Thursday, August 31, 2006

Widespread Billing Fraud at the Nations Largest Firms! A Call To Action in a Crisis of Conscience

The Wall Street Journal reported yesterday that a partner at one of the nations largest firms, Holland & Knight, blew the whistle on its firm for billing fraud that potentially resulted in $100,00 in bills for time that was never put in! This is the first time that a lawyer has had the courage to speak up about what has been described as the "perfect crime" in law firms that bill by the hour. What's worse, having interviewed hundreds of attorneys, partners and associates alike, from some of the largerst firms in this nation I can tell you that many of them have readily admitted that billing fraud, bill padding, and "creative" billing practies are a part of daily business at their firms. It begs the question: How can you ever trust your law firm that bills you by the hour when they make more money by billing you for time and the client has no real way to ensure that the time was put in? This is precisely why we started Exemplar Law Partners and have abandoned the billable hour in favor of a fixed-price model. No surprises, no hidden charges, no FRAUD!

It is time for a call to action for attorneys and clients alike. I always go back to Malcolm X's saying: "If you are not a part of the solution, then you are part of the problem." To deny that billing fraud is a widespread practice is to have your head in the sand. To admit it and not speak up and DEMAND investigation and an end to the practices that ruin an honorable profession is to be no better than the firms and attorneys who commited the fraud on the clients they claim to serve. Will the true leaders in this industry please STAND UP? I welcome the leaders and change agents in this industry to stand with me in making positive change in the legal profession. The fact is that "You've got to stand for something, or you'll fall for anything." At Exemplar Law Partners, we stand for making a difference in our profession. For those attorneys out there with the courage to be a part of the solution, I welcome you to email me about opportunities to join a revolution that promises to bring consumers of legal services the integrity and service they deserve out of their law firm!! No Hourly Bull! - I promise to repond.

Sunday, August 27, 2006

Accountability: What Most Professionals Hate and What Makes Me a Better Professional

The oddest thing about traditional partnerships is that everyone wants a say in everything and yet NOBODY wants to be accountable for anything! Does this situation sound like your law firm? David Maister writes masterfully about this issue in his book True Professionalism. I was sitting down to dinner tonight and reading his book for the 3rd time and got to Chapter 6 entitled "Are you willing to be managed" where he so correctly points out that "To choose a goal without being prepared to be accountable for progress towards it is to chose nothing." You might expect me to go on to discuss how most lawyers are difficult or impossible to manage, but that would be a better subject for a book than a blog. This blog is actually about me. You see, I have chosen to be a leader of a professional service firm that has put its vision and values out there and am thankful every day to have a team of attorneys and executives who help me to be the best I can be. So what, you ask? Well, I know that if I am going to be an effective leader of an organization with such high standards I also have to be accountable to be an "exemplar" of the values that we espouse. The great people that are the heart of Exemplar deserve to have a leader who strives for excellence as a professional and who holds himself to the highest standards. I am far from perfect and have a lot to learn, but as Maister puts it "It is okay to fail, but unacceptable to fail to try."

Exemplar has eight core values: Excellence, Leadership, Integrity, Team, Trust, Respect, Communication, Equanimity. In order for these to be living values in our organization, they first need to be present (always) in the leadership of Exemplar. At Exemplar, our team has "rights" to take any members aside to talk about how we can improve in any of these core values. Although I feel I have a good sense of the values, I also count on having good people around me who I can count on to hold me to the highest standards with respect to our values. You see, talking about how we can improve as professionals and as leaders is not an act of punishment but an act of caring. Maister calls it the "courage to care" because we as professionals have to consent to receiving feedback from our colleagues on values. Most would fear what they would hear. What's more, at Exemplar we each agree that it is mandatory to hold each other to the highest standard with regard to our values. This creates an environment of candor and openness that has helped me to grow more as a professional than ever before in my life. Ron Baker writes in his book The Firm of the Future that "people do not care how much you know until they know how much you care." That statement is right on! Being a professional at Exemplar is not about showing the world how much we know, it is about showing how much we care, because our customers will be the first to say that there are thousands of lawyers who know at least as much . . . and yet very few customers feel that their former lawyers really cared about their business. We are accountable to our values because we have the courage to care. It is not something that can be packaged into marketing materials, nor is it something you can pretend to do. It is the Exemplar way. . . and one reason that so many of our customers have chosen Exemplar.

Sunday, August 20, 2006

The Curse of the Peter Principle: A Crisis of Incompetence

For all of those who do not know the Peter Principle, it is the principal that "people tend to get promoted to their highest level of incompetence." It's most common application is to management . . . since most people seem to get promoted because they are good at what they do and management (at some level) becomes a part of their responsibility whether or not they have any skills in that area. We all know some (or several) people who should NEVER be managing others. The largest Gallup study of profit centers in this country revealed that people do not leave companies, they leave managers. It doesn't seem to matter how good the talent coming in really is if the managers suck at what they do. Would you be surprised to learn that it is almost unheard of for lawyers to go through management training? Do you actually think that partners at most firms are held accountable for being good "managers?" Given your answers, are you surprised that law firms are experiencing the highest attrition rates ever? If you want to know how bad the "management crisis" is, just count the number of books written on the topic in the last decade.

The epidemic in the law is real and systemic. I will outline my view of the problem and propose solutions below:

1) It starts with the training and mentality of lawyers. In law school, students are not learning the law, they are learning a new way to think. They are learning how to "find" the law and how to be resourceful. With naturally high egos and resourcefulness most lawyers actually believe they can do just about anything well. It is time for the reality check that managing professionals is a real skill that requires training and competency in the area. Firms need to take this seriously to retain their best people. (Read David Maister's book "First Among Equals" for a crash course)

2) Create up-ladders that do not have "bundled" management responsibility. If you do not, you cannot avoid a Peter Principle problem because not all of your performers have a natural management skills (in fact, most won't). At Exemplar, it is our mission to be a "Peter-Principle-Free Zone!" We will not position our people to fail by putting them in a position that does not leverage their talents and minimize their weaknesses: It is cruel to them because it will be the least favorite activity of their job, it is cruel to the people they lead because they deserve better than that, and it is more costly to the organization than any firm has the means to calculate. We have created up-ladders that are tailored to the individual's talents and strength and are designed to minimize one's weaknesses.

3) Managers ought to be compensated (and accountable) for being good managers. (Yes, this is far more logical than it is common) If you want them to think only about themselves (which is the message being sent by most law firm compensation systems today) then you will only compensate based on metrics having to do with their core function as an attorney. (Thus, you just want them to fish). If you want them to play for the team and teach everyone to fish then you have to compensate to motivate! What do you think will be more profitable for the firm, a bunch of individualists out for themselves, or a team that is helping the organization to move forward at every turn? At Exemplar, attorneys at not "endowed" with a management function by virtue of being experienced. The attorneys who manage are "selected" to lead and manage people based on skill and ability.

4) Create Mangement Standards: Should one associate's experience in your firm be drastically different from another just because they report to different people? Of course not, so why would you let you lawyers treat their reports any way they want with no oversight? Just like needing to make sure that your customers have a consistent customer experience with your firm, you also need to make sure that the heart of your organization (your people) have a consistently positive experience in your firm. If you truly care about your people then you have to create management standards that your managers are accountable to and the best people to review them for compliance is, yes, their direct reports! The days where role and power do not accompany accountability need to be declared "OVER" in order to move your organization forward. At Exemplar, we think much harder about positioning our people for success because role and authority most certainly comes with the corresponding amount of accountability.

Summary: The Peter Principal crisis is not unique to the legal profession. What is problematic is that the Peter Principle is a significant problem given current large-firm pyramid structures and committee-based decision making schemes, yet it is not as significant a discussion topic in our industry as it ought to be. At Exemplar, we believe that a Peter-Principle-Free-Zone is the key to creating a boundaryless organization. This is a significant challenge and takes a serious dedication of time and resources, but our people will know the difference and be positioned to soar to heights that they could not otherwise go!

Monday, August 14, 2006

The Dirty Little Secret About Hourly Billing and Low Professional Satisfaction!

What most people don't realize is that the modern complaints about corporate law practice can actually be attributed to the billable hour model. In this post, I will specifically address how the billable hour model causes low professional satisfaction, low morale, minimizes communication and mentoring, and produces high rates of attrition in firms. The purpose of this blog to to explain why, after decades of increasing problems in all of these categories, firms have failed to address the problem:

HISTORY: Billing by the hour did not even start as a widespread practice in the US until the 50's, before which lawyers used to give a fixed-price for their services. Average billable hours in the 1960's were about 1600 hrs. Every decade since and in an effort to make more money, law firms have increased their billable hours to a present day average of well over 2000 hrs per year. Also note that since the 1960's we have not managed to find a way to shove more than 24 hrs into a day. People still have to balance work with family life, health, and everything else. (In fact, in the past 20 years the need for a more flexible workplace has increased significantly as women entering the workforce has increased to 50%)

FACTS: Let's take a look at the billable hour revenue model and see if we can make a connection to the problems listed in the first paragraph. If partners of a big firm sat around a table and said "How can we make more money here" what would the answers be? Here are the obvious answers:

Idea 1: Let's raise the billable hour quotas. Then, our people will work harder and make us more money.

Idea 2: Let's raise our hourly rates. Then, we get more money for doing the same thing.

NOW, here is the answer that most people do not think of and that explains why firms have not addressed the problems above:

Idea 3: Let's keep work at the top. If we convince clients they need an expert at our highest rates then we can have out top partners bill work instead of delegating to our cheaper, younger associates. Even better, if we do that we will save millions by not having to take non-billable time to mentor our people!!! (Note that mentoring takes a unit of non-billable time for both the mentor and the mentee if done ethically)

THE LINK: You see, systemic underdelegation is said by legal market experts to be an enormous problem. Underdelegation makes firms money when partners do legal work that is below their competence level in order to bill higher rates to the client. When this operates as an economic system within a firm, you end up with a workforce that is entirely underchallenged. This also means that firms do not have to invest in mentoring their people, which minimizes communication and relationship development in the firm and is responsible for the low professional satisfaction and high attrition rates in our industry. The funny thing is that our whole business is about people. People are the product and most firms have a system that creates financial disincentives to invest in its people. With that said, does this better explain why law firms are unable to change? For the attorneys reading this post who work in firms that promised you "work-life balance" and "mentoring" in their marketing materials, do you think they actually delivered on their promises? (Please write me and let me know).

THE SOLUTION: A Fixed-Price model. We already know how it is better for the client. Let's talk about how it is better for people. In a fixed price model the revenue for a project is fixed. Therefore, profitability depends on the efficient delivery of legal services. Now the incentives are completely flipped from the billable hour model. In a fixed price model, profitability requires us to delegate down to the lowest competent level and mentor the heck out of our people. Here, with higher profitability comes a great product at a fixed price, along with a attorneys who are challenged, always learning, building relationships through mentoring and communication, low attrition and high professional satisfaction. (Note that there is a high correlation between happy people and happy customers). There is no better model than one that puts its people at the heart of its business. The billable hour model puts people last. All of the marketing materials in the world cannot create a people-centered law firm if the business model is wrong. This systemic problem explains why firms are structured out of providing the kind of lifestyle that most attorneys entering the workforce today are seeking. Exemplar has found a system that works; one which recognizes that the most successful businesses in the world put their people first. We have put our money where our mouth is. Would you want to work with a firm that won't?

Sunday, August 06, 2006

A Golden Map is Useless Without a Destination in Mind!

A golden map is pretty useless without a destination in mind. With just a golden map and no goal, you can drive around wherever the roads may lead and admire the etchings in your golden map, but at the end of the day you've spent a lot of money on gas and are just as lost as you were when you started (but you continue to rationalize your journey on the basis that you know where you are on the golden map, right?). This would be just fine if you had all of the time in the world and you were the only one in the car, but unfortunately most lawyers take their clients with them. You see, when lawyers bill you by the hour they are not required to tell you where they are taking you (SCOPE -- you have a right to ask, you know!). Many of them gain years of specialized knowledge (golden maps) and they waive them in front of you so that you will get in the car. The most specialized ones take their golden maps and promise that they can get you there faster with their golden maps (and many clients believe them without asking the all important question "where is there?). What if your taxi driver told you the same thing? Would you get in a cab without knowing your destination (after all, they bill you by the 1/8 of a mile)? You see, without a destination you are lost. . . even if you have a golden map. The reason I worry about what roads my cab driver takes has everything to do with the fact that he is billing me by the 1/8th of a mile (when I want to get there faster) and nothing to do with whether or not he has a map handy! (If you think about it, I never chose a cab driver for his quality map because most of the time I am not going to the moon. Perhaps we shouldn't choose our lawyers that way either) At Exemplar, we recognize that our customers want and deserve to know where they are going and the price for the journey. We accomplish this by working with the customer to clearly define the scope of every engagement. They know and agree to the roads we will take on the way and are empowered with OPTIONS! They know where they are going and we are proud to take them there. Suddenly, customers realize that they don't need a rocket scientist of a lawyer with a golden map (sans destination) to complete 90% of the legal work that they encounter because it is more important to know where they are going than to know they have a genius working for them who makes more money the longer he takes. I don't get in a cab and let the driver drive me around aimlessly and I wouldn't let my law firm do it and bill me for it either. Fortunately, customers now have a choice in the marketplace. You would be surprised how much peace of mind you get when you know where you are going and are on your way (the Exemplar way)!