Category: Management
Today, a client called me to ask whether I know a compensation systems consultant who can help their firm create the right environment for non-equity partners to become equity partners. My response was i) compensation systems are a function of the firm culture and governance; ii) one first must analyze what the goals of the firm are and ought to be; iii) for any system to work, it must have the acceptance ("buy-in") of the principle stakeholders in the firm.
Most systems will work so long as the participants deem the system in place to be fair and reasonable. The system is better, in my opinion, when there are objective metrics in place. But, even subjective metrics work as long as the participants think there is fairness and justice working … with an appellate process in place that is also fair and just.
Oh, by the way, I concluded, I do that! <g>
Apropos of this conversation, I read that another law firm is being sued for unfair compensation system that works against the women in this firm. See my earlier post on this subject.
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As in most law firms, compensation systems is where governance and other issues are expressed.
In a recent matter, a female partner claims that Dewey & LeBoeuf, a law firm that has received diversity awards, discriminates against women. She asserts that women partners receive less compensation than men in the firm.
The firm’s partner distribution system is apparently based on origination, not just billable work. This is the case in many firms. What do you do, however, when “the old boy network” was created years ago, when women were not major law firm players, and there is no “sunset” provision in the firm for compensation? Seemingly, this would entrench old relations as the basis for current compensation … and allow little or no access to women, to younger lawyers, and to other diverse groups in the firm.
Firms unwilling to look anew at their compensation culture will continue to face challenges from within as well as pressures from clients from without.
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A new report discusses how a law department can make money for its company.
Assertion of rights (warranties and other claims) and prevention of wrongs (preventive law) are two ways to protect clients. This report describes one of the two ways. In the assertion mode, there appears to be a metric of "counting" the benefit that lawyers provide to clients. This may be what is needed to persuade management to pay more attention to its legal department.
Yes, the numbers can be significant. In this case (the assertion mode), however, the client must be willing to engage the lawyer/law firm/in-house counsel to be alert to those opportunities. In the latter case, the client must likewise be willing to engage the lawyer to show the client how to negotiate and/or structure customer relationship so that challenges/problems do not arise or at least are minimized.
In both cases, there must be a willingness to include the lawyer in the business process. In the former, we wait for a problem to arise … and then claim credit for a return on the investment in the lawyer. In the latter, we are inserted into the process from the beginning … and the ROI is more difficult to measure. After all, how can you measure or take credit for something that didn’t go wrong in the first place?
Lou Brown was the "father" of preventive law. I "grew up at his knee" and learned a great deal from him. The concept of "preventive law" was a difficult one to "sell" to both clients and lawyers, especially in an era of good times and increasing wealth for lawyers. I suspect it will be a difficult sell even today, despite the even greater need for it. It’s always easier to claim credit and persuade management that the lawyer is an essential part of the recovery process when you can claim credit for the flow of recovery money.
Good work and congratulations to those who prepared this report. Perhaps we will get closer to preventing problems by showing how we can cure problems. I’m not so sure though. This reminds me of the search for cures for lung cancer. The American Lung Association raises a lot of money and makes millions of dollars of grants to research for a cure for lung cancer. Yet, less than 5% of their grants are for behavioral research that prevents smoking, the primary cause of lung cancer. Why cure cancer so patients can go back to smoking, why create a cigarette with fewer carcinogens, when not smoking at all will take care of most of the problems? Why set patients up so they can return to buying from the tobacco companies?
Seems to me to be the same here. Warranty work (cure) is important, but better customer relations (prevention) is the better approach.
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In Friday’s Wall Street Journal, there was an article about Bert Lahr’s 1956 Broadway performance of Waiting for Godot.
The article was enticing and caused me to go to Amazon.com to order the mp3 download of the performance. I purchased the download, but had trouble viewing it. I went to Amazon’s "help" section and followed the instructions for over an hour … then I saw that I could contact them. They asked if I wanted email response, a phone call later or a phone call NOW. I asked for the latter and within less than a minute received a call. Now, that is SERVICE!
The person must have been from India (after all, it’s a holiday week-end here <g>), but I could understand him. He offered to give me a refund or download the play again. I chose to download it again … after all, I did make the purchase because I wanted it. But, we still had trouble and what was downloaded did not appear to be what the WSJ review promised. So, without argument, protest or difficulty, the man said I would get a refund.
While I didn’t get what I wanted, my recourse is to go back to the journalist and determine what I didn’t understand. BUT, I was super impressed by the detail to service presented by Amazon. They will now address the issue for me on their end, I was not charged for something I didn’t get and I will sing their praises. (Oh, I guess that’s what I just did.)
Amazon, thus, is not just a repository of books. That can be had in a library. But, they are a customer experience to satisfies. Congratulations to the folks at Amazon. I am one very pleased customer.
Do the clients of your law firm say the same thing about dealing with you? Is the experience of dealing with your law firm, despite the stress of their legal challenge, more than satisfying? Are they being cared for? Demonstrate that you care for them and care fully.
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In August 2009, the California legislature enacted a law requiring the State Bar to examine how it governs itself. I don’t think any other state in the Union has a legislature overseeing the bar. This is usually a function for the State Supreme Court. However, in California, since the 1920s, the Bar must get permission for it to send out dues bills to members; thus, the legislature has the power to impact the legal system through the back door.
Does this remind you of law firms whose compensation structures govern what its lawyers find to be important? If the firm emphasizes and rewards new client acquisition more than work performed, that is what lawyers will spend their energy doing ("eat what you kill"). If, on the other hand, the firm compensates more for hours expended, then focus on new client generation will go down and billable hours will go up.
The same is true in the relationship between the bar and the legislature. Today, with less than 30% of the members in the legislature having a law school degree, there surfaces an animosity between lawyers (the bar) and those (the legislature) who approve the dues to be paid by lawyers to retain their license. Oh, did I forget to say? California is a mandatory license state, meaning that you must be a member of the State Bar in order to practice law. Voluntary bars exist at the county and local levels, not at the state level. The state is mandatory. Voluntary bars exist, but only at the local (county and city) levels.
So, what’s the big deal? The fear by legislators is that a self-regulating body (more than half of the Board of Governors are elected by lawyers; others are appointed by the Governor and others) will serve the interests of their constituencies, not the public interests. I thought that was the whole point of public members being part of the Board; they are, they participate and they have a significant influence from the Board. The legislature wants the Bar to "protect the public" only; the well-being of lawyers is unimportant.
More than 50% of lawyers earn less than $100,000, a relatively paltry sum when considering the number of years of education required and the good that lawyers provide. (Yes, I know there are a few bad apples, but that is true in every profession … hmmmm, even with law makers.
If lawyers were helped by the bar and did earn more money, there would be far less temptation to invade clients’ trust accounts. This would be real public protection.
I have yet to find a set of rules of professional conduct that favor lawyers over the public. And what the rules of professional conduct does not "catch," the penal code does. And sometimes rules are made that hurt the public. For example, in the loan modification fracas, the legislature enacted a new penal code provision that made it a felony to take money from clients for loan mod work before the work is done … can’t even take money for the clients’ trust account! The rules of professional conduct were similarly altered. But, no intelligent, business savvy, lawyer would now represent such clients unless pro bono. If the client has insufficient funds to keep the mortgage current, what makes legislators believe such clients will pay their lawyers after the modification is completed? The clients didn’t suddenly get flush with money! So, lawyers will not now help the people who need help the most, those about to be kicked out of their homes …
A new wrinkle to this, however, is that the law seems not to apply when a lawsuit is filed. So, the lawyer might take the client into bankruptcy or sue the lender on some pretense, all with the ultimate objective of merely getting a loan modification. This is more costly and adversarial than needs to be … if the law makers kept their hands off! There were already rules on the books sufficient to punish the "bad apples" in the profession who were guilty of fraud on the clients.
Back to the main point: If the legislature removes governance from lawyers, the resulting agency will be merely a licensing and disciplinary agency … and lawyers who volunteered their time and expertise to the bar for the benefit of many in the public and produced much good work will go elsewhere. That would be a grave loss that will hurt the public.
The Bar should push back and fight the legislature … All the more reason for the separation of powers! Let the legislature do its job … and this does not include determining how lawyers govern themselves.
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From Michael Bryant of CTS Consulting in Baltimore comes these gems of phrases to ditch now:
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It isn’t fair.
Translated: I didn’t get my way.
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I’m too busy.
You’re not “too” busy; you’re as busy as you are. “Too busy” means I over planned, or over promised.
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Insurance companies hire lawyers as in-house counsel at reduced (wholesale) rates, pay lawyers in accordance with insurance policies for their insureds, and otherwise have a dramatic influence over the billing practices in the legal community. Wasn’t it insurance companies in or about the 1960s that demanded lawyers submit bills that showed the time expended in matters for which they pay? And then, as a consequence, lawyers began using time increments as a basis for pricing, not just as a management tool. Before then, lawyers based their fees on the value received by the client.
Perhaps the insurance industry will, once again, have a dramatic impact on the legal profession, but indirectly this time. In Rhode Island, it’s reported that the Lifespan hospital group and Blue Cross have reached an agreement intended to overturn the way hospital care is financed. The goal is to promote and pay for health (value) rather than episodes (hourly) of treatment. Currently, when you go to a hospital, you pay (and the insurance company reimburses or pays directly) for your stay in the hospital, for tests performed and surgeries and related care. Does this remind you of the hourly bill that lawyers produce monthly (hopefully no less frequently?.
The agreement is the first to meet Rhode Island’s unique rules concerning health insurance policies and their premiums. Blue Cross, the largest health plan in the state, and Lifespan, the largest provider in the state, have agreed in principle (details yet to be worked out). The program will provide for fixed fees (alternative, or value, billing) for given procedures, thus discouraging tests and procedures that might not be needed – but usually performed because of insurance payments or attempts to make sure “no stone is unturned” in the treatment. Does this sound familiar? Performing more discovery than needed just to make sure “no stone is unturned” and to avoid an accusation of malpractice for failure to uncover the hidden evidence.
The hospital will be eligible for bonus payments when they meet as yet to be determined quality standards. Again, does this sound familiar? Bonus payments for faster resolution of the litigation, payment for results below the insurance company’s reserve or other standards determined by the parties. Almost sounds like a sport’s figure’s bonus payments when playing more games or hitting more home runs, etc. than set forth as minimums in the contract.
Increased and more effective communications and streamlining payment processes to increase the hospitals cash flow are also part of the agreement. Again, does this sound familiar? When lawyers have effective communications in place, it is seldom that the client is upset with the lawyer and it is seldom the client refuses to pay in accord with the engagement agreement, thus increasing realization rates for the lawyer.
Tying payment to quality care is available elsewhere, but to a modest extent and never before to an entire state. The insurance commissioner in Rhode Island is mandating change in connection with premium rate reviews. As they say elsewhere, “follow the money.” In this case, when customers demand change, suppliers change. Here, the review process for payment of insurance premiums and health care will change, not overnight, but quite assuredly … only because the customer (or regulator) demands the change. When will clients of lawyers finally say “enough is enough” and demand change? Until then, lawyers are not likely to alter current billing practices
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In today’s WSJ, a lead article talks about the courts in New York requiring the lenders in foreclosure suits to be honest in the filing of their documents. This follows the Florida cases with "robo signers." Affidavits claiming full knowledge of the facts of each matter were signed by employees of the lenders and the mortgage servicing companies as well as improperly notarized. Lawyers are being blamed for filing defective documents.
Lenders made the loans, their servicing agents prepared the information and signed the affidavits under penalty of perjury. Yet, the focus of attention seems to be falling on the attorneys. Somehow, attorneys are expected to verify that their clients are telling the truth. I thought that was the function of the trier of fact, either the jury or the judge. What am I missing here? Or, is this just one more case of seeking to toss the blame anywhere but where it belongs.
Lawyers in our system of justice are the messenger. Lawyers present the evidence in the light best suited to tell the client’s story … but it is the client’s story … and the only obligation on the part of the attorney is not to allow known perjury to be placed before the trier of fact. How and why is that now being altered?
The mortgage companies are now saying that the cost of foreclosures and loan modifications will increase, hurting consumers! Wow, it is an affront to human intelligence to suggest that the cleanup of their corruption (filing false documents with the court) will cause consumers to pay more!
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The current political mood of the country seems to be that "less is more," at least when it comes to government intervention. A student of American history will note the changes and mood swings between federal/national involvement and states’ action. On reflection, we may be going through one of those swings now.
A similar reaction is being generated by the mere mention of the American Bar Association reviewing the Model Rules of Professional Conduct to determine whether new rules should be created or old rules modified in reaction to the new technology. The problem is that new technology such as social media is merely a distribution method of ideas. Rules already exist that deal with statements to the public, advertising, self-promotion and the creation of attorney-client relationships, just to mention a few.
There is nothing inherently wrong with the ABA reviewing the rules. But, sole and small firm practitioners are fearful that the ABA will not stop at merely a "review." And, as Carolyn Elefant so eloquently pointed out, the members of the task force/commission that are reviewing the impact of the social media are, themselves, devoid of any personal experience with the media. That would be like someone with no newspaper experience at all seeking to create rules of procedure for the newspaper industry. Or someone with no automotive experience trying to design a car.
Here, the case can be made that there are now rules on the books; more are not needed.
Strange how this discussion takes me back to the conversation about the Bar preventing lawyers from taking retainers to do loan modification and loan foreclosure prevention work. Who does the Bar represent anyway? Ah, but that’s another question for another day.
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I’m seeking to connect with lawyer(s) who either did or are currently doing loan refinance work for homeowners. In some states, the bar and/or legislature has created regulations preventing lawyers from taking money from clients for this work in advance of completing the work.
I’ve written about this and now have a major newspaper interested in talking with such lawyers to inquire whether such work is still available and how the lawyer is handling the fee.
Please contact me directly at edpoll@lawbiz.com
Thanks.
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