Category: Marketing

Verizon customer service – REALLY?

Two weeks ago, I purchased a Motorola Razr Maxx from Verizon and an iPad. I’m happy with both, but both need some adjusting. Perhaps I would be more correct in saying that the owner of the devices needs some adjusting … or relearning.

In any event, I went into Verizon this afternoon, the same store from where the purchases were made., and asked for assistance. I was told that they now have a new policy:  They would help me if I want to buy a new device or accessory. But, they would need to make an appointment with me for another time if I want to ask questions or get some help about the devices I already own.

The old policy was to wait your turn until a representative had finished with a current customer and was available to meet with you. That seemed fair.

Apple, a much larger store, will put you on their list and you wait your turn. Yes, they will also make an appointment for you at the Genius Bar. And there are many knowledgeable sales people walking the floor who can answer most of the questions I’ve had … and are willing to do so.

This reminds me of the lawyer who plays telephone tag with a client … to the frustration of the client. If you’re not in when the client calls and cannot return the phone call quickly, have your assistant make an appointment. It’s clearly better, however, to take that call on the first attempt if you’re in the office. Failure to connect is still the #1 complaint against lawyers.

Verizon does not seem to get this simple fact of customer relations! Do not let the customer go away angry because you are unwilling to answer his/her questions about the device you sold. Oh, yes, I forgot. They can be as nasty as they want because they have you tied to a two year contract!  Just think what would happen without that contract? I’d be back at AT&T in a heartbeat!


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“Caveat Emptor” Is No Way to Practice Law

In the Opinion section of today’s Wall Street Journal, two fellows from the Brookings Institute espouse their philosophy for deregulating the legal profession:  Let anyone practice law; whether they’ve gone through law school or not, and allow anyone to own a law firm.

These are not new ideas, but the assertion that these ideas are the key to lowering costs of delivery of legal services is misplaced.

First, the licensing of lawyers is to protect the public; they are not there to protect the interests of lawyers. For example, an individual must be competent to represent and advocate for the interests of a client.  It’s the same principle as licensing doctors.  Incompetence either in court or in the operating room can cost people their lives.

Second, technology provides many avenues to reduce legal costs. Removing the licensing requirements has no impact on this issue. Yes, requiring a license does cost money and does cost time (opportunity costs for the student), but it also impacts the quality of services delivered … just as in the case of medicine (oh yes, and plumbing), etc. Why not remove licensing requirements for everyone in everything, from medicine, to plumbing, to driving a car. Licensing assures a minimum standard of quality. Licensing requirements in specific areas of human endeavor are society’s way of self-protection. Caveat emptor is acceptable, but not to the degree apparently desired by the authors of the Brookings report.

If lower legal costs are the objective, the argument should focus more on the pricing modalities as they impact the cost of legal services rather than the governance of the law firm. We’ve talked about this on previous occasions.

Third, the underlying premise that licensing provides an insurmountable barrier to entry and substantially raises costs by controlling supply might be true if one doesn’t look at the facts of recent and current reality. There are many more lawyers than the current demand can accommodate.  Many lawyers cannot find work. Thus, it is illogical to suggest that licensing is the cause for higher legal costs. Those lawyers who are working often provide legal services at lower rates than they used to charge. Even large law firms find significant resistance to raising their rates. Are legal expenses high? Yes, but compared to what? How low should these prices be before they are acceptable? And, if there is no regulation, we might likely see larger law firms pattern their pricing after one another, just as the unregulated airlines currently do, so that the benefit of lower costs would not be evident.

There is no price regulation now in the airline industry. Yet, it’s remarkable how similar airline prices are. Yes, there are a few low cost airlines such as Southwest. And, yes, there are also lower cost law firms as we sit here today, even with the regulations we have in place. The only benefit of the authors’ "non-licensing" proposal would be the destruction of minimum standards of quality. Caveat emptor might be acceptable if the public had a way of knowing what the quality standards should be … but they don’t and they won’t.

Combining other skills such as accounting into one organization (the old "multi-discipline" argument) is not required … many law firms already work closely with allied professionals for the benefit of clients. This is merely a non-issue.

Dewey, which went into Bankruptcy Court last night, did not fail for lack of credit. The firm had been extended bank lines of credit. It failed for lack of effective management. It’s unlikely that investors or others would have given Dewey more money if they understood the true nature of the firm’s economics and governance. Thus, this is also a non-issue for the authors’ arguments.

In sum, law firms function no differently from all other businesses. Good, solid business decisions must be made to attract customers/clients and operate cost-effectively. Dewey failed on both counts. The arguments put forth by the authors would not have changed this outcome. But, in the terms of business, by going into bankruptcy, the firm may be able to disgorge its unfunded pension obligations and become a viable candidate for acquisition by another large firm.  That’s when the principle of caveat emptor really comes into play – as a normal risk that businesses take every day.


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Generation warfare will grow in law firms

In a recent issue of a major legal publication, as reported by the American Bar Association, the magazine looked at pension plans of law firms. It appears that a number of the country’s largest law firms have pension plans that are unfunded. In other words, these are firms with pension plans, but without money to pay the obligations of those pension plans as their lawyers retire. What we will increasingly see are law firms with the bulk of their lawyers leaving the practice for retirement with the hope and prayer that the fewer remaining, younger partners will be willing to fund the firms’ obligations. We will also see many situations where these younger lawyers will find it to their economic advantage to torpedo the existing law firm and its pension obligations in exchange for creating a new firm with no pension obligations. Doing so will give them the opportunity to take on more of the revenue that is produced by their efforts. They will earn more and pay less.

This phenomenon will exacerbate the generation warfare that is building in today’s law firms.


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Law market segmentation – It marches on

The Wall Street Journal, perhaps reflecting the concerns of its corporate readership, continues to emphasize what it considers to be the overpaid lawyers at the pinnacle of the profession.  In a recent article that had the less-than-subtle title, “Biggest Lawyers Grab Fee Bounty,” the Journal reported that partners in the top 25% of more than 4,000 law firms examined in a new study boosted their average price to $873 an hour last year, up 4.9% from 2010.  At the same time, the lowest-billing partners struggled to keep pace with inflation. Partners in the bottom 25% of surveyed firms charged an average of $204 last year, up just 1.3%.  As the paper said, “That disparity between who can raise prices – and who can’t – spotlights a growing segmentation in the $100 billion corporate legal market.”


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The Business of Law® confirmed again

Once again, it is confirmed that law practice is a business. As I’ve been saying since I received the registered mark for The Business of Law®,  law practice is a business. Yes, it’s a profession AND also a business, a service business.  Dewey & LeBoeuf confirms this. 

This large, national law firm has just retained outside bankruptcy counsel. Why? To consider whether they can create a controlled bankruptcy … filing a bankruptcy application with creditors and potential acquirer already in place. The beauty of such a filing is that it will i) stop the bleeding of lawyers leaving the firm a few at a time, ii) eliminate the unfunded pensions that would be a drain on the firm assets and future revenue, and iii) enable another firm to complete an outstanding acquisition quickly with a clean balance sheet and revenue stream intact.  A side benefit of eliminating the unfunded pension obligations would be to avoid generation warfare that frequently arises between retiring partners and younger partners left with the responsibility of using current revenue to pay for the old debt.

This process is precisely the same process used by so many other companies, including some of the large companies in the recent financial crises that survived, but in different configurations. This is the same process as the airlines are implementing today … to reduce their obligations to labor. This is the same process being contemplated by a number of prominent government entities (cities and counties) to get rid of their unfunded pension obligations that are expected to require more than 60% of their current tax revenues.

So what is different about Dewey? Nothing. We are in the world of business, The Business of Law®.


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