Rob Knowsley LL.B
MIMC
Principal Consultant
Knowsley Management
Services (KMS)
Central West Law Society Annual CLE 2009
Bathurst, Friday, 20 November 2009
For today’s session we have an hour, including time for questions, so attendees will appreciate that I have needed to choose just three skills I consider particularly important to concentrate on today. There are many others, but during my 35-plus years since admission, and experiences with 1127 firms, I’ve formed the view that these are critical to the success of most practices, and badly handled in most too!
1. The ability to really manage people…
2. The ability to be effective in using Business
Development to take the business to the size and shape you want it to be…
3. Getting and maintaining the confidence to
have all in the firm charge properly what the services they deliver are worth…
The Ability To Really
Manage People…
It goes without saying that law is still essentially a
“people” business. Team members in law firms need to have good people skills to
work with internal and external clients.
From the management perspective you need to start with a few
important assumptions about people.
Truly excellent people don’t usually require a lot of
managing, but by the same token they’re harder to find, and can be harder to
keep.
Assume that you do get rid of really bad people quickly.
You’re still left with the reality that you’re trying to run
your business using people who have average abilities.
In my experience average people need leadership and
management that is firm but fair, and very clear in its expectations of them.
People really do need to be praised for good work and
behaviours, and also promptly pointed back to the desired approaches where they
don’t do what is asked of them.
My experience is that most partners and other managers in
law firms do not do nearly enough to make clear what is expected of people,
thank them appropriately when it’s done, and deal with the issues quickly when
it’s not!
Too many people say, or simply act as if, they hate
“conflict”…and hide from it in large volumes of their “own real work”,
forgetting that managing people to be productive and effective is about the
most important work a business owner can have!
The end result all too often is that the really important
part of the potential productivity of employees is lost, and to get even a
modest return from the practice partners end up working far too hard.
These days at least 80% of an average firm’s revenues get
chewed up in overhead…assuming that overhead includes a reasonable salary for
the partners, as it must. Forget the one-third/one third one-third rule…it was
always seriously flawed because it ignored proper salaries for owners, but
overheads in progressive firms simply cannot be held down to levels that create
stagnation.
On this basis the reality is that huge numbers of law firms
in Australia and New Zealand make no true profits at all...and some that do
make a modest profit achieve it by partners working unreasonably hard.
The first 80% of an employee’s productivity is reasonably
easy to get (which makes us wonder why so many firms fail even to get that) but
the balance 20%, which often represents the true commercial profit potential of
a practice, is a lot harder to achieve.
To achieve it consistently you need good systems, great
clarity around your expectations of people, and a real willingness to do the
teaching and face to face mentoring, and yes, disciplining if necessary!
Partners often complain that they do not have the time, but
usually it’s not really a lack of time but a lack of will, arising out of a
lack of appreciation of the huge potential returns of all types from getting it
right.
For a practice to be truly successful, and almost always a
practice has to be properly profitable to remain truly successful, partners first
have to make the time to learn how to manage well, and make the time to
consistently manage well in fact.
For fee earners most firms do not establish any real clarity
around what is expected, and in particular do not ensure that at all times each
person has a “healthy backlog” of Client work.
Consequently productivity is almost always ad hoc, revenues
far less than they can and should be, and profits low to non-existent.
All the while employees are of course paid 100% of their
agreed remuneration, and all suppliers to the practice get paid (sometimes even
on time)!
The KMS approach over the last twenty years or so has been
to use WorkPlans™ for every fee earner to set clear expectations of minimum
inputs and recorded activity in FirmTime and ClientTime.
The actual results in all key areas are tracked in
KMSFeedBack Reports™ so team member and management can see what is happening
and discuss where it is on track and where it is not, and agree what needs to
do done about anything.
This leads me into the second important skill, but before
leaving I’d like to give you a thought to ponder…
Whenever I de-brief unhappy employees heading for perceived
greener pastures, they invariably unburden themselves on me with stories of how
badly managed or disorganised one or more of the partners is. They have had
little clarity around what was expected of them and almost never had enough appropriate
work.
On the other hand when I meet with “happy-in-harness” high
achievers in well-managed firms...the same people who encourage their friends
to apply for jobs there…I hear that what they like is the clarity of
expectations and a real focus on ensuring that they have enough Client work to
progress the development of their skills, and meet their agreed fees targets.
Almost always, they enjoy being heavily involved in the
firm’s Business Development.
The Ability To Be
Effective In Using Business Development To Take The Business To The Size And
Shape You Want It To Be…
This topic ties strongly in to productivity and to proper
generation of profit because a sound use of marketing can ensure that
well-managed employees are actually operating for you in the profit zone, with
a permanent healthy backlog of client work.
The reality is that in most firms partners are far to busy
all the time and employees properly busy almost never…a situation that is more
than slightly back to front!
Far too many lawyers in small-medium firms are still either
shy of marketing, or actively averse to it, treating marketing with suspicion, as
expensive hocus pocus to be avoided at all costs.
In teaching what I prefer to call “Business Development” I
stress that thinking about what it really is correctly can help lawyers get the
right mindset.
Marketing is
identifying what clients and potential clients really need from you, and
organising your business to supply that service consistently well… and
profitably.
Because you see this now as a helping activity, it fits neatly with the professional service
ethic, and removes the inhibitions you may have about “blowing your own
trumpet”…because you never need to do that directly.
People and businesses have known and unknown needs…you
deliver services that meet some of those needs so you need to build clear
reputation for being the firm to at least call for a chat. Get the phone
ringing, and the email humming! From leads and enquiries come jobs.
So, what’s the best way to do it?
Far too often when lawyers think marketing they really think
advertising…and I’m here to tell you that often advertising isn’t the most
effective thing to do per se, but also that it is often not a very
cost-effective thing to do either…poor return for your dollar often.
Further, advertising tends to need to be fairly continuous,
so once you become dependent on a flow of work from it you can tend to find you
are locked in to the expense for so long as you want that level of enquiry.
There is a far better way most of the time, and again it
fits with lawyers’ natural inclinations and skills.
Use information
freely available to you to educate client, prospect and referrer groups, so
they are more aware of their needs and also can see you demonstrating your
skills and your reputation builds.
Demonstrating your capabilities is far more effective than
merely alleging what you can do…so in simple terms a newsletter full of
practical, relevant, helpful information is far better than a sales brochure or
capability statement.
It should go without saying that different services need to
be marketed in different ways to different marketplace groups…hardly ever is
Business Development a one size fits all situation.
For this reason I’ll just give you a few of the simple tools
from the toolkit…and then give an example of how you might choose from the
available tools for the particular job.
N.B. I have a simple list of 40-plus tools that I’m happy to
email to anyone who emails me with a request for it… robk@lawfirmprofit.com
Small seminars, newsletters (Electronic and hard copy),
short emails, articles in suitable publications including websites, articles on
your own website, How’s Things visits and calls, talks to suitable interest
groups.
So, for example, if you were interested in building
reputation for your services in Estate Planning, advertising would often be of
limited benefit, but a strategy of educating the right parts of your own client
base, and educating the best referrer groups such as Accountants, would be far
smarter and more effective.
You would test the results of the use of each communication
tool over time, building emphasis and reducing emphasis on the various chosen
tools as you track results.
In educating the accountants you could test the value of
visiting their offices to talk to groups as part of their own professional
education program, could put on seminars, and could back up this program with
an E-newsletter, or more preferably simply a series of short emails packed with
practical, relevant, helpful information, and usually containing a simple War Story
(case study) to help get the point across.
Use Plain Language and keep right away from case names,
names of Judges giving decisions and sections and sub-sections of Acts…in this
context not only do they add nothing, they make the material less likely to be
read and enhance your reputation in one area only…your skills in verbosity, pompousness
and boredom!
I’m generally not in favour of narrowly-based formal networking
groups (one lawyer, one plumber, one IT person, one Real Estate agent etc)
simply because in my experience they take too much time for the results
achieved and can divert lawyers from far more useful activities.
A final point…you and your employees do have the time…no-one
spends all day doing client work…and I regularly find employed lawyers
averaging less than five hours a day legal work...not all of it recovered!
I suggest employed lawyers should be averaging at least half
an hour a day or 115 hours a year in normal times, and doubling and trebling
that effort should tough times be on the horizon…or have already kicked in your
door!
Partners should always be doing more, as generally they have
more contacts and more experience and so usually a greater chance of getting a
full return of the investment.
Getting And
Maintaining The Confidence To Have All In The Firm Charge Properly What The
Services They Deliver Are Worth…
Chronic under-charging is one of the worst faults of much of
the legal profession…ironic when considered in the light of the myths abounding
about lawyers’ fees!
The reasons are varied and include:
·
Not knowing what something is worth…
·
Assuming every client is price-sensitive…
·
Not having the skills or guts to test what the
market will bear…
·
Fear of losing a job…
·
Inability to work out how to add significant
perceived value…
·
Assuming that in the main “fixed fees” means
“lower fees”…
·
Thinking that you need to be charging close to
what everyone else is…
·
Letting inexperienced staff give estimates and
quotes and prepare bills unsupervised…
·
Probably the most important issue is low
self-esteem…and to prove to yourself that you are undercharging you need to
continually test the market…
Scales have to take a lot of blame for the poor mindset of
many lawyers, because Scales removed much of the need to think about value
delivered and constrained many lawyers from becoming sophisticated in methods
of charging for different types of work and services.
A few key tips…
Test the market…push the boundaries…assume your present
prices are too low and just start giving estimates which are higher until you
find where there seems to be genuine resistance...one thing’s for certain...it
will be a lot higher than you are presently charging.
Remember…anything you charge over and above what you are
presently charging is all your after the break-even point is reached so it’s
really worth pursuing!
Learn to avoid giving estimates in ranges…human nature is
that clients will mainly want to think the fees will be towards the lower end
when we know from experience that’s highly unlikely!
Learn to understand the value of avoiding threshold figures.
From our own experience we all know that, for example, $300 is so much more
than $299.95…so why do we tell prospective clients that something will require
them to invest $3000.
You’re on a hiding to nothing…$2985 will be appealing to a
far higher percentage of people…but worse…everyone who agrees to pay $3000
would not have had any issues with any number up to at least $3885, so you’ve
lost up to $885 extra profit on every job that is commenced.
The bigger the fee the further apart the thresholds are. For
example, if something were acceptable to most people at $145, thresholds for
most of them would have been just $5 away at $150, or $55 dollars away at $200.
On the other hand, if you can get most clients to agree to a
fee of $3285, many will have a pain threshold at $3500…$215 higher…or
$4000…$715 higher.
Lesson…as the figures get higher you can be much more
expansive (not “expensive”) with your testing…there’s a lot more to gained from
being confident and boldly testing the bigger the job.
Finally, don’t be rushed into giving estimates…as 99% of the
time rushing will lead you into giving figures which are way too low. Scope the
planned work carefully and come up with a top figure. Then “sit” on that figure
and let it “ferment” for a period of time (longer periods for bigger jobs)
re-visiting it and increasing it to a more correct figure just before getting
back to the client.
I guarantee that your new figure will still be too low, but
it will be closer to the proper figure, and deliver you extra profit…some of
the profit presently missing from your practice.
I can confidently state that profit is missing from your
practice because I’ve only seen one law firm in the 1127 I worked with in the
last thirty-five years that had proper profits.
Despite the very limited time and necessity to just pick the
eyes out of the topics for you, I trust today’s pointers are some assistance to
you in clawing back some of what you are entitled to for your training, experience,
financial investment, time and stress. They have been for many thousands of
your peers.
Many thanks for your time and interest.
Rob Knowsley LL.B MIMC
Knowsley Management
Services
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