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The following discussion thread excerpt is from a recently completed law.com online seminar, “Law Practice Management: Managing People First,” moderated by Edward Poll, J.D., M.B.A., CMC of Edward Poll & Associates, Inc. (http://www.lawbiz.com/). For more information on this program and other law.com seminar offerings, please visit www.law.com/seminars. EDWARD POLL, J.D., M.B.A., CMC OF EDWARD POLL & ASSOCIATES, INC., VENICE, CALIF. The Great Salary War of 2000 did it once again — salaries almost doubled, literally overnight! And there is a threat that salaries will once again increase substantially in 2001. What is a mid-size firm to do? How can a mid-size firm compete for the talent that is represented by the young lawyers earning the larger salaries? And, equally important, how can a small firm compete for this legal talent? How can the large law firm continue to prosper if it is paying out significantly larger dollars to its young associates? And how will the law firm that does engage the associates at the higher compensation levels in effect today pass this increased expense to clients without alienating the clients? These are many questions begging for answers. What is your opinion? DIANE HAMLIN, CHIEF MARKETING OFFICER, FENWICK & WEST, PALO ALTO, CALIF. I would be surprised if salaries increase substantially in 2001. It is my understanding that when Bob Gunderson raised the salaries at Gunderson Dettmer, he did so with the hope of creating a differentiation point for their recruiting efforts. I don’t think he in any way anticipated that other firms would follow en masse. I do think that the hit many firms took by following suit will only add to the spate of mergers [and] alliances, as well as the demise of some firms. And I think the unstable perceptions of the economy will contribute to more conservative approaches to salary increases. I also think it’s important to define our terms here. When I started at Fenwick & West in 1996, we were 135 lawyers and we were considered mid-sized. Today, we are over 300 lawyers and in many arenas, we are still considered mid-sized. I’m going to assume for purposes of this discussion that we would fall into the large firm category. Here’s what I think is true for large firms. I think that these salary increases are only putting more pressure on firms to re-invent the practice of law. I think that law firms that survive and thrive will find more and more revenue streams that depart from the traditional billable hour model. These models will include equity, premiums, and the like, as well as a variety of models that “productize” law. Firms that cling to the billable hour as the only source of revenue are going to find themselves in danger of being the smartest dinosaur. I agree that the higher associate salaries present a challenge to firms in terms of client management. When we shifted associate salaries last year (Fenwick opted to create two tracks: one that incorporated an 1800-hour model and one that paid out the higher salaries at a higher billable hour minimum. Associates were asked to opt for one model or the other, although the firm will pay out the higher salaries to anyone who achieves the increased hours regardless of whether they signed up for it or not.), we made a commitment not to pass this hit on to our clients. And we haven’t done so. It is my observation that the nature of attorney/client relationships is shifting significantly in any case — at least here in Silicon Valley. As clients become Gen X, just as the associates are Gen X, the traditional loyalty from clients to which so many lawyers are accustomed has become increasingly hard to find. Clients shop lawyers just like they shop other commodities. But, I think that clients are less alienated by billing increases than they are by all the things that have historically been irritants: unreturned phone calls, slow turnaround, shifts in staffing teams and the like. “A” clients expect to pay competitive rates for excellent service; they only tend to haggle when there are other issues that need to be surfaced anyway. Or they suspect that the rates are not, in fact, competitive. Clients want to be important to their lawyers when it’s important to them as clients. And all firms — regardless of size — need to learn that the landscape has shifted. The increasingly competitive nature of the business means that lawyers will no longer be able to take longstanding clients for granted. Or their reputations, brand, as well as their client base will quickly erode. MARK GOULSTON, M.D., UCLA ASSISTANT CLINICAL PROFESSOR, AUTHOR OF: “THE 6 SECRETS OF A LASTING RELATIONSHIP” (�2001, PUTNAM), SANTA MONICA, CALIF. I am a psychiatrist, specializing in business psychology, and agree with Diane regarding the evolving landscape as Gen X’ers increasingly populate both the client and associate ranks — namely that new revenue stream models will need to be developed and that loyalty is going to be less of a factor in client decisions to retain and keep retaining their attorneys. I especially agree with her last comments about doing everything you can to reduce the “irritants” most often associated with lawyers; unreturned phone calls, slow turnaround, and “surprises” equals excuses for the case not going as promised/implied to the client. It will be more and more important to track with clients with regard to what’s important to them. The more you stay on track, the less concern there will be about the money and the more value they will feel they are getting for their money. Clients either consciously or unconsciously have expectations that affect how satisfied they are about the service they are receiving from you. If you can put yourselves in their place, and answer these seven expectations, you’re more likely to have them be okay about the money they’re spending for you. 1. What are you going to be able to get done for me? Robbie Bogue, President of Marketing Excellence, says, “People don’t care what you know or who you are, until they know what you can get done for them.” Requiring too much thinking or effort of your client to derive the benefits of your service is not going to fly when your client is already stressed out. 2. How is that going to be important to me? Your client is looking for something that clearly serves their needs and case more than your needs. Periodically ask yourself what is important to the client right now and check with them if it’s (still) true (clients do change their mind from time to time, don’t they?) and try to incorporate that in where you are and are going with their case. 3. Is that more than I’m expecting to be getting? Whether people own up to it or not, everybody wants more. Getting more gives your client the feeling that they are smart rather than naive and that hiring you was a good choice. This, of course, goes back to the adage, “Promise less than you deliver.” 4. Is it better than I’m expecting? Find out exactly what your clients are expecting and you might discover that it is sometimes less or different than you thought, both in quantity and quality. You may discover that it actually takes very little of your time to give them something that is much better than they expected. 5. Is it sooner than I’m expecting it to happen now? Return phone calls and email the same work day or have your assistant do it, if only to say you received their message and are working on that point and will get back to them within 24-48 hours with either an answer or another update. Keep in mind the paradox that your clients may procrastinate about contacting you about something, but want you not to procrastinate in getting back to them. Often just letting [them] know you received the message is enough and better than the service they’re receiving in many areas of their life. If you say you’re too busy to do this, get your assistant to do it. If you’re dragging your feet in this area, because you don’t want to use up your excuse that you never received their message, clean up your act. 6. Will my legal fees cost less than this situation is costing me now? Don’t sidestep this stickiest of issues. Elicit from your client as clearly as possible what the lack of resolution in their case is costing your client in money, time, pain and suffering, and sleep. The more they tell you about these areas, the more they convince themselves of how much less the cost of using you is compared with the cost of doing nothing. 7. Is using a lawyer less risky than what I am doing now? Speak with your client about the risks of taking legal action vs. not taking legal action. Talk with them about the likelihood of the situation improving or of their being able to put it completely behind them if they take no action. Ask them what they see the risks to their financial and psychological well-being are if they don’t use you. Answer the question to yourself: “What value or service or expertise or results can I get my client that they can’t afford to not use me?” If you don’t make the effort to consider what your clients expect from you, why should they go to the expense of starting or continuing to retain you? How successful can you hope to be if you’re offering something that: doesn’t do anything for them, isn’t important to them, is less than what they’re expecting, is of lower quality to what they are expecting, takes longer than their expecting, costs more than they’re expecting, and requires more risk than they’re expecting? Your clients are not fools. If you don’t take their expectations into consideration, you’re only fooling yourself. NANCY BYERLY JONES, LAW OFFICE MANAGEMENT CONSULTING & MEDIATION, BANNER ELK, N.C. Wow! You’ve hit on many “hot button” issues, Ed, with your questions — all of which affect all firms big and small. I will try to address a few of them below. I heartily agree with all that Diane and Mark have discussed. Most important of all is the way we treat your clients. Client servicing expectations far outrank their need to impress others regarding their lawyer’s so-called “credentials.” All clients expect excellent legal expertise; that is an underlying assumption when they retain a lawyer. However, they will be making key decisions (e.g. whether to refer others and to send future work to their attorney, whether or not to sue them if mistakes are made, whether or not to file an ethical grievance, etc.) — all based on how they have been treated (e.g. calls returned promptly, being kept regularly and clearly informed of case status and strategy, etc.). It is important to emphasize here that how clients are treated by their attorneys is not the only critical ingredient when it comes to client servicing. Rather, it also includes how clients are treated by the law firm’s staff. We should never underestimate the power of how staff members’ conduct, tone of voice, professionalism, courtesies extended (or lack thereof!) affect our clients. A potential client who receives a cold or otherwise unprofessional reception from a staff member may in all likelihood take their business elsewhere — it doesn’t matter how many people have recommended the firm to them; if we are treated rudely by a firm or business’ staff/employees, most of us will turn to other resources for the assistance, product or service we are seeking. In my opinion, there should be little, if any, tolerance for a staff member or attorney who treats clients and others in a rude, arrogant or otherwise unprofessional manner. In regard to the small firm and the great salary wars, I encourage our small-firm clients to remind their associate applicants of all the non-monetary benefits they will receive if associated with the firm. It is also important to re-remind them of these benefits from time to time after hiring them. We can touch, feel and immediately use our paychecks, but the non-monetary benefits of working with a small firm can sometimes slip from sight in the midst of busy schedules, stressful trials and the like. Some of those benefits may include quicker partnership tracks, more client contact, more input regarding firm decisions, case selection and management, law firm administration, less red tape in general when decisions must be faced and made, relaxed dress codes, no billable hour quotas, perhaps more scheduling flexibility, etc. Bottom line: all firms big and small should take great strides to paint as realistic a picture as possible of the firm and the firm’s expectations of their associate candidates before a hiring choice is made and accepted. Likewise, they should remind applicants of the critical importance of their being forthright and candid regarding their personal expectations, quality of life preferences and career desires. A significant percentage of personnel management headaches and employee disenchantment within today’s firms could be avoided if more attention, preparation, effort and honesty were injected into the hiring and interviewing process itself. EDWARD POLL Amen to all that’s been said above! The WIIFM radio station is the mentality that pervades today’s world. “WIIFM: What’s In It For Me?” That’s what the client wants to know . . . they want to see value, not billings; they don’t mind paying for value … but we must show the value . . . we must continue to ask the client whether they perceive the value we believe we’re delivering. That means there must be a dialogue between client and attorney. And, if this process is successful, then the client will pay the increased fee . . . and then the law firm will have money to pay its lawyers and its staff . . . That may mean a change in the billing mentality of today’s law firm. When lawyers start talking about 4-, 5- and $600 per hour, which may be needed to compensate today’s new lawyer, the client begins to choke. Refusal to pass on the higher costs resulting from higher compensation will work for a while . . . but only for a short while . . . before lawyers say they need more revenue to continue to take home the large salary packages they’ve become used to . . . . And . . . what will be the impact on the smaller firm? Will they die? Will they have to merge to become “mid-size” firms to survive? JOEL HENNING, SENIOR VICE PRESIDENT & GENERAL COUNSEL, HILDEBRANDT INTERNATIONAL, CHICAGO, ILL. I can’t disagree with anything my colleagues have thus far written. But I don’t think we will see another universal major salary increase next year. I didn’t think so before the economy and the stock market began to soften; I’m rather certain of it now. That’s not to say that a handful of firms won’t try to push in front, as Gunderson did this year, but I don’t think all the major firms in the country will follow suit next year. The fact is that some of the top law firms can least afford this blip. The firms that represent bricks and mortar old-line, slow-growth companies, unlike the Gundersons of the world, find that their clients see the legal function not as an essential function needed at any cost to get the deals done, but as a cost center, to be contained. These firms are constantly under the gun carefully to manage and control their costs. I think that one way we will see law firms responding to the combined pressure of higher wage costs for lawyers and downward pressure on fees is to seek mergers even more aggressively than now. At Hildebrandt International, we will have worked this year with more clients than ever, looking strategically at whether merger is a strategic option. We anticipate that the pace will increase as the economy goes south. That’s not to say that merger is the best option for many firms, but it constitutes one way to meet the market pressures — it’s hard to find good lawyers, and it’s hard to pay them market wages. In some cases, a larger organization, with more breadth and depth, is better positioned to get and keep good lawyers. But back to the old-line firms representing top of the line but slow-growth bricks and mortar companies: We think that one-third of the wage increase will be absorbed by clients of such firms, one-third by partners, and one-third by associates by working even longer hours. Another innovation that we think will help firms survive is the gradual disintegration of the rigid partnership track. Associates should be paid what they are worth, and should advance toward partnership at whatever rate makes sense, given their development and their interest in becoming true owners of the enterprise. And, for many associates, two-tier partnerships will represent useful career options. Some may never make equity partner. Some may not want the benefits and burdens of equity ownership, but want to be good lawyers, doing good work, paid well, with long term career opportunities, short of equity partnership. BILL FLANNERY, PRESIDENT, WJF INSTITUTE, AUSTIN, TEXAS The title “Managing People First” is clearly not what law firms do. Lawyers are mostly analytical types (70 percent) and we manage by the numbers (billable hours, fees collected, etc.). I am struck by the number of firms that don’t teach leadership. Our last survey indicated that there was only one firm that conducted a leadership workshop in the last five years. Daniel Goleman, author of “Emotional Intelligence,” give us great insight into this problem of leadership and people skills in a highly technical/ intellectual workforce. However, great leadership needs great “followership,” which is virtually nonexistent. A rather bleak HR environment. There is one New York City firm that has decided to develop a system for managing and leading people using the “best of breed” approaches from the corporate world. There is hope. As for salaries, I feel sorry for new associates. More money means more work, longer hours, no personal life — indentured servitude. The clients will pay more or the partners will suffer lower profits and the associates will get the blame — no carrot here. As a profession that always had the expectation that we would make more money by going to law school, we have now discovered the price. Dissatisfaction among lawyers is at an all-time high. As consultants and lawyer/consultants we need to find way for our clients to be as satisfied and fulfilled as their clients. The problems they face are clear and we can close the knowing-doing gap. I recommend a Harvard Business Reviewarticle titled “The Smart-Talk Trap” by Jeffrey Pfeffer and Robert I. Sutton (Reprint 99310). As long as we only deliver advice and not action or implementation, we will remain part of the problem. Lastly, the comments and observations by this group are very different from what I have seen or heard before. Let’s try to develop 10 great action items from our dialogue.

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