The Innovators Dilemma in a Billable Hour World

The last several conferences I have been to have been revealing with regard to the challenges that innovators face when trying to sell new products to the legal industry. The vendors all expressed how difficult it is to sell to law firms since decision making is so decentralized and because the logic for investing in new technology that works so well in "normal" businesses does not work in the legal industry. In fact, the logic is BACKWARDS. What do I mean, you ask? Well, if the legal industry is so different in that regard, you might find the root of the problem by asking what makes the legal industry so different from a normal business. Yes, since this is my blog, you can probably guess it is that the legal industry bills by the hour. Normal businesses actually tell you how much their product costs BEFORE you buy it! How does this impact investments in technology and why do you care? Here is the link. . .

In Normal businesses, you and your competitors give the customer a fixed-price. Since there is competition in the marketplace, you use every edge you can to gain cost efficiency so that you can offer your customer a better price than your competition and/or improve your profit margins or market share. Since your price is fixed, your profitability depends on your efficiency and investments in technology that improve your efficiency have a positive return on investment. This puts maximum pressure on companies to innovate and embrace new technologies.

Law Firms, on the other hand, bill you by the hour. The economics of this business model are exactly the opposite of a normal business. In the billable hour world, you make more money when you are inefficient. Since law firms are billing for time (and therefore cannot amortize the cost of R&D over the course of several projects -- eg. like a good template, for example) there is an incentive to reinvent the wheel for each client rather than build on solid foundations that we already know exist. Investments in technology that improve efficiency actually REDUCES revenue in a billable hour firm. The faster we are able to do things, the less money we make (that's really backwards, isn't it?). Technology has a negative return on investment in most firms. So, such investments are only made at the lowest-common-denominator level or when the customers demand it. Have trouble believing it? Well, there is easy math here. Billable hour requirements at the largest firms are at historic highs. With recent charges of billing fraud and padding at large firms, high attrition rates, and sweat-shop work environments, you can count on the fact that the pressures to bill more hours are enormous. With that fact, you can also count on the fact that the associates are not looking for "innovative ways" to make it harder to bill hours (to be more efficient) and partners who are getting rich by eating their young are also not looking for "innovative ways" to reduce their profits at the end of a quarter.

This leaves us with two types of technology providers to the legal industry: 1) Providers who have technologies that the practice of law more efficient, and 2) Providers who make non-legal activities more efficient. Here is what I have discovered about their fate.

1) Providers who have technologies that the practice of law more efficient: These providers fall into two categories:
A) Mass-market products (high consumption)
B) New Innovations

A) The category makes all of the difference in success. Mass-market products that are widely subscribed-to (Lexis and WestLaw are examples of these). They provide tools that actually make the lives of the attorneys who use them easier. The resources they provide actually do make lawyers more efficient and, arguably, reduce billable time. What makes them acceptable is that they are so widely consumed that it effects the competitive market equally (all boats rise with the tide) and these technologies actually serve as the "innovation floor" for the legal industry. In addition, the products are already being consumed . . . the partnership is not being asked to consider a "new" product that would change the way they operate. The firm evolves with the subscription.

B) The New Innovations have the most difficulty. The vendors I have spoken with cite tremendous frustration selling to firms, saying that they have been challenged by partners of firms who ask them "why would I buy your product? If I did I would make less money!". Sadly, it is true. The problem, however, is not the technology. It is a backwards billing model!

2) The true winners in the legal industry have been the products that reduce non-billable time. These new technologies are widely purchased because they are the only technologies that have a positive return on investment. With partners wanting to squeeze every minute out of each hour in order to bill their clients (as well as to get their associates to bill more), they happily purchase products that make non-billable time more efficient. These technologies can include document retrieval systems, or billing software (counting time for you), etc. Next thing you know, innovators might find a way to put a toilet in every lawyers office just to reduce the commute time (non-billable right?). Sadly, many big firm attorneys I know admit that they think about the client on the way to, and during, their bathroom break. It will show up somewhere on their timesheet. . . you can count on it. So, if the next time you get a bill from your law firm you notice that something stinks, You'll know that it's not just the service. . . . . it's, well, "pressure!"

This is just a glimpse of the innovators dilemma in the legal industry. In general, I find it quite backwards that the legal industry has adopted a billing model that promotes inefficiency and where investments in new technologies have a negative ROI. It is no wonder why the legal industry is one of the most stagnant industries in the nation. Hopefully, with the new trend toward fixed-pricing in the profession, we can be rewarded for innovation and provide customers with the service they deserve and a high quality product without reinventing the wheel!

Want More Clients? Get Over Yourself!

We have all seen the problem: Pride, Hubris, Ego, Conceit, Contentment, Smugness. Sometimes lawyers just can't get over themselves. It is as if they would rather be looking in the mirror to make sure every hair is in place than look at the client and ask "how can I serve you?" I am struck by the smug attitudes that some attorneys have with regard to client service, which explains why we are a service industry that is known for TERRIBLE service. Below I will describe a few attitudes that I recently encountered:

"If they are not my client yet, they should come to me. I am not going spend my time to visit them" -- To which I responded "Are you serious?" Am I missing something here? In my view, if you have a prospective customer that is worth having, a good attorney ought to bend over backwards to show them how much they care about the customer's business. You are asking someone to invest several thousands of dollars in you and your firm for something that is about as exciting as a trip to the dentist! The least you can do is invest a little to show that you care. In my view, this attorney's perspective represents a "taking" mentality, which is rather "old school" in my opinion. There are twice as many lawyers as a ratio of non-lawyers today as there were in the 1970's. We are competing for half of the business. If you want to be around in another 10 years, your going to have to learn to "give to get." You are not going to be desired as an attorney because you are smart. . . there are thousands of attorneys just as smart in the high rise right next door to yours. . . . . . . (smart lawyer is now nodding whilst looking out the window at competitive firms in ivory tower next door). . . People don't care how much you know until they know how much you care! In this day and age, smart lawyers are a commodity. . . . lawyers who really know how to serve their clients are a rare breed.

"All of our clients come to us. We don't need to 'market' our services" -- This is a funny one, because I hear this all of the time. Lawyers who utter these words smile with a sense of pride actually thinking that somehow their presence at the firm contributes to this phenomenon! They never bothered to use basic process of elimination or logical deduction (asking "if I were gone would that still be true") in order to figure out that the clients are not coming to the firm for them. This is where I introduce them to the word "branding" and walk them by their own marketing departments that they never knew existed. All dreams and ego being shattered, I refrain from telling them that it is the hard work of thousands of OTHER attorneys who created the referrals that give them their perceived "freedom." Is there a slavery analogy here? The only difference here is that most attorneys still think they did it all themselves! If they only knew what they looked like to the rest of us . . . the ones with their feet on the ground and some sense of reality. Someone should create a support group.

"I dictate my letters to my secretary" -- Really? You dictate your letters? Dictatorships never work! They are costly to your partnership. . . . thousands of dollars paying someone else because you can't get with the times and learn how to use a computer. Even worse, your clients are paying the bill . . . for you to talk into a machine, and then for your secretary's time to interpret your ramblings into complete sentences. I want the economy to be healthy too, but I can think of far better ways to create jobs! Can't you?

"I love the legal work, but I just hate talking to clients" -- I cannot tell you how many lawyers actually feel this way. They love the legal issues and absolutely dread client contact. Did anyone ever tell them when they entered law school that they were going into a SERVICE INDUSTRY?!@(*& NO TIPS FOR YOU! Proving that this is a recipe for disaster is an easy one. Let's say that you go to a fancy restaurant with great food and horrendous service. What will you think about your dining experience? Most customers I talk to have a bad taste in their mouth from the lack of service from their last attorney. At least half had indigestion. It's amazing how poor service can make the food taste bad. What's more amazing is how few attorneys understand just how critical the service element is with regard to client satisfaction.

Did you ever meet someone who was dangerously clueless? So oblivious that they are actually dangerous? Well, in my experience people with the highest egos who think they know everything are just too clueless to know how much they don't know. They are dangerously clueless. I would not go to a doctor if I knew his pride would blind him from a sound diagnosis. Would you? Well, next time you visit doctor ESQ, make sure that you are not being taken on a trip to prideville. YOU ARE THE CUSTOMER. You are in control. Demand excellence in service. Accept nothing less. Communicate your expectations and hold the professionals you work with accountable for serving you the way you deserve to be served. The price of professional ego is TOO HIGH. Don't be afraid to say "NO TIP FOR YOU!"

Dilution By Consensus of the Clueless - The Partnership Dilemma

I was inspired to write this post by an email I got from an attorney overseas who was discussing the challenge of getting agreement on innovative ideas in their partnership. The email sparked a memory of numerous conversations I have had with BigLaw partners who talk about how difficult it is to reach a good decision in a partnership meeting. Everybody wants to have a say in everything, and often the best ideas become so diluted by the end of the discussion that they have lost the very quality that made them good ideas. Most attorneys feel competent to argue their position on just about any topic (even if they have little or no information on the subject matter discussed), and this causes discourse and bad feelings among the partners in the partnership. This begs the question: How can you have a group of happier partners and higher quality decision at the same time? I would like to propose a win-win that we have implemented at Exemplar.

At Exemplar, we recognize that there exists a difference between having an interest in a decision and being self-interested. Every partner in a firm has a self-interest in a decision so long as the decision can be said to affect the partnership in some way. We can rationalize that since all decisions impact us, we should be involved in every decision. You see this all the time, right? Well, if that were allowed to occur in corporate America then the US economy would come to a halt. Law firms should learn a lesson from the most successful corporations that you need to hire great people into positions that match their expertise, and then TRUST them to make competent decisions. Yes, that means you may not have a say in what copy machine gets bought next month, or whether your firm uses a cash or accrual method of accounting. Is that really why you became a lawyer anyways? Below I suggest a better way:

OLD MODEL: Decisions are all made by committee and by consensus. Because lawyers are risk-adverse by nature and a great at scaring the heck out of each other with their nuclear "what if" scenarios (on any idea proposed), law firms get the lowest common denominator of innovation and creativity. By the time consensus is achieved, what you get is a product that still looks and tastes like vanilla (just by a different name). This explains, in part, our industry's failure to innovate at the speed of business. Now, here is the worse part! When the decision goes wrong, who do you blame? Nobody and everyone! Everyone blames each other and nobody takes accountability because they claim they just voted based on their opinion and it is not their fault that most people agreed. It is like a ghost in running the ship. You can't change the direction of the ship if you can't talk to the captain (the captain being the popular vote of whatever contingency showed up for the meeting).

NEW MODEL: At Exemplar, we still have committees and attorneys who are interested in a functional area of the business are encouraged to attend the meetings where decisions are made on those topics. Each committee has a chairperson (the one with the most expertise or substantive knowledge in the area relevant to the committee). In exchange for having input in the decisions, everyone splits up the responsibility of doing "homework" on issues so that everyone is invested in the decision and not just there to pontificate. Everyone has a chance to weigh in, but the ultimate decision is made by a committee chair based in part on the combined input and also on the TRUSTED expertise of the committee chair. After all, why have someone THAT GOOD in your organization and not TRUST them to make quality decisions. Now, you do not face the issue of having decisions get diluted by popular vote of strong personalities. If things go wrong, you have someone who has agreed to take accountability for making good decisions in the organization. What's more, trusting your colleagues sets you free! You do not have to worry about every decision if you trust in the people you work with.

I am always amazed how the largest firms in the nation manage to hire the smartest minds in the industry and yet many attorneys still do not trust each others' competence. This blog, on its face, appears to be about adopting a more corporate-like decision making model for a law firm. What I am hoping that you will see is that a condition precedent to adopting a more efficient and higher quality decision making model is TRUST. Without trust in an organization it will be impossible to make the change I have recommended above. Am I right? If you have an opinion on this topic I would love to hear from you. (I will post the results)

Making Policy: Linking Core Values to Compensation Part-1: Communication

Compensation experts say time and time again that "what you measure and compensate is what you get for behavior" and yet it is amazing how many companies fail to motivate the behaviors they want through their compensation system and then complain that people are not acting the way that they should. Many companies have "core values" that are no more than mere words on a page somewhere deep in an employee manual that never gets read. Even that is far beyond what most law firms have, since I have neither seen or heard of a law firm that touts of having a set of common values (other than vague references to integrity, quality, etc). The true test, of course, is to ask an employee to recite them. Our goal at Exemplar is to find a way to integrate these values into the evaluation and compensation system so that the values really do become common values. What seems to be the age old challenge is that the most important things are perhaps the hardest to measure.

This particular blog is about Communication, which is one of the 8 core values at Exemplar. Why did I start with this one? Because it is less common to have communication as a core value and I also believe it is among the hardest value of them all to measure (and very important). Why? Well, let's start with the fact that most people don't even know what the heck it really means. How do I know this? Well, we put in our job ads that we are seeking people with excellent communication skills. Hundreds upon hundreds of resumes come pouring in with candidates who claim that have such skills. After interviewing them it is clear that most people think "excellent communication" means that they know how to talk and complete a sentence. In fact, I don't think I have ever met a person who thought they did not have great communication skills, yet I also don't think I have ever met a person that did not know a long list of people who have terrible communication skills. This tells me that we all seem to be suffering from a crisis of self-awareness. One thing is for sure: Miscommunication is costly to an organization and often unnecessary, and no organization has ever failed because it over-communicated. Therefore, it seems to be a worthy mission to explore how communication can be measured and rewarded in an organization. Here is where your input comes in. I would love to hear your thoughts on the following questions:

1) Since most people are not self-aware of how well (or poorly) they communicate, the feedback needs to come from the people with whom you work. If the system is to be effective, the feedback itself needs to be constructive. If you were designing this system, how would you collect and deliver the feedback? Should you "rate" a person on a scale based on several adjectives that describe good communicators? Should it be open form to allow for examples and explanation?

2) Firm Yet Flexible: A system for promoting good communication needs to be firm enough to offer guidance on what excellence in communication means within the organization, but also needs to be flexible enough to accommodate various communication styles and cultural norms in communication. Since the people giving the feedback will not be communication experts trained to make evaluations against set standards (some of them will themselves receive poor feedback in their communication review), should everyone be involved in this process?

3) You all know and have worked with someone who was a terrible communicator. How much easier would your life be if that person communicated better? How important do you think good communication is in an organization? If you could find a way to evaluate and promote good communication through an evaluation system, would you do it?

I appreciate your comments and look forward to the discussion. Feel free to post them below or email your thoughts to me and I will either post them with a response or keep them private if you wish: cmarston@exemplarlaw.com

Reengineering A Broken Industry: Contribute to the Best Practices of a Firm Dedicated to Excellence

I always tell people that what we are doing at Exemplar is reengineering the practice of law into the business of law by examining why we do what we do and asking oursleves how we can make it better. Since we have opened, I have been overwhelmed with the supportive responses from attorneys and businesspeople all over the world who have written me personally with their words of support. Because I am dedicated to creating the standard in our industry and best practices that will shape the future of the business of law I am everyday thinking of how, as we shape our policy, we can ensure that we are making deliberate improvements on what has already been done or otherwise create it in the vision of what we think is best. This requires us to take on challenging questions like how to reward the most important qualities in one's performance (often these are the hardest things to measure). Because the readers of this blog seem to be as interested in positive change in our industry as I am, I would like to open the lines of communication between us and start a "conversation." For those of you who are interested in exploring those challenging questions and brainstorming with me on innovative solutions to challenging questions I will create additional blog posts that begin with the words "Creating Policy:" and I welcome you to think with me on how we can be the best we can be here at Exemplar. I will respond to thoughtful posts with good ideas and we can work on a solution together. Since I know that so many of you support Exemplar, I welcome you to be a part of shaping the future of the profession through your intelligent feedback, innovative ideas, and engaging discussions! I will look forward to your comments on my next post.

Don't Be A Wet Rag! Tips For Professionals Considering Fixed-Pricing

Pricing psychology is powerful thing. While fixed-pricing it far better for the customer and the legal professional alike, it is critical that it be done right in order for it to work in your firm. Many of the barriers to success in a fixed price model are psychological. Below are some tips that will help you to do a self-analysis and determine if fixed pricing will work for you.

Did you know that billing by the hour was an accident? Hourly billing did not become a widespread practice in the US until the 1950's, before which counting time was a costing method. Since then it has been the bane of a lawyer's existence and has spurred numerous debates among clients who hate the uncertainty of hourly billing. Do you know what is good about it for the lawyer? Well, lawyers avoid having to justify the value of their services when they bill by the hour since they just state their rate and start billing when they work. You see, attorneys have a lot of pride and hate feeling like they have to justify their value. A fixed-price model holds the professional accountable to providing and communicating the value of their services. The good news is that, if you are comfortable communicating the value of services you provide, you will find that there are many more value-adds that you can provide to a customer than a typical firm can (because an hourly firm can never make more than the profit margin that is built into the hourly rate. . . . therefore there is no incentive to add more value). Before you switch, consider whether you are confident and comfortable communicating the value you are adding to the customer in advance of doing legal work.

Don't be a WET RAG! Some lawyers are like wet rags. Since legal services are personal services, a lawyer's ability to keep "busy" is directly related to self-confidence. If a customer starts complaining about your hourly rate or fixed-price, you most likely start to lower your rate or prices (can you feel it? . . . . the customer is squeezing you, the wet rag, . . and you are DRIPPING). Think about the last time you held a wet rag. What did you do with it? (Yes, you rang it out). When did you stop ringing it? (Yes, unless you have OCD you stopped when the rag stopped DRIPPING. Are we getting the point now? In a billable hour world, it is no wonder that professionals lower their rates because there is no logical relationship between time and value to the customer, but in a fixed price world, your price should reflect the value of the services. So, you have to be confident in your value proposition. You have to know that it is more important to have clients who value your services than to take them all just to be "busy" and have a false sense of being valued. An airplane does not feel "sad" because all of its seats are not filled, and the airline executives are not scrambling to lower prices just to fill the seats. If you are considering fixed-pricing, ask yourself if you have the confidence in your value proposition to not be a wet rag. Know your value. Stand firm. Be prepared to walk away.

You get what you pay for. When people go to lawyers it is because there is something very important at stake. People are not looking for a bargain basement brain surgeon. A study of pricing psychology in the consulting market showed that the clients of higher priced consultants were actually more successful. Why? No, not because there was any proof that the more expensive consultants were any better than the less expensive ones. (Note that a Jaguar is built on a Ford frame). It is because people take their advice more seriously when they pay so dearly for it and they were substantially more likely to take action on a consultant's advice. When they took action they were more successful. It is a self-fulfilling prophecy. You get what you pay for. You are what you charge. Be valuable and act like it.

These are just a few considerations for professionals considering fixed pricing. Our industry has not scratched the surface in exploring how much more value can be added in professional services firms. The first and most important barriers to success are psychological. If you can break down the barriers of the mind, a whole world of opportunities will open up.

Our Satisfaction Guarantee. Does Your Firm Care Enough To Stand Behind Its Service?

I recall being asked why Exemplar Law Partners stands behind its service with a Satisfaction Guarantee and responding "It's just good business." What I find most interesting about it is that we are one of only two firms in the nation who stand behind their service with this guarantee. The very idea of offering a guarantee is horrifying to most firms because they know that we are a service industry not known for good service and they are afraid of what would happen if they were held accountable for creating a positive customer experience. For whatever it is worth, Exemplar has never had a single customer take us up on the guarantee. That is the kind of statement that speaks for itself. As a service industry, I truly believe that customers should have the right to have a positive experience and hold their professionals accountable for devliering excellence in customer service. Below, let me explain what I believe firms need to do in order to be able to deliver on a guarantee:

1) Hire good communicators or else keep them away from clients: Communication is the tool that we use to build meaningful relationships. This is a relationships business. If you cannot communicate well (and I don't mean argue well) then you are not in the game. Many firms are filled with brain surgeon lawyers with no communication skills whatsoever. In order to satisfy clients, you need to have a team of attorneys who can "communicate" how much they care about the client (not just the law) because "people don't care how much you know until they know how much you care!"

2) Set and adjust expectations regularly: There are few businesses that have the luxury of having such close contact with its customers as the business of law. Professionals often complain about customer expectations being unreasonable. What they are really admitting is an absolute failure to manage their expectations. If they are not manageable then they should not be your clients! In order to have happy customers we have to work with them to understand what they expect of us and make sure that we are able to deliver on those expectations. We also have to adjust those expectations as a case moves along (with good communication). Customers deserve to be informed and deserve professionals who will be honest and candid, rather than macho and illusive. Customers are not interested in paying for your ego, they are interested in getting the results they expect. If firms are ever to have a satisfactions guarantee, they will certainly have to learn to manage customer expectations and adjust them regularly.

3) Be selective about your customers: Most firms just care about whether or not you can pay for their services and not at all about whether it is a good "fit" or whether they can even deliver on your expectations. How do you know? Just ask your firms if they have origination credit. This is a sales commission that pays lawyers for bringing in any client who is willing to pay the fees. It is plain to see that this strategy is all about getting your money to line their wallets and is not at all a customer-centric policy. At Exemplar, we always ask ourselves "can we provide the kind of value you are seeking?" "Do you value what we have to offer?" and, equally important "Are you the type of customer that we want to work with?" We would rather spend our time serving customers that value us and are fun to work with. If you force your professionals to work with customers who are just there to pay your salary, you will certainly not be able to provide excellence in client service.

4) Ask customer what they think and hold professionals accountable. Let me say this again: Ask customer what they think and hold professionals accountable. Yes, that's right, I said hold professionals accountable. Do you think that your law firm holds meetings with each attorney to explain how they can improve in delivering service to clients? So, let me ask you this: This is a service industry, right? If you are a lawyer, you chose to be in this service industry, right? So, it should not sound so unreasonable to expect attorneys to provide SERVICE, right? If professionals at the big firms were being held accountable then perhaps most in-house counsel would not be so disappointed with them. In order to provide the kind of service that you can back up with a satisfaction guarantee, you will certainly need a team of service-minded professionals who have the courage to care and agree to be accountable for results. I don't know about you, but I don't remember a darned thing about what happened at my last doctor's appointment, but I do remember that he didn't waste my time by making me sit in his waiting room for an hour, he returns my phone calls, and I feel that he actually cares about my health. Competent lawyers are a dime a dozen. Layers who care and can show it are one in a million. If your lawyers care as much as their marketing materials claim on their websites, ask them to offer you a satisfaction guarantee as see if they will put their money where their mouth is.

5) Get Feedback, "Learn and Leverage"
One of the most valuable things about the satisfaction guarantee is the opportunity to find out how you screwed up. Most professionals start sweating at the thought of asking their clients where they went wrong or how they can do better. It is as if they are not allowed to be human. Seriously, firms need to have a centralized process for the collection and leverage of customer satisfaction data. A non-lawyer professional should proactively follow up with key customers to find out what works and what doesn't. This leverage can be used to set firm-wide customer service policies that attorneys are accountable to following. To make it easy for them, call it "The Law". Tell them, "the law can change at any time" and tell them to check "the law" regularly for changes and that they can be fined for violating "the law." (They will understand this very well, trust me) When you get consistent feedback that can be leveraged, create or update firm "law" and publish it on your intranet for all to see. Send out a newsletter to your people with changes to "the law". Fine those violators!!! Use the new source of revenue to elevate and reward your good citizens and you are sure to have a compliant society of attorneys who please customers time and time again. After all, your stars should not be the ones with the biggest egos and attitudes, they should be the ones with the happiest customers . . . the ones who keep coming back time and time again.

Client Hoarding -- A Profession Ruined By Greed

Client hoarding is said by legal market experts to be one of the biggest problems plaguing our profession today. Most experts take aim at the elementary compensation systems that give lawyers what amounts to a "sales commission" for bringing in legal work. From the outside, you might now see your "biglaw" lawyer in a different light when you realize that he is being paid as a salesman rather than a servant. So, what is behind client hoarding anyways? Well, here are some of the things I hear from big firm partners:

1) I can't trust that if I hand my client off to my colleague that it will get done right!

Response: First, most large law firms have some of the smartest attorneys in the country working in their ivory towers. If you cannot trust them then perhaps the real problem is that you really cannot trust anyone. You have officially cast your "no confidence" vote in your firm and your colleagues. Congratulations, you have just sent the client to the competition for their other needs! Imagine if you went to McDonalds to order to McAnything and the clerk said to you "I really think you would be better off at Burger King." or how about heading to the Ritz Carlton and being greeted at the front desk by someone who tells you "This place is good, but you may enjoy the beds at the Four Seasons better." How much longer do you think they would be working there? What would Donald Trump say? ("Yer Fired!"). That's what we would say at Exemplar. Funny enough, this happens every day at the large law firms across this nation. A systemic failure of trust is one of many reasons why professionals
fail to cross sell services and lose their firms tens of millions of dollars.

2) I'm not going to give my colleague the origination credit. Cross selling is like giving my colleague my paycheck!

Response: You are right! Most firms talk the talk about cross selling yet the largest components of compensation as a partner in most firms is origination credit followed by billable hours. What you incentivize is what you get for behavior, so it should be no surprise that your partners don't want to hand their paychecks to someone else. Interestingly enough, it is unlikely to change because the lawyers who hold the power at most big firms are the ones who control the largest books of business and benefit most (financially) from the origination credit scheme. Which do you think will happen first? A) Hell with freeze over OR B) Big firm partners will become altruistic?

Compensation scheme aside, our industry is making a statement about what it values in people every day by what information is puts out in the marketplace. You need only look in the legal newspapers to see that all they care about is money. You will regularly see ads like "Be a Partner at BigLaw! Bring your book $1.25 Million." Yes, that's right, they want to buy you for your book. So, as long as the big firms are selling partnership positions for a book of business, do you really think that partners are going to "share" the business they get in the name of loyalty to a brand when their book is their golden ticket out of there when someone else offers them more? At the very highest levels we have become a profession ruined by greed, with professionals who shop their books in search of the "green carrot." So, where your attorney could be serving more of your needs, he instead is serving his own self-interest.

At Exemplar, we only hire professionals who trust the colleagues they work alongside, who believe in their firm, and who are more interested in serving all of our customers needs than hoarding a book (pretending they own you, the client) for a potential career move. Greed has no place in a service industry and certainly no place at Exemplar. It has already infected the power structures of many of the largest firms in this nation. Fortunately, Exemplar has created the next generation law firm with a chance to get it right! With an uncompromising commitment to our core values, we are well on our way!

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!cmarston@exemplarlaw.com - I promise to repond.

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.

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!

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?

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)!

Fixed Pricing is Obvious. . . So Why Doesn't Everyone Do It?

One of the most amazing things about Exemplar's fixed-price model is that everyone finds it to be so intuitive. It is so obvious that customers prefer it (even lawyers -- just google the words "billable hour" and see what you get. . . everyone hates it. If you find a positive comment on it let me know!) that everyone asks me why everyone is not already doing it. I have had the pleasure of speaking with many attorneys in practice under the "old" model and I consistently hear them say "well, I just don't know how long it will take." Curiously, I ask them how much time they spend at the very beginning thinking about how long it might take so they can give their clients some guidance and most say "well, none really, because then I would not have the time to get the work done and plus, I can't bill them for my effort!" I don't know about you, but that sounds pretty lazy to me (not to mention a feeling of entitlement to get paid for every single minute of time spent on an activity). What kind of statements does that make about our industry? What does this say about how service minded we are if we operate under that model? Do you think I would ask you questions I did not know the answer to already?

The next most frequent response I get is "what if it gets out of hand or the project goes in a different direction. . . I can't price something if I don't know where it might go." This is where I take the axe to the linear thinking log and remind them that customers do not expect their attorneys to have a crystal ball and tell them the future. They are not asking us to put a price on all of the uncertainties. They DO expect a price on the things that are certain and even likely to happen. They would not be hiring you unless there was at least a certain amount of legal work that is certain or likely to happen. Therefore, there is no excuse for being lazy and billing by the hour when you know that a certain amount of work will occur, and you need only care enough about your clients to actually take a moment to tell them how much that will cost (it is the least you can do, really!). Then, there are no surprises. If the work goes outside the scope of what is known, your customers will understand that more action needs to be taken at an additional charge. With good communication and clarity as to the work being performed, you can give your customers what they deserve (clarity) and free yourself from counting every 6 minutes of your life. Exemplar Law Partners has not had a single customer ask us to bill them by the hour (that is telling) and our people certainly enjoy focusing on building relationships rather then building a timesheet.

Herding Cats Part 2: Building a Brand Requires People Who Care More About Team

I met with an in-house attorney who refers about $2 million in legal work to large firms who told me "I don't have a favorite law firm, I just have some attorneys that I like." One thing became clear when I heard that and connected it with much of the market research our there: The problem with branding a law firm is that most attorneys want to do things "their way" and have their own ideas about what serving the client means. From the customer's perspective, this means a completely inconsistent customer experience from lawyer to lawyer within a firm. What is so amazing about the Starbucks brand is that my 15-syllable latte tastes the same at the Starbucks in Vienna Austria (really, it does!) as it does right here in Boston. While it is easy to train a barrista to make a latte in a consistent way, it is very difficult to get lawyers to provide a consistent experience because they don't like to be told what to do. It begs the question then: Can firms truly claim they care about serving the customer when they allow each of their attorneys to do whatever they want and not what equates to good service in the mind of the customer? Exemplar Law Partners brings attorneys together who understand that service is in the eye of the customer, and that providing a consistent and reliable experience for our customers is what makes them confident in our ability to deliver of good product time after time. It is building the brand of Exemplar through the selection of service-minded attorneys that allows us to stand behind it with a satisfaction guarantee. . . a move which few firms in this nation have made and one which signals to each of our customers how much we care about them. I don't know many business that I purchase products from who do not stand behind their products either. . . it is simply a statement of belief in what you do and who you are. Ironically, I rarely return any products becuase most companies I purchase from care enough about their product to make it well (which is why they guarantee the product in the first place). Our industry seems to have a long way to go, but the professionals at Exemplar are happy to be leading it in the right direction!

Exemplar and the 80/20 Rule: What Other Firms are Missing!!

I speak to lawyers all of the time who live in constant fear of not being busy. They think it is a reflection on their self-worth if they don't have a stock of clients in the "waiting room" to fill their schedules. This represents a very backwards type of thinking compared to how most businesses are run. Let me explain. Let's say that we sat a bunch of airline executives around a conference table and showed them a diagram of a 747 and said "Ok folks, here is a plane with hundreds of seats and we want to make money. What is our goal?" If you asked attorneys this question they would say it is to FILL THE PLANE! The airline executives would say "To get the right customers on the plane." You see, partners at most large firms have the incentive system of salesman since partners get a commission called "business origination credit." They are not doing an analysis of whether or not you are the type of customer that would value what they have to offer more than any other firm within a 10 mile radius. So long as you say you can pay their hourly rate, they want you as a customer.

In business, this violates the well-known and well-respected rule called the 80/20 rule. This rule states that 20% of your customers produce 80% of your business. Put another way, the bottom 20% of customer produce 80% of your complaints, headaches, and chargeoffs. The only way to avoid violating this rule as a law firm is to actually care about whether your customers value your services and not simply how deep their wallet is. Assuming it is reasonable to expect lawyers to "care", then let's talk about why most clients of law firms don't feel like their firm "cares" about them. If law firms really wanted to send the right message to both their attorneys and their customers, why would the single most important factor in a partner's compensation be a sales commission? With legal services in particular where each customer has so much on the line you'd think that it would be important to consider whether each and every customer is likely to walk away happy having had a positive experience with their firm. The actually surveys of in-house counsel show overwhelmingly that the opposite is true. Exemplar, on the other hand, will refer customers to other firms if we do not feel that we can achieve excellence for them. We do not have a "commission" nor do we attribute each dollar to a single-individual's efforts. Our team gets paid for having happy customers.

It is time for firms to put their money where their mouth is and compensate the right behaviors. You see, the power to care must come from the top, a message that continues to ring hallow in the board rooms of firms across this nation, and one which is loud and clear at Exemplar.

Managing Lawyers is Like Herding Cats - Here's Why You Care!

David Maister, a well-known author of books for the professional services industry, wrote in his book on managing a professional services firm that "managing lawyers is like herding cats." He was describing how attorneys are often difficult to deal with, impossible to manage, and are terrible at working together for a common goal. We recently interviewed the former Executive Director of two large firms in Boston who told stories about attorneys whom all had their own forms, processes, and quirky ways of utilizing their support staffs. From an executive's perspective, he expressed great frustration with the inability to manage the efficiency of the organization when all of the attorneys were doing things "their way." This leads me to the obvious question from a customer's perspective, which is "Why do I care?" Well, in a normal business you wouldn't care because once you pay the price you are done! Your law firm, on the other hand, charges you for their time (unless you are our customer), which means you are paying for every bit of inefficiency in the system. Do you think they have an incentive to be efficient? Think for yourself: If they have processes that allow them to do your legal work better and faster what happens to their revenues? (yes, they go down because they bill less time). What about profits? Well, they make a fixed margin on every hour that they bill, so of course they make less money when they are efficient. You can probably also understand that lawyers don't like to be told what to do even if it is in the customer's best interest, right? Now imagine a meeting of the partners of a large firm with the Operations Director that goes something like this:

PARTNERS: Mr. Ops, what do you think we can do to make our customers less frustrated with our bills and service?

OPS Director: Well, if you adopt efficient processes as a partnership and all behave consistently to provide a positive customer experience then I'm sure we can make great things happen at this firm

PARTNERS: Wow, that sounds great. What do we need to do?

OPS Director: Well, each of you are doing things "your way" and you need to start utilizing resources consistently so we can make sure you are not overcharging the customers by billing them for your quirky work habits.

PARTNERS: Why would we do that? Customers don't know the difference anyways and they still pay the bills, and plus: How much more money can we make if we were 20% more efficient anyways?

OPS Director: I hate to say this, but if you all worked 20% more efficiently you would bill 20% less time, reducing your profits per partner by $200,000 per year. You will have to lay off 30 associates and 25 support staff leaving one floor of the building empty with no revenue generating associates to help pay the rent in this place, which will probably cost each partner another $50,000 per year Your customers will be ecstatic though, and will appreciate your integrity and be loyal to you for at least another couple of years.

WHAT DO YOU THINK THE PARTNERS ARE GOING TO DO?

Since Exemplar was built from the ground up with our customers in mind, we don't have to correct 100 years of operational inefficiency because of attorneys who insist on doing things "their way" at your expense. With a fixed price, we do not make our customers the victims of inefficiency. Our incentive is to provide a great product in an efficient manner.
So the next time you get a bill (and the simultaneous heart attack) from a law firm that is billing you by the hour you might just be hearing the echo of the Partners singing Sinatra's tune "I did it my way!" while toasting with a glass of Dom Perignon in the ivory tower of autonomy.

Note To The CFO: Lighten Up A Bit, Will You?

As someone who has served as a CFO and holds two degrees in finance you would think that I am a person that lives by the numbers. What I have come to realize in my professional experience as a Chief Financial Officer is the true limitations of numbers in providing guidance for running a company. We have all heard that numbers can tell you whatever you want to see in them. I remember reading in Ron Baker's Book "The Firm of the Future" that "according to numbers, everyone in this country has one testical" (half of us are women). With technology and data capacity so great, it seems like we collect data just because we can and not because someone sat down and did the math and determined that the cost of keeping such vast amounts of data and creating hundreds of jobs to interpret it actually produces a positive return on investment. Take law firms, for instance. They measure their entire operation in 6-minute resolution, forcing their entire workforce to adhere to a regime that by all accounts "changes the way you live your life." The partners who operate the firm actually believe they need to count this way to be profitable in spite of the fact that the most profitable companies and industries in the world operate just fine without knowing where every minute went. In the meantime, countless hours are spent just counting time instead of actually doing something productive with your life.

The biggest question that skeptical and fearful attorneys ask me is "how do you know you are profitable if you do not count every 6-minutes." After a moment of internal giggling (because I have worked the real world and understand quite well that no other business runs this way) I answer "Lighten Up A Bit, Will You? You don't need to know whether every single project you did made you a profit. What you need to know is that your business is operating profitably." The savvy questioner understands what I just said while the not-so-savvy one just sits there with a blank look on his face as if to say "Huh?". For those of you finance people out there, it is called portolfio theory. An investor has a portolio of stocks (just like a law firm does clients) and the job of the portfolio manager is not to make sure every stock goes up, it is her job to make sure that the portfolio is profitable as a whole. This entails managing the portolfio as a "big picture," eliminating non-performers and increasing the investment in the winniners (in law firms, this is called forced churn) Clearly, every organization has metrics that help guide you in making informed decisions for the organization, but Exemplar recognizes that myopia will not make the firm more profitable; that making thousands of highly educated people count their lives in 6-minute increments and sending them home to their loved ones trained to think of personal time as an "opportunity cost" is not just cruel but inhumane. At Exemplar, we are happy to come to work every day because of the opportunity to use every bit of our intellectual capital on activities that help our clients achieve success in the marketplace. We recognize that there is a high correlation between happy people and customer satisfaction (See Southwest Airlines), and thus profitability. My message to those who live by the clock is to "Lighten up a bit. Let your hair down. Manage your portolfio and stop driving your people crazy. They will love you for it and your clients will notice the difference. Ours certainly have!"

NOT for Sale!

When I meet with executives and attorneys to talk about how our firm has a positive, supportive culture with eight core values which are living and breathing I am often asked what I would do it we were approached by a firm who wanted to buy us out. I know where they are going with this question, because history shows that companies that grow by merger and acquisition often merge themselves out of being able to differentiate and are victims of what I call the "lowest common denominator effect." Our industry has seen extreme M&A activity in the past 15 years that has caused just that, which explains the difficulty that firms are having in differentiating their services from other firms as well as the perceived commoditization of legal services (after all, this business is about people). Just look back at the historic marriage of Coopers and Lybrant with Price Waterhouse. Coopers was larger by far than Price Waterhouse and Coopers had a positive and unique culture than was second-to-none. Price Waterhouse had a very competitive and distrusting culture. When they combined, which one of the cultures do you think infected and spread in the new organization? Of course, the negative one. This is the lowest common denominator effect at work. That being said, our firm is being built on a better way of doing business starting with a team of people who are happy, team-oriented, business savvy, and supportive. They are counting on their leaders to make decisions that preserve the culture of the firm they are integral in building. My first duty, above all, is to the great people that make Exemplar what it is today and which will no doubt continue to shape its future. For them and for you, I put the sign out in our yard that Exemplar is "NOT For Sale!" Money cannot buy the teamwork that happens when delivering on a complex client engagement, or the interest we take in advancing the personal lives of the people that make us "real." Perhaps the most important lesson is that money cannot buy the most important things in life . . . the things that make all of the difference. Money certainly can ruin it. As guardians of the vision, it is our promise not to lose sight of this reality as we continue to grow and expand.

Pour Your Heart Into It: How Exemplar is Building the Firm of the Future One Customer at a Time.

I was on the phone last night with a colleague at until about 3am talking about philosphies and principals that have shaped the Exemplar that exists today and that will continue to guide our future. She was exmplaining that her reasoning for joining Exemplar was, in part, because of the way I have "poured my heart and soul" into the business of building a better law firm than exists today. I also learned that another colleague was asked in an interview last week what the best thing about Exemplar was, to which she responded "Our People." I am reminded of the book "Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time," where the story of Starbucks is told from the beginning. I often reflect on the role and significance of passion in business. Before Starbucks, the coffee market was fully commoditized and there was no premium market for the beverage. The story of Starbucks is one of passionate businesspeople who poured their heart and soul into building a premium business in an commoditized industry that was suffering from intense competition, low margins, and a failure to competitively differentiate. As an interesting aside, I hosted a couple of European engineers at my home last week and after tasting coffee in America (not Starbuck, but Dunkin) they commented that "the reason American coffee is so terrible is because it is not made with any passion." Are you beginning to connect the dots? The legal industry is a maturing market that is facing more competition than ever, is perceived my many as a commodity, and suffers from a failure to competitively differentiate in the areas that made the great companies like Starbucks the success it is today (service, quality, and consistency across the organization). It is the passion for the product that keeps Starbucks customers (including myself) coming back again and again to pay premium prices for the Starbucks "experience."

I recall a critic arguing that people only care about price. If that were true, I probably would eat Sbarros "cardboard tasting" pizza. I was told by a famous author and dear friend of mine that "It is possible to make pizza so cheap that nobody wants to eat it." I cannot agree more. I went to a true Italian restaurant and watched a lifelong chef make a pizza from scratch. . . his playful and happy demeanor as he flipped and spun the dough in the air. . . his attention to every fine detail . . . his determination to make that round lump of generic ingredients into a masterpiece. . . I will tell you from the bottom of my hear that when I ate that very pizza I could taste the smile on his face, the passion for his product, and the heart and soul that turned mere dough into a masterpiece. When I go to Starbucks I "experience" the passion in the product, and it is because of these truths, so telling about life and the role of passion in business, that I am driven to pour my heart and soul into Exemplar. With passion I have never felt more fulfilled and driven to create an Exemplar Experience that will keep customers coming back for more. I look forward to having our customers fill in the blanks on the warning label in our engagement letter: "Warning, the passion in this legal product may cause . . . ."!