About a month ago I was having lunch with the General Counsel of a large multinational company. We were having a conversation on the role of legal and on whether a GC should be part of the board. This GC, arguably one of the more experienced in the world, had herself been a board member for the past five years now. Despite being an Executive Board member, reflecting on her contribution she told me she had often found herself out of depth during board meetings. Nine out of ten meeting there are no legal issues on the agenda. Boards tend to focus on growing shareholder value. GC’s remain lawyers and not entrepreneurs. Their role is to limit risks rather than identifying business opportunities. Law firms and in-house legal teams must realize that they are operating in a micro cosmos. For lawyers their day-to-day business revolves around legal issues. For law firms it is even the way they make money, it is the business model. For clients, the companies that employ the in-house lawyers and that keep law firms busy, this is not the case. Clients’ world revolves around growing the business. From the CEO perspective Legal is not more important than Facility Management. Probably Facility Management could be slightly more important given the huge savings that can be made by negotiating a good deal for an office building and given the importance of having decent heating/cooling and the lights burning. For lawyers this insight invariably comes as a chock, how can a mundane function like Facilities ever be more important than Legal? Isn’t Legal the most important thing there is? No, it isn’t. I recently came across an interview with the owner and founder of one of the world’s leading offshore companies. He has just returned form sailing around the world solo on his yacht. Upon return he had fired half the board as they had not been able to take the company forward during his absence. During his time at sea, he had come to realize that his company had gradually over time lost its entrepreneurial spirit. Growing bigger had changed the dynamics towards risk control, compliance, and administrative procedures. Pivoting away from the ambitious, opportunity seeking, client driven entrepreneurial company it originally was and that had been the foundation of its success. What he particularly hated were lawyers. The cost of lost opportunity For lawyers it is important to better understand what is ultimately the most important to their client. Commercial companies are under tremendous pressure to deliver shareholder value. Business leaders have to focus on growing the business by identifying business opportunities. Companies are more concerned with revenue, cash-flow and profit than they are with costs. When lawyers state that they “understand their clients’ business”, they typically refer to industry sector expertise. Seldom to the business economics. The same holds generally true for the in-house team. For companies, time equals money. Between 11 and 13 March 2019 all global aviation authorities decided to keep all Boeing 737-max aircraft grounded due to serious safety concerns. Immediately several legal battles began on who is liable for what. No doubt an interesting and challenging legal question. The corporate reality behind this is however slightly different. This reality is about time and revenue. Leasing a 737-max costs around $360,000 a month or $12,000 a day. For an airline operating 15 of these aircraft that is $180,000 per day in leasing costs alone. Then there are the costs of renting other aircraft and the costs of potential loss of market share on routes that were operated by the 737-max. For the airlines every day costs money and every day represents lost opportunity. It is far more important that the technical issues are solved fast than to quibble about who is liable for what. Time is money. Rather than focus on liabilities they want Boeing to focus on making the aircraft safe again. For companies, the cost of legal is often overshadowed by the cost of lost opportunity. Every extra day it takes for the lawyers to get their job done, equals a certain amount of revenue and profit missed. If Hilton opens a new 200 room hotel one month late due to legal issues, this easily represents over $1m in revenue lost. Lawyers, whether external or in-house, are typically not enough aware of this. Lawyers tend to see legal issues disconnected from business reality. Lawyers are operating too much in a legal bubble. Who is the client? For law firms the in-house team is in many cases the representative of the client. The Legal Department, headed by the GC, instructs the external lawyers and manages the matters. Like all other internal departments in a sizable company, the Legal Department will have its own dynamics. There is no reason to assume that as it comes to office politics and office dynamics the Legal Department is any different than Facilities, Finance, IT, HR, and so on. Anyone familiar with the big corporate world will know that departments always complain about each other. Who doesn’t believe that the IT-Department ‘sucks’? Again, why would Legal be the exception? For everyone working in a legal capacity on behalf of a company, either in-house or outside, it is of vital importance to keep in mind that ‘the client’ is not the Legal Department. The client might not even be the CEO. The ultimate client are the Shareholders, as increasing shareholder value is the only purpose of the company. We would encourage all lawyers to keep this in mind. Lawyers should focus on being business enablers rather than legal technicians. Data & Dialogue, a relationship redefined In April we will publish a 292-page book on the relationship between law firms and their clients and between clients and their law firms. The book will explain in great detail what the business and political dynamics are at either side. In doing so, the book will describe how lawyers can increase value to clients while retaining their profitability. The use of data analytics might be one of the drivers for change. The book will contain tons of graphs, tables, industry standards and best practices. Complementing the book there will be a special website with regular updates and free information to share. The book is for both law firms and in-house legal departments and it will absolutely transform their future relationship.

article by Lisa Håkanson I have been contemplating an article on diversity for a long time. Over the past years many law firms have come to us with questions to help improve diversity in their firm. Clients are increasingly pushing their law firms to become more diverse. Law firms find themselves struggling to comply. As this week, Friday 8 March, is International Women’s Day this seems like the ideal timing to write and publish on this topic. You might wonder why I have been pushing writing the article forward for some time. The problem is that the more you dive into the topic, the more complex it gets. In our upcoming book ‘Data & Dialogue, a relationship redefined’ (Jaap Bosman / Vincent Cordo Jr.) an entire chapter is devoted to diversity. Traditionally law firms have been dominated by white men. Even today sizable law firms with more than 25% female equity partners will be very hard to find. When you take a look of the websites of the leading law firms in various jurisdictions across Europe and the US you can see very little has changed. I have been present at multiple lawyer conferences where the panel on stage debated how important diversity was to them, while all the panel and the whole audience were white. We personally know a talented lawyer who was at the time the only black associate at a reputable law firm. Despite a successful career path he decided to leave because he hated to be in every photo in brochures and on the website and being portrayed as the minority success story. He just wanted to be recognized for what he was: a damn good lawyer, period and not as a poster boy for the firm’s inclusiveness. Diversity is a hard nut to crack. Actually the ‘bro’ culture is the problem Law Firm clients are increasingly exerting their buying power to ‘force’ law firms to become more diverse. When today a law firm is pitching for client work or a spot on a panel, submitting statistic on the firms diversity has become a standard requirement. At the same time labor market forces are also pushing towards more diversity. In many European countries the numbers of women and minority law school graduates have exploded, sometimes even surpassing the number of traditional white males. A significant percentage of law firms has 50/50 male/female associates. Yet as it comes to equity partner promotions, figures look totally different. We also know of a number of law firms that have actively stimulated recruiting talented minority graduates as associates. Most of these initiatives however failed. The issue is not that law firms do not want to have female or minority partners. The issue is also not the quality. The core of the problem is the strong ‘bro’ culture that is defining how lawyers behave and interact. Being a lawyer is a very competitive and individualistic profession. Partners don’t operate as teams and have their own personal targets to meet. Lawyers operate for the most part in conflict situations. The combination attracts Alpha males. On top of that comes that traditionally the top universities have had strong fraternity cultures. We only need to watch the hearing of both Christine Blasey Ford and Brett Kavanaugh on 27 September 2018, to get a picture of what the culture was (is?) among top students at Yale. Other top universities are no different. Bro culture is what made law firms successful. Bro culture is also what is leading to #MeToo and the failure of diversity and inclusiveness initiatives. It is very hard to become part of a club if you are not like all the other club members. This is equally true for the Hells Angels as it is for an elite law firm. The real issue is that culture at law firms will need to change. The prospect of that succeeding is however bleak. The other day when we hosted a round-table of managing partners one of the participants described his most important task as “being the guardian of the culture”. No doubt that he meant well and didn’t refer to diversity and inclusiveness, he just totally didn’t see the connection. The culture is at the heart of the problem. Meet Purl On 4 February Pixar released a nine-minute short film that depicts what could be an investment bank (or a law firm) with its workplace misogyny and strong bro-culture. Today it has already amassed 7.6 million views. It’s the story of a walking, talking ball of yarn called Purl. She’s carnation pink, bubbly and eager to kick off her new desk job at the firm. But after her colleagues – all male – negatively react to her, she shapes herself (figuratively and literally) to be more like the hyper-masculine workers around her so she can fit in. It’s an example of tribalism, which can be damaging to both individual workers and the companies that employ them. When people are in an environment where everyone looks, sounds, acts and thinks the same, it can create an echo chamber and cyclical system that only includes and rewards the same kinds of people over and over. That is why we at TGO Consulting are vocal advocates of diversity. We truly believe that only having people of a similar background, will easily lead to tunnel vision or intellectual inbreed. In order to deliver outstanding results teams need to be composed of people who have diverse backgrounds, cultures and visions. Study after study has shown that more diverse teams are more innovative, more successful and make better decisions than homogeneous teams do. Diversity makes economic sense and is a good business decision. Action plan It is the culture that has to change. No managing partner should strive to be ‘the guardian of the culture’. Managing partners should be the change agents dismantling the toxic bro-culture step by step. One of the steps includes actively increasing the number of ‘dissenting characters’. This could start by looking beyond mere images of ourselves when scouting for talent. Focus on skills and abilities rather than university and grades. Move from an individualistic culture towards a more collective culture. Make minorities and people with diverse backgrounds part of the firm’s leadership. Changing the culture of a law firm very much depends on the tone form the top. When the leadership really want a change in culture, you will be amazed how much is possible. Even at Microsoft with its strong corporate culture Satya Nadella managed to change the culture and turn the company form an increasingly irrelevant giant into an inspiring profitable company. To all you law firm leaders: be the agents of change, break down that bro-culture and lead your firms into a glorious future. Lisa Håkanson is a partner and one of the founders of TGO Consulting. She is a lawyer with over a decade of experience in the legal sector both in-house and with a law firm. Lisa has worked internationally throughout her career, including in South Africa, Sweden and other parts of Europe.

Working with lawyers on a daily basis, we know that ‘an empty desk’ is what many lawyers fear most. Those who are working as a partner in a law firm are under constant pressure to perform. Partners have to meet certain revenue targets, have to produce a minimum number of billable hours and keep their associates fully occupied at the same time. Every matter whether big or small will come to and end and then the lawyer will need a new matter to keep himself and his team occupied. As a consequence I’d say that a majority of lawyers will accept any new matter in order to avoid the risk of idle time. Understandable as it may be, this is probably not a smart thing to do. This article will give you five reasons why you might want to turn some clients down, even at the risk of ending up with an empty desk. 1. Clients not prepared to pay your normal rates Certain clients tend to always complain about your rates while others have no problem at all. Assuming that your rates are fair and realistic, there is no apparent reason to accept clients that demand a discount. Obviously it is not uncommon for lawyers to give discounts, but these need to be reserved for your best clients that have been loyal to the firm for a long time and/or clients that bring a guaranteed substantial volume of work. Nevertheless, I see lawyers accepting to work for low fees for new clients all the time. The reason is ‘fear of an empty desk’. But even if there is not enough work it is probably better to not take on the clients demanding huge discounts. Lawyers can only sell their time once and it will likely be more profitable to skip the client and look for the next one who is willing to pay the rates. 2. Clients or matters that will get you conflicted for big ticket matters There are strict regulations governing what constitutes ‘conflict of interest’ for a lawyer. In general if a lawyer takes on a matter for a client, however small, the whole law firm will not be allowed to act against that client. This something that should be carefully considered before accepting a small matter for an new client. Even if this client is a reputable brand that you very much would like to work for. If one of your partners accepts to handle some employment matters for company A, it would prevent the whole M&A team one week later to represent company B in its the takeover of company A. Thus accepting a 25.000 Euro file could potentially stand in the way of a 500.000 Euro M&A matter. This applies also to accepting a small role in a big matter to soon. If one of your partners gets hired as counsel to the board in a merger, the firm as a whole is prevented from representing the buyer or the target in this acquisition. The firm would miss a large amount of revenue. If you accept to have the government as a client, your firm will likely not be able ta act against the government which might be far more lucrative. The fear of an empty desk does affect your judgement 3. Clients that want you to accept a non-compete Big companies that have a lot of legal work tend to only use law firm that have been admitted to their legal panel. In order to become part of such panel multiple law firms are invited to pitch. The firms who have submitted the most competitive offers in terms of value will be appointed in the panel. Usually for a period of several years. What most law firms, eager to get on the panel, do not realize is that being on the panel does not guarantee any volume of work. It just means that the client’s various departments are allowed to work with the firm if they want to. No obligation, client is totally free to give all or most of the work to one of the other law firms on the panel. Keeping this in mind, law firms are advised to carefully read the ‘terms & conditions’ the client has for its panel firms. In many cases being on the panel will exclude a firm from representing companies that the client sees as competition. Being on a panel for 3 years might not get you any meaningful work but will prevent any partner within your firm to take on lucrative work for any of the companies that operate in the same arena as the client. Not only are panel firms prevented from acting against the client (even if there is no conflict of interest and even if the panel firm has never got any work), but the firm would also be prevented from acting for any of the client’s competitors in matters where the client is not at all involved. All this could be perfectly reasonable if the firm gets a substantial amount of work from the client, but if not it might cost you a fortune. 4. Clients that might damage your firm’s reputation in the market. Every law firms should have proper and adequate compliance procedures that will help prevent taking on clients or matters that involve illegal or criminal elements or constitute a breach of international sanctions. Even if perfectly legal, this type of matters or clients could seriously harm your firm’s reputation. This is an obvious reason why you should avoid certain clients. There are however also other situations where you might want to stop and think before accepting the mandate. The best known example is the pharmaceutical industry. Law firms that represent manufacturers of generic medicines will have a hard time getting hired by the big pharmaceutical companies. Reputational damage however comes in many forms and shapes. A law firm that consistently represents hedge funds in their often aggressive attacks on large corporates will probably drop of the corporates’ shortlist as they do not like being attacked for no other reason than manipulating the share price upwards. Equally representing ‘patent trolls’ will also not help your firm to become the corporates’ darling. The clients you choose to represent should be subject to strategic considerations. Choosing one direction might cut off another perhaps more lucrative market. 5. Matters that harm your positioning with the client’s in-house team. Most lawyers are most eager to work for large companies that have a strong reputation in the market. Not only do these companies have a substantial budget for external legal counsel, they also have some of the most interesting and profitable legal matters to hand out. Working for this type of clients could propel your practice forward. No surprise lawyers are eager to jump at the first opportunity. No matter how eager you are and how tempting the prospect, it might be a smart thing to first consider how your first mandate will shape the image the in-house legal team is going to get from your firm. Lawyers that are hired to do small matters will brand themselves forever as being the perfect firm for small matters. No matter how satisfied the client is with your service, you will never get big ticket work. Big ticket work goes to firms that do big ticket and not to firms that have built a strong reputation on small matters. Even if the matter is not small from a monetary point of view, the matters you are dealing with might harm your future prospects. The firms that capably handles all real estate rental and leasing matters is unlikely to get M&A or big ticket litigation, even if the firm would have all the required experience and skills to do so. It is extremely difficult to convince the client that you are capable of handling matters that are more strategic than those you have built your internal reputation on. The other way around is mostly not a problem. Aim high, not low if you are planning to build a profitable relationship with a large corporate. The clients you accept should be part of the firm strategy! There obviously is a lot more to say on this topic and yes, there are lots of nuances that I did not cover. However it is not the purpose of the article to be exhaustive or overly nuanced. My message is that the type of matters and clients you take should be part of the strategy of your firm. There should be a clear and well defined shared vision among all partners on what this strategy and policy is. If your firm has such strategy, great! If not, you might have some work to do. It will come as no surprise that we would be happy to help :-)

Shortly after the untimely death of Princess Diana, the well-known British actress Joanna Lumley mooted the idea of a “Diana memorial bridge”, a pedestrian ‘park like’ crossing to the Thames in central London. The idea was then not taken up and had been rejected several times since, until the moment Boris Johnson became mayor of London. From then on things moved swiftly and on 30 October 2013 The Garden Bridge Trust was incorporated to build and own the bridge, as private space in the public realm. I must admit that I am quite sympathetic to the concept of such a garden bridge. As you can see on the picture above, it resembles the High Line in New York and Paris's Promenade Plantée, with the exception that these are existing old structures that are converted into a park and the Garden Bridge had to be constructed from scratch. Fast forward, on 14 August 2017 after months of uncertainty the Garden Bridge Trust entirely abandoned the project after having spend a whopping £53 million of public funding on a bridge that never left the drawing board. Last Sunday, 17 February 2019, I read a lengthy article “An absurd vanity project for our age – Boris Johnson’s garden bridge” in The Guardian. Interestingly the article included a link to an itemized list of all the money that had been spend on this project. This cost overview shows that out of the £53 million, no less than £3.510.447 had been spent on legal fees. That’s right, 3.5 million Pound or 4 million Euro spent on legal fees for a project that has never materialized. That means that in this no litigation scenario, 6,6% of the whole budget has been spent on lawyers, just for reviewing documents and drafting some contracts. This must be difficult to grasp for all of you who have to work with clients who do have a business to run. No company bidding for an infrastructure project would spend 6,6% of its budget on lawyers (project finance not included). This is legal la-la-land and totally out of touch with reality. There have recently been more reports on excessive legal costs in the press. After Carillion, a UK facility management, civil engineering and construction company with 43.000 employees went bankrupt on 15 January 2018, a report by the House of Commons showed that Carillion was billed £6.9m by Slaughter and May over the last seven months before its compulsory liquidation commenced. That is 1 million pound in legal fees per month! On the merger between pharmaceutical companies Takeda and Shire that was closed on 7 January this year, Takeda’s lawyers will be paid $44 million, while the legal team for Shrine will invoice $77 million. That is $121 million for the lawyers doing the paperwork. Back in 2015 New York firm Cravath billed $100 million in fees for its legal assistance to AB InBev during the takeover of rival brewer SABMiller. For 99% of all law firms these kind of figures must take place in a parallel universe. Within the next two months my new book ‘Data & Dialogue, a relationship redefined’ will be published. This book details the present and future relationship between clients and their law firms. I have had the privilege of writing this book together with Vincent Cordo, jr. who is Central Legal Operations Officer at Shell. Working on this book and talking with many in-house teams and with many law firms, we know that for law firms and clients who have to operate on planet Earth, the situation is very different from what I have described above. The vast majority of companies is cost conscious as it comes to legal spend. What clients are looking for is value. There is no academic definition on what exactly value is and how it can be measured. I have been discussing this with Harvard and other leading institutions, but no one has a workable answer. We at TGO Consulting have spent some of time thinking about this and have now developed the TGO Value Matrix©. As the graph shows, there is a clear and direct relationship between the Return On Investment that the client can expect and the preparedness to spend money on the legal advice needed to get to the ‘profit’. The more money the client can potentially make (or prevent losing), the more he is willing to invest. The second relationship has to do with the number of available experienced lawyers that can do the job. The more choice the client has, the more competition, the lower the price that represents value for the client. We call this commoditization. The graph illustrates under what conditions clients expect low rates in order to get value, and in what situations a high fee will be acceptable. For lawyers value depends on the legal complexity of the matter and on the amount of time spent. For clients it is all about return on investment. Is legal spend part of opportunity or part of cost, this makes all the difference. Is legal spend part of the opportunity or part of the cost? Back to the examples mentioned before. In excess of $100 million in legal fees for a merger is an astounding amount of money, but in a situation of a $50b business opportunity it is just a small part of the costs that need to be made in order to successfully do the acquisition. The number of lawyers that have ample experience in handling this kind of processes is extremely limited, so there is a clear combination of business opportunity and limited availability justifying high cost. Whether that cost should be $100m is debatable. In the case of the Garden Bridge or the last days of Carillion, the situation is entirely different. There is in both situations no business opportunity and no shortage of competent and experienced lawyers. The amounts paid to legal fees seem to make no sense. The UK parliament and the press both have come to that same conclusion, be it in hindsight. The clients involved better had studied the Value Matrix...

Like most of us I am a great admirer of Steve Jobs. For me the man was a genius, not only because he developed brilliant innovative products like the iPhone, the iPod, the iPad, the App Store and other products his critics predicted would fail, but also for his ability as a manager to push the people he worked with to go far beyond their limits and achieve the unachievable. As it came to his own health however Steve Jobs was a ‘total idiot’. The biography by Walter Isaacson details his weird dietary habits. The book describes Job’s occasional tendency to eat only one or two foods, like carrots or apples, for an extended period of time. After Steve Jobs was diagnosed with a rare form of pancreatic cancer in 2003, he allegedly delayed surgery to remove the tumor for nine months. During that period, he attempted to treat his cancer with alternative medicine, including a special diet. As we all know, it did not work out well. Interestingly in our practice working with law firms in many different jurisdictions we observe from time to time similar patterns of behavior. We sometimes see law firms sliding down the path and finding themselves stuck in a bad situation with declining profits and with clients and lawyers turning their back on the firm. These firms do not necessarily have bad lawyers, on the contrary. These firms have over time developed a culture of management softness and diffusion. To our experience the culture in the partner group and the style of the management are strong indicators for the future success of a firm. Here are six pointers that might help you assess the situation in your firm: 1. Frequency of partner meetings Firms that have partner meetings once a month to discuss aspects of day-to-day management of the firm have a higher failure rate than firms that only have two formal partner meetings a year. Having a high frequency of hands-on partner meetings creates a culture in which all partners need to be involved in all aspects of day-to-day management. This will paralyze the decision making of the management and will lead to lack of action and to sub-optimal decisions. Managing a law firm on a once a month impromptu basis (partners rarely prepare for a partner meeting) is simply impossible. Partners should delegate all executive management decisions to the managing partner/executive team. 2. Deus-ex-machina solutions Instead of addressing an issue with a real solution we often wish for an easy way out. The term ‘deus-ex-machina’ refers to the crane that held a god over the stage in ancient Greek and Roman drama. This 'mechanical god' could solve all problems as by magic. Within law firm partnerships ‘deus-ex-machina’ solutions often arise when business is slow and revenue and profit are going down. The real solution would be that each partner doubles his/her efforts to bring in new business. Many partnerships find it too confronting to admit that the partners are at the core of the problem and resort to textbook deus-ex-machina solutions like replacing the head of marketing/BD, build a new website, invest in a new CRM system, anything to avoid ‘the hard way’ and change their personal behavior. 3. Consensus Wouldn’t it be nice if we would always agree on the best solution. In Steve Job’s case it has been well documented that all industry experts predicted the iPhone would fail. Prior to that Jobs had even been kicked out of his own company. These examples are not meant to illustrate that there should be no checks-and-balances, but that consensus leads invariably to bad decisions. Partnerships that have a culture in which consensus prevails tend to struggle to keep a competitive edge. Partnerships that embrace dissenting opinions and have the ability to have fierce discussions in partner meetings achieve better results. 4. Too much or too little autonomy For law firms to thrive it is paramount that partners have a reasonable amount of autonomy. Partners should have full ‘ownership’ and take responsibility for the development of their practice. This responsibility should not be delegated. At the same time every partner will need to align with the strategy of the firm. The most successful law firms manage to strike a fine balance between autonomy and centralization. Lawyers that are too fiercely independent doesn’t work and neither does an organization that is totally centrally managed. 5. Weak management Sometimes managing partners are unwillingly held hostage by their firm. Having grown attached to the perks that come with the job, many managing partners fear being voted down and having to return to practice. Others have lost their practice and would stand empty handed when being degraded to partner and having to bring in a certain amount of revenue. Fear of demotion will create weak management that will avoid any confrontation that might lead to major controversy. The most effective managing partners tend to be those who are ‘fearless’. A good managing partner will be an ‘iron fist in a velvet glove’. Respected, feared and loved at the same time. 6. Partners being ‘experts’ on everything Equity partners are from a legal perspective the owners of the firm. To be rewarded such position a person needs to be an excellent lawyer and a successful rainmaker. What is not required, nor expected, is that one is an expert on everything. Being risk averse and being focused on details, lawyers in general have poor management skills. Partners should not think themselves experts on copying machines, IT or the paper used for the stationary. Those things are, like many other decisions, better left to experts. Aroma therapy or chemo therapy? So based on this checklist, where is your firm? Obviously the six points mentioned above are not an exhaustive list. Trust among partners or prioritizing firm interest over personal interest are equally important. It goes beyond the scope of the article to discuss every aspect of the culture within the partnership that will foster bad results. As you have noticed none of the indicators involves legal qualities or business skills. It is all culture. Over the past few years we have managed to help several law firms that were in a bad situation to successfully turn the tide and find their way back to inspiring matters and profitable business. Under-performance due to inadequate business skills or lack or a realistic and relevant strategy can be reversed. Based on that same experience we know that the more affirmatives a law firm scores on the six indicators, the harder it becomes for us (or any other business consultant) to help. These law firms have ended up in a bad situation because they have systematically avoided to act, preferring ‘aroma therapy’ over ‘chemo therapy’ time after time. Like Steve Jobs, good lawyers can develop bad habits as it comes to their (firm’s) health.

To our experience about 95% of law firms are heavily focusing on the partners’ own billable hours when it comes to KPI’s by which partners are evaluated. In most law firms partners are expected to make 1500 billable hours or more. Missing that target could have serious consequences and could eventually lead to demotion or even ousting from the firm. The number of billable partner hours is also internally used as a measurement of success and often of influence. Partners who make the most billable hours are considered to be the most successful and are listened to as it comes to decisions within the firm. All this might seem very logic. However, in reality it might be the wrong thing to do. Pushing partners to primarily focus on making billable hours might prove to be a costly mistake. Allow me to explain why: In order to understand we first need to establish how many working hours there are in a normal working year. Looking at non-lawyers, so ordinary people having a 9-to-5 job in an ordinary office, 1900 hour annually would be considered normal. This takes into account not working during the weekend, about 4 weeks of paid holiday and an additional number of 4 national bank holidays. Numbers do vary slightly between countries but the number would hover around the 1900 mark. Ordinary office workers work 1900 hours annually, so could lawyers The average office worker handling insurance claims, doing secretarial work, doing administrative work and so on, is expected to work 1900 hours without any overtime. If ordinary office workers are expected to work 1900 hours, why couldn’t lawyers be expected to do the same? If we assume each lawyer would spend 50 minutes every day on non-billable activities, there still would be 1700 hours left to spend working on client matters. Every single associate in any law firm could easily work 1700 billable hours in a year without having any stress or without it affecting work-life balance. Just by being equally productive as any other office worker. If that is the case, why are most lawyers only doing 1500 today? The problem is that associates simply do not have enough work to fill their week. Partners are so focused on reaching their own billable target, that they are not bringing in the optimal amount of work. It is key for any partner to better understand the economics of the business of law. Understanding the business means understanding the nature of fixed costs. For law firms 95% of all costs are fixed. So if associates make 1700 instead of 1500 hours, there are no extra costs involved. This means that the 200 additional hours are 100% profit. Please let this sink in: the additional hours come at no additional cost and are pure profit. If we would assume a leverage of 3 (3 associates per partner) and a blended rate of 250 for the associates, 200 additional hours would lead to 150.000 extra net-income for each partner at the end of the year. Letting your associates work like ordinary office workers pays off big-time! Partners should focus on filling the pipeline So if the economics are so simple, why are partners not focused on providing their associates with sufficient billable work? Part of the answer is that law firms measure partner performance in the wrong way. Utilization of associates should be one of the most important metrics. One of the KPIs for partners should be how well they succeed in enabling ‘their’ associates to reach the 1700 hour target. It is in the interest of the firm that partners are incentivized to provide for the associates before providing for themselves. However it is not only the KPIs that are to blame. Many partners rather sit behind their desk diligently working on complex client work, than go out and find new clients. These lawyers often are outstanding lawyers, but poor businessmen. Too many partners avoid having to go out for new clients by burying themselves in work. Also the inability to delegate comes into play. Being a law firm means being a business. Today’s legal sector has become highly competitive. Clients are demanding better value, competing law firms are hunting each other’s partners and there is a growing army of Alternative Legal Service providers eating into the market. The law firm that does not get its business together might fall casualty to the market forces. Partners need to be more focused on the business than ever before and still many act like in the good old days. It is time for law firms to start adapting their partnership criteria. For decades now law firms have promoted brilliant lawyers to become equity partner in the firm. For decades now partner promotions have been the play-ball of internal politics and defensive moves. All this has created many partners that have weak business skills. Law firms should recognize that the most important characteristic of a successful future equity partner is the ability to bring in new matters and new clients. Lawyers that do not have that ability should remain employees and not become equity partners. Partners have a responsibility for filling the pipeline.

In 1908 the American Bar Association published the Canons of Professional Ethics by which lawyers were forbidden to advertise. Only business cards, a professional letterhead and listings in directories were allowed. This prohibition to solicit for work only ended in 1977 when the US Supreme Court held that lawyer advertising is partially protected by the First Amendment (Bates v. Arizona State Bar 433 U.S. 350). When I started in the legal profession, the elder partners still felt it was more appropriate to sit in their office and just wait for clients to call. Actively going out to find new clients was considered ‘not done’. How much has changed since. Today being a law firm is being a business before anything else. Today’s law firm partners need to get from behind their desks to go out and get new mandates and new clients. I would say that the main difference between an experienced senior associate and a partner must be the ability to get new matters coming in. In one of my previous blogs I explained why partners should work less. Partners have a responsibility to fill the pipeline that will keep the associates fully occupied. If every law firm associate would work the same amount of hours as an office worker at a bank, an insurance company or any other business, they would make 1700 billable hours without breaking a sweat. The fact that associates at many law firms are at 1500 hours is largely because partners are not putting enough efforts in filling the pipeline. Bringing in new business is paramount for partners. Fact is that the majority of partners rather sits in the office than go out for new business. The brutal truth is that these partners should never have been made equity-partner in the first place because they lack the business skills. Reality however is that partners with little or no business skills are simply a fact of life. In order to encourage (or force) reluctant partners to bring in new business, many law firms have introduced some form of ‘Origination Credits’. These origination credits come in many different forms and vary widely between law firms. What all systems have in common is some form of financial reward for the partner who brings in a new client or matter that is handled by one of the other partners in the firm. There are examples of law firms where a partner will until eternity get a percentage, of all revenue billed by other partners in the firm, for a client that he/she at one time ‘brought in’. I even know an example of a partner of an international law firm who literally stopped working after he happened to be the one to pick up the phone when a large multinational called with a new matter because their usual lawyer was conflicted. This client remained with the firm and generated millions in revenue over the years, working with many partners in multiple jurisdictions. A percentage of that adds up nicely as it turned out. Obviously most firms do not have ‘life time’ rewards, and also the firm mentioned above does not have it anymore. Firms cap the number of years that the ‘originating’ partner will receive credits. This could be anything between 1 and 10 years. Some firms have a special committee overseeing distribution of credits, others have a 50 page document outlining in great detail who will receive credits for what, how many and how long. Some firms have no official origination credit system, but let the partner who ‘owns’ the client keep all the revenue in his/her name regardless which partner is actually doing the work. A corporate partner could end up with all revenue created on employment matters for ‘his’ client. Whatever the system, all systems are skewed towards ‘self-enrichment’ rather than benefitting the firm. This is exactly the reason why origination credits are such a bad idea. It is just another incentive to promote selfishness rather than teamwork. As with other KPI’s the system will be manipulated. I recently came across an associate who had brought in a new client. After putting that client in the name of the partner she worked for, she found herself being called in by one of the other partners who insisted the client should be put in his name instead, because it was his paralegal who had introduced her to the client in the first place. I guess all readers will agree that this is not the kind of conversations you want in your firm. Origination credits are a fix to a problem that should not be there in the first place. Every equity-partner must by definition be able to get new clients and new matters. Commercial skill is the only relevant distinguishing factor between equity-partners and the rest. Being a brilliant lawyer is not enough, it is the business skills that count. Law firms should significantly raise the bar at the gate. Origination Credits are also to a large extent random. They typically benefit the elder partners who have built a solid reputation and also have the largest network. Origination credits might even prevent these partners from introducing younger partners into their network. The credit system also favors partners who are contact partners for international networks (Terralex, Multilaw, Lexmundi, AIDJA, and many others) and favors those who are listed as ‘practice head’ or ‘local managing partner’ (international firms). As the earlier example showed, even just picking up the phone might be enough. Getting a new client can to a large extend be just random luck. Keeping a client on the other hand can only be the result of delivering great service and an excellent product. Keeping clients requires talent as does growing the business by introducing other partners and practice areas to the client. Most clients are unaware of the existence of origination credit systems. Those who are aware, are strongly opposed as they see that it is not their (the client’s) interests that are central but the interest of the partner. The partner might attempt to monopolize the relationship or only introduce other partners that are willing to share the credits of any work that might come out later. Speaking with partners we know that origination credits could also become an hindrance when the expertise of two or more partners is required to develop a new market segment. Finding partners prepared to invest time and effort might require negotiations and a prior agreement on how to divide the credits once clients come in. This kind of internal discussions stemming from self interest are preventing law firms from growing their business. Looking at the data shows that law firms without a system of origination credits are more successful than those who have it. Something to consider if your firm is in the latter category. We at TGO Consulting could help you to migrate from one system to the other and help you grow your business based on teamwork and alignment of partners.

At TGO Consulting we work with law firms in a great many different jurisdictions across the world. Due to the international nature of our practice I have to travel frequently and as a consequence often have to spend a few nights in a hotel. After a day of working with a client followed by catching up on emails and work in the evening, I typically end the day with watching something light and entertaining on TV. Among my favorites is a series called ‘Gold Rush’ which is aired by Discovery Channel and its affiliates across the world. It is a reality television program following the open pit gold mining efforts of various family-run mining companies in Alaska. The series (176 episodes to date) has been aired globally since 2010 so you might have come across it. As improbable as it might seem, these rough unsophisticated gold miners may have some valuable lessons for law firms: Lesson 1: always know your bottom line Mining gold in Alaska cannot be done without considerable investments. Miners need very expensive equipment to even get started. Once the miners have secured a claim, typically against a percentage of the gold they will find, they need heavy duty excavators to get to the paydirt (gold rich soil), they need a high capacity heavy duty ‘wash plant’ to clean this paydirt and extract the gold, and they need some massive Volvo 60-ton mining dump trucks to get the paydirt to the wash plant. Operating all this machinery requires massive amounts of fuel and a skilled crew. So gold miners face hundreds of thousands USD in upfront costs that they first must recover before they can make a profit. The miners in the TV series are small family run businesses. They have typically mortgaged their homes and borrowed from whoever they could to finance their endeavor. If their mining season does not return enough, they and their families face personal bankruptcy. The miners are extremely aware of their costs and as a consequence remain hyper focused on getting as much gold as they can. Relentless and without any distraction they focus on the weight of that pot of gold after every cleanout. Interestingly there is a parallel between operating a goldmine and operating a law firm. Law firms first need to recover the costs before the partners start getting an income. Although law firms do not need expensive heavy equipment and massive amounts of fuel, the costs are still considerable. Numbers do vary but as industry average a law firm that makes 100 million in revenue incurs 65 million in costs. This means that the law firm in this example will first need to make that 65 million in revenue before the costs are covered. Only after this 65 million has been secured, the partners start to earn an income. As basic as this is, it is shocking how detached some partners are from this simple business calculation. Every lawyer starts the first ten years or so of his/her career being an employee. Employees don’t have to worry over revenue, costs and profit. Their income is secured, regardless how the business is performing. Once a lawyer becomes a partner, why would this attitude change? Secondly most law firms have become institutionalized. As the firm already existed before most partners became partner and will continue to exist after the current partners have left, partners do not feel they are entrepreneurs. The law firm does not feel as their business. Partners are passengers on a train that seems to be self-propelling. They can hop-on or hop-off, but the train will continue. The firm as a whole is a collective responsibility and therefor no-one’s responsibility. Partners in a law firms do not face the prospect of bankruptcy for themselves and their families if one year there is no profit. Lawyers should watch the miners in Alaska and try to get some of that basic entrepreneurial business spirit. Once partners start to understand the business dynamics and start to feel the heat to return a healthy profit, this will prevent them acting as ‘employees’ on a cozy 9-5 job with a guaranteed income. So don’t wait but get out to get those great clients, enter your timesheets every day, invoice once a month within the first week of the next month, hawk-eye if your client has actually paid the invoice and take immediate action if he doesn’t. Be constantly aware of cashflow, costs and profit. Act like an entrepreneur who has put everything he owns at stake. Lesson 2: Don’t waste time on clients that do not bring a good return Not only comes mining for gold in Alaska with substantial financial investment, the miners are also faced with a very short period of time to make their profit. Due to the location of the claims far up north in Alaska and Canada, the mining season extends only a few months during summer. The rest of the year the ground and the water remain solidly frozen making mining impossible. For the miners time is not a commodity they can waste. In one episode, while removing the top layer of soil to get to the paydirt, the foreman noticed that there was gold in the top layer and wanted to put the ground from that top layer through the wash plant to extract that gold. After a 24 hour test-run, it was established that the return in gold, cleaning the top-layer, would not justify the time it would take to clean it all out. It was better to just remove the top layer and basically throw that gold away and get to the rich paydirt as quickly as possible and start cleaning that. The miners have a limited amount of time and have to maximize the returns of every available minute in order to reach their targets and make a healthy profit. As for gold miners, for lawyers time is finite. Accepting a matter or a client that has a below par return on time invested will block the opportunity to take on matters that are more profitable. Time is a precious commodity and should be used sensibly. Far too often we see lawyers that take on a client or a matter at a rate that cannot be justified. Partners feel a pressure to meet their targets and fear the potential of having an empty desk. Driven by this fear, some partners take on everything that comes their way without asking themselves the question whether they are making the best use of their time. Accepting a client that will pay low rates creates a problem. The bigger this client gets, the bigger the problem. Sometimes it is better not to accept a matter and wait for the next opportunity. Don’t waste time cleaning paydirt that does not contain the right amount of gold. You will not be able to make up for it and it will ruin your season. Lesson 3: Whatever happens, act as a team Gold miners are by nature rough guys. Those who want to work in the remote wilderness of Alaska and be away from civilization and their families for months are predominantly strong individualists and not the easygoing sociable types. Gold mining is a particularly heavy job with long hours and a lot of physical and mental stress. No wonder there sometimes are hefty arguments and they fall out at each other. But whatever happens, whatever the argument or difference of opinion between them, they always know that in order to succeed they have to remain a team. Only together and only with a common goal they stand a chance of making a profit. No need explaining what lawyers in general and partners in particular could learn from that…

About a month ago I had the honor of being a keynote speaker at the biggest conference for lawyers in China to date. Over 700 attendants gathered in Shanghai. The other keynote speakers were professor Ashish Nanda and professor Richard Susskind. The theme of the conference was the future of the legal profession. In one of the coming posts I will share with you what I learned during that conference. In this article I want to highlight one particular observation I had. In between the keynote lectures there were several panel discussions by leading Chinese lawyers. The first panel discussion took place after Richard Susskind’s lecture and consisted of a forum of 10 managing partners of the most prestigious law firms in the country. Without exception these were men in their early sixties. In most cases they had been, some 30 years ago, the founder of the law firms that had become today’s elite firms. These men all had achieved incredible business success. They were the true top dogs of China’s ‘Red Circle’ law firms. What really struck me however is how conservative they were. All of them defended that the old way was the right way and that there was no need for change in the future. (despite Richard Susskind’s lecture). This reminded me that ‘nothing fails like success’. The present business model has simply been too successful The same holds true for the legal markets in the western parts of the world. The wide adoption by law firms of time-based billing since the mid-seventies and the subsequent ‘business approach’ has made many lawyers incredibly rich. Thought leaders like David Maister have educated law firms how to maximize the earnings. No doubt that law firms are among the most successful business models in the world. So, if law firms are so successful, why should there be change? Why risk killing the goose that lays the golden eggs? It turns out the attitude of law firm leaders in Europe and the US is not significantly different from their Chinese counterparts. In the most developed parts of the world, demand for legal services is almost flat. Looking at the market figures shows that this has been consistently the case since 2010. So for the last eight consecutive years there has been no increase in demand for the market as a whole. Surprisingly revenue of law firms has consistently been growing over that same period. Data from The American Lawyer, Thomson Reuters and others shows that growth in revenue is only down to higher rates. Average revenue growth (revenue collected) across the US market has been 5.5% for 2018. For the whole US market this means an extra 5 billion that clients had to pay for the same amount of work. It doesn’t take a genius to figure out that this is not a sustainable model. In a flat market clients are paying $5,5 billion more for the same output We at TGO Consulting are active in many markets across the world and our figures show that 2018 has also been a bumper year for many law firms outside the US. What we see happening in the US is happening in all developed western markets. Only increasing rates are fueling growth. Analyzing the available data we can see the first cracks in the current business model appear. Data shows that the gap between ‘standard rate’ and ‘collected rate’ has steadily grown over the past decade. Looking at the rates of 161 U.S.-based law firms (52 Am Law 100 firms, 46 Am Law Second 100 firms, and 63 Midsize firms) the average blended standard rate (all firms, all lawyers) back in 2007 was $385 with an effective collected rate of $348. This makes in 2007 a difference of $37 or 10%. In a decade the gap between standard and collected has doubled Over a decade this gap has doubled to 20%. Today the average standard rate is $525, while the average collected rate is $425, a difference of $100. This might on the one hand indicate that ‘standard rates’ have been inflated, only to be able to offer the client an attractive ‘discount’. On the other hand it clearly show that clients are pushing back against the increasing rates. Interestingly Am Law 100 firms recorded the lowest realization ratio (against standard) during 2018 at 81.1 percent, as compared to 83.5 percent for Am Law Second 100 firms and 83.9 percent for Midsize firms. Maybe AM-100 clients, which are predominantly the large Fortune 500 companies, have better bargaining power than the less professional clients of the smaller law firms? What we see happening in today's market is that these more sophisticated law firm clients have embraced legal operations as a function and a method to better manage the relationship with outside counsel. For over half a decade some of the largest in-house departments in the world have been collecting and analyzing data on their external legal spend. Today these data collections contain sufficient usable data-points to do state of the art data analysis. Big data on every timekeeper -both external and in-house- that has worked on their matters enables these companies to identify inefficiencies and eliminate them. Law firms should be prepared for clients that will enter into a permanent dialogue with their external counsel to systematically eliminate all inefficiencies in the process. Much like Amazon uses data to eliminate inefficiencies in their warehousing and logistics. My upcoming book ‘Data & Dialogue, a Relationship Redefined’ (spring 2019) will elaborate on this trend and its consequences in great detail. The time-based business model will crash Here we have the squeeze that will create the ‘problem’. On the one hand clients are increasingly pushing back against the rising rates and at the same time clients have started to actively demand a more efficient way of working. Efficiency will in part come from streamlining the process (efficient workflow), meaning less time spent on things that do not directly contribute to the quality. Efficiency will also come from the use of technology enabling necessary tasks to be completed within a shorter amount of time [see our blog]. The squeeze described will eventually crash the time-based business model. Much like the Chinese managing partners pictured before, managing partners in our part of the world are very reluctant to even discuss changing the magic formula that enabled them to earn millions. Not unlike Kodak, famously unwilling to change to digital after they had been earning millions on film for so many decades. Let’s hope lawyers turn out to be smarter than Kodak’s board at the time…

July 31 1961 IBM famously introduced the IBM Selectric typewriter. Instead of the "basket" of individual typebars that swung up to strike the ribbon and page, the Selectric had a "typing element" (frequently called a "typeball") that rotated and pivoted to the correct position before striking. The Selectric had a "Stroke Storage", which smoothed out the irregular key strokes of a typist. The capacity to type faster and more accurate was created. The Selectric allotted a speed of up to 14.8 characters per second. Producing text documents instantly became more efficient. The same amount of text could be produced in a considerably smaller amount of time. Office workers have always used technology to become more efficient Two decades down the line the introduction of desktop computers and Wordperfect, revolutionized text processing once again. Again there was a substantial boost in efficiency. The purpose of this brief history lesson is to demonstrate that the adoption of technology that helps office workers to be more efficient is of all times. What is also important to realize is that the efficiency gain is in production, not in the content. The developments in text processing have lead to increasing the speed at which the document is produced. It has not lead to better quality content. Please keep in mind that it is ultimately the content of the word document that counts, not the speed at which it is produced. Demand for legal services in the US is flat... Last week I was asked by a journalist form Lexis Nexis Law360 to comment on the slight decline in jobs for the legal industry that had been reported in the latest report of the US Department of Labor. The number of legal sector jobs landed at 1,136,700 at the end of December, according to the DOL’s Bureau of Labor Statistics. That’s 400 jobs fewer in the industry than at the end of 2017 and a decline of nearly 2,000 since October. One of the journalist’s questions was to explain how the number of jobs could decrease while the sector as a whole reported one of its best years in recent history. My answer was that the decline in jobs was most likely the result of increased efficiency. At present, efficiency per lawyer is growing faster than the market for legal services as a whole, so as a result fewer lawyers are needed to meet the demand. This trend will continue over the next years. As previously noted, the U.S. legal market overall showed positive trends during 2018, with a healthy growth in worked rates. During 2018, standard rates increased by 3.1 percent, worked rates by 3.2 percent, billed rates by 3.3 percent, and collected rates by 3.4 percent. Reflecting these positive trends, average revenue growth across the market was up for the year. When we start digging below the surface however, the data shows that demand for legal services in the US in nearly flat (+1.3%). At the same time the average number of billable hours per lawyer per month has gradually dropped from 134 in 2007 to 122 in 2018 (-8.9%). It turns out that the shiny picture of the US legal industry is predominantly the result of higher rates. Obviously this is not a sustainable model. Efficiency per lawyer at present is outpacing demand Today’s legal industry has many tools at its disposal that will make lawyers more efficient. In other words, tools that make it possible to produce the same result in less time. Like with the introduction of the IBM Selectric over half a century ago, these tools just reduce the time needed to produce the same result. They do as such not influence the quality of the content. Using online legal databases and search tools, the use of e-discovery and e-due-diligence tools, all enable the lawyer to produce the same result in a shorter time frame. As the examples in this article show, there is basically nothing new in applying technology to enhance efficiency. Over the past decades the market for legal services has grown considerably, so the increase in efficiency was met by an even greater increase in demand. This is no longer the case. Today demand is flat. Further increasing production efficiency will undoubtedly lead to fewer lawyers needed to complete the same tasks. The current leveraged business model will increasingly come under pressure. The time-based business model will become unsustainable in the future Law firms will need to re-engineer their business model. This will include the leverage and the time-based billing. Time-based billing is not compatible with increasing efficiency in a non-growing market. As I have written before, there is in my opinion too much emphasis on the disruptive forces of legal technology. Technology as such is nothing new and has been adopted through the centuries. The use of new technology has always made companies more profitable as it enabled them to create more output against less effort. Just look at the number of people that used to be employed by banks, insurers and corporate head offices in general a few decades ago. Business model re-engineering will be necessary Today fewer employees deliver more output and more profit. The problem with the legal industry is that it has built a business model that heavily relies on the sheer number of people employed, as more lawyers making billable hours means more revenue and more profit. We need to re-engineer the legal industry with the product and the clients’ needs in mind. We at TGO Consulting have over the past few years developed and implemented alternative law firm business models that result in increased long term profitability, while embracing increased efficiency and creating greater client loyalty and satisfaction. I will write about this in more detail in future articles. Stay tuned!

As the year draws to an end we see a change in leadership at many law firms. At TGO Consulting we have extensive experience in supporting managing partners in their role. Therefore we thought it might be a good idea to dedicate this week’s blog to the challenges of being a managing partner. This might help the newly elected managing partners to get a good start to their term of serving and managing their law firm. The first question when nominated to be the next managing partner is why you would want to do it. Surprisingly this question is rarely asked. The truth is that becoming managing partner for one or two terms of four years has a high probability of ruining your practice and possibly even your career as a lawyer. At TGO Consulting we have done some research and it turns out that 32% of managing partners leaves their firm within 2 - 3 years after their term has ended. Part of this is due to (early) retirement, but also a surprising number of young managing partners leave the legal profession soon after their term has ended. 32% of managing partners leaves their firm within 2 - 3 years after their term has ended. Becoming managing partner might ruin your career Given the fact that one-in-three managing partners will leave the firm, it is indeed wise to take one step back before accepting the nomination. After university you decided to become a lawyer and you have invested by now way more than a decade to become a partner and build your own practice. Being a partner comes with the constant pressure to perform. Building and growing your practice requires uncompromised dedication. Before accepting to be the next managing partner you should realize that you will most likely lose your practice. Meaning that once your term has ended you will pretty much have to start all over again. The question is are you prepared for this at the age of 50/55? One of the reasons managing partners leave after the end of their term is that they cannot find the energy to start from scratch. Some that do try to rebuild their practice simply do not succeed and find themselves ousted after the leniency period has ended. Getting addicted to status No denying that being a lawyer can be an interesting life, but it remains mostly between your desk and the courtroom or your desk and your client. It is not unlike the professional life of a medical doctor who has to spend his time in the hospital with his patients. For managing partners things are much different. As the official representative of a prominent business in your community you get invited to important events and you will share tables with other leaders. It is key to remember that you are treated this way because you are the representative of your firm. It is not about you as a person. In reality however this aspect is all to often soon forgotten as the managing partner starts to enjoy the social life that comes with the job. It can be quite addictive to attend important events domestically and abroad. Our research showed that some former managing partners found their life empty after their term had ended. This would in part also include the life of their spouse or husband who enjoyed accompanying them to these events. Aspiring managing partners have to take a deep look in the mirror and ask themselves if they will get addicted to being ‘important’. From microscope to helicopter Being a lawyer requires a great attention to detail. Every lawyer knows that a small mistake could have serious consequences. Lawyers are trained to focus on potential risks and try to avoid them. Lawyers are risk averse control freaks and micro managers. The attributes that make a great lawyer become a huge hindrance when managing the firm. Being a manager you need to develop a helicopter view. Getting lost in details and losing sight of the big picture will not get the firm anywhere. Based on experience we know that it typically takes around 6 months before the new managing partners starts to see – part of – the bigger picture. It takes time to learn accept a certain amount of risk and it takes time to trust others and not to micromanage. Some managing partners even become excellent managers over the years. The difficulty is scaling back. If developing an helicopter view is hard, getting back behind the microscope is even harder. I personally know a very successful managing partner who after his term had ended decided to leave the profession because he simply could not have conversations with clients on where to put a comma in a sentence anymore. Make your investment worthwhile Hopefully all new managing partners are fully aware of the personal investment they are making in the firm. Not only is there a one-in-three chance that it will kill their career, the new life outside the law firm will in general also offer a lower financial reward. Becoming a managing partner could potentially cost you money. So if all this is true then you better make it worth the investment and leave the firm in a substantially better position than before you were elected. Don’t be that person that simply looks after the firm and keeps it afloat. Be the one that made a difference. The one that will be remembered for elevating the firm to the next level. Be realistic, be ambitious. Focus on the destination rather than on the way to get there. So here are some pointers that might help to get started: Decide on your strategy within the first 100 days of being a managing partner. You potentially only have four years to make necessary changes and implementation will at least take three years. So analyze the present state of the firm and where the market is going and develop a clear vision on where you want the firm to be in three years. Be realistic, be ambitious. Focus on the destination rather than on the way to get there. Don’t get bogged down in internal meetings just because your predecessors used to do this. In the first four weeks get an overview of all meetings you are supposed to attend and skip at least 50%. Internal meetings are for the larger part just time consuming rituals. Only have internal meetings that have a clear well defined measurable purpose and do not last longer than 2 hours. Do not get trapped in details. Leave day to day management of staff and operations to the professionals. Give them a clear framework and clear goals and objectives. Managing partner should focus on the business and the future of the firm. Talk regularly with individual partners about their practice. Spend time on associates as they are the future of your firm. Also spend time talking with clients. It is important to understand what keeps them awake at night and what they want from their lawyers. Don’t assume responsibility for everything. In order as a firm to make progress it is important that each individual partner takes ownership. Outlining the strategy for the future an keeping the firm on course is the responsibility of the managing partner. Day to day execution is the responsibility of every partner. Do not take that burden, the managing partner alone can do little or nothing as it comes to execution. If unpleasant decisions are needed take them early on in your term so you can focus on the future and the positive as soon as possible. Don’t be afraid of conflict and confrontation if required. Managing partners need to be an iron fist in a velvet glove. Be result driven and put the interest of the firm above anything else. Be not afraid to lose your position or be voted down. Keep as much of your practice as is possible to avoid getting out of touch with the pressure of being a partner. As a rule of thumb spend 20% of your time on your practice, 30% of your time on helping your partners develop in the right direction, 30% on clients, markets and strategy and not more than 20% on internal issues and day to day management. Obviously there is a lot more to say on the topic. We have done so in our book and in previous blog posts. We will continue to write on this topic in future articles. TGO Consulting offers assistance to managing partners in many jurisdictions, committed to helping them to make the most of their investment in the firm.

Guest post by Ivo J. Mensch, ICF certified integral development coach Can law practice make you crazy? Perhaps not crazy, but depressed or otherwise mentally miserable when practicing law without proper self-care. Lawyering comes with specific occupational hazards that can lead to ill-health. But by learning smart self-management techniques and forging a culture that supports well-being you can prevent lawyeritis. The theme of mental health of lawyers has fully moved into the spotlight over the last few years. Unfortunately, that’s not because the profession is such a posterchild for well-being. Quite the opposite. Increasingly, legal media have started reporting on the prevalence of depression, substance abuse or worse - suicides among lawyers. Just in my own circle, I have heard of four partners taking their own lives within the span of just a year. The last one less than a week of writing this sentence. I’ve worked with and for lawyers for over a decade and half now. Coaching them, writing about them and picking their brains about what makes them tick (or stop ticking). I learned that the practice of law comes with some specific perils to well-being. Some are familiar, others are less well known and even intrinsic. The last decade has seen a creeping uptick in burnout and mental health issues among lawyers. Today, in some big law firms I know, this can even be called endemic. It’s not just in Europe, but it seems to be a global phenomenon. According to the research I’ve done, looking at the UK, the US and The Netherlands, it’s now mostly younger lawyers with less than 10 years of work experience that are at risk. It’s heartbreaking to see talented young people at the beginning of their career have their dreams thwarted because of health issues. Some, due to the severity of the damage done to their physique, never return to their former level of capacity. A dive into scientific studies shows that lawyers are at a 3.6 higher risk for depression than other professionals. Also, alcoholism, substance abuse, feelings of anxiety, loneliness and isolation belong to an unhealthy mix of experiences that many lawyers confront during their careers. The American Bar Association stated in a reaction to a 2016 study conducted among more than 12.000 lawyers that: ‘lawyers are really unhappy.’ Some findings: - 28% experiences mild or higher levels of depression - 19% experience anxiety - 23% experience chronic levels of stress - 21 to 36% qualify as problematic drinkers Let this sink in, and bring to mind your colleagues. With the above in mind, are you now seeing the changed behavior of that certain colleague a bit differently? Not in my firm, you may think. But remember, humans are masters at keeping up appearances. What to do and watch out for? Below some findings that I believe are need-to-know, so you or your firm can work on and prevent these issues. Dopamine wars Stress has always been part of work, but new is that life has morphed into what can be called the DOPA reality – Distraction, Overstimulation, Pressure and Always on. The lines between life and work have blurred, with the help of smart phones. Clients demand their lawyer to be available 24/7. Getting restorative downtime has become harder. Also, since about a decade, the tech industry has our ape brains figured out. Behavioral psychologists are teaming up with developers and neuromarketeers in Silicon Valley to figure out how to best hijack your attention by tinkering with your dopamine reward system. The goal is to get you addicted to the fun free stuff, so they can mine and sell your data to third parties and get rich. Good for them, bad for us. Know that a person living in the western world today, is exposed to as much information in a single day as someone living in the 1800’s was in seven or eight years. Ask yourself: is your brain equipped to handle this load? What is the effect of multitasking, constantly switching between streams of information in an environment where constant interruption is the new normal? We’re poorly equipped, evolutionary speaking, to deal with these weapons of mass distraction - social media being the worst among them. Neuroscience explains how constant over-stimulation creates excess dopamine. Since this neurotransmitter modulates the reward system in your brain, you literally become addicted to over-stimulation. Do you find yourself compulsively browsing news sites, your Twitter feed, or automatically checking your smartphone every 10 minutes for new messages or incoming likes for your social media posts? Yes...? You’ve been hacked…. This constant targeting of the reward system in your brain by an army of supercomputers that got you figured out, can cause dopamine insensitivity over time. This means that hyper-normal stimuli are now needed to generate a similar level of felt pleasure. More importantly, motivation and modulation of focus are regulated by your dopaminergic system. Think how much more stressful it is to do law practice with a decreased capacity for sustained focus. Good luck doing deep work in a state of flow. What could possibly go wrong? Yes, your own mind can turn against you. As a lawyer, nobody pays you for your rosy outlook on life. And clients usually don’t call to share good news. No, your job is to be risk averse, think negatively, adversarial, and often in zero-sum fashion - winner takes all. Evolution has equipped humans with a negativity bias. To up our chances of survival, it simply paid off to be negative – better safe than sorry is a good heuristic. Negativity and pessimism are traits that lawyers are already biased towards upon entering law school research shows. But know that brain areas used for negative thinking and problem spotting are the same for generating positive thoughts. So, the more you use an existing neural pathway in the brain, the groove gets deeper (so called use-dependency). As useful as a negative bias is for survival and being a good lawyer, it also means training your brain to become even more biased toward developing a negative outlook on life. This, in combination with the aforementioned dopamine insensitivity, might steer lawyers faster towards depressive disorders or compensatory strategies such as alcohol and substance abuse. So, find balance, actively seek positive experiences and ways to generate positive emotions. (see point 6 below). Below the neck When I coach lawyers, building somatic literacy is almost always part of a program. Due to the cognitive nature of the work, many lawyers come to live in their heads. Everything below the neck is often seen to be nothing more than a brain taxi. Numbing feelings and repressing emotions may be a smart short-term coping strategy to get you through a stressful day in a hectic office. But in the long run, the numbing can cause one to lose touch with the body and what it tries to tell us - take a break, sleep, eat. If the call for sufficient regeneration isn’t answered, the message can become as follows: ‘screw you for not listening, I’m shutting the system down.’ Many of the lawyer burnouts I encounter, all have at their core an ongoing denial of what’s really happening to oneself. In burnout literature there’s a so-called Crash Type. Seemingly, out of the blue, there’s sudden collapse but a long recovery ahead. That’s what you get from ignoring the wisdom of your body for too long. Let me help you with that Another cause of malady hides in many lawyer’s source code – the identity of being a professional helper. It’s a known fact that people in helping professions are more reluctant to seek help for themselves. When problems arise, the strong, can-do helper self-image erodes, invoking shame. Sticking to being bulletproof often causes lawyers to seek help too late, unnecessarily increasing the severity of the issues and impact on their health. Another issue connected to having a helper identity is becoming overly identified with the client’s issues. The health insurance company I coach for lists empathy burnout, (aka compassion fatigue), as a common cause for lawyer burnout. Learning to set boundaries and say no without guilt is an indispensable tool for maintaining mental health. (See point 8 below). I hope I’ve not added to any existing depression with my words. There’s good news - we have plenty of actionable biodata and understanding of neuroscience nowadays, making health and well-being a choice. If you just take away one thing from this piece is Aristotle’s empowering maxim that ‘we are what we repeatedly practice’. Developing the ability for doing deep concentrated work at will is an indispensable part of the skillset for 21st century professionals living in the age of distraction. Good self-regulation and developing healthy habits can be learned. Happiness, emotional agility and state regulation are all teachable skills. Start today. What can you do? The reasons behind the lawyer health crisis are myriad and complex. This list of 11 points some tips, hacks and good practices below is incomplete, but a good start. Reach out if you wish more in-depth instruction or further references to the science underlying this list. 1. Managing young lawyers Since it’s young lawyers most at risk now, a few words about working with generation Y (Gen Z is just about to enter the work force and will require further adaptation of management style). Research shows Millennials seek and need more feedback and mentorship. Consider giving feedback real-time after every project. A sense of no support often causes increased stress, withdrawal, isolation and anxiety. Check in often. Seek to forge a culture where making a mistake does not result in shaming. Many law firms have a culture of perfectionism that can lead to extra pressure while learning the trade. Don’t give young people the impression they have to be robots. 2. Give (and take) back control This is a big one, the underlying cause of many cases of depression. The feeling of having no control over one’s life can lead to what psychologists call ‘learned helplessness’, often a forbearer of depression due to loss of agency. Know that it’s not about the work itself. The same job done one one’s own terms and time makes all the difference. Give back control to people, they find meaning and often thrive again. 3. Remove the stigma Make asking for help as easy as possible. As a firm, discuss mental health issues and the shame surrounding the topic. Have partners who lived through dark times but came back stronger share their stories. Do not ask people in need of help to go through your own HR-department. Fear of damage to career prospects makes many refrain from seeking help. Organize easy-to-access professional help outside the firm. Ensuring confidentiality is key. 4. Get brain-savvy As a knowledge worker, understanding how your brain works and what it needs to function optimally is worth investing in. A few work-related brain hacks below. Stop multitasking. This destroys your short-term (or working) memory. Upon starting a new task while leaving the former one unfinished, there’s the so-called ‘attention residue’. Part of your attention remains with the unfinished business. And after a task switch, know that your IQ drops by 10 points on average. So Singletask. Start reading faster. Our brain can process information faster than it receives it by reading. Faster reading fosters deeper concentration. Memory retention is 30% better when reading from paper than from screen. (sorry trees). Practice cognitive offloading. Make to-do lists. Before going bed, journal, or write down what you will do the next day. You thereby free your brain from having to remember these to-do’s. Sleep will improve. Important for lawyers: separate learning vs analysis. Your brain doesn’t handle doing both at the same time very well. There’s different systems for each task. So choose and set times for these different tasks so your brain doesn’t get confused. Put your smart phone out of sight. Just having it within your field of vision siphons off a lot of attention. Avoid interruptions. Getting back into flow after an interruption can take up to half an hour for some. 5. In the right career? Lawyers are naturally risk-averse and prone to security seeking. For many, choosing a career in law was a secure second choice over a more desired but financially uncertain calling (like becoming an artist or musician). I’ve heard this security-driven rationale from lawyers over and over again. This also means a higher chance of winding up in a career where you don’t really belong, this can be highly stressful. Take to heart Nietschze’s words: ‘he who has a Why, can bear any How.’ So be radically honest with yourself when answering this question – do you have a Why being in law? Law practice can quickly become a dead end without intrinsic motivation. Money is no substitute for meaning and fulfillment. You’ll just be comfortably unhappy. 6. Practice entering positive states The emotional state you’re in right now is a choice. With practice, you can learn to shift states. Your significant others will love you for mastering it. Bring to mind a person you love or recall a positive life experience, breathe deeply into your chest, feel everything associated with the image and anchor any positive emotion by taking a state-snapshot. Neuroplasticity will ensure instant access to this state after practice. Use the above practice for daily entries in a gratitude journal. Just a few minutes of writing when starting your day is a powerful way to shift the balance between negative to positive states. Easy and effective. 7. Avoid golden handcuffs Financial troubles are a big source of stress. Combined with the stress of work this can put you at risk. Don’t get trapped in a lavish lifestyle from which you can’t walk away from. Many lawyers needing a change of pace have to keep going in order to pony up the finances to support their lifestyle. Or, conversely, when health issues arise and income tanks, the resultant financial stress often exacerbates problems. Work towards building a buffer so you can say no and do nothing for at least 6 months if you need to take time off. 8. Beware of compassion fatigue My Zen teacher taught me that opening yourself up to the suffering of others can only happen safely if you’re ability for equanimity is greater than the suffering you let in. Otherwise it can destroy you. Learning to dis-identify from negative emotion through mindfulness meditation is a great skill to have. Maintaining healthy boundaries, and the ability to say ‘no’ without guilt, is a must-have skill as a lawyer. Learn to say ‘whatever’, or in more scientific parlance, develop some empathy suppression. Being overly identified with a client’s problems can lead to empathy burn-out, or compassion fatigue as it’s sometimes called. A useful distinction is that empathy comes in different forms. Cognitive empathy, necessary for understanding an issue is fine. Emotional empathy, feeling what another feels, is not essential to being a good lawyer. 9. Get tested There are plenty of tests available, like the Vitality Scan, that gives you insight and actionable data on what habits or areas of your life you need to change to bring balance and make work-life sustainable. Knowing what replenishes your energy and what drains you can help you order your work so that there’s proper balance and replenishment of energy. 10. Sleep Often taken for granted but so important. There is a lucky 3% of the population that is genetically endowed with needing less than the 8 hours. Assume that’s not you. The negative effects of sleep deprivation are serious: sleep durations consistently shorter than 7 hours in a 24-hour period are associated with cardiovascular disease, diabetes, depression, learning and memory problems and an overall increase in mortality. Poor sleep can even undo the benefits of a healthy diet and exercise routine some argue. Deep sleep, especially delta wave sleep, is necessary to flush toxins out of the brain so it can perform optimally the next day. Limit blue light exposure coming from led screens. Melatonin (the sleep hormone) levels decrease because of this wavelength. No screen time an hour before bed is a good practice. Get some thick blackout curtains if there’s light pollution in your bedroom. Or, when travelling, bring along a good sleep mask. 11. Invest in relationships (and learn role switching) Perhaps the most important one for your long-term well-being. Really, spend quality time with loved ones. Since you can’t leave your lawyer brain behind at the office, learn to consciously shift into the role of parent, spouse or whatever is not-lawyer. Drop the need to be right all the time. Lawyers score high for the traits of pessimism and cynicism. Relationships often suffer when these traits are brought into their relational life. Leave that professional identity behind and be a normal flawed human being like the rest of us again. Ivo J. Mensch is a neuro-savvy, ICF certified integral development coach and consultant, servicing clients in London, Amsterdam and Berlin. He specializes in full transformations & vertical development, building leadership presence and closing complexity gaps, alongside developing physical and psychological well-being.

On a daily basis the legal world is flooded with news about legal tech. Not a week goes by without one or the other law firm announcing a fancy new tech initiative. Nine out of ten newsletters contains an article on legal tech and in every major city around the world there is a constant stream of seminars on the topic. Legal Tech seems to be omnipresent, no escaping possible. All this buzz creates an uneasy sense of nervousness among law firms. We get questions from clients on this topic all the time. Typically there is the fear of losing out. An atmosphere has been created in which it seems that all other law firms are investing in legal tech and that when not keeping up with technology a law firm might go out of business. Will there still be a future for law firms that do not use fancy technology? In this article I will take a look at legal technology from an investor perspective. So, if I had a law firm, why and when would I invest in legal technology? What problem am I trying to solve? Time based billing has been the de facto standard in the legal world for the past decades. Notwithstanding the fact that this system is flawed it is favored by both the law firms and their clients. In a situation where clients are paying the lawyers by the hour, it is in the clear interest of the client that the process is as efficient as it can be. Lawyers should not use more time than needed. In a way, just like all other businesses, law firms have a long track record of integrating new technology to make the workflow more efficient. A couple of decades ago there would be a small army of secretaries and typewriters that since has been replaced by MS Word. Lawyers used to dictate memos, today it will be hard to find even a partner that does not sit behind a keyboard. Incorporating this kind of office technology has immensely increased the capacity of lawyers. The work volume that can be handled in terms of output has increased. At the same time cost for secretaries (and their workspace) went down. Today the issue is not the optimization of office procedures or workflows. The discussion is pivoting towards the output side, the legal product itself. Should we use technology to – in part – replace lawyers? In order to answer this question we need to dissect the legal product as we know it. The process of producing a legal product whether it be an agreement or a litigation, invariably consist of two components: creation and production. Creation being the fruit of the brainpower, the skills and the experience of the lawyer and production being everything that needs to be done in order to make it happen. In my new book ‘Data and Dialogue, a relationship redefined’ I will elaborate in more detail on this topic. What we see in the market is that law firm clients are increasingly reluctant to pay a lot of money for production. This totally makes sense since the value is in the creation. We regularly hear law firms complaining that their clients only want partner time. This reflects the theory. As long as there is time based billing, law firms will be under pressure to limit the costs for production. This is exactly where potentially technology could help. It however does not necessary mean that it is sensible to heavily invest in Legal Tech. What about return on investment? Most of the technological progress that law firms have made through the last decades has lead to an increased capacity and a reduction of costs at the same time. From an investment perspective this is a no-brainer. Today things are fundamentally different. Investment in legal technology that replaces part of what lawyers are doing could have a strong eroding effect on profitability. Let's examine this in more detail. Let’s assume we have a law firm and we invest 1 million in fancy legal technology. The 1 million investment will comprise of the purchase and implementation of the software. Typically there will also be annually recurring costs for software licenses, updates, trained staff, data entry and data cleaning. For the sake of simplicity we will assume only the one time fixed investment of 1 million. The first question will be how the investment will help us make money. For this there are two options: the investment either lowers the costs of production at the present volume or the volume of work needs to increase thanks to the investment. Lowering the costs at the same volume of work would mean that we have to make some lawyers redundant. If we want to invest 1 million, make a return on investment and don’t want to fire lawyers, we need to increase the volume of work. A method we use to calculate if an investment will be viable is through calculating the IRR. The Internal Rate of Return is a metric used in capital budgeting to estimate the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. I will not bother you with the formula as Excel will easily calculate the IRR for us: As the table shows, in this example when investing 1 million we make a loss and when investing 500.000 we can make a profit. Please bear in mind that the (fictional) figures are based on additional profit as a direct consequence of the investment. Assuming a profit margin of 33%, the extra revenue needed would be 3x the amount in profit. So the 350.000 extra profit in Y5 would require a growth in revenue of 750.000 in Y5 only attributed to the investment in technology. So we can only take into account the additional revenue that the firm otherwise would not have made. The point of the article is that law firms should always look at the potential for return on investment when deciding on legal technology. At TGO Consulting we help our clients to make a realistic business plan that will provide a financial rationale before investing in legal technology. In some situations there absolutely is a strong business case to be made. More often than not, law firms invest because they believe everyone else is doing it and they fear being left behind. Many investments are made without any strategy on how to monetize the investment. In general that is not a smart move.

At TGO Consulting we regularly talk with clients of law firms. Despite what you can read in reports and magazine articles, law firm clients in general are reasonably satisfied with the product and the service they get. When prompted, some of the law firm clients will obviously say that they would rather pay less, but overall even pricing does not seem to be a major issue. So what, according to law firm clients could be improved: Avoid the ‘black hole’ When a client has instructed a lawyer on a matter, continuous communication is key. Clients really hate it when they are not regularly updated on what the lawyer is doing. Your clients want to know what you have done on the matter so far and what you expect to be doing next. If you want happy clients, communicate proactively and regularly. This could be a weekly email or a brief call, just don’t leave the client in the unknown. Discuss ‘risk appetite’ The clients of business law firms are businesses. They have to make money and their world ideally does not revolve around legal issues. Businesses have to take risks all the time and also legal risks are part of the game. Unlike his clients, a lawyer - by nature - has zero tolerance for risks. Upon instruction of the matter it is important to explicitly discuss the client’s risk appetite. If lawyers were plumbers, they would by default advise golden plumbing as gold will never deteriorate and will last forever without malfunctions. Unless you are designing the plumbing for a Space Station, golden plumbing is way over the top. In most real world situations PVC will do. This applies equally to legal matters: for most clients in most situations it is not useful to eliminate every potential risk. So please discuss with your client before you start. PETT invoices As mentioned above clients in general can live with the rates that their law firm will charge them. However, what clients really hate are unpleasant surprises. Clients tend to prefer the certainty that a matter will cost 20.000 monthly for the next 12 month (240.000 in total), over not knowing what to expect and receiving a surprise invoice of 210.000 after 12 months. So Predictability may well be more important than the actual total sum. Predictability is what the P in PETT stands for. The E stands for Efficiency. As long as the legal world is centered around time based billing, clients will have to pay for all time the lawyers spend on a matter. Effectively for the client this is a leap of trust. Clients are used to this and accept that time is a big unknown in the handling of a matter. However clients want lawyers to handle the matter in an efficient manner. Lawyers will have to assure their clients that they are efficient in their way of working. Today, increasingly, use of modern technology is part of being efficient. How do you assure your client that you are highly efficient? By being totally transparent. That is why the first T in PETT stands for Transparency. Transparency is about more than a detailed specification with the invoice. It also means active communication what has been done and what still needs to be done. Not only in terms of activity but also in terms of anticipated costs involved. Transparency also includes any unforeseen hiccups that might impact the outcome of the proceedings. Being open and proactive about bad news as well as good news is an essential part of your relationship with your client. The last T stands for ‘timely’. Again no surprises. Send your invoices monthly promptly after a month has ended. Your clients hate being surprised by an invoice months after the matter has been closed. Mentally they have moved on and the cost of a previous matter is always something they didn’t count with. Dialogue. The issues addressed in this weeks blog are pretty basic and simple. Essentially it all boils down to ‘dialogue’. Clients want to have a permanent open and meaningful dialogue with their lawyer. Surprisingly, there are still many lawyers that are not too keen on having an open and active dialogue with their clients. They rather ‘hide’ behind their desk and communicate by occasional emails than picking up the phone or meeting in person. Many lawyers strive to be their client’s ‘trusted adviser’. It is hard to imagine a trusted adviser who does not have the essential dialogue with the client.

Today the overwhelming majority of law firms in the world uses time based billing to charge for their services. Clients have to pay for all the time that lawyers spend on a matter. As a consequence all law firms keep a time-sheet and each lawyer has to keep accurate track of the exact amount of time spent on each matter every day. Time is typically tracked in 6 minutes installments (0,1 hour). The problem is that most lawyers are not very disciplined in tracking time. You might be surprised by the number of lawyers who are more than one day behind as it comes to entering time spent on a matter into the timekeeping system. Entering time with a 0,1 hour precision based on the memory of what you did the day(s) before is beyond human capability. As people tend to underestimate the time they spend on tasks, time and thus income is leaking away. An installment of 6 minutes or 0,1 hour is incredibly small compared to the duration of a -working- day. Let’s examine the financial consequences if every fee-earner would write 3 extra units of 0,1 hour each day: 230 workable days per year 3 x 0,1 hour per day (18 minutes) Results in 69 hours per lawyer per year By not keeping very precise and accurate track of time spend, on an annual basis 69 hour per lawyer could easily evaporate. The financial impact for the firm will obviously depend on the hourly rate and the number of lawyers: 52 lawyers and a blended rate of 275 will lead to 1 million in lost revenues Please let this sink in for a moment. Even a relatively small law firm with a very modest blended rate could annually easily make 1 million extra. If we assume a leverage of 3,5 the firm will have 12 equity partners and the 1 million would lead to 84.000 extra profit per partner. It is ever so easy to lose 3 units per day. Based on our experience keeping better track of the time that is actually spent and being more conscious of the value of every 6 minute installment will easily make the firm a million on an annual basis. Only because of more accurate charging for the same matters. Please note that this article is about accuracy and awareness, not about overcharging. There is never an excuse for charging for more time than time actually spend! Improved accuracy will easily make you a million Besides lack of accuracy there always is a second factor that is eroding potential revenue: 'modesty'. The present arrangement with clients is that the lawyer will charge for all time spent on the matter. The agreed hourly rate takes into account the level of experience and expertise each lawyer has. The more experienced, the higher the rate. This is fair because the more experienced lawyer will need less time to come to the same result. The lower rates for less experienced lawyers take into account that they will need more time to get to the same result. The problem is that it happens quite frequently that lawyers feel guilty about the amount of time it has taken them to prepare a document or part of a matter, so they artificially lower the number of hours as they enter time into the system. This form of ‘private initiative’ should be strictly forbidden in any law firm. It is of utmost importance that the real time spend is accurately entered into the system. I would advise every firm to actively and regularly communicate this to each individual fee-earner. Should there be a legitimate ground to write off some of the hours, this decision should only be taken at the end once the matter is completed. Only at this stage there is a complete overview of all time spend and does it become apparent if someone has spent unreasonable amounts of time on an aspect of the matter. Being less 'modest' will easily make you an other million annually Time based billing as such is a very poor way of measuring value to the client. I personally foresee that eventually the industry will move away from this and turn to value based billing. The theory behind this thinking is explained in my upcoming book: ‘Data & Dialogue, a relationship redefined’ [reserve your personal copy now]. I will also write about this topic in one of the next blogs. As long as there is time based billing lawyers have entered into an agreement with their clients that the client will be charged for all time spent on the matter. Humans in general perform very poor as it comes to estimating the time they spend on tasks. Would you for example accurately know how much time you spend yesterday in total on fetching and drinking tea or coffee during the whole day (included at home)? Typically we tend to (vastly) underestimate the time spent. That is why we are always pressed for time: things take much longer than expected. Lawyers are no different. Time is lost by memory, modesty and inaccuracy. All fee-earners being more precise and aware will easily make your firm an extra million.