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Welcome to my blog!

This blog contains useful articles, educational content pertinent to the legal industry and a few personal experiences I’ll share. With more than 29 years of legal experience, I have become a resource for members of the legal community. I believe in educating legal professionals to assist them with making better business decisions. I invite you to bookmark my blog and check back often as I’ll provide content on a regular basis. Additionally, should you have any comments or suggestions, please don’t hesitate to leave me a note right here and I’ll be sure to get back to you.

Toss out the Book and Innovate

By on December 16, 2012

You already know the famous saying, “do the same old thing, the same old way and get the same old results”. This is never truer than during challenging economic times. The market is full of businesses just like yours and the customer needs to make a choice. Your same old message, based upon your same old business plan may no longer resonate and you’ll be at risk of losing out to the businesses that innovate. Innovation is clearly a method of differentiation.

Every CEO and business leader will claim that their business innovates; they will cite a few new initiatives in their annual plan. However there can be a huge gap between plans, efforts and actual results. I won’t use companies like Microsoft, Google and Apple to prove that innovation works, they might be outliers, although you might be amazed what “outliers” have in common by reading Malcolm Gladwell’s book on the subject.

Let’s instead look at Blinds.com, it started as Laura’s Draperies with Jay Steinfeld trying to sell blinds and shades door to door, a really tough gig. He built his first web site in 1993 and by 1996 was selling products over the web as NoBrainerBlinds.com. In 2004 Jay changed the name to Blinds.com and the business was growing. A defining moment came in 2007 when Jay introduced a real innovation, on-line videos explaining how to properly measure a window and then install a blind. Blinds.com now has a complete library covering dozens of “how to” video’s that make buying and using their products risk-free.

I could go on and on with innovation stories, even law firms have examples of innovations. Some are offering Project Management services to help align efforts and results with their clients. Other are offering self-help like Goodwin Procter, a Boston-based firm providing startup entrepreneurs and venture capitalists with free documents and tips on best practices on a site called Founders Workbench. Can you imagine that, free advice and forms.

Here are 5 ideas to keep in mind when deciding on innovation projects.

  1.  Get Away. The best way to come up with innovative ideas is to completely get away from your normal daily grind. Find a place to just goof off, clear you head and turn off the cell phones and email. Set-up a creative environment that allows people’s minds to ask why and why not.
  2. Plan on Failure, and Fail Early. Everything we do in business is to avoid failure, but innovation can’t exist without at least a tolerance for failure. Businesses can accept pilot project that are innovative and then structure the roll-out to test for failed concepts. Nobody should feel threatened for a failed innovation.
  3. Alignment. The best innovations are where the business aligns their core capabilities with the customers’ needs. What are your core strengths, what value can you provide your customer? In the case above, Goodwin aligned their expertise in helping emerging companies grow with an entrepreneur’s desire for self-prepared  documents.
  4. Ask Why and Why Not. Question everything, look at the client experience. When I think of Heinz ketchup I think of the bottle being upside down, makes it much easier to use. I’m not sure they invented this concept but someone there must have had a eureka moment. Turn things upside-down and see what happens.
  5. Leadership and Change. Make sure that you have CEO driven projects, or at least find a Vice President of Change in your business to help provide the leadership necessary to make innovation in your business an on-going process, not just an annual event.

When starting out, look for small “hits”, you don’t need a home-run in your first at-bat. These will come as you build a culture and track record for innovative ideas.

 

 

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Categories: AFA - alternative fee arrangement, Best Practices, Legal Marketing, Management, Productivity

Is Your Law firm Headed for a Fiscal Cliff?

By on December 9, 2012

Is your business headed for a fiscal cliff, most corporate CEO’s have a pretty good measurements to help guide them from falling off the edge. However, law firms are somewhat strange and operate quite differently from the Fortune 500 companies.

Here is a short check list to help a firm see a potential fiscal cliff before falling off:

  1. Don’t let current financials fool you. Law firm financial statements don’t always provide a true view of profitability, they are cash based. They try and match up cash collected today from work done long ago, along with today’s expenses. This cash may have resulted from clients and partners who are no longer even associated with the firm. Pretend you are recognizing revenue and costs based upon the accrual method of accounting, compare that to your cash basis results. This can be a simple calculation, just take the historic realization value of the hours worked this month and subtract all of your true costs for the same for the month (not just what you paid) and this should give you a comparison. Is your firm healthy?
  2. Closely examine forward looking indicators.  In a law firm, forward looking indicators include:
    1. Review total hours recorded this month or quarter and the value of those hours at their potentially billed and collected value;
      do not calculate any of this at standard rates.
    2. Can you project out a backlog; does your firm have enough work to become 90% utilized over the next 3-6 months?
    3. How satisfied are your clients, are you winning the client swapping battle? How dependent are you on key clients in any one
      sector of your business.
    4. What is the economic climate in your client’s market place? How will this affect your future work and your ability to raise
      rates?
  3. Worry about the mix. The business mix of law firms equate to the product mix of a corporation. It can be critical. Compare your current and forecasted mix with historical values. Do this by type of law, in other words are you getting more business in transactional litigation with lower rates while your patent litigation is slumping. Take a close look at your associate to partner mix, are you actually forcing work down to the lowest practical level?
  4. Look at the trends. All the measurements we are discussing here must be looked at from a trending point of view. Most law firm financial reports are “point-in-time” snapshots, what does the trend look like? Keep on-going trends spreadsheets for hours, effective rates, cash, write-off’s and expenses. It would be helpful to keep these by practice group and branch office. These trends will help you look forward, instead of just backwards.
  5. Culture, Lateral Partners and Acquisitions. We have all seen the demise of law firms over the last few years and there are many things we can learn from this experience. Many of the firms that have imploded were a result of either falling off a fiscal cliff or culture issues. Let’s talk about the culture issues, is your firm playing on the lateral partner “merry-go-round”, whereby you lose a partner but
    gain one from another firm? There is a huge financial and cultural risk associated with growing by lateral partners. The larger a firm becomes, the more the culture fractures especially if the growth comes through acquisitions. A fractured culture can quickly turn on a firm and once a group leaves, it can be like a cash-run on a bank … deadly.

Pay attention to the list above and you’ll have a better chance of seeing and avoiding a fiscal cliff in your business.

 

 

 

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Categories: Best Practices, Financial Management

Your 50% Bonus is About to Fall Off a Fiscal Cliff

By on December 6, 2012

Your 50% Bonus Depreciation on capital equipment will disappear as of December 31, 2012. In addition, no one exactly knows at this point how normal depreciation will be effected in 2013. So now might be the time to buy, buy, buy!

How does all this depreciation work and why should you care?

Most businesses, including law firms, buy capital equipment and software an on-going basis. The timing of these purchases can be critical from a tax savings point of view. Most businesses would like to be able to just “write-off” the entire purchase of equipment and software as an “expense” in the purchase year, just dream-on, you can’t. Although at one time there was a loop-hole commonly called the “Hummer Deduction”, whereby “businesses” were buying SUV’s and writing them off in the same year. That’s all changed and instead you normally must depreciate the purchases over a period of time depending on the item, for example 3-5 years.

Two key events changed how depreciation works through the end of this year. The Tax Relief Act of 2010 and the Jobs Act of 2010 made changes to the IRS Code Section 179. These revisions to Section 179 allowed for a 50% “Bonus Depreciation” on qualified assets placed in service during 2012.

Here are some general details regarding the “Bonus”:

  1. Let’s assume that your business had a profit in 2012 and will be paying taxes. There are other provisions for losses that are carried forward.
  2. Your equipment or software must be in place on or before December 31, 2012.
  3. You can either pay cash or finance your purchase.
  4. Small, medium and big businesses have different thresholds.
  5. Normally the Section 179 deduction is taken first, followed by the Bonus Depreciation calculation.
  6. “Off the Shelf” computer software qualifies.

Make sure your firm takes full advantage of the 50% Bonus Depreciation before it disappears at the end of 2012.

Please note: I am not a tax advisor nor qualified to discuss the accounting treatment of any purchases you might make. All of the information above is available on various web sites and specific advice should come from a qualified advisor.

In my next posting I’ll give you a check list to make sure your business isn’t going to fall off it’s own “fiscal cliff”.

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Categories: Financial Management, Management

Empowering Employees to Break Standard Procedures

By on December 2, 2012

In my last blog post I wrote about relying on “superstar processes” to achieve results. There are however times when employees may be empowered to deviate from the standard and improvise, especially in dealing with customer issues. Empowering employees to handle customer issues can improve customer satisfaction and loyalty. Have you ever called customer service, explained a unique issue and had this
person “bend the rules just a little” to make you a happy camper. It’s a nice experience.

There is of course the famous story of a Nordstrom’s department store worker taking back a set of snow tires to keep a customer happy. Did Nordstrom’s ever sell snow tires? The legend has more to it than I can relay here, but you get the idea on how improvising can go too far.

At the same time, with the support of management, employees can be empowered to solve customer problems using individual discretion.  Here are 4 steps needed to successfully build an employee empowerment culture in your business:

  1.  Skills. Employees need to develop specific skills so that they can deal with customer issues that are outside the scope of structured processes. The more customer service skills that are developed within an employee, the more success the results will become.
  2. Examples. One of the best methods of training these skills and empowering employees is by a continual feedback of successful outcomes. For example, a manager might conduct a monthly employee meeting whereby employees are encouraged to relay specific
    examples of how they handled customer issues. This serves to build employee self-confidence and train others how to handle similar problems.
  3. Access to information. Empowered employees need a plan, goals and objective that are easy to understand and measure. Employees will understand that with authority comes responsibility. Set well defined limits of authority so there is never a complete melt-down.
  4. Remove constraints. Empowered employees need a different management structure that is willing to delegate down. In most businesses today, managers have sole responsibility for decisions that deviate from standard practices. Empowering employees will change this paradigm.

Keep in mind that not all employees can handle this empowerment; some will just freeze like a deer in headlights. They just plain don’t have the self-confidence to take on this level of responsibility. In this case don’t take them past the point of routine training; they just aren’t cut out for this structure.

 

 

 

 

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Categories: Uncategorized

Ways Management Can Gets Results Without Superstars

By on November 26, 2012

The dream of management is to build an entire superstar team of high achievers and then dominate the marketplace. Unfortunately, this rarely happens. Why ….. because superstars don’t always work well together and they tend to be hard to find and harder to keep.

Management can get the results they are looking to achieve by getting their “average” people to follow “superstar processes”.  If the processes are flawed or not well defined, then failure is probable. The American scientist and father of modern-day quality Edward Deming once said “A bad process will beat a good person every time.” Most of our businesses no longer rely on expert craftsmen, we instead rely on a mobile and family-centric “average” workforce.

Let’s take a look at major successful franchises like McDonalds, Subway and Pizza Hut, they become very profitable because they follow proven “superstar processes”. McDonalds instituted their Hamburg University in 1961 to insure process control. You might say that your business is much more complex than a fast food joint and many of your requirements can’t be put into structured processes. Really! Some of the most
complex tasks in the world are done by developing and closely following superstar
processes.  Check out my stories on the Checklist Manifesto, you’ll be amazed.

Your business, no matter what it is, can benefit by developing and implementing superstar processes for your average employees. As Fujio Cho, the former president of Toyota Motors, once said, “We get brilliant results from average people managing brilliant processes, while our competitors get average or worse results from brilliant people managing broken processes.”

Which type of business are you running?

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Categories: Management

2012 Year-end Survival Guide for Law Firms

By on November 11, 2012

Law firms are quite unique, as compared to most other businesses; they normally choose to operate on a cash basis. Income isn’t earned, from a tax point of view, until that cash actually comes in the door.  In addition, expenses can’t be deducted until they are actually paid. Cash-in, cash-out that’s how law firms work. Even though smart firms might keep unbilled, accounts receivables and accounts payable on their balance sheet (accrual accounting) it really doesn’t factor into revenue or taxable income. One benefit of cash accounting is that income tax is deferred on accounts receivable, which may or may not be collectible. Law firms on a cash basis can do much more yearend maneuvering to manage the tax consequences of either the corporation or partnership.

In a Slow Year – Ways to Increase Income

  • Of course, the best way to increase income is by billing more hours through November and collecting it all by December 31st. By this time of the year it’s a little late to expect work to be billed and collected.
  • Stop paying expenses probably has single biggest impact on income. Contact your vendors first so that they understand that November and December bills will be paid by mid-January.
  • Contact clients with large receivables, especially those that are old and risky and negotiate discounts for payment in December. Surprisingly, some companies have “use it or lose it” budgets and they just may want to get this liability off their books. Keep in mind that they operate on an accrual basis; it’s good to reduce liabilities for them.
  • Contact clients with large projects and see if you can get more upfront retainers, (not IOLTA payments). This additional cash will probably be calculated into taxable income.

In a Good Year – Ways to Keep Taxes Down

  • Just the reverse of a slow year, one excellent way to keep taxes down is to pay forward 2013 expenses in December 2012. This doesn’t mean going on a buying spree. Many vendors would gladly bill 2012 services and accept payment in early January. (Checks dated December 31st this year will reach them in early January).
  • One hidden expense that is sizeable in some firms is credit cards, go online and pay off all balances.
  • Make purchases in 2012 instead of 2013 for hardware and software that can be put into service pretty quickly. Only buy the items you were going to purchase in the upcoming year.
  • Contact some large clients and tell them you’ll delay November and December billings and instead bill them in early January for immediate  payment. This might benefit the client since they are accrual basis, and if they receive a bill in 2012, it impacts their financials.

Beware of Pitfalls

  • Beware of the false sense of security that  cash accounting provides. Many of the above suggestions have short term benefits with a potential longer term negative impact.
  • Drawing down the line of credit in a slow year-end, for any reason, is risky.

Best Practice

Manage the firm day to day on an accrual basis. Accrual reporting provides cleaner snapshot of the health of the firm. Sure, you’ll compensate
partners and pay taxes on a cash basis, but accrual will allow you to sleep at night knowing what tomorrow will look like.

Beware of drawing down a bank line for partner compensation

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Categories: Best Practices, Financial Management, Law firm billing, Management

A Time of Transition

By on October 7, 2012

It’s been a year since Aderant acquired RainMaker Software and the transition has long been successfully completed. On a personal note, Friday was my last day at Aderant.  After 20+ years at RainMaker I’ll never forget the wonderful experiences with my former employees and clients.

As with everything in life there are lessons to be learned and here are some things I’ve learned in the last few years:

  1. Employees and clients want and need leadership. They almost carve for a vision that will help them achieve both personal goals and
    goals of the organization. Sometimes leaders have fancy titles and are managers, other times they have no official recognition but we all know who they are.
  2. Businesses are all about employees. They will drive growth, innovate to build new products, find and support new clients and they will be around long after all the current trends and technology change.
  3. Provide your employees with non-stop training and communications. Give them real jobs and make them accountable for their own futures. Provide an atmosphere where employees have fun coming to work every day. Don’t sponsor parties for those that leave, instead celebrate and recognize those that stay. I was always proud of those employees who had 0 sick days and 10-20 years with the company, it showed commitment.
  4. Businesses run because they sell products and/or services to clients and delight them to keep them from leaving. There should never be a gap between client and vendor expectations. If there is, then somewhere along the line communications have broken down. Sometimes clients need to be told how to be happy, but that is part of setting expectations. The very best vendors provide superior customer services.

I wish all my friends and former clients the very best of luck as I move on to other opportunities in my life.

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Categories: Uncategorized

Cover Letters on Client Bills – No Way

By on September 23, 2012

Law firms are under pressure to increase profitability and at the same time deal with stagnant revenue and increased costs. Improvements in productivity appear to be easier than rate increases in keeping a firm healthy.

I read with some disbelief a recent recommendation suggesting that attorneys send a personalized cover letters consisting of a paragraph or two with their monthly billing statements. The overall concept seemed understandable; just explain to the clients what you’ve done.

The idea of sending a personalized cover letter with each bill does nothing more than slow up the billing process, cost the firm cash flow and may allow the attorney to think that he/she is actually communicating with the client. The fact is, anything important the attorney needs to communicate to the client probably can’t be put in a general cover letter that passes through the accounts payable department in any case. In an efficient mid-size or larger law firm we want the accounting department to get good, clean bills out to clients for payment as soon as possible. Delays don’t benefit anyone, including the client. Can you imagine a billing attorney, who might be billing a few hundred matters (or more) each month generating cover letters for matters where he/she possible didn’t even do any work? Remember, we are hopefully using our billing attorneys to better manage projects and push work down to the lowest practical and competent level.

The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way and adding a cover letter to the front of a bill is not a step in the right direction. The firm might be better off setting up a policy that says a billing attorney must call a client, on every final bill after a matter has closed or any bill over $xxxx dollars to explain it personally to the client.

In summary, cover letters on bills really don’t serve the intended purpose and only delay the firm’s cash flow.

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Categories: Best Practices, Financial Management, Law firm billing, Management, Productivity, The Legal Market

Lower Law Firm Expenses by DRIFT

By on September 18, 2012

I read with interest The Am Law Daily post discussing how law firms were dealing with rising expenses.  Law firms are looking for ways to improve profitability, especially during tough times. One sure way to lower costs is by “doing it right the first time” (DIRFT).

This philosophy is best understood through the work being done by Philip Crosby Associates. Crosby’s initial book (no longer in print) “Quality is Free” kicked off his process in 1970 during a time when US industry was trying to understand the management styles in Japan. People such as Edward Deming were explaining the differences in Japanese cultures and how they related to industry.  The Crosby quality process fits service organizations like law firms as much as it does a manufacturer. Let’s take a quick look at his concepts.

According to Crosby here are the Four Absolutes of Quality Management:

  1. Quality is defined as conformance to requirements, not as ‘goodness’ or ‘elegance’.
  2. The system for causing quality is prevention, not appraisal.
  3. The performance standard must be Zero Defects, not “that’s close enough”.
  4. The measurement of quality is the Price of Nonconformance, not indices.

In general, quality is the starting point based on specific requirements. Once the service is delivered it is too late to add quality. The standard is Zero Defects; the thought of AQL (acceptable quality levels) is completely unacceptable. A law firm that
delivered documents on time, 95% of the time has failed, attorneys that come close to hitting their requirements have failed.

So, what’s the benefit of adopting the Crosby quality program, quite simply, it is cost savings, client satisfaction and employee empowerment. If you don’t believe in the program you can take a quick self-test and try to measure the real price of non-conformance (PONC) within any business. The potential price of not “do it right the first time”.

For example:

  • Resending and reprocessing
  • Expediting, overnight shipments, overtime hours
  • Disruption to other schedules, rescheduling
  • Client complaints
  • Non-billable services
  • Missed filings, filing for extensions
  • A lost client, no new matters
  • A claim of misconduct, added insurance costs

Law firms can reduce their costs and improve profitability and client satisfaction all at the same time by “do it right the first time”. I can assure you that if you don’t do it right the first time, you do it right after the second, third, forth ….. time.

 

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Categories: Best Practices, Financial Management, Management, Productivity, The Legal Market

Microsoft is Looking Really Good

By on July 15, 2012

I attended the Microsoft annual Worldwide Partners Conference last week in Toronto and it was quite an experience. I’ve been to several of these in the past and I can tell you this WPC was special.

It’s easy to have a love-hate relationship with Microsoft and it’s easy to get frustrated at times dealing with them. However, in all fairness, it’s getting easy to “love” them, they are on the move in all the right direction.

In addition to general sessions, I was invited to attend a few invitation-only sessions. What I learned was amazing; here are a few of my observations:

1. In the last year Microsoft purchased Skype, Yammer and launched the Windows Store. Yammer finally brings a social network to Microsoft that will help meet the needs of even their largest corporate clients.

2. Steve Ballmer made it clear in his keynote speech that the upcoming (October 2012) release of Windows 8 will be a game changer for years to come. Tami Reller – VP & CFO of Windows personally demonstrated Windows 8 on a dozen different devices. She then took a 32GB USB stick that had here entire personal Windows 8 system, profile and documents, plugged it into a PC with Windows 7. The entire Air Canada arena saw the Windows 7 PC boot up Windows 8, load all of Tami’s settings and she accessed her documents in SkyDrive in moments.

3. Windows 8 also includes the Metro interface that brings a rich touch environment to Windows. Metro won’t be practical for heavy data processing applications where a keyboard and mouse are tough to beat, however for presentations, executive inquiry and mobile it is fabulous. Applications that run on Windows 7 will run on Windows 8. We also learned that Windows 7 now accounts for 50% of all Windows installs worldwide. Microsoft knows that Windows 8 will take a while to roll-out to the level of even Windows 7, but they needed one platform that would scale across all platforms and devices, Servers, PC’s, tablets and phones.

4. Enterprise applications are starting to incorporate “gaming like” features into their user-interfaces making for an improved client experience. This along with Microsoft Kinect technology and multi-touch navigation will open up new worlds of productivity applications over time.

5. Microsoft Office 365, now running on Microsoft’s Azure cloud will also be a game changer. Enterprise customers are already adopting the model to keep one system running possibly forever without the normal “version upgrade” headaches. Microsoft sales reps worldwide now have a line item in their performance quotas that require the sales of both Office 365 and Windows 8, pressure to upgrade to these will be intense.

6. Speaking of Azure, Microsoft’s cloud offering is immediately on par or even superior to both Amazon’s and Google’s cloud offering. You’ll see more vendors offering highly affordable solutions on Azure. Vendors just can’t run private clouds at the cost Microsoft is selling Azure for. Whether you use Azure for just disaster recovery, or run apps from it, it is one of the most technically superior clouds available today, and somewhat a best kept secret.

7. At Aderant we have already moved our Deadlines.com business to Azure and more announcements will be coming shortly. Stop by ILTA and see more products running on Azure.

8. Last but no least on my list is the explosive growth of Microsoft Dynamics, including CRM. Aderant was recognized as a top 5% of all worldwide Microsoft partners by being named to the Dynamics President’s Club. Aderant CRM4Legal is built on this technically superior platform and is now starting to take market share. By the way, Microsoft Dynamics CRM is also available on Azure at an affordable per user/monthly fee.

9. Microsoft Office 15 is still on target to ship before the end of 2012 and will have Windows 8 Metro screens in addition to the ribbon tool bars we are now learning to use.

In summary Microsoft is in a definite “love” phase and the next 12 months looks quite exciting.

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Categories: Productivity, Technology, The Legal Market
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