 1-gallon of milk, and $2.00 off Alkaline Batteries—discounts that keep going and going.

Wouldn’t it be nice to have the same percent off attorneys’ fees, or coupons for half-price on your next court case

According to a recent ethics opinion, apparently you can.

The American Bar Association (ABA) declared that ethics these discount deals may be structured in two ways:

  • First, in coupon deals, a lawyer can sell a $25 coupon, for example, at a 50 percent discount on up to five hours of legal services. 
  • Second, in prepaid deals, a lawyer can charge $500 for up to five hours of legal service, a value of $1,000.

If the money is collected up front by the marketing organization—along with some information—than there’s no problem.

Nevertheless, the ABA Standing Committee on Ethics and Professional Responsibility warns about these coupon deals, stating in Formal Opinion 465:

“The committee has identified numerous difficult issues associated with prepaid deals, especially how to properly manage payment of advance legal fees, and is less certain that prepaid deals can be structured to comply with all ethical and professional obligations under the Model Rules.”

It’s not just the ABA that’s concerned.

Lawyers are also concerned that price equals value—that clients will believe the quality of services rendered were as low as the bill for them. Lawyers suspect clients will become accustomed discounting and will eventually refuse to pay full-price for attorney’s fees or choose alternative representation in the event these fees rise.

However, discounting can be an important strategy for attracting new clients or retaining old ones in a competitive market. With an overabundance of attorneys today, this type of corporate strategy of price differentiation is key.

Luckily for lawyers, however, times are looking up and fees are going up with them.

According to a Law Watch Managing Partner Confidence Index survey, confidence in the broader economic, and particularly in business conditions for the legal profession, has increased.

“A lot of the discounting pressure that we’ve seen over the course of a number of years now, post-recession, has been driven by the fact that there’s not enough legal work to go around,” explains Citi senior client adviser Gretta Rusanow to The AmLaw Daily.

“So, where firms have excess capacity, they are more inclined to discount their fees in an effort to keep their lawyers busy.”

Increased confidence in the market is a good sign for lawyers.

In the end, whether you firm decides to discount or not, managers should emphasize the following to clients:

1. Evidence of the value

Have a new client one-page summary sheet that lists your firm’s case wins, satisfied client testimonials, and the profiles of your qualified employees. Provide a short cost-benefit analysis that shows your fees are appropriate, as well as important to stave off the possibility of higher costs in the future.

2. Consistency in work product

Consistency equates to quality. Provide regular case matter updates, personal and electronic communication, and billing. Clients are less upset by invoices that they are already expecting.

3. Confidence in the future

Increased confidence about the market or the future of the field of law is good news on the whole. But, retaining confidence in the high quality of your practice will also help your firm retain its clients.

The economy is uncertain. But, with comprehensive and confident work on a client’s case, your performance doesn’t have to be. Even if your clients are coupon-cutting, a law firm’s value is created by a rock-solid reputation, time-proven results, and high human capital—not simply the price tag.

The advent of pricing managers at law firms has created a bevy of metrics on cost and profitability, and savvy clients want to see it!

How much detail should your firm share? Is sharing a profitable marketing practice, or will it cut into your firm’s bottom line? Our panel of experts will address these questions, and more during this practical pricing event.

Pricing is one of the most important factors in a client’s decision-making process when choosing a law firm. Failure to understand the clients’ often unspoken requirements perpetuates pricing shortcomings and lowers profitability.

Take C4CM’s course, “How to Use Pricing Metrics to Win and Keep Legal Clients,” on Thursday, January 28, 2016, at 2:00 PM Eastern.

  • During this information-packed webinar, you will learn: 
  • Why pricing must be a part of your marketing strategy,
  • How to use the metrics you already have, and
  • Steps to align pricing strategy with your firm’s broader strategic objectives.

The course includes:

  • How to set cost and profit objectives, and determine what value customers perceive in your product and how willing are they to pay for it?
  • Ways to include competitors and similar products in the pricing mix, and structure accordingly
  • How top firms are tracking and sharing data in a manner that satisfies client needs
  • Explanation of how clients use price as an indicator of quality
  • Methods your firm can use to make sure data drives the right kinds of discussions
  • Why more firms are engaging in rate negotiations for pricing of individual pitches and proposals

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Valentine’s Day Massacre: Al Capone Reminds Law Firms To Diversify Their Services

On February 14th, people rarely discuss the 1929 St. Valentine’s Day massacre. But, for citizens of Chicago, this date signified the end of a long period of conflict between two powerful criminal gangs in Chicago: the South Side Italian gang led by Al Capone and the North Side Irish gang led by Bugs Moran.

Not only did public outrage over the St. Valentine’s Day massacre end the long, bloody era of Al Capone, but, two short years later, Capone was finally sent to prison. Capone was convicted of income tax evasion and sentenced to ten years in a Federal institution, plus one year in the Cook County Jail for attempted jury tampering.

Lawyers well remember the arrest of Al Capone. His conviction for pettier crimes, such as tax evasion, has become a model for achieving creative justice.

In 1931, the U.S. government alleged Al Capone owed $215,080.48 in back taxes from his gambling profits. Adjusting for inflation, this amounts to just over $3 million.

Today, the Justice Department’s Criminal Division is looking for just $5 million. Why? To handle future financial fraud cases—cases that could, quite possibly, lead to the successful imprisonment of the current recession’s Al Capones.

According to budget documents submitted to Congress on Monday a mere, $5 million would create 28 new positions, including 16 prosecutors, to handle financial fraud cases.

The WSJ Law Blog reports, “Some of the prosecutors would likely be part of a new mortgage-crime unit to investigate possible financial-crisis era misconduct in the pooling and sale of residential mortgage-backed securities, the documents say.”

The new unit was also announced by President Barack Obama in his 2012 State of the Union address (via WSJ).

“Without the commitment of additional resources, the department’s expanding fraud caseload will outstrip its ability to handle such matters effectively and efficiently,” the department reportedly said to the WSJ.

“These resources will enable the department to hold accountable criminals who perpetrate financial and mortgage fraud, deter future perpetrators of fraud, and recover monies stolen from the U.S. taxpayer.” 

According to the division’s budget justification, the Justice Department’s Criminal Division is seeking more resources in order to:

  1. Expanded use of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to pursue fraud involving federally insured financial institutions;
  2. Increased protection for federal programs important to the nation’s economic recovery, such as small business and student loan programs;
  3. Combat fraud against the government’s minerals royalty program — one of the largest nontax sources of federal revenue.

These investigatory resources would likely lead to growth within the criminal and real estate sectors of law. Good news for attorneys during a time when experts predict “tepid growth” in the legal industry.

President Obama appears to be on board, with his fiscal 2013 budget proposal allocating $36.5 billion to the Justice Department, an increase of $1.9 billion from the previous year.

Law firms should think about restructuring and broadening their services to include criminal defense or real estate and other financial fraud. Prepare your clients now, for a trend of increasing litigation by the Justice Department in the near future.



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Three Steps To Getting A Bonus This Year

Yesterday we discussed the “dos and don’ts” of salary negotiations. Although December is generally a month decorated in reds and greens, the latter seems to be most on people’s minds.

Year-end bonuses are on the focus of many lawyers and law firm professionals this month. Although it’s been tough in terms of a hiring freeze and recessed economy, that shouldn’t mean hard work goes unrecognized.

So, use these three steps to get a well-deserved bonus and have happy New Year.

1. Do Good Work  

This step sounds a bit obvious, but keep in mind that standards have raised in 2011, post-economic recession. What sufficed last year will not get a lawyer far in this one.

Make sure your hours are long and productive. If there are ways you can increase your efficiency, then implement them. Maybe you need to close your office door to hallway chatter during the day. Or, eat lunch at your desk once per week.

Your first priority is to do whatever it takes to get noticed for the high quality of your case work.

2. Make Yourself An Invaluable Asset
Lawyers and legal professionals are a firm’s most valuable assets. Human capital drives the successes and losses of a company.

What expertise is still missing at your firm? Identify the missing link, and then become proficient in that skill. If, for example, an important client is a Spanish-speaker, dust off your schoolbooks and refresh your memory.

Perhaps a case requires specific knowledge of the oil or gas industry. Call up an old classmate in the industry and pick his brain.

Becoming an invaluable asset to your firm improves your chances at a bonus, increases your job security, and demonstrates your professional initiative.  

3. Make An Appointment And Arrive Well-Prepared

Finally, when you’re confident about your good work and valuable position with the firm, schedule an appointment with your boss. Bring all appropriate documentation with you.

Don’t be afraid to speak first and explain why you’ve requested the meeting. In the least, it will serve as an excellent opportunity to request constructive criticism on your work or praise for a job well-done.

Develop a relationship with your supervisor. If it doesn’t help you achieve that year-end bonus, it will certainly get you a positive professional recommendation for the future when you move to a job that will.


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Salary Negotiations: Dos and Don’ts

Whether post-offer letter as a new associate or during performance reviews at the end of the year, lawyers must, at one point, negotiate their salary.

Not all lawyers, however, are meant for the throws of a fast-paced litigation environment. Outside the courtroom, many of us mishandle the process of negotiation.

Discussions about money are difficult. In a professional environment, the company knows best its limits and budgets. At the same time, the employee knows best how much their time is worth.

Whatever the circumstance, law firm managers and employees should arrive to meetings about salary and benefits adequately prepared, using the following tips.

Do Your Due Diligence

Whether through Glassdoor or other salary websites, employees should know the market rate for their position. Whether paralegal or first-year associate, legal services salaries are one the best advertised online.

Take into account the tier of your law firm and your individual pedigree to come up with two numbers. Your ideal salary, and then your minimum.

Law firm hiring managers should also be well versed on the market rate of employees in their industry. And, in negotiations, should the firm extend a number below this average, be prepared to justify the offer. Perhaps your firm provides superior intrinsic benefits or healthcare. Or, your law firm is small, giving associates greater trial experience and sooner than its BigLaw counterparts.

Whatever the trade-off, be sure your new hires feel happy in their choice and your firm hasn’t broken the bank.

Don’t Go Below Your Bottom Line

For employees, set your minimum salary requirement in advance. Then, in negotiations, don’t go below this number. Sometimes if a firm offers a wage very close to that limit, you’ll be tempted. Nevertheless, hold fast.

A firm who really appreciates your skills will honor the difference. In addition, discontent over salary will only make you begrudge the firm and your work at a later date when hours are long and hard.

Firms should also come up with a bottom line. No single employee is worth breaking the whole budget—no matter his or her Ivy League education, exceptional background, or interesting profile. Law is a team effort, and paying that much-desired partner or associate too much will reap too little.

Do Sell Yourself

Salary negotiations are an active process. Especially in the case of performance reviews, sell yourself to the firm. Don’t assume that they know every little contribution you’ve made for the past 12 months.

In fact, prior to a performance review, make a list or outline your accomplishments at the firm in writing and practice dictating them. Prepare a 5-minute speech that explains why you deserve your ideal salary raise.

For new hires, prepare an elevator pitch explaining why your skills deserve a higher salary than those of your peers. Why do you stand out? Why are your skills worth more?

Even if a firm manager is the first to talk and immediately explains there will be no salary increases, speak up anyway. It’s a great time for superiors to be aware of your value to the firm. And, if they are impressed, you may be first in line to receive a raise next year, as the funds become available.

Don’t Settle

Negotiations can be tough on the nerves. Employees must understand that this is business, not personal. Firms, for their turn, should also realize that employees are only pursuing their just reward after many years of hard work and education.

In the end, even if you experience a negative outcome (blame the double-dip recession) don’t let a salary dictate your self-worth or your positive attitude.


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New Business Models: Avatar Lawyers Still Too Space Age For Today

You won’t find large office space, power suits, or even lawyers inside the Penn. Ave.-based bureau of the law firm Clearspire. Confused? Not President and CEO Bryce Arrowood, he is confident. According to Arrowood, Clearspire represents the pinnacle of a changing market for legal services.

Clearspire aims to “change the system,” with a new approach to client billing and legal services. At a typical firm, according to Clearspire, partner profits comprise over 30 percent of typical big law balance sheets. Office overhead accounts for another third. Only the final tranche of revenue—one-third of the billable rate—is earmarked for those attorneys’ salaries diligent and dedicated to client work product. Since October, Clearspire has worked to channel more firm profits into direct value for the client.

To accomplish this, Clearspire has a 1:2 ratio of lawyers to business managers—fodder for reflection on how much information technology and business administration, as opposed to actual lawyering, plays into the smooth operation of a law firm.   For those few Of Counsel at Clearspire, there is no dress code or FLEX schedule request forms. Most attorneys already work from home via high-tech software with virtual meeting rooms and virtual representations of each employee. The Washington Post, first to profile the firm, reports:

“One of the first things new hires do on the job is pose for three photos that become their online avatars—one on the phone, one too busy to be interrupted and one available—which allow their colleagues to begin conversations only when appropriate.”

Clearspire is not off track. Dan DiLuccio, a Principal at Altman Weil, is quoted as saying, “The current economic environment may be the tipping point that causes general counsel to finally demand real financial accountability from their law firms or start moving to firms that are more flexible.”

But Clearspire has chosen an extreme response. In the same way the e-book industry is slow to gain market share, the total digitalization and outsourcing of legal services is perhaps too much, too soon. Although Kindle and Nook sales are high, the general population has shown its preference for the feel of a new hard-backed book. Similarly, individuals filing for divorce or corporations facing high-stakes mergers, though dissatisfied with the current cost-to-efficiency ratio, would not attend a meeting with a lawyer in jeans. Or, for that matter, the avatar of a lawyer in jeans.

By founding Clearspire, Arrowood is trying to respond to clients’ growing frustration with high fees in the legal industry, especially for those lower-level employees. “These people are being billed at $400 at least per hour. And the clients are saying, ‘Why am I paying to train this guy?’”

Nevertheless, Clearspire seems predominantly focused on blue-collar lawyering. If firms only reward middle-level legions, who is left to train the first-years? And, what motivation would they then have to earn promotions to partner level—especially when there’s no partnership at all?

There are, of course, many positive aspects of Clearspire’s practice. For example, the idea that law firms, like any business, need administrators. Too many firms skimp on human resources, or consider themselves too boutique to follow a strict and proper budget. A lawyer is only as good as his paralegal. In the same way, a law firm is only as good as its structure. Administrators are the ones who contribute fresh ideas regarding bonuses, employee incentives, and bureaucracy that both attract new employees and retain the old.

Also, Clearspire’s clear priority on information technology systems, is, in fact, critical to success. If your firm’s budget is pressed for funds in today’s economy, it’s important not to skimp on computers, electronic discovery software, or case management programs. Law firms should embrace the technology revolution, or face a fate similar to Howrey’s, which failed because of its inability to evolve.

Finally, Clearspire is committed to flexibility on the part of its offices and employee schedules. Efficiency is achieved differently by different people. So ask your employees what motivates them, and implement changes accordingly. Remember, a system of monetary incentives does not make the best policy.

A step in the right direction doesn’t have to be a giant leap forward. Gradual but substantive changes will demonstrate to clients that your firm is committed to serving them capably and consistently in this new generation of law.


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Challenging Biglaw: How Small Firms Attract Talent On A Tight Budget

The image of David versus Goliath is frequently evoked in legal arguments. This metaphor is used in the first line of a suit against McDonalds, in the tag line for the Institute of Justice, and in myriad legal publications, such as Jewell v. NBC and the Basics of Defamacast in Georgia. The same image that is used to describe court cases is also used to describe the firms defending them, specifically large corporate law practices. Nowadays, there’s conflict between those who see big as bad and others who view big as better.    

Such is the subject in of an article in Above The Law, featuring Steven Harper, a Kirkland & Ellis partner who teaches a Northwestern University class titled “American Lawyers—Demystifying the Profession.” In his class, as in his numerous publications, Harper analyzes attorney unhappiness and law students’ unhealthy obsession with large firms. Decidedly not Texan, both Harper and the Above The Law author seem to agree that Biglaw is the root of much associate unhappiness—high billable hours and low compensation in terms of the number of attorneys made partner.  

At the end, the article issues a challenge to small firms across the nation. It asks, “What options are there for promising graduates other than Biglaw? What advantages do you offer to talented attorneys?” A portion of the answer is listed below.  

Flexible Working Hours. Offering flexible schedules or telecommuting options is a cost-free benefit for firms and has been shown to increase productivity. With fewer associate timesheets to keep track of, small firms excel at offering unique working hours for attorneys with young families, long commutes, or simply a green state of mind (see Apple Not Green, But You Can Be). Biglaw outshines its competition in terms of mass training, office policies, standards, and consistency. One thing it finds difficult to offer, however, is an exception.  

Location. Smaller-sized firms require smaller-sized offices. This flexibility in location options often leads to lower rent and sometimes a more unique space. For example, a small firm can take advantage of the building or office for rent at the base of a ski slope or next to an urban park. It can situate itself in the center of a city, instead of the suburb. When first-years spend over 2,000 hours each year in the office, it’s not surprising that location plays an important role in their decision of choosing a law firm.  

Youth. A large firm typically indicates a long history. The experience of older attorneys is certainly valuable, but small firms have the drive and of enthusiasm of youth on its side. Younger firms are more open to risk and thus more motivated to succeed. When you know the intimate details of each employee’s family background, financial history, and future plans, winning attorneys fees in a court case suddenly becomes personal. Additionally, younger firms are more familiar with the new technology vital to the modernizing industry of litigation. For the best and brightest law firm graduates, enthusiasm, gadgets, and a general openness to fresh ideas are more attractive than grey-haired men in last-year’s suits.  

Profit-Sharing Programs. If all else fails, money talks. While larger firms are stuck fighting internal red tape, smaller firms are giving attorneys a stake in the business. Not only is this an added draw to the firm, but studies show profit-sharing programs (like the one at Google) incentivize employees to be more efficient with their time and more productive in their work. 

Training Opportunities. Finally, small firms can spend one-on-one mentorship time with every new associate. For the eager law school graduate who earned top grades, professional development, high-level responsibility, and courtroom experience during his or her first five years is a dream come true. So, when compared to the excessive doc review at Biglaw, a job with a small firm suddenly looks like the more promising career path.

The question of whether or not big is better will continue to be asked. And the answer, for each attorney, will continue to differ.



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Why Penny-pinching Doesn’t Pay Off

Filtered or tap? It started with an unofficial survey regarding who drank the bottled water in the office. Then one day, the spring water was gone. Next, the hot chocolate mysteriously vanished, and suddenly (horror!) the free soda machines only took quarters. Finally, one by one, the employees also started to disappear.

The aforementioned events actually occurred at a New York-based firm—a boutique-sized bureau with 25 to 50 attorneys. After the notorious water survey, it took exactly one day for the first associate to give notice, and many other associates followed (pinstriped) suit tendering their resignations. Although my assistant may be a closeted conspiracy theorist with her own opinions about government contaminants in tap water, I don’t believe these employees were insane water purists and I bet they could live without hot chocolate. However, the reduction in small employee perks can signal bad business practices on the part of the firm. Though specializing in corporate and commercial litigation, this firm clearly did not understand the true market price of commodities, like bottled water. Penny-pinching—or simply the appearance of it—can start a panic, make employees fear for their jobs and flee. Worse, the savings are not worth the damage done.

Penny-pinching saves just that—pennies. If your firm is looking to cut resources, maybe the smaller items are not to blame for blowing the budget. For example, a five-gallon bottle of natural spring water is $6.99, which, refilled every week, costs the firm $364 a year—or, the price of one first-rate meal for two partners and two clients. If 10 packets of hot chocolate, at $1 a packet, were drank every work day for a year in 2010, the cost to the firm would be $2,610—or, the price of one business class ticket from San Francisco to New York City. A four-flavor countertop soda dispenser is $2,254. Add $18 for CO2 refills every month and $60 for syrup to yield 30 gallons of name-brand soda. This amounts to $2,530 for the first year and $276 for each subsequent year.[i] However, what is the cost of replacing, re-training, and retaining a young associate disgruntled by said water incident? Significantly more than $5,504 in foods stuffs.

If you need to replace a first-year associate, firms—you’re out of luck. Median starting salaries for associates have been steadily increasing. From 1996 to 2009, median salaries for first-year associates within firms with 26 to 50 lawyers saw a 78 percent increase, according to NALP’s 2009 Associate Salary Survey[ii]. Large firms in New York or Chicago, for example, underwent a 107 percent change for the same time period. So, if you’re a mid-sized firm replacing a young associate hired in 2007, expect to pay $11,500 to $14,000 more a year for your new associate’s base salary. And, forget the money it took to woo them in the first place—to a firm tainted by large turnover and a reputation of devaluing their employees. Additionally, the new associate, now earning $104, 000 a year, will likely operate three months at marginal efficacy while they’re mounting the learning curve. This includes adapting to your specialized technology and absorbing the complicated histories of your cases. In the end, there are countless other fixed costs on the firm—benefits and social security payout, new business cards, name plates, painting office space, welcome lunches, etc., etc. Ergo, in the time it took your previous associate to board a plane and live out their savings in Bermuda, you’ve spent over $40,000 on a new hire—or enough hot chocolate to last the firm 15 years.

If your firm can’t even afford the hot water it’s in, maybe it’s time to start examining larger issues at hand, such as library resource spending, upgrading technology (sometimes you have to spend to save), or hiring practices. And if that doesn’t work, consider seeking a professional legal consultant for help.

[i] Kinch, Richard J. “Carbonating at Home with Improvised Equipment and Soda Fountains,” Updated as of January 2011.  kinch@truetex.com. http://webcache.googleusercontent.com/search?q=cache:UDuE4A8GVlAJ:www.truetex.com/carbonation.htm+countertop+fountain+drink+system+refills&cd=2&hl=en&ct=clnk&gl=us&client=firefox-a&source=www.google.com

[ii] http://www.nalp.org


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