This article has also been posted in the ABA Journal The vast majority of lawyers does not manage to consistently write 8 billable hours a day. Utilization, billable time as a percentage of the target, is typically at 90% or below. In almost every law firm we know there is time that is currently not used to work on client matters. What if we could monetize these idle hours? That would instantly create a significant boost in profit. Recently a business trip took me to Paris. As the schedule was tight and I had a number of appointments across the city, I had to frequently rely on the use of Uber to get me there in time. Doing a number of comparable rides over a couple of days, I started to notice that the prices could significantly differ. The same ride from A to B could be more expensive in the early afternoon than in the mid-morning. When at some point it had started to rain, the price almost instantly went through the roof. This was a live illustration of how Uber’s pricing model works. It is almost like an auction: if demand is high, the price will go up and in times of low demand, the price will drop. This so called dynamic pricing is used as a sophisticated form of revenue management. Price is tailored to maximize revenue in relation to costs. So why couldn’t a law firms learn from Uber’s pricing strategy. What if we would introduce revenue management to the legal world? A characteristic of a law firm’s business model is the fixed nature of the costs. Costs consist predominantly of salaries, rent, subscriptions, insurance, etcetera. Each month the same amounts have to be paid. So if cost are fixed, each extra billable hour is 100% pure profit since there will be no additional cost. Instead of selling only 1400 hours at the rack rate, law firms should become more flexible and focus on maximizing revenue for lawyers. Let me give an example: if a lawyer now has 1300 billable hours at a rate of 350 Euro, the total revenue would be 455.000 euro. With a cost percentage of 65%, profit will be 159.000 Euro. Any additional billable hour of this lawyer will bring no additional cost. So if this lawyer would make an additional 100 hours against a rate of only 100 euro, profit would be 169.000. This is 10.000 Euro of net. profit. Revenue management for law firms does pay off big time. We believe lawyers should start focusing on revenue management rather than on the hourly rate. Start applying market dynamics in the way Uber does. Or the airline industry, they are also willing to sell you the last remaining business class seat at a discounted price. Also for them selling that seat will bring pure profit as there will be no additional costs. Airline passengers have got used to this and have learned to accept that the person sitting next to them might have a better deal. Today we are working with our clients to introduce smarter and more sophisticated pricing models. These models introduce flexible pricing in order to better manage revenue and enhance profitability. Also for the law firm’s clients this provides new opportunities as they will have a better deal at times of low demand. Talking to the in-house lawyers we know they are ready to embrace this model. No reason for law firms to hesitate. Want to learn how this could work for your law firms: Talk to us. For further reading: Hourly rate, the end of its life cycle? Learn more about our services

The 1% are getting richer: The Global Elite In 2017 average profit per partner among the AM Law-100 firms rose 6.3%. The top-10 firms saw an increase in PPP of 8.4% while firms 54-100 saw an average PPP growth of only 3.4%. When we take the 10 largest firms out of the statistics, profit growth for the remaining 90 firms would be 4.6%. We have not seen this sort of uneven profitability growth in the years before. The firms at the top, the Global Elite, are a league of their own. They effectively only compete with each other. They’re hired for the most complex ‘bet the farm’ matters where price is not a major consideration for the clients. This league is not competing with Alternative Legal Service Providers, the Big Four or the in-house legal department. They are in fact not even competing with other law firms as they operate in a separate segment of the market. Attracting superstars These Global Elite firms have the ability to attract superstars. The best performing partners are drawn to the best performing firms, making them even better. In this respect law firms have started to be much like premier league sports teams: the teams that can pay the higher salaries will attract the best players and will be more successful in the competition and thus attract more income from sponsoring, broadcasting rights, merchandise and ticket sales. The same has become reality for law firms. "The Global Elite operates in a separate segment of the market" You need to have a seat at the table to get a seat at the table. Mega transactions and high stake litigation are only awarded to partners who have done that type of deals and engagements before. Without the money to pay superstars the rest of the firms are not able to attract prestigious high-end work and thus they don’t develop a track record and thus they will never get this type of work. It is just a vicious circle. Lateral ‘star’ hires are paying off for Kirkland & Ellis The big winner over 2017 seems to have been Chicago based Kirkland & Ellis. (1,997 lawyers, 504 non-equity partners, 388 equity partners, 8 US offices, London, Munich, Beijing, Shanghai, Hong Kong). With a total revenue of $3.165 billion (yes billion) this year’s largest firm by revenue in the world. Its gross revenue has grown 57 percent since fiscal 2013, while its head count increased 28 percent and its profits per partner rose 43 percent. Last year Kirkland added $514 million in organic growth (no mergers). Kirkland managed to achieve a very healthy profit margin of 58%. The firm has clearly benefited from its effort over the last few years attracting star partners in high-rate practice groups such as M&A, Private Equity and high-end litigation. MergerMarket data shows that Kirkland has advised on 489 transactions in 2017. More than any other firm. Kirkland also saw the largest increase in deal value (up 63.5% to $ 432 billion) Kirkland operates an ‘eat what you kill’ system and is very individualistic and competitive, with a very big spread between the highest- and lowest-paid partners. Partners are paid based on their share value, which can fluctuate. Average partner compensation is $4,701,000. Lateral hire Sandra Goldstein, a former leader of Cravath’s litigation department, will make a reported $11 million a year for five years. Former Kirkland partner Robert Khuzami made $11.1 million for work from late 2016 to early 2018, according to information in financial disclosures made public when he became deputy U.S. attorney in Manhattan. One factor boosting Kirkland’s profitability is its huge non-equity partner class. (504 salaried partners vs.388 equity partners). Most of them don’t stay at the firm longer than five years. Associates make partner earlier than at most firms, after six years, and they generally work another three to four years before they find out if they’ll be selected for share status or must leave. What about the other 99%: Your law firm While the 1% are locked in competition with each other for high profit margin mandates, the 99% finds itself competing for commoditized work against hundreds of other law firms, the big-four, alternative legal service providers and in-house legal departments. The past year we have been lead to believe that law firms could be segmented in two groups based on size and profitability. The big size high profit firms were believed to outperform the group of smaller size and lower profitability. Analysis of the AM Law 100/200 data does not support this thesis. Growth and decline can be seen equally in both segments. There is absolutely no predetermination based on size and profitability. The only differentiator really is management. "Strategy and management are the key differentiators for success" Law firms operating outside the Global Elite segment need to radically adapt their business model to compete in this increasingly commoditized high competition segment of the market. Contrary to popular belief today’s position is not destiny. Rather than a divide defined by size and profitability, the key differentiator is to have a clear strategy and the ability to assertively manage lawyer numbers and costs. This is something I already predicted in my book Death of a Law Firm (2015). What about the clients? Overall Gross Revenue of the AM Law 100 grew by 5.5%. This indicates that clients have spend a staggering 4.7 billion more on legal fees with these 100 firms alone. This does not even include budget spend at Alternative Legal Service Providers, The Big-Four’s legal services and the increasing number of matters handled by the in-house team. Still traditional law firms managed to increase client’s external legal spend. In 2008 the Association of Corporate Counsel (ACC) famously launched ‘The Value Challenge’. In the decade that past literally thousands of General Counsel have been speaking at conferences and with their law firms reiterating this same message: “we want better value, prices must go down”. Procurement got involved and law firms were put up with complicated and elaborate RFP’s and legal panel formations. "Clients focusing on efficiency will be a game changer for the legal industry" The figures show that despite all efforts clients have not been successful in pushing down external legal spend. Based on the research for my new book ‘Data and Dialogue, a relationship redefined’ (co-authored by Vincent J. Cordo Jr), I strongly believe this is about to change. Clients have learned the hard way that focusing on the hourly rate does not get then anywhere. The focus is shifting towards ‘efficiency’ and the first results are outright spectacular. Savings of 25% are possible without any compromise on service or quality. Watch this space for more articles on this topic that will be a game changer for the legal industry. TGO Consulting has prepared a comprehensive presentation with more insights and analysis based on the AM Law -100. - Happy to share. Please contact us for more information. Learn more about or strategy consulting business

Many law firms require their partners to make an annual business plan. Not only is this typically a struggle for the partner, it also seems like an ritual annual routine since most of the plans never actually get executed. The same holds true on a firm level. At any firm partners sit together at an annual retreat or on a practice group level discussing future strategy. Flip-overs are filled with ideas, working groups are formed and action points assigned. Follow up meetings are scheduled. And yet, several months down the line typically nothing has happened. Even on a more strategic level it is our experience that when discussing strategy with our clients, at some point the managing partner opens a drawer and takes out a meaty strategy document put together five years ago by a reputable consultant at the time. Unfortunately it has remained in that drawer ever since and has never been executed. A huge waste of time and money. So based on years of experience we know that successful execution of any plan at any law firm is very hard. There is a high risk that plans never get successfully executed at all. That is why we have put together 5 primers to help you successfully execute and implement any plan: 1. There is no perfect plan Working with lawyers surely the greatest of all dangers when it comes to execution of any plan is perfection. Lawyers are primed to search for excellence and eliminate any risk. Search of perfection is a tried and tested method to postpone decisions infinitely. Perfection and risk avoidance might be great qualities when it comes to legal advice. When it comes to strategy and business development, they are not so good. In business it is unavoidable that uncharted territory needs to be entered. There will always be uncertainties and unknowns. As Donald Rumsfeld once put it: “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.” This is something that every startup recognizes. Startups take off with often nothing more than an idea. They recognized that it is more important to start than to be perfect. When it comes to execution, noting beats action. Rule one: accept that the plan is not perfect but start anyway. 2. Keep improving while executing The Japanese have a name for the method of getting better through small continuous improvements: kaizen. When applied to the workplace, kaizen refers to activities that continually improve all functions and involve all employees. It is often applied to processes, such as purchasing and logistics, but also applies to strategy or business development. It is not only important to get started it is equally important to maintain a high pace in execution, learn form every action taken and quickly improve what needs to be improved while taking the next step. Minor imperfections or mistakes should not be considered an issue. They are simply part of the learning curve. It is generally recognized that the best way to learn is by doing. One could endlessly read books on ‘how to ride a bicycle' and make plans on how one would drive a bicycle and what risks it would bring. Nothing beats stepping on a bike and actually start cycling… Rule two: execute, evaluate, improve and keep going. 3. The enemy within With any strategy and any business plan, there will always be partners that do not agree. Not agreeing could have principal reasons, they just don’t believe in the strategy, or personal reasons. The latter typically are more dangerous to execution. If partners feel a strategy or a plan is not in their personal best interest they will typically try to derail the execution. Not by openly disagreeing, but by endlessly asking questions. As it comes to derailment few methods are more effective than asking for additional information, questioning facts and pointing out uncertainties and the risks of unknowns. As these questions and arguments seem very reasonable they appeal to the other partners. Failing to recognize the nature of this type of ‘reasonable’ questions might halt execution infinitely. Rule three: identify and ignore ‘the enemy within’ 4. Ownership The execution of any plan is not the responsibility of the managing partner, the practice group head or the working group or committee chair. As much as most partners would like to delegate the responsibility for execution to management and leadership, reality is that each partner needs to take ownership. For successful execution of any strategy or business development plan it is key that every partners feels personally responsible and takes full ownership Rule four: each partner should take personal ownership 5. The 10-minute rule The fifth and last rule is not to be too ambitious and not to make things too complicated. We have learned from experience that when you ask any partner to do things that will take more than 10 minutes daily, it will never happen. Tasks that are not perceived as clear, simple, quick and doable will be infinitely postponed till tomorrow. That ‘tomorrow’ will never come. So break everything up in small and simple steps. Rule five: keep it simple, stick to the 10-minute rule At TGO Consulting we don’t want to sell plans that will remain in your drawer. Plans only have value when executed. We design plans that will help transform lawyers and law firms. Proper execution in the end is more important than the plan or strategy itself. We help law firms to get ready for tomorrow’s market.

Guest post by Fiona Bliss Quiroli The question everyone wants to know, when they are working on a pitch or bid process from the "inside", is what are our competitors doing? Are they better than us? Are we doing it right? What can we do better? Unfortunately, such intelligence is frustratingly hard to come by. Bidding in the legal sector is like many other industries, a difficult process to get right. There are so many factors involved - some controllable and many uncontrollable. There is a lot of intense competition and the market in general has become more complex. Some years ago, there was an assumption that other sectors outside legal services were somehow more dynamic, more innovative, jazzier in the production of their bid responses, and had better resources, but the reality is that it is a challenge whoever you are, big or small, regardless of sector or industry. Universal truths Due to increased pressure on costs, and greater answerability to procurement functions and senior management, businesses everywhere are required to tender for services more frequently, even if their incumbent adviser is historically the preferred one. This has generated more bid and proposal activity and a requirement for dedicated, professional resources to produce higher quality responses; more edgy, visually appealing pitch materials that encapsulate the sales message in a succinct and digestible format. It has also made winning less certain. Specific challenges in legal services With the mass globalisation of business on one hand, commoditisation of certain legal services on the other, combined with a growing number of niche service providers emerging in the form of boutique law firms, the market has become a matrix. It's an immense challenge for a law firm to differentiate itself, find the right market position, and offer something unique and compelling. If you throw pricing into the mix, it is an even harder scenario. Professionalising the bid management activity Whatever the market you are in, legal or otherwise, a professional and well executed bid response, will make a client sit up and take note. To achieve this end result, requires significant commitment in time and resource. Here are a few high-level pointers: 1. Approach. Always approach your bid from the view point of the client. Resist the temptation to write only about you and your firm. Consider how the services and expertise you offer will help them. Anticipate some of the hurdles and obstacles they will face and demonstrate your understanding of their problems and how to solve them. 2. Price. It is not always about the lowest price. What is important is being able to explain why the price you are quoting, is the right one. Be as transparent and detailed as you can, so that the client can conclude for themselves why the price is right. 3. Visuals. Even though it is the content that counts, a visually appealing bid makes a difference. If all else is equal – and it often is – then the offer that looks good in a relevant way, comes across as more professional. 4. Evolve. Markets and economies are not static; so, the way companies and law firms respond to RFPs needs to align with that. Producing a bid document is an evolving art. There is much to learn in every bid or tender process – evaluate each process, chase that feedback from clients, and try your best to learn how other market players are bidding. 5. Experience. Engaging a bid and proposal expert is a smart thing to do. Not only can our bid management professional be totally focused on the bid project, but also share valuable lessons learnt from other bid processes, as well as offer a wider cultural and industry perspective. The RFP (Request for Proposal) is not disappearing any time soon. The Anglo-Saxon model of doing business through competitive tendering, with a formal process attached to it, is more and more widespread, resulting in a growing professionalism in bid and proposal management functions. Law firms, as much as other industry players, need to listen to and learn from their peers, competitors and clients, on how to make winning proposals, and take every opportunity available to them to do that. Anxiety keeps you on your toes. You don’t have to think that firms with deeper pockets make better bid responses, but you do need to evaluate continuously if you can do it better. In an increasingly competitive landscape, bidding anxiety is a good thing. See it as a way to strive for the best, and maximise all the resources you have access to, to win that bid. Read more on what we can do to help you win pitches Fiona Bliss Quiroli is an experienced bid and proposal management specialist with considerable knowledge of the legal services sector. She was European Bids and Proposal Manager at Baker McKenzie for seven years and EMEA Bid Manager at SDL, Web Content Management division, for a further three years. Prior to that she worked in business development and marketing roles at Allen & Overy, Field Fisher Waterhouse and McKinsey.

Law firms are commonly lead by an elected managing partner for a term of about 5 years. In general lawyers leading law firms do an OK job and keep the firm afloat during their term. Some managing partners excel and leave the firm in a better shape when their term has come to an end. Looking into what makes a successful managing partner we noticed they have five characteristics in common: 1. They are not afraid to lose their position Successful managing partners rigorously focus on what is in the best interest of the firm. The interest of the firm will always precede personal interests. Successful managing partners do not fear the vote of no confidence and they to not fear confronting individual partners or the partner group with bold measures when this would be required in the interest of the firm. In our practice we see how the fear of losing the position is holding managing partners back from doing what should be done. As the saying goes: ‘it is impossible to make an omelet without breaking eggs’. In general people are hard wired to be liked and to protect what they have gained. Successful managing partners are not bothered if they are not liked by everyone all the time and they are always prepared to ‘gamble’ their position at the risk of being demoted. 2. They have a long term strategy vision Successful managing partners have a strong vision on where they want the firm to be in five years time. They have the ability to outline this vision and share it with the partner group within the first 100 days of their term. This will instantly make clear to everyone where the firm will be going. All the rest of their term will be focused on executing this vision in a systematic manner to ensure that the strategic goals are met at the end of the five year term. The long term strategic vision is paired to a system of continuous ‘micro adjustments’ while executing and implementing. Successful managing partners are very purpose driven. 3. They have an iron fist within a velvet glove Successful managing partners typically have great human skills. They have great empathy and understanding of how others think and feel. The successful managing partners can be very convincing and have great persuasive powers. They recognize the importance of good an open communication and are constantly in touch with fellow partners, other office workers and with clients. A common characteristic of the successful managing partner is however that they recognize that just being empathic, open and communicative will get you far, but not all the way. Therefor they show that they are prepared to take tough and unpleasant decisions when needed. They make that other partners know that they would not hesitate to kill off their best friend if necessary. Underneath the friendly empathic surface there always looms a menace. They will not be pussies that one can easily walk over. 4. They don’t micro manage All characteristics that make a great lawyer become a huge hindrance when it comes to managing the firm. Being a great lawyer coincides with a meticulous attention to detail and elimination of risk. On top of this lawyers are not trained to manage a company nor do they in general have any relevant prior experience. Successful managing partners recognize their limitations and surround themselves with skilled professionals whom they trust with day to day management issues. Being the managing partner does not imply that one knows everything better. Successful managing partners are fully aware of this. They know that their role and value to the firm lies in keeping everyone fully motivated and aligned to the strategy. They make sure that no one deviates from the track and that no one fail to deliver on time. Details obviously are important, they are just not the prime focus of the managing partners. 5. They don’t waste their time nor the time of others At TGO Consulting we spend part of our time helping law firm leaders to be effective in their role. One of the things we have noticed though the years is that it seems very hard for managing partners not to be in internal meetings all the time. When we ask questions about this we often hear that they feel they need to be present just to demonstrate that the meeting is important or because they are ‘control freaks’ Successful managing partners know that although good communication is key, internal meeting are for the most part a ritual waste of time. They treat their time and the time of others as a precious commodity that should only be used in the best possible way. Leaving the managing partner time to focus on the success of the firm and the other partners time to focus on the clients. Coaching law firm leadership Managing partners need to master many skills. These five characteristics seem to be the differentiators that we noticed successful managing partners have in common. Only to a very small number of lawyers these come natural. Most however, will need some guidance. At TGO Consulting we have extensive experience in guiding and coaching law firm leadership. Enabling you to maximize the contribution to the long term success of the firm.

It is happening at every law firm. Seemingly out of the blue one of your associates announces leaving the firm. Sometimes to go to another law firm, but often to go in-house or leaving the legal profession altogether. These are typically not the associates that under-perform and would have had to leave anyway. What I am talking about are those considered a ‘regretted loss’. Recently I had a conversation with one of the market leaders in legal recruitment and headhunting. She comes across these ‘leavers’ on a daily basis. So we started a discussion as to their motives. Not surprisingly ‘work life balance’ is mentioned a lot. But it is hard to believe that this is dominantly the real motive as a significant number seems to come from law firms that require around 1500 billable hours a year. ‘Work life balance’ however is a politically correct motive as the desire to have a fulfilling personal life is hard to dispute. “Business development stress might well be the prime reason for associates to leave” Business development stress Having analyzed hundreds of interviews with associates who decided to leave a firm, it became clear that business development might well be one of the prime reasons. Many ‘mid-tier’ law firms expect their associates to generate new business. Besides having to work on matters that are originated by the partners, the associate has to find new clients and originate personal revenue. Graduates who embark on a career as a lawyer with a ‘mid-tier’ firm are typically driven by the ambition to become really good legal practitioners. They tend to thrive on delivering a technically perfect legal product. Predominantly this type of lawyer tends to be more introvert than extrovert. Being pressured to go out and hunt for business goes deeply against their nature. They never wanted to be ‘sales people’, that is why the studied the law and became lawyers in the first place. The mid-tier/top-tier juxtaposition Those law students with great talent and a burning ambition to become a ‘mover and shaker’ as a lawyer will typically join one of the top-tier firms. Surprisingly we found that also in this segment associates are leaving because of business development. Not because they feel forced to solicit new business, but because they are forbidden to do so… Top-tier firms focus on high value high end matters which are beyond the capabilities of an associate to attract. At top-tier firms new business is the ‘privilege’ of the partners. This leaves the eager associates frustrated. So here we have it: in the mid-tier associates are expected to generate business of their own while the lawyers joining these firms desire to be just legal counselors, not sales people. At the top-tier, associates are forbidden to develop new business, while the lawyers joining this type of firm have a burning ambition and would very much like to go out independently to find new business. Business development angst Once, decades ago, being a lawyer was a ‘nobile officium’ and lawyers were forbidden to solicit for work. Today is very different and we have to recognize that law firms are a business. Developing new business has become key to survival and success. Every lawyer needs to master the basic BD skills. Across the spectrum, law firms struggle with how to improve the business development skills of their lawyers. In general it is best to start working on reducing ‘business development angst’. Young lawyers who feel pressurized to attract new business often have a misconception of how business development really works. The have this ‘nightmare’ vision of having to ‘work the room’ during receptions and seminars, handing our business cards to complete strangers. This vision embodies almost everything a serious content driven professional does NOT want to do. At the TGO Centre for entrepreneurship we have several tailor-made programs to help lawyers to become entrepreneurs. Highly effective. It might be worthwhile to ask how we could help you.

When you finally made it to partnership, you were filled with joy. This surely was the best thing that happened in your professional life. Now five years down the line you are not so happy anymore and you have started thinking about switching to another firm. According to The American Lawyer’s Laterals Report, there were 2,895 partner moves among firms in The Am Law 200 between September 2016 and October 2017. Back in 2016 we at TGO Consulting looked into the German market and found an annual increase of 20% of partners switching firms (report Mercenaries on the Move 2016). Like the divorce rate, the rate of partners leaving their firm for another firm has dramatically increased. So the numbers suggest that if you are a partner considering to leave your firm, you are certainly not the only one. A growing number of partners is having similar thoughts. But before you decide to jump ship there are two things we think you should consider. 1. The grass might not be greener Statistics show that nearly a third of the laterally hired partners move on again. This suggests that once partners start moving, it is not unlikely that he or she will move again. These statistics are very much in line with our own experience. We frequently come across partners who after a couple of years have started to question their decision. Maybe, the new firm did not provide the synergy and the new clients they hoped for. Maybe they started to miss the ‘brotherhood’ of their old firm (even if at the time they ‘hated’ their fellow partners). Maybe the pressure to perform in the new firm is too high or maybe the new firm is not ambitious enough. Whatever the reason, the grass that seemed so green might not be greener after all. 2. Will your clients be happy? Every partner knows that without his/her book of business there is little chance in getting hired by another firm. Partners work hard to keep the relationship with their clients as close as possible. Not only is this the best guarantee that all matters can be put under their name (see the previous blog on partner performance), but is also the best ‘guarantee’ that the clients will follow when the time has come to move to the next law firm. For any partner clients are key for their career. Even more for those who are considering to switch firms. How clients might see your switch At TGO Consulting we frequently talk to in-house legal departments. Did you know that the big multinationals are confronted with one partner move every month. Once every month these companies go through the process of having to involuntarily spend significant time and resources to deal with the consequences of a partner who is handling their matters moving to another firm. And you know what, clients are always the last to be informed (typically on a Friday afternoon). What happens if a partner decides to shift firm? It is likely that the new firm is not part of the existing panel leading to countless administrative nightmares that have to be addressed to assure critical work is not jeopardized. Maybe the new firm is conflicted. Maybe the new firm has higher rates than the old one - Would this automatically mean that the same partner can now charge more to undertake the exact same work, to the same client? Rates are locked-in for at least a year with a panel firm – Who talks with client about the increase in operational costs? Even if it is only one partner making a lateral move, he or she is seldom alone. About a week or two after a partner move the senior associates, and often the entire team, follow the partner. Some General Counsel have suggested to charge the moving partner with the administrative costs. Knowing this, now think about your own clients. It is quite possible that your clients are not as organized as the legal department of the big multinationals. In that case there will be no administrative hurdles or costs. What will remain is the issue of the potentially higher rate and the possibility that your new firms is conflicted. Placing yourself in the position of your client, what would you think if you suddenly have to pay more for the same person performing the same routine. You probably would not be too pleased, would you? Start putting clients first! This article is not meant to say that partners should not switch to another firm. There might be perfectly good reasons for that. Reasons that will typically revolve around better opportunities for practice development. But before you make your decision, at least question your motives as in general about 30% gets this wrong. What this article is mainly saying is that being a successful lawyer is not so much about you as it is about your clients. Our clients are the sole reason that lawyers are in business. Therefor the interests of your clients should be central in the decision you are about to take. Almost half of all lateral moves ends up to be a disappointment because the clients did not follow or left soon after…

In theory all partnerships are based on trust. Partners jointly own the firm and all contribute to its prosperity and success. That’s at least the theory. In reality trust is not at the basis of the partnership and a system of checks and balances is needed to make sure each partner performs and contributes in a more or less equal amount. Law firms currently focus on measuring inputs like revenue, billable hours and origination. Leadership focuses on individual lawyers as the key performance indicators. Law firms are insufficiently aware how strongly the metrics are detrimental to behavior. Most firms measure the revenue and the number of billable hours each partner creates. This might seem the most logical thing to do, but: ‘what you measure is what you get’. If partners are assessed on revenue and hours, then that is what they will produce before anything else. No incentives to cooperate. Once one starts measuring personal revenue, partners will start competing with each other to be ‘billing partner’ and put the file in their name. Holding partners accountable on the basis of their personal revenue is not going to encourage cross-selling. The firm will lose out on opportunities. From the client’s perspective law firms should be integrated partnerships. All partners cooperating in a collaborative harmonious way looking after the client’s interests. In reality all too often partners are trying to monopolize the client relationship in order to maximize personal revenue even if it is at the costs of the greater good of the firm. No incentives to become more efficient. Clients have started to demand that law firms enhance the efficiency of the work process. Spending as few hours as possible, but as much as necessary. This introduces a completely new way of working for a lawyer who is used to have almost complete freedom on how time is spend. Actively trying to reduce time spend on a matter or on a client would go directly against the interest of the partner. Partners and associates alike have to make the required number of hours in order to comply with the norm. We have been called to a law firm where senior associates started to leave because the partners needed to make the hours themselves. This might seem like an extreme example, but it happened. For associates typically their bonus would depend on the number of billable hours they make. Little incentive to become lean and mean with time spend. Overcoming the ‘prisoners dilemma’ The prisoner's dilemma is a well-known paradox in decision analysis in which two individuals acting in their own self-interest pursue a course of action that does not result in the ideal outcome. The typical prisoner's dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process. Stated simply, the prisoner's dilemma stipulates that personal interest seems more desirable, but it often leads to a worse result if two parties are both acting in self-interest. Interestingly this is precisely what we see happening in law firms: as long as personal interests prevails, the firm as a whole will lose out. A more balanced system. Focusing predominantly on revenue and hours has served law firms well over the past decades. Today’s reality demands that more balanced and sophisticated measurement systems are put in place. We know a small number of law firm partnerships who do not measure anything individual at all. These exceptions might well be the only true partnerships. However, I’m not convinced this is the best way to go. Like any other business law firms need measurable and quantifiable KPI’s for their partners and lawyers. These performance metrics should focus on what is in the best interest of the firm as a whole. What and how exactly will greatly depend on the system of profit distribution. Lock Step, Eat-What-You-Kill and anything in between. Today we are actively working with our clients to develop and implement these new and more sophisticated systems of performance tracking. Always with a clear eye on the interests of the firm as a whole. Rewarding cooperative behavior. The time has come for law firms to overcome the prisoners dilemma…

Not a day seems to go by without blockchain being mentioned in one way or another. Most of the hype is about cryptocurrencies such as Bitcoin. Even to the point that many people have started to think that blockchain and Bitcoin are one and the same. The creation of new Bitcoins, called Bitcoin mining, is done by solving increasing complicated mathematical puzzles, a process that huge computing power and consumes insane amounts of electricity to complete. The consequence is that people have started to believe that blockchain consumes a lot of energy. It does not. The blockchain technology is generating a huge amount of interest amongst the technology community in Silicon Valley and elsewhere. It is widely predicted to transform huge swathes of industry over the next five to ten years and beyond. A vast number of potential applications have been identified, some of which are already applied in real world applications. Blockchain can best be described as a digital platform or database for securely storing information and recording transactions. And while blockchain technology does have genuinely interesting and potentially powerful use cases, it has enormous drawbacks for consumer applications that get little mention in media coverage: 1. Scalability The on chain transaction processing capacity of the bitcoin network is limited by the average block creation time of 10 minutes and the block size limit. These jointly constrain the network's throughput. The transaction processing capacity maximum is estimated between 3.3 and 7 transactions per second. However, in reality the Bitcoin network is achieving maximums of 3 to 4 transactions per second. Let's compare this to Visa which uses a security protocol Verified by Visa, that guides its client banks and merchants in confirming that it is the cardholder performing a transaction. Visa processes an average of 150 million transactions each day, or around 1,667 transaction per second on average. Based on rigorous testing, Visa estimates that it is capable of processing more than 56,000 transaction messages per second. Blockchain still has a long way to go. 2. No password recovery Blockchain wallets and their passwords are tied to a file on a user’s hard disk and are absolutely critical to users trying to access the blockchain. By their very nature they have no recovery mechanism. “You lose your password, you lose everything” is an awful user experience for mainstream consumers and a nightmare for companies attempting to build their service on a blockchain. If you use a hosted service, the risk of theft or sudden loss of assets is very real, with central targets and limited traceability. For most consumers, losing a password to an online service is a mild inconvenience they’ve grown accustomed to, since typically, it’s quickly fixed by requesting an email reset, say, or talking with customer service. Not so with blockchain. 3. Smart contracts are computer code, not legal documents One of the terms that almost inevitably comes up in the context of legal issues and blockchain is ‘smart contracts’. Smart contracts are for example underlying Initial Coin Offerings (ICO) and are a set of coded operations that get executed automatically when someone sends an input to the contract. But smart contracts and are just like any other piece of code, and may sometimes contain vulnerabilities and bugs that can be exploited. A scan by researchers from National University of Singapore (NUS) of nearly one million Ethereum smart contracts has identified 34,200 vulnerable contracts that can be exploited to steal Ether, and even freeze or delete assets in contracts the attackers don't own. The potential use-cases for blockchain are vast and broad ranging, reaching across multiple sectors and industries. While there are many perceived benefits (not least reduced transaction processing times and cost for financial institutions), there are some significant barriers to adoption, including the legal challenges outlined above. Nevertheless, as the use and implementation of blockchain becomes more widespread, businesses will need to be able to respond to increased customer demand for more efficient and secure service delivery methods and blockchain may offer an attractive solutions to these issues. For the short term however blockchain is predominantly a technical issue and not so much a legal issue and it remains surprising to see how many law firms today are trying to ride this wave.

For years now India has been talking about finally opening up its legal market to foreign law firms. On 13 March the Supreme Court of India ruled that this would still not be allowed. Foreign law firms however will be allowed to give legal advice to their clients on foreign laws. The Supreme Court also ruled that Business Process Outsourcing companies working on legal services can operate in India as they don't have to operate under the ambit of the Advocates Act. And it also ruled that foreign law firms can fly in and fly out of the country to give legal advice, but they can't be allowed to set up permanent offices in the country. The Indian judiciary has been grappling with the question of whether to permit foreign lawyers to practice in India for more than two decades. The original dispute started more than 20 years ago when licences were granted to foreign firms such as White & Case and Ashurst to set up offices in India. At some point the Bombay High Court ruled that foreign law firm should not set up offices. However the question as to whether foreign lawyers practicing foreign law in India without a physical office was unresolved. In a now famous case, petitioner, AK Balaji had sought a direction to the Union of India, the RBI, the BCI and the Bar Council of Tamil Nadu to take action against 32 foreign law firms, allegedly practicing illegally in India. In 2012 the Madras High Court ruled in favor of the ‘fly-in, fly-out’ arrangement for foreign lawyers to visit clients in India in 2012 which was reaffirmed by the Supreme Court. This was appealed by the Bar Council of India. Ashurst, Bird & Bird, Clifford Chance, Herbert Smith Freehills, Linklaters, Norton Rose Fulbright, among others gave evidence at the time. Interestingly, last year in January, the ministry of commerce and industry on January 3 amended a rule allowing foreign law firms to set up offices and advise clients from Indian Special Economic Zones (SEZs). Before that, India did not permit multinational law firms to operate in the country. Indian law firms were also not allowed to operate from any of the SEZs. Last year's amendment however was made by the commerce ministry, while whether to allow a foreign law firm in India is a purview of ministry of law and justice. To be continued...

Fundamentally we are still training our future lawyers to become legal scholars. Given the fact that most if not all of that knowledge will be available to everyone via Artificial Intelligence soon, this must be completely the wrong way to go. So here comes my list of the five things law schools should teach, but don’t: 1. Drafting skills One of the core capabilities of a lawyer whether it be today or in the past is having the ability to draft an agreement, a law, general terms and conditions, or any other legal document from scratch. It is surprising that even the drafting of something as simple and elementary as a Non-Disclosure Agreement is never taught or practiced in law school. I really find this a shocking omission. And hopefully most of you would agree. As a consequence as a practicing lawyer we are dependent on and addicted to templates. We keep reusing old stuff that we adapt a bit here and there, without asking ourselves if it wouldn’t be better to start from scratch. The same is true when it comes to new laws. By adding on to existing laws we all too often create our own mess 2. Negotiation skills. What clients want from lawyers is their ability to negotiate on the client’s behalf. Most lawyers have to negotiate all the time. Lawyers have to negotiate a deal, a contract, a settlement, and so on. Legal issues rarely are about being right, they are about convincing others that your client has a valid point of view. The vast majority of disputes never come to court but are settled instead. The vast majority of contracts are a matter of give and take. The ability to negotiate and the ability to come up with a negotiating strategy is at the core of a lawyers profession. One cannot be a good and effective lawyer without being a good negotiator. The process of negotiating has been subject to academic studies for over a decade, so it is the more surprising that this is not yet part of the law school curriculum. 3. Project Management Lawyers typically are not very good in time management and project management. For a scholar working as an academic this might not be much of an issue, but if you are in private practice it is. On the most basic level every lawyer must have the ability to plan each matter in advance and keep track of multiple matters for different clients at the same time. Anyone who has ever worked within a law firm knows this is an issue. All too often associates have to work late or in the weekend, not due to the sheer volume of work, but only as a consequence of poor planning. This is as annoying as it is inefficient, but it is quite harmless (or even beneficial) when it comes to the financial results. The hours are still paid for by the client. Things get more serious as it comes to Alternative Fee Arrangements. Even the most experienced lawyers tend to hugely underestimate how long it will take to perform a certain task. Due to increasing pressure on legal fees, law firms have to become highly efficient in the way they manage a case. Law school need to teach future lawyers how to break down a case in smaller steps and how to assign people and time to each of these blocks, while keeping track as the case develops. 4. Business skills and economics Being a lawyer is very different from being an academic. As a lawyer you are running a business or you are part of a business. Lawyers need to understand the fundamentals of business economics in order to run a profitable business. They need to understand profit and loss, revenue and cost, cashflow and so on. With today’s competitive climate, pressure on legal fees and the potential need for investment in IT is more important than ever before that every lawyer in the private sector has good understanding of running a business. This is equally true for sole practitioners as it is for anyone at a big law firm. We have all experienced that most associates promoted to partner have no idea how to run a profitable practice. 5. Creativity Lawyers are still trained to apply the law and avoid all potential risks. Clients on the other hand are mainly interested in solutions: road maps, not road blocks. As the knowledge of the law becomes easier accessible to our clients, our added value will be defined by our ability to come up with new and creative solutions. Creativity is not some mystical gift, it is a state of mind that can be thought and trained. It is the way in which you approach problems and obstacles. It is important that law schools make this part of the educational process. Progress can only be made by pushing the boundaries. Young people cannot learn this early enough. So what about technology you might ask? There is no denying that technology will change part of the legal profession. Many of the boring tasks like e-discovery, legal research and document management are already done by computers. Artificial Intelligence will end the monopoly on knowledge of the law. Lawyers should embrace these developments as they will take away the boring stuff enabling us to focus on the things that really matter. There is no need for lawyers to understand this technology, like there is no need for a pilot to understand the jet engine.

In the relationship between law firms and their clients, the relationship is typically in the hand of one of the partners. In many cases this will be the partner who was involved when the relationship originated. The question is however if this is the optimal way to manage the relationship. The partner who acts as the client partner has a personal interest to keep the relationship as exclusive as possible. This way the partner gets all or most of the revenue in his or her name. Secondly, if the partner at some point should want to make a lateral move to an other law firm, it is important to have a portable book of business. The more exclusive the relationship, the more likely it is that in such event the client will follow the partner. Seen from the client perspective in most of the cases it is not ideal if the relationship is overseen by a partner who is also a practicing lawyer in a specific area. The legal specialism becomes a hinderance in discussing the broader client legal needs and opportunities. Ideally form the client perspective the relationship should be managed by someone who is equally broad as the General Counsel. This is where a Client Service Director could emerge as a new rol within law firms. The CSD would hold the over-all relationship with the client. The CSD would be responsible for the pricing arrangements and for identifying how the firm could best - proactively - help the client reach its business goals by bringing in the right legal expertise at the right point in time. The CSD will typically not be a practicing lawyer. Experience as a lawyer would be extremely helpful by does not need to be a prerequisite. It is important to clearly distinguish between the role of the Client Service Director who is responsible for client management and the role of the partner who will always remain responsible for matter management.