Gruntled Employees

Of sticker shock and empathy

I'll never forget the stickers from the night before my wedding. On the other hand, my brother Bill probably can't remember them.

Because of the fumes.

Let me explain:

Just before the wedding, my bride-to-be had everything under control. The flowers were set, the caterer was prepared, the ceremony site was ready. She was as calm as a bride can be. But then a friend of my parents asked what should have been an innocuous question:

"What are you doing for wedding favors?"

Wedding favors? Now to me, "wedding favors" was as foreign a concept as "centerpieces" and, well, "marriage." Turns out "wedding favors" are defined (by Wikipedia) as "small gifts given as a gesture of appreciation or gratitude to guests from the bride and groom during a wedding ceremony or a wedding reception." Who knew?

Alarm bells replaced wedding bells! This was a crisis of the first degree! Fortunately, the inquiring family friend was quick to provide a suggestion: small silver picture frames in which we could place cards telling each guest where they'd sit at the reception. Then they could take their frames home and toss the seat cards and replace them with pictures of their cats, or whatever. (This was 12 years ago, before there were blogs.) Brilliant!

My fiancée sped to the local Christmas Tree Shops, a New England bargain store that specializes in little knickknacks. Amazingly, Heidi found a bunch of little frames similar to the one in the cheesy picture above. She immediately bought 150 of them and brought them back to me. My job was to do the desktop publishing: make nice calligraphic seat cards with each guest's name and table number. That job was hard enough. My brother's job was much worse.

He had to do the stickers.

You see, every single one of these little silver frames had a silver UPC sticker on it. Not so much on the frame, though. On the glass! And the glue on these stickers must have been that kind of glue they use for keeping those tiles from falling off the Space Shuttle. The stickers themselves fell apart if you tried to scrape or pick them off.

Since he was best man, Bill's job was to remove the stickers. The only hope was to use some high-powered chemical solvent and a razor blade, which is what Bill did for hours in the underventilated living room of my apartment. Twelve years later, he's still not the same. (Actually, he's fine, though he lives in Oklahoma, which is odd.) (His living there; not the state itself.)

Anyway, this brings me to my point: the frame-maker forgot about empathy. Someone at Cheapo Frames Unlimited or whatever made a decision to put bar-code stickers on the glass part of the frame. Maybe he or she did it because the store would need to scan the stickers at the cash register. Maybe it helped with inventory control. But I guarantee you that the sticker decision-maker lacked the critical character trait of empathy — namely, empathy with the customer who was going to be using the cheapo frame. He or she never stopped to think how the customer would feel when confronted with the unremovable sticker. He or she never wondered how the customer would be able to see the wedding guest's table number (or how the guest would later see the cat picture) through the permanent label that obscured the frame's transparent glass face. The frame-company decision maker had no empathy for the customer.

And neither did his or her supervisors. Neither did the owner of Cheapo Frames Unlimited. Neither did the buyer at Christmas Tree Shops.

Having empathy for the customer — or the end user of a product or service — is an undervalued, underpromoted, and undertrained quality in today's business world. Here are some examples where empathy for the customer or end user is missing:

• The people who package children's toys. In their quest to thwart the one or two percent of toy-store customers who would steal accessories out of a Dora the Explorer package, or whatever, they tie everything down with wire, then tape it to the inside of the box. It takes twenty minutes to free your kid's toy from its package. The manufacturer didn't think about how unhappy that delay would make the child, or her dad.
• Customer support lines that play recorded advertisements for the product you're having trouble with while you wait 31 minutes for a live human being. My particular favorite is when you call your internet provider because you can't connect, and the recording tells you that you can get answers to your questions at www.whatever.com. Uh, no I can't ... The company never thought about how that would sound to a frustrated customer.
• Billboards that have the same tiny little text at the bottom that a print ad has. I'm driving 60 miles an hour past your billboard; how am I supposed to read the little text? Obviously, the art designer didn't think about the driver's ability to actually read it (or didn't care if it was read).
• Lawyers who fill their letters, contracts, and briefs with pompous and stuffy legalese. Don't they want the reader to actually be able to read it?
• For that matter, lawyers who bill by the hour. Don't they wonder how the client is going to feel when she gets a bill showing that it cost her more money because it took longer for her to get what she wanted?

Managers need to make sure that everyone in the workplace thinks about what the customer is going to do with the product or service, and how the customer is going to feel about it. That's empathy, and it's critical to a company's success.

Seth Godin has written about this before in his excellent blog. See his post from three years ago called, simply, "Care." And Becky Carroll at Customers Rock! blog has a nice post on empathy called "Empathy Matters."

As for the wedding favors, they were a hit at the reception, Heidi and I are still married 12 years later, and Bill's only a little woozy from the solvent fumes.

No hourly billing, eh?

The Great Billable Hour Debate of '08 is playing out north of the border, too. Maclean's magazine is the Canadian equivalent of TIME or Newsweek, with nearly three million readers every week. In the current issue, writer John Intini has a terrific article called "Time to stop the clock? A backlash against the billable hour has some firms charging flat fees." John covers the entire issue from the reasoning behind hourly billing to the problems it causes for clients and lawyers. His reporting also uncovered some great lines: When asked how fast law firms are shifting away from hourly billing, Vancouver consultant Richard Stock quips, "Global warming is faster."

I talked to John at length about the subject and whether we'd soon see a tipping point away from hourly billing. John writes:

Experts anticipate that the current economic downturn will lead to further belt-tightening and could force more companies to reassess deals with their lawyers. “The days of just writing cheques are coming to an end,” says Jay Shepherd, whose Boston firm, Shepherd Law Group, banned billable hours last year and doubled its 2006 revenue. “There is no other business that we don’t know the price of something before we buy it. Imagine getting on an airplane and being told they’re going to charge you by the minute. It’s crazy. Nobody would do it.”

Shepherd, who describes the billable hour as “anti-client,” says the savings his six-lawyer outfit provide is the result of team efficiencies, not cut rates. In addition to flat-fee pricing, his firm offers unlimited advice plans: for a fixed price a client can call the office as often as needed without worrying about a big surprise at month’s end. “It’s almost as if we’re in-house lawyers for them,” he says.

[Since I was speaking to a reporter for a Canadian magazine, I said "cheques" instead of "checks." Good of John to notice that over the phone.]

Our discussion turned to the question of timesheets — the same topic we were debating in yesterday's post ("The fool or the fool who follows him?"). To recap, Tom Kane over at Legal Marketing Blog.com called us "foolhardy" in his post "Has Your Firm Tamed That Damn Billable Hour Yet?" because we don't internally track lawyers' hours. Here's that topic covered in the Maclean's article:

Shepherd — who predicts the billable hour will last another decade — doesn’t even track his staff’s hours for internal purposes. This has prompted many competitors to ask how he knows if associates are doing their work? “I manage them,” he says. “That’s my job.” And late nights or weekends holed up at the office don’t impress him. “The firm,” he says, “doesn’t get anything more if it takes longer and the client wants the work done as fast as possible.”

Intini notes — correctly — that it's easier to change the firm culture at a boutique firm than it is at a megafirm. He again quotes Richard Stock, who says that at larger firms, "the business model is entrenched across hundreds, if not thousands of people in the corporation. It’s not an especially nimble ship.”

That's true, but you have to start somewhere. Great article, John!

As for the Tom Kane post, value-billing guru Ron Baker had this response on his VeraSage Institute site. And Columbus lawyer Mike Grodhaus's terrific new blawg, The Alternative Fee Lawyer, wades into the fray in his post, "Timesheets & Alternative Fees." After nicely summarizing the discussions, Mike gives his own take:

What's fascinating to me about this debate is that is not an "apples to apples" comparison. Tom Kane and Jay Shepherd aren't even really talking about the same thing. What Jay Shepherd is talking about is a complete paradigm shift in how lawyers (or any professionals, for that matter) should think about pricing their services.

Not that I'm discounting Tom Kane's mindset. To me, a law firm (like mine) that uses alternative fee arrangements but still uses timesheets internally is still much better than a law firm that bills all its clients by the hour. Indeed, if we ever move the profession to that brave new world without the billable hour, doing it this way will probably be the transitional phase to Shepherd's wholly value-driven approach. But it certainly makes you want to learn more about Shepherd's way of pricing his law firm's services.

Make sure you check out Mike's blog, which now adorns our Blogroll over on the right of your screen. While I still bristle at the term "alternative billing" (which smacks of the seamy, like "alternative lifestyle"; see last year's post, "No-alternative billing"), Mike brings a broad, balanced approach to the conversation. Welcome, Mike!

The fool or the fool who follows him?

In our last episode, "The billable beast of burden," I talked about the recent ABA Journal article that described Shepherd Law Group's successes in banishing the billable hour ("Taming the Billable Beast," February 2008). I also mentioned that there were naysayers about.

Tom Kane is one. He writes Legal Marketing Blog.com, a fine site with a surprisingly generic name for a marketing site. Perhaps "Raising Kane" was taken. (Actually, it turns out it was — see here — by a self-described "recovering lawyer." Huh.) Tom covers the ABA Journal article in his post "Has Your Firm Tamed That Damn Billable Hour Yet?" and commends us and the other two firms for addressing the billable hour problem. (Thanks, Tom.)

But he also takes a shot at something I said in the article, and I feel the need to respond. Here's Tom:

One troubling point mentioned in the article relating to the Shepherd firm. And that is the statement involving CEO Jay Shepherd that “he denies secretly keeping track of hours spent on each case.” If the firm doesn’t do so, IMHO, it is being foolhardy based on the following simple reasoning:

• You can’t make a profit on fixed fees unless you know what your costs are;
• You can’t know what your costs are unless you know how much time (and other dollars) are consumed by the matter; and
• There is no way to know how much time is being spent on matters if you don’t keep track of hours!

Duh!

So, either they are guessing which means they don’t have a clue what their profit margin is either, or the firm has some other means of determining costs that I am unaware of.

"Duh," indeed! Wow. We're being foolhardy to the point of being duhed. (New word; pronounce it "dud." Think of me when you use it. "Hey, Mom! In school today my teacher duhed me.") So I was all set to roll up my sleeves and explain how Tom's "simple reasoning" (IHHO — in his humble opinion) was flawed, when I learned that the Godfather of Value Pricing had already done so.

Ron Baker is the founder of VeraSage Institute, a think tank dedicated to helping professional-service firms rid themselves of archaic billing practices. He is the author of Professional's Guide to Value Pricing, which is the ultimate hornbook on the subject. Having Ron publicly defend your billing practices is like having Martha Stewart compliment your table setting (only without the whole jail thing). Here's Ron in his post "He Who Says 'A' Must Say 'B,'" responding to Tom's "duh":

No, not Duh. There are over 500+ firms worldwide, across all professional knowledge firm sectors, from advertising to CPA firms and law to IT consulting firms, that don’t do timesheets.

This doesn’t mean they don’t know their costs, it’s a question of WHEN do they know their costs. With timesheets, you only know them in arrears. With our methods, you know them BEFORE you do the work.

What good is it to know your costs if the client doesn’t like your price? This is known as price-led costing; Toyota has been using since it was founded in the 1880s, and Toyota does not have a standard cost accounting system (nor do they do timesheets).

In the real world, value drives price, not costs. Price actually drives costs, so it makes sense to know value and price before you spend a nickel on any costs....

I just wanted to set the record straight. If the Shepherd Law Group is smart — and they are  — they will trash timesheets. [Thanks, Ron. Already have. — JS] They are the cancer in the professions; it is just a matter time before they will be buried.

Ron also says that timesheets "keep professionals mired in the mentality they sell time." In another place, Ron has written one of the best arguments against timesheets ever:

So what good is measuring hours logged on a timesheet? Do you think you can measure the value of a Picasso, the deliciousness of a meal prepared by a five-star chef, the splendor of a building designed by an architect, or the acting ability of an actress, by looking at the hours they work? As they say, it’s easier to count the bottles than describe the wine. You remain mired in counting and costing the bottles, while we are interested in the quality, taste and subjective value of the wine.

Knowledge workers aren’t inspired to track every six minutes of their day. No one entered this profession with the objective of logging the most hours. Not only is it the wrong theory of value, it’s also demeaning, demonstrating a lack of trust, treating them like children.

Oh, snap! I really couldn't have said it better myself.

No, we don't track hours spent at Shepherd Law Group, secretly or overtly. Other lawyers often shake their heads knowingly and then ask me how I know whether my associates are working. "Uh," I reply, "with this crazy new thing called management." (They usually shake their heads some more and wander off, muttering.) Our associates work hard because they want to help our clients and they want to do a good job. That's why we call them professionals. Professionals don't need an annual billables goal to make them work hard.

Now I don't want to dis Tom too much; he's written some good things against hourly billing. And he went to my dad's alma mater, the Cross, so he can't be all bad. Still, he may think I'm foolhardy for trashing timesheets, but there will soon be many other "fools" following our lead.

The billable beast of burden

Finally! The writers' strike is over and we can all get back to work. Thank goodness I can now live off my DVD residuals, or whatever. Ahh, the power of the Union. Nothing like sticking it to The Man ... and the makeup person, and the costume person, and the hair stylist, and the gaffer (whatever that is) and the best boy (just what makes him so good?). Shutting down an entire industry for a hundred days and billions of dollars is a small price to pay for a tiny-but-respectable percentage of the revenue generated by webisodes. Because everyone watches webisodes ... right? Ka-ching!

[End of management-biased sarcasm. Actually, I'm just a little cheesed off that "24" has been pushed back to January 2009 because of the writers' strike. For a Gruntled take on "24" from last year, please see "What would Jack Bauer do? Use plain English."]

Since we last spoke, the hourly billing debate has been going full throttle. The current issue of Crain's Chicago Business reports that "only 16% of in-house lawyers say hourly billing is their preferred arrangement." Yet hourly billing remains the dominant way that lawyers bill their corporate clients. Samantha Stainbaum's article, "The end of hourly fees?" quotes Northwestern Law dean David Van Zandt, who offers a possible explanation: "It's difficult for companies to evaluate what they're getting, so they fall back to hourly billing."

That's possible. Still, if five out of six in-house counsel would prefer something other than hourly billing, don't we outside counsel have an obligation to provide it? The February issue of the ABA Journal has a story by David Gialanella called "Taming the Billable Beast." In it, he talks about three law firms who he says are "changing the billable equation last year in hopes of reducing associate and client dissatisfaction."

Two of the firms focused on first-year associates' billing requirements: Dallas's Strasburger & Price, who cut first-year billing requirements from 1,920 hours a year to 1,600; and Atlanta-based Ford & Harrison, who got rid of first-year requirements altogether.

The third firm went even further. (This may sound familiar.) David writes:

Shepherd Law Group in Boston has thrown out the billable hour altogether in favor of flat fees and fixed prices, and it could not have asked for a better result.

In 2007, says CEO Jay Shepherd, the firm “billed exactly 0.0 hours [yet] more than doubled our revenue for all of 2006.” He adds, “It sounds too good to be true. It’s not.”

Now there’s no looking back for Shepherd, whose firm handles labor and employment law. He recently added a sixth attorney, and he denies secretly keeping track of the hours spent on each case.

In their new billing model, Shepherd and the other partners can get together to brainstorm strategies—something that would have required billing for several different attorneys. Most clients would never stand for those sessions if charged by the hour.

It’s easier for a boutique firm to institute a change, but Shepherd cannot argue with results: Research becomes more focused; soon, efficiency improves. For the Shepherd Law Group, at least, eye-popping numbers are to follow.

(Thanks, David.) The point here isn't to trumpet our firm's successes (at least that's not the main point). The point is that clients want a better system, one that puts their interests in line with their lawyers' interests — rather than in conflict with them. And it can be done successfully.

But there are plenty of naysayers.

Next post: The naysayers say "nay." Stay tuned ... (unless there's another writers' strike).

Legal advice: 30% off! (Why discounts don't always save you money)

It seems like more clients are complaining about their legal bills. With hourly rates rising into record-setting territory (see "Cheaper than A-Rod: Some lawyers getting $1,000 an hour"), there's plenty to complain about. Many  sophisticated clients are questioning whether the problem is hourly billing itself. (See "No-alternative billing" and "Outside counsel ignoring GCs on hourly billing.")

And how are many law firms responding?

Discounts.

Taking a page from the mattress sellers' handbook, some law firms are offering discounts for certain services. Employment law is a common example, since it's often seen as less critical than securities law or mergers-and-acquisitions work. (Of course, without talented employees, your securities and your acquisitions aren't worth a heck of a lot, but that's a fight for a different post.) "Six hundred bucks an hour for defending a discrimination charge? You're right, client. Tell you what I'm gonna do ...."

Thinking that they're mollifying the cost-sensitive client, the lawyer offers a discount in the form of a lower rate, written-off time, or a change in the staffing of a project. But these discounts can actually increase your legal costs. Here are five reasons why:

1. Lawyers are rational, and will work harder on more-profitable matters.
Now most lawyers are ethical, but they are not selfless saints. Instead, most lawyers are rational human beings. (Yes, believe it or not, lawyers are human beings, no matter what you've heard.) Human beings tend to respond to incentives. They tend to prioritize their actions based on the expected rewards.

Let's say a lawyer has two otherwise identical projects to work on: same level of difficulty, same amount of intellectual interestingness. The project for Client A is billed at the lawyer's usual rate of $400 an hour. The project for Client B is billed at a discounted rate of $215 an hour. If the lawyer has an hour to bill before a meeting and wants to add as much as possible to the firm's bottom line, the lawyer — a rational human being — will usually choose Client A's project.

Knowing that the undiscounted project is more rewarding, the rational human lawyer will tend to give his or her best efforts to that project. Now some lawyers will tell you that they put the same amount of effort into each project, regardless of the reward. But they're either lying to you, or they're lying to themselves. Or maybe they're just not rational human beings.

2. Lawyers are rational, and will work less hard when they know their time is worth nothing.
Sometimes it makes sense to have two (or more) lawyers working on the same task at the same time. Multiple lawyers can brainstorm together to come up with the best ideas about how to proceed on a case. Bringing another lawyer to a client meeting can help make sure that nothing gets missed.

But clients hate being billed for this. When they see a bill entry that describes two lawyers having an office conversation about a case — whether it's called analysis or strategy session or whatever — they often see it as an attempt to jack up billable hours. Knowing this, the smart rational human lawyer will cut his or her time so as to not show the doubled-up billing. But being rational and human, and knowing that he or she can't bill for that time, there will be a tendency to mail it in. No one likes to work for free.

3. In the billable-hour paradigm, there is no incentive for efficiency.
Discounting doesn't solve the biggest problem with hourly billing, which is a built-in disincentive to efficiency. If I take longer to do a job, the client pays me more. Lowering the hourly rate doesn't change that reality.

4. When a firm lowers its rates, it must make up the difference some other way.
Discounting the hourly rate has no effect on the law firm's costs, like associates' salaries and rent. Assuming the firm desires to make a profit (and why shouldn't it?), it must make up the shortfall somewhere else. That somewhere else is more hours, not-entirely-necessary work, or the use of partners to do associates' work (getting the higher discounted rate instead of the lower one).

5. For a cost-sensitive client, a firm may push work down to a lower-level associate.
Instead of using a discounted rate, a firm might lower the client's costs by giving work to a junior associate that would have otherwise been done by a partner or senior associate. This artificial staffing imperative rarely helps the client. A junior associate might take longer to get the job done, and might miss something. Then the partner has to redo the work, and then cut his or her time (see number 2 above). Work should be done by the right-level lawyer, regardless of the rate.

*    *    *

These five reasons apply more to partners than to associates. At most firms, associates are more concerned with the total number of hours they bill than the rate at which they bill. (In fact, they often don't see the final bill.)

The bottom line for clients is to look at the bottom line — not just the discounted rate. You might just find that your law-firm discounts are actually costing you more.

[Note: I revised and reposted this piece on September 21 because I didn't think the original version was good enough.]

Your employees are the sizzle

My wife and I went out to dinner Friday night at a new restaurant in Boston called KO Prime. Its temporary website describes it as "a modern, creative interpretation of a traditional steakhouse with an energetic, sexy and chic atmosphere." As intimidating as that sounded, we thought we'd give it a try.

We showed up around eight o'clock without reservations. Although it was busy, the hostess was friendly and accommodating and sat us immediately. A busboy greeted us right away and quickly delivered water and bread. Then our waiter, Josh, introduced himself and asked if we'd been there before. Everyone was friendly and pleasant, but not in an in-your-face way.

Now if you don't already know it, Boston is a baseball town. The Red Sox have the best record in the majors and are on their way to their first division title since 1995. KO Prime's bar is separated from the dining room by a frosted-glass wall, but from where I was sitting, I could just see part of the bar's television. The Sox-Orioles game was on (with the sound off). I happened to look up as the benches cleared, and like any true Sox fan, I needed to know what was happening. With a sheepish apology to my wife, I got up and hurried over to the bar.

Everyone in the bar was staring at the screen, trying to figure out what was happening without the benefit of audio. (As I later learned, Baltimore pitcher Daniel Cabrera, agitated after Coco Crisp caused him to balk in a run, threw behind Dustin Pedroia, clearing the benches. No punches were thrown, Cabrera was tossed after throwing a complete nutty, and the game resumed.) This took at least five minutes to sort out. I said to the guy standing next to me that my wife was probably tiring of my having left her alone at the table. (Understandably.)

Turns out the guy was Phil Gerster, the restaurant manager. Without missing a beat, he called over to the bartender and asked for a glass of Champagne, then hand-delivered it to my wife (who was amused and mollified).

We chatted with Phil for a few minutes, and learned that he had been working in restaurants his whole life, starting out as a dishwasher. When we mentioned that everyone had been providing us excellent service, Phil gave us his management theory (I'm paraphrasing here):

It's all about the service. It doesn't matter if you have the best food in the world. If the people serving you are jerks, that's what you're going to remember. And you're not going to come back.

And Phil is absolutely right. Our food was great. But what will bring us back in the future — and more importantly, what will lead us to tell others about it (and to write this post), was the friendly, thoughtful service we received. In addition to Phil's marriage-salvaging Champagne, we had:

• Josh, the waiter, unsolicitedly opening a new bottle of great Shiraz to give me a taste (at no charge) when I happened to mention that I usually drank that variety of wine. (The Malbec he recommended with my ribeye, a Navarro Correas Alegoria 2004, was amazing.)
• The busboy quipping in accented English that the aforementioned ribeye — which had a 14-inch bone sticking out of it — looked like something out of "The Flintstones."
• The hostess, while we were all watching the Red Sox nonfisticuffs and some new guests arrived, telling me that she would rather see what happened with the game. (She was kidding, and she greeted the guests just as warmly as she'd greeted us.)

You've heard the marketing expression "Sell the sizzle, not the steak." It applies to the workplace, too. While your company's product or service is the steak, your employees are the sizzle that will keep people coming back. Keep that in mind when you're hiring employees.

So you want to be a barista ...

So it's Sunday and it's hot and I'm taking the family to the local pool. But I need my caffeine fix, and I'm trying to figure out the mechanics of sneaking a triple venti latte into the pool area without getting caught. I decide it's worth the risk, so we stop at the nearby Starbucks en route to the pool.

While I'm waiting for the barista to make my order, I notice a small table with a little sign and a pad of employment applications. As an employment lawyer, I'm always interested to see how businesses go about hiring new employees. I'm curious, especially with national employers, to see how many violations of state law (in my case, Massachusetts) the application has. I counted just two.

Now don't get me wrong. My purpose here is not to call out Starbucks, which is by all accounts a first-rate employer. Every state has slightly different employment laws, and a company that operates in multiple states has to pay attention to all of them. It's an enormous pain to have a different application for every state a company does business in. Many multistate employers try to synthesize the laws of their different states, and often include footnotes with state-required language. (Starbucks included language for California, Maryland, and — yes — Massachusetts. Just not all of it.)

But here's what the application does right. More than right. Better than just about every other application form I've ever read.

After asking all the usual job-application questions, it asks the following:

• Have you ever visited a Starbucks Coffee location? Where? Describe your experience.
• What do you like about coffee?
• Why would you like to work for Starbucks Coffee Company?
• Describe a specific situation where you have provided excellent customer service in your most recent position. Why was this effective?

Now the first and third questions are pretty basic. They probably get a lot of lame answers, which help weed out the barista pretenders.

But the second question and the fourth question are brilliant, and should be emulated by all employers.

Starbucks is all about two things: coffee and customer service. To attract the best employees, Starbucks looks to hire people who get coffee and get customer service. Judging from the top-quality service I get every day at the Starbucks near my office (the School Street store in Boston) — where Gregg, Meg, Theresa, Roger, and the other "partners" (as the company calls all its employees) make an extra effort to remember my name and my order — it seems to be working.

What questions can your company put on its job applications to make sure you attract employees who get what your company is all about?

(As for the minor Massachusetts statutory problems: give me a call, Starbucks, and I'll tell you what they are. On the house.)

Employee satisfaction for $2.40 a day

Have you gotten your iPhone yet? As a Mac fan (our entire law firm runs on Macs), I had no problem waiting in line for an hour at my local AT&T store last Friday evening. When I got there (about an hour after the iPhones went on sale), I was about fortieth in line. When I was seventh, they sold out. Would it have killed the AT&T store people to come out and count the people in line, and tell me, the six people in front of me, and everyone behind me that we were out of luck? Maybe.

Fortunately, a friend texted me that the Apple store near where I live had plenty. I went there, waited in no line, and had my new gadget in about five minutes. And I'm happy to report that it lives up to all the hype.

While there have been about a skitillion stories written about the iPhone (that's one followed by a wad of zeroes, or ten to the wad), one of the most interesting to me as an employer evangelist is this: Apple reportedly is giving each of its employees a free 8-gigabyte iPhone. I first read about this in John Moore's excellent marketing blog, Brand Autopsy. John is a brand guru who's worked with Starbucks and Whole Foods. His post on "Marketing to Employees" described the Apple employee giveaway, which was reported in the San Jose Mercury News. John writes:

Apple is doing a lot of things right in marketing the iPhone. But amidst all the iPhone hubbub, one vital marketing nugget is getting lost:

Apple is giving all its full-time U.S.-based employees an iPhone.

I am a huge proponent of companies spending marketing money on employees. It's simple. Astonish employees and they will, in turn, astonish customers. Giving every full-time employee a $600 (retail value) iPhone is an astonishing act that will only help to feed the already vibrant evangelical corporate culture within Apple.

[Other reports (MacRumors, Ars Technica) add that the iPhone giveaway also includes part-time employees who have been with Apple for at least a year.]

John's key line — "Astonish employees and they will, in turn, astonish customers" — reminds me of our post from last month, "Put your employees first and your customers second." In that piece, I described a recent British study that showed that employee satisfaction — more than customer satisfaction — was a leading indicator for company growth. The study talked about "emotional contagion," where the employees' good feelings rubbed off onto the customers.

This also reminds me about the Cornell study showing that bonuses were ten times more effective than merit increases in raising employee performance. (See "Bonuses: more bang for your buck.") If bonuses are more effective than raises, then iPhones and other employee giveaways are even more effective. Think about it: each 8 GB iPhone retails for $599. Ignore the fact that it costs Apple something less than that to make. Giving each Apple employee a $599 bonus would be nice, but it wouldn't really generate any excitement. And if you convert that $599 to a raise, it works out to less than 30 cents an hour for full-time employees, or $2.40 a day. Big whoop.

Instead of giving employees a 30-cent raise, Apple gave them a status symbol and a story to tell their friends and family. (And it got another news story out of the deal.)

The lesson for employers: find creative, surprising ways to reward your employees, instead of just a 3% merit increase. Your employees in turn will reward you with better performance.

Put your employees first and your customers second

Got an email a few weeks back from Siobhan Ford at the Harvard Business Review calling my attention to an article in their June issue. (Actually, her email ended up in my spam filter, because I forgot to turn off the "ignore all things Harvard" rule.) (Kidding.) She had found us through Frank Roche's excellent KnowHR blog (shout out, Frank), which has been a staple on our Blogroll (right) for quite some time.

Anyway, Siobhan pointed out this short piece by two professors from Manchester (UK) Business School, Gary Davies and Rosa Chun. Davies is a professor of corporate reputation (how cool a title is that?) and Chun is a professor of business ethics and social responsibility (slightly less cool, and harder to fit on a business card). Davies and Chun conducted field interviews with 4,700 customers and employees of 63 businesses. They learned that service companies were more likely to be growing if their employee satisfaction exceeded their customer satisfaction:

Our research shows two things: Employee and customer views strongly correlate, indicating that the former influences the latter; and year-on-year sales growth positively and significantly correlates with the size of the gaps between employee and customer views. The more the staff’s view outshines the customers’, the greater the sales growth, because, we believe, employee views tend to transfer to customers through the aptly termed process of emotional contagion.

"Emotional contagion," apparently, is the way that employees' good feelings rub off onto the customers. The professors also found that employee satisfaction was most influenced "by the perceived quality of both training and management and by how much autonomy workers have."

Bottom line for managers and HR: employee satisfaction can actually be used as a metric to provide a leading indicator for company growth. Maybe that will get the boardroom's attention.

The article, which is only slightly longer than this post, is available for free until June 27 here. Thanks to Siobhan for the tip, and sorry about the whole making-fun-of-Harvard's-blog-policy post. (Well, not really.)

No-alternative billing

I hate the term "alternative billing." It has that sneering, look-down-your-nose quality to it, like "alternative lifestyle." Actually, I think lawyers have done a very good job of marginalizing it. I mean, there's hourly billing, and then there's ... what?

The lawyers look away and reply, "Well, there's ... (ahem) ... alternative billing."

"Oh?" the clients ask. "How does that work?"

"Uh, well, there are contingency fees, blended rates, flat fees, fixed fees, retainers. That sort of thing. It's not the traditional way of doing things. Very few of our clients ask for it."

"Oh."

As if there's something wrong with it. As if traditional (hourly) billing came over on the Mayflower. (In fact, it's only two or three lawyer generations old.) And the menu of "alternative" arrangements sounds ominous: a collection of ways to bilk the client.

Actually, 62% of in-house counsel say they're interested in "alternative" billing arrangements, according to the Association of Corporate Counsel's 2006 Managing Outside Counsel survey. This figure is surprisingly high, since most in-house lawyers migrated from large law firms where the almighty billable hour rules. But after working in the real world of business and bottom lines, in-house lawyers are seeing hourly billing for what it is: a way to increase clients' bills.

But in the same survey, corporate counsel report that 90% of their outside lawyers resist the idea of "alternative" billing. (Read more about the survey in Outside counsel ignoring GCs on hourly billing.)

Maybe clients will continue to put up with this. But I doubt it.

Pretty soon, they'll start looking for "alternative" lawyers.

Geniuses of Service: Being of value

In law school, you learn about torts, contracts, and evidence. As the cliché goes, you learn to think like a lawyer. But here's what you don't learn about:

Client service.

And lawyers run into more problems with bad client service than they do with torts, contracts, or evidence problems.

There are plenty of great books on client service — a couple of excellent ones are in the booklist on the right:  Raving Fans and Re-Imagine!   (That's Tom Peters's exclamation point, not mine.) But most lawyers are busy reading cases and contracts, and don't have time to add client-service books to their reading lists.

As a timesaving alternative (since you're already reading this), I thought I'd start a series of occasional posts highlighting real-world examples of excellent client service. Not surprisingly, most of these examples are from outside the legal world. (Does this make them extralegal? And while we're on the subject, why doesn't extralegal mean outlaw? But I digress.)

Here then, for your consideration, is the first installment of "Geniuses of Service":

Genius: Meredith & Grew — a Boston-based commercial-real-estate company.

Story: Our law firm just moved to a new, much-larger office on Boston's Beacon Hill. Moving offices is always disruptive, but our move went smoothly. This was thanks to the exceptional client service we got from our broker, Meredith & Grew. Even though our new office was still small compared to the rest of the commercial market, our brokers — Roger Breslin and Michael McElaney — treated us as if we were their biggest client (we're not, by a wide margin).

Although it was a smaller deal, it proved tricky because of a very tight schedule driven by the need to quickly sublet our old space. Every time a problem arose, Roger and Mike were immediately on hand to solve it. We got voicemails and emails from them early in the morning and late in the evening — it was as if they were working on our move at all hours of the day.

They showed us nearly every available space in town that met our requirements, but they never tried to "sell" us on a space. After they found us the ideal spot, they worked tirelessly to make sure the deal went through. And they kept at it, even when it seemed like it wasn't going to happen. Once we were all moved in, they treated our firm to a top-notch steak dinner that probably cost as much as the fee they earned.

But the thing that stood out the most was how they managed to make us their client in the first place. In April 2005 — nearly a year and a half before we entered the real-estate market — Roger got in touch with me to offer some market information about our old building and neighborhood. For free. Didn't try to sell me anything. Didn't hassle me. Impressed with this approach, I met with Roger and Mike and learned a lot of valuable information. It didn't seem to matter to them that we were a small firm, or that we weren't in the market just then. Instead of trying to sell me something or convince me how good they were, they simply came to my office with one goal:

To be of value.

And they were. Over the next year, they kept in touch. No pestering; just reminding me that they were there and that they could help when we needed it. And when we finally did, guess who we called?

The lesson for lawyers (and any service professional) is that you can go farther by showing a prospect how you can be of value to them than by trying to sell them on how good you are. We should keep that in mind.

Hating lawyers around the world?

Since my recent post, "Why businesspeople hate lawyers," I've learned that this isn't just a problem for lawyers in the United States. There's an excellent legal-marketing blawg in Brazil called, unsurprisingly, "marketingLEGAL." (Or maybe it is suprising. Only the title is in English; the blog is in Portuguese.) The blog's author is Marco Antonio P. Gonçalves, a legal-marketing specialist in Rio who is coauthoring a book on the subject. Marco Antonio devoted a recent post to translating my thoughts into Portuguese and expanding upon them. Apparently, lawyers in Brazil face similar problems of popularity, and the trifecta of hourly billing, legalese, and legal-not-business advice are at the root of the problem. (I'm guessing his solution to legalese would not be "plain English." Is there such a thing as "plain Portguese"?)

A note on language: I listen to a fair amount of bossa nova (the Gilbertos, Jobim, Getz), but I don't speak any Portuguese. Fortunately, we have Google to translate foreign-language blogs and webpages. That an online service can instantly convert a webpage into another language with reasonable accuracy is very cool. But it does lead to some amusing false notes. It calls the post "Why business-oriented men do not like lawyers," and it labels "hourly billing" as "collection for the moment." You can read the translation of Marco Antonio's post here.

Working our way across South America, I just got an email from Ivan Cavero, who writes the Peruvian blawg PracticaLegal: Sólo Marketing Legal. (Google's intepreters can give it to you in English here.) Ivan is a legal-marketing trailblazer in Peru, and he came across my post via Marco Antonio's blawg. He's working on a similar post for Spanish readers.

A while back, I heard from Jim Belshaw, a strategic consultant in Sydney, Australia, who writes the excellent and thought-provoking blog, Managing the Professional Services Firm. He's got some good thoughts on work-life balance and associate retention.

Some might be concerned that the problems US lawyers (and their clients) face are shared around the world (or at least, I guess, the Southern Hemisphere). But I find it comforting to know that people like Marco Antonio, Ivan, and Jim are adding to the conversation and helping to find solutions to these problems. So: obrigado, gracias, and ta, mate.

Legalese: code for "assumes the reader is a moron"

In my last post, Why businesspeople hate lawyers, I complained that legalese is one way for lawyers to show off their basic lawyerliness. This sets them apart from their clients, and puts their own interests before their clients'. And what is the defining characteristic of legalese? It is where the writer — a lawyer, or someone trying to act like a lawyer — writes in a way that Assumes The Reader Is A Moron.

Let's call it ATRIAM for short.

Examples abound. For instance, most legal briefs and motions begin like this:

____________________
                                 
John Smith,          
    Plaintiff               

v.

Example Corp., Inc.,
    Defendant
____________________

Defendant Example Corp., Inc.'s Motion to
Compel Production of Documents from
Plaintiff John Smith Pursuant to
Fed. R. Civ. P. 34

Now comes Defendant Example Corp., Inc. (hereinafter, "Defendant"), who moves to compel the production of documents (hereinafter, "the Documents") from Plaintiff John Smith (hereinafter, "Plaintiff" or "Mr. Smith") pursuant to Fed. R. Civ. P. 34 (hereinafter, "Rule 34"). For the reasons stated below ...

*   *   *

Put aside for now the superfluous "now comes" business and the omnipresent "pursuant to" (do lawyers have trouble saying "under"?). Let's talk about the "helpful" parentheticals:

Was the lawyer thinking that the reader — in this case, a judge — wouldn't remember what he or she read ten seconds ago? Is the judge really going to read the caption (which names the parties), read the title (which says what the document is), and then get to the first paragraph and go, "Who the heck is this John Smith? And what is he doing here?"

Journalists don't have this problem. Have you ever read a newspaper article that turns a person into a defined term? Roger Clemens ("Mr. Clemens") struck out eight batters yesterday. After the game, Clemens said ... Would the reader not know who "Clemens" was without the parenthetical? Are sports-page readers smarter than brief readers?

Maybe the lawyer thinks the hereinafter parentheticals are helpful, or perhaps more precise. But in this brief, there's only one Example Corp. and there's only one Smith. The caption identified them, and said who's the plaintiff and who's the defendant. The only time a parenthetical is helpful is when the names are confusing, or when you need to distinguish one "Smith" from another.

In fact, most lawyers write this way because most lawyers write this way. We've been reading briefs and judicial opinions and memos since law school, and we think that's what we're supposed to do. We don't really know why.

But that's not a good enough reason. A lawyer shouldn't write anything without knowing why. By adding the unnecessary parentheticals, the lawyer is sending the ATRIAM message: that he or she assumes the reader is a moron.

More examples to follow ...

Why businesspeople hate lawyers

Oh, they may tell you that they don't. "Hate" is such a strong word, and so forth. But most businesspeople really, really don't like lawyers.

Why?

Three reasons, all of which are related:

1. Billing by the hour
2. Using legalese
3. Giving legal answers instead of business answers

And what do these three things have in common?

They're all examples of lawyers putting themselves first, instead of putting clients first. Hourly billing prices legal services based on the time the lawyer spent, not on the value the client received. What difference does it make to the client whether something took two hours or four hours? Rarely does the client get twice as much value when something takes twice as long (and thus costs twice as much).

Next, lawyers speak and write in legalese to show off that they are, in fact, lawyers. Rather than trying to find the clearest way to communicate with their clients, lawyers fall back on shopworn phrases whose meanings they're not even certain of. "Wherefore, premises considered" — I mean, who really talks like that? Lawyers use legalese the same way doctors and cops use the jargon of their professions — to set them apart from the people they serve. (For more on jargon, see Abandoning jargon "at a high rate of speed.")

Finally, businesspeople ask their lawyers business questions but get legal answers in return. How many of you have asked a lawyer a question about your business only to receive a memorandum on what a statute or regulation or court opinion says. You don't care about the dicta in Smith v. Landingham; you just want your lawyer to solve the problem.

So as we start the new year, lawyers should add to their lists of resolutions three things that put the client first:

1. Price legal services based on the value to the client
2. Use plain English
3. Give clients business answers

For more about putting clients first, read Dan Hull's always-excellent What About Clients? blog. Dan's a lawyer who understands about putting his clients first. His blog's tagline asks the fundamental question: "True service — are we lawyers delivering?" I'm certain that businesspeople don't hate Dan.

Dan started the year off with a terrific list of client-service blogs, which include heavy hitters like Guy Kawaski's How to Change the World and David Maister's Passion, People and Principles. Check out the list here.

Happy New Year!

Amtrak blows whistle on lawyer bills

The Saturday edition of the Wall Street Journal had this fine article by Nathan Koppel and Ashby Jones: "Amtrak's Lesson: Check Legal Bills Closely" (subscription probably required). They report that the federally funded railroad company had audited its legal bills, finding that it had allowed outside law firms to ignore the company's billing guidelines. After spending over $100 million in outside-lawyer fees from 2002 to 2005, it realized it could have spent "substantially" less.

The article has plenty of ammunition for opponents of hourly billing, such as:

• 41% of the fees one firm submitted had "cryptic" descriptions for tasks, such as "Review Amtrak documents." William Ross, a law professor and consultant, noted that while these phrases were common in law-firm bills, they didn't help clients evaluate whether the work was necessary.
• Another firm billed exactly nine hours of a paralegal's time on 10 different occasions in a single month. The auditor thought it unusual that there were no entries for 8.9 or 9.1 hours. Ross suggested that this practice could mean that the times were estimates: "Attorneys often bill exactly the same amount of time, day to day. It's like they are trying to fill a quota."

[I'll pause while you let that last phrase reverberate in your head.]

• Some of the law firms used "block billing," despite the Amtrak billing guidelines' barring the practice. Block billing is when "law firms lump together tasks without itemizing how much time each one took.... [It] can make it tough to gauge whether lawyers spent an appropriate amount of time on each task." Another lawyer, apparently unconnected with Amtrak, defended block billing, saying that it was not necessarily "evidence that you are not providing good legal service."

[That may be true. But it's certainly not evidence that you are providing good legal service.]

• The article also cites the problem of close relationships between the in-house lawyers and the outside law firms, where some of them previously worked. The Amtrak auditor said, "The attitude of the law department was that they shouldn't manage the [outside] law firms, because they were their buddies."

So Amtrak has learned to watch their law-firm bills more carefully. But that is just a stopgap measure for a much bigger problem. Hourly billing does nothing to help a client determine the value of the work that was performed. Just because something took longer doesn't mean it was more valuable to the client. Without hourly billing, in-house counsel won't have to worry about whether their outside counsel "are trying to fill a quota."

Peter Lattman's WSJ Law Blog treatment of this issue is here. Earlier coverage on this topic is here and here.

Outside counsel ignoring GCs on hourly billing

The Association of Corporate Counsel has just released its 2006 Managing Outside Counsel Survey. Martin Daks of the New Jersey Law Journal summarizes some of the key findings. Much will be made of GCs' concerns about compliance issues. But what I find most interesting is in-house lawyers' feelings on hourly billing. Daks writes:

Despite criticisms of the hourly billing format, its use continues to grow. In 2005, 87.1 percent of companies said they used standard or discount hourly rates, compared with 81.2 percent in 2004 and 81 percent in 2003.

While 62 percent of respondents are open to alternative fee arrangements — including fixed, blended hourly rate, contingency and retainer — they say that 90 percent of outside counsel resist the suggestion.

(My emphasis.) Ninety percent? Outside lawyers will tell you that they listen to their clients' concerns, but apparently that doesn't apply to the almighty billable hour. Now tell me if this sounds like a coincidence:

And companies are quicker to fire outside counsel. In 2005, 55.6 percent reported they terminated the relationship with at least some of their firms, up from 50.7 percent in 2004. The most-cited reasons were poor quality of work and results, lack of responsiveness, high fees and personality issues.

I wonder how much of the "lack of responsiveness" had to do with resisting clients' requests for alternative billing.

You can get the ACC's press release here, and you can order the survey here. Compare all this with Ed Poll's post on the popularity of alternative billing in his excellent Law Biz Blog, and the discussion in Carolyn Elefant's always-insightful My Shingle.