Tag Archive: Management

Innovation Does Not Occur in a Year

Getting paid by the hour stresses us, according to Frank Partnoy. He says that "(i)nnovation doesn’t occur in a year or a quarter—and certainly not an hour. So why measure work in too-brief increments?"

This is a novel rationale for moving toward the fixed or flat fee billing concept and away from hourly billing. During the 25 years of my law practice, I remember how stressed I was, always seeking to make sure that I had accounted for my time … and correctly billing my clients. During the last 23 years of coaching and consulting …. and only flat/fixed fee billing, I’m focused on my clients’ condition and how I can improve it, not on how much time it takes me to do so. As Partnoy says, "Clocks and calendars are not going to change — so it is up to us to try to get off the clock, especially when we find ourselves watching it." (See Parnoy’s "Wait: The Art and Science of Delay.")


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Blogging Power

Verizon – Redux:  The power of blogging is apparent when Verizon calls me the day after my original post in this column about their service, or lack thereof, to ask how they can address the problems I raised.  I glad to say that the issues I raised have been resolved. The process, however, is fascinating to me.

The day after my post, I attended a conference conducted by my own business coach, Alan Weiss. While there, coincidentally, Verizon Fios was conducting a sales training program. I talked to one of the folks running the program, who then introduced me to a district manager. He knows the store manager where my incident occurred and said he would contact him. (I have still not heard from him.) Also, during the day, another higher up attempted to reach me by phone. On my return later in the day, I returned the call … and we finally connected. 

The billing issue that arose after my purchases was resolved to my satisfaction, and I learned more about Verizon.  One,I was told they outsource their collection issues rather than first seeking to resolve any questions internally.  To my way of thinking, this is a mistake because most billing issues result from the actions of the creditor.  And, in the case of lawyers, unresolved billing issues could result in a malpractice action. Wouldn’t it be better to address the billing issue, resolve it and retain the goodwill of the client, not to mention the client’s future business? Verizon, being in an oligarchic position, apparently, doesn’t understand the nuance. Of course, collection is not their strength; sales and service is. But, I would think that better collection techniques could enhance rather than destroy customer goodwill.

Second, I learned that neither he store level nor the first contact person can resolve these issues. They have to be pushed "upstairs." In this case, it was another district manager who had the authority. One of the lessons learned from Ritz Carlton Hotels (now a division of Marriott) is that all front line personnel have the authority to spend up to $2,500 to satisfy customer complaints. SAS, the airline, after their bankruptcy, pushed all decision-making authority down to the lowest level. This process made sure that customer issues are resolved as quickly as possible; that the sour taste of complaints does not remain with the customer longer than need be; and that senior folks are focusing on what they are hired to do … not to settle what usually amounts to "small" issues.

In the case of lawyers, value is in the eye of the beholder, the client. Lawyers can/should adjust bills in order to match value as seen by the client. Most billing issues, in my opinion, are set up by the lawyer in the first intake session. A full discussion not only of the matter, but also the fee to be charged for the matter, will likely avoid most billing problems … and assure the lawyer is paid on time and in full.

Next, I learned that Verizon is experimenting in our geographic area (Southern California) with requiring appointments so that customers can better plan their time and be served without interruption. I commend the company for seeking to offer better service. I believe (this is unsolicited feedback) that a combination approach would work better …. that is, make appointments and serve "walk-ins" if / when their representatives are available. It is difficult to manage any large company. Verizon certainly is in this category. But, then, so is Apple and Apple, among others seems to be able to address appointments as well as walk-ins.

Bottom line, I’m pleased with my purchases from Verizon, which included the new iPad and Motorola Razr Maxx, and I’m pleased with finally dealing with the other issues that arose. It was unfortunate that Verizon could not have handled our issues more effectively, with less turmoil, in order to retain that sweet smell of consumer purchase euphoria.


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The Problem with Bankruptcy Isn’t Attorneys’ Fees – It’s Executive Incompetence

In the Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.

Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your “normal” bankruptcy.

The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, it is insignificant in comparison to the compensation received by incompetent CEOs and others in the C-suite offices. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, which often is at astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may have more positive economic impact, it clearly is not sexy enough to sell many papers.

The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:

•    Though the lawyer applicant must disclose his/her hourly rate now, the Justice Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.

•    The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the client’s planned legal strategy.

In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. Such a listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit.  The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their own services accordingly, causing rates to slowly increase in lockstep over the years.

Intruding into the fees charged for practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either and the process should not be extended. “Transparency” is a bogus issue. There is no backroom conspiracy on how bankruptcy fees are charged. All the proceedings are public and must be approved by the Court before attorneys are paid anything.

Budgets are good. I recommend them to my attorney-clients with whom I consult. Budgeting is a process, however, between the client and the attorney. By requiring that bankruptcy budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors’ claims; and they have no right of confidentiality. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best windup of affairs in their economic environment.

Don’t worry about the lawyers’ hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before the company entered bankruptcy? Why are inept executives not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there? Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office.  Perhaps the fact that quite a few newspapers and newspaper chains (Tribune Co. and papers in Detroit, Denver, Minneapolis, Philadelphia and many other cities) have been mismanaged and had to file for bankruptcy has something to do with it, too.


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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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When a lawyer needs a lawyer

Have you committed negligence in representing a current client? Do you suspect you may have committed negligence in a current matter? Don’t talk about your mistakes with other lawyers in your firm! According to Richard Zitrin in his recent article in The Recorder, the courts have held that such internal discussions, even if used as a teaching device to make sure the mistake isn’t repeated, can be discovered in a malpractice case.  Only if you hire outside counsel and talk with such counsel are such discussions privileged. According to Zitrin, the client is owed the duty of competence as well as the duty of candid communications. These multiple duties trump whatever duty the lawyer may assert.

There is something wrong when you are not allowed to talk with other members of your own firm either to explore if something really was negligent, or how to deal with it for the betterment of all concerned and clearly how to make sure it doesn’t happen again in the future. I suspect that talking internally about the best way to talk with your client about the actions taken or not taken would also not be privileged. This conclusion, at least to me, is counter-intuitive.

While the rule seems to be clear in California, the rule is not so clear elsewhere. It can only be hoped that as this issue receives more light, there will be obvious exceptions for issues as I’ve noted above.


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Legal fees are high – according to whom?

In today’s Wall Street Journal,  staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.

Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your “normal” bankruptcy.

The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, by comparing this to the compensation received by incompetent CEOs and others in the C-suite offices, it is insignificant. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, oftentimes earning historically astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although  this focus may be more important for us to understand how our economic system works, it clearly is not sexy enough to sell many papers.

The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
•    Though the lawyer applicant must disclose his/her hourly rate now, the Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
•    The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the legal strategy to be engaged in by the client.

In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. This listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit.  The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their services accordingly, causing rates to slowly increase over the years.

Intruding into practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either. But, the process should not be extended. “Transparency” is a bogus issue. This is not some backroom conspiracy. All the proceedings are public and must be approved by the Court before attorneys are paid anything.

Budgets are good. I recommend them to my attorney-clients with whom I consult. This is a process, however, between the client and the attorney. By requiring that these budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors’ claims; and they have no right of privacy. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best of what is left to them in their economic environment.

Don’t worry about the lawyers hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before they enter bankruptcy? Why are they not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there?
Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office.


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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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