Reflections on professional experience

I have been off-line for a little while simply because I have been thinking! Part of those thoughts relate to my own directions, part relate to the core focus of this blog.

Over the last few years, I have changed my mind on some issues. For example, I am a stronger supporter of partnership models than I was so long as the partners accept the limitations involved.

On some other issues such as the the profit per equity partnership concept, I think that they are just as dangerous as before unless very carefully defined.

Then, on some issues such as time based charging, I have formed the view that a lot of the discussion simply misses the point. Time based charging has its problems, but it still is the best approach in some circumstances.

I have also become frustrated about my inability to get advice across about the need for change.

Part of this relates to a purely professional question that I have discussed before. What do you do when your client wants advice that you know won't work or must be just plain wrong? Part of this relates to my own professional skills, my inability to get a story across. However, part also relates to current management structures and attitudes within professional services. Some of this is just plain wrong.

Over the next week or so I thought that I might record my conclusions from all my thought. It's hard for a professional to accept his/her failures. Yet if we don't, how can we improve?        

Concept of sustainable profit

Only five posts this year. Talk about a useless blog!

Over on my personal blog, I have had two posts looking at profits (here and here). In the second post, I talked a little about professional services.

My problems with profits in professional services is two fold.

First, I Have come to feel that the overwhelming focus on profits is simply taking all the fun out of life, as well as creating clashes with our professional roles. Here I was talking to a former senior partner of a major law firm the other day who had decided to exit stage left.

Many things came into that decision. One was his feeling that his share of the profit pool, the attempts to increase the size of that pool and hence the size of his share, simply wasn't worth it. The extra dollars at the margin held little value.

Don't get me wrong, profit remains important. Without it, you can't do things. However, this brings me to my second point.

In thinking about profit, we tend to look to the immediate future. More and more, I think that we need to think about the concept of sustainable profit.

If the aim of the firm is to achieve maximum growth in profits per partner that's fine. However, it also carries costs in terms of life style and also risk. In many cases, a better question is how do we sustain our profit level, perhaps building in some growth, over extended periods?

This involves different strategic choices, as well as different staff management and investment patterns. It is both easier and harder to achieve. Easier in that the pressures are less, harder in that it requires action to insulate the firm to some degree from market changes. Survivability is increased, but at the cost of reduced maximum returns per partner.     

History of Canadian law firms

Christopher Moore pointed me to an interesting article by Christopher Guly in The Lawyers Weekly on the history of Canadian law firms, tracing the rise of larger firms.

Gully notes that the process has been slower than in the US. Its partly a matter of relative size of the two markets, but is probably also linked to institutional factors. My impression is that the sizing process has been faster in Australia, a significantly smaller country.   

Time based billing goes round and round

Interesting article by John Chisholm in Lawyers Weekly, A billing discussion worth its time, on billing principles.

Reading John's remark's reminded me how little had really changed over recent years where time based charging is concerned. The discussion on alternatives to time based billing in law seems to go round and round and round.

The real problem as I see it is a simple one. Time based charging is easy, whereas alternative methods are much harder, requiring very different approaches.

When I first started as a consultant, my firm actually used four different pricing models:

• time based billing usually associated with a cost estimate up front
• fixed price contracts, especially where Government contracts were concerned
• retainer style arrangements where clients paid a standard monthly amount in return for exclusivity and an agreed package of services
• and fixed prices for certain types of work such as training or information products.

Running four different pricing systems posed its own problems.

To begin with, we needed a practice management system that would allow us to measure time inputs and various types of disbursements. This had to mesh with the general accounting system. We still attached value to time via hourly rates not just because of the continued presence of time based charging but, more importantly, because of the need to monitor costs on fixed price jobs and to compare relative profitability between areas.

Generally in time based charging, things such as marketing time get allocated to firm time. We could not afford this approach because of, among other things, the presence of significant size fixed price bids. Marketing costs need to be measurable because they were a major cost component; in some smaller open tenders, the total cost to bidders of tender preparation can in fact exceed the value of the tender, creating a an effective zero sum game.

In order to get a better measure on marketing costs and to to aid recover, we created a special time code called work in anticipation. This covered all bid costs plus time investments in looking after specific clients.

General marketing was measured by another time code. The attachment of job and client codes to WIA allowed us to measure direct marketing costs, both time and disbursements. With client support, the aim was to recover WIA over time through new work from that client. With fixed price jobs, the aim was to recover the WIA through the tender price. This type of measurement has some salutary effects because it quickly throws up potentially unprofitable activities.

While the system did generate the type of information used in conventional billing and performance management systems, there were no charge targets as such. Instead, we used the concept of effective time. This varied from person to person and might include not just billable hours, but also WIA, other marketing and business development time and product and personal development time.

A person studying, for example, might have study time included in effective time, removing the conflict that can arise between approved study and billings. Similarly, the inclusion of marketing time in effective hours removed the conflict that arises in so many firms between getting the cash in now and laying the basis for later cash.

We used manual rather than computer based time recording systems. Our people travelled all the time and were usually working on multiple tasks. It was just easier to scribble on a time sheet once the necessary discipline had been installed. This also allowed for multiple time recording. For example, in travelling on a client job, travel time would be charged to the client. However, dead time might also be used on and recorded to another task.

Each Friday, all staff transferred their time data to summary sheets that went to admin staff for data entry. This was obligatory, no matter where staff were so that full weekly firm performance data was available for review by Monday lunchtime by management, client officers and project managers. Weekly data was essential because of the presence of relatively large contracts that needed to be closely monitored.

I am providing this personal example simply because it illustrates the type of complexities that can arise when you move from conventional time based charging to other models. Other models may be better, I believe that they are, but they also require changes in systems and culture that are not, of themselves, easy.           

More on Allen & Overy in Australia

Since yesterday's post, Allen & Overy to open in Australia, I have been mulling over just what the implications might be.

When i wrote yesterday I did not have the names of the people who had left Clutz - Australians like shortening things, so Clayton Utz is commonly called Clutz. Since then I have seen a list provided by ALex Boxsell in the Australian Financial Review. I can't give you a proper link because it's behind the fire wall.

This was quite some people raid. The fourteen who left Clutz included:

• Geoff Simpson, partner in charge, Perth office
• Michael Reed, national managing partner corporate
• David Wilkie, national head of real estate
• Michael Parshall, joint head of mergers and acquisition.

I must say that I was quite fascinated by the machinations that must have gone on to organise this coup.

There has been something breathless about the reporting on this issue. "British bombshell a shock for local firms" read one headline, "UK raider sparks legal talent war" another. Obviously this type of raid will force all major firms to review their strategies. However, I also think that we need to keep a bit of perspective.

  Allen & Overy is a big firm, with annual gross revenues in 2008-2009 reportedly at $A1.96 billion. However, the current strategy is essentially high end niche, with A&O planning to grow its partners from 17 to a possible 30 in the immediate future.

Depending on the average charge rate achieved and the leverage adopted (A&O is reportedly looking at 50-60 associates for the its starting partners), we are looking at a projected fee base of perhaps $A55-$A60 million in the first instance. Substantial, but still not large in a total legal services marketplace of around a reported $A12 billion, of which the top eight firms control perhaps $A3 billion.      

Allen & Overy to open in Australia

Interesting article in The Australian by Legal affairs editor Chris Merritt on the plans by Allen & Overy to open in Australia next month. The firm will open with seventeen staff, fourteen lured from national firm Clayton Utz.  

While Australia is the world's 14th largest economy, its relatively small size together with its remoteness from Europe and North America has kept it a little below the global horizon. This has actually given local firms something of a protected market. 

Australia's recent economic performance has been quite astonishing by global standards. This plus the China link has focused more attention on the country. 

Allen & Overy's core practice areas in Australia will be energy, mining and natural resources; finance; infrastructure; investment funds; mergers and acquisitions; private equity; tax; telecoms, media and technology.

These are generally all areas where Australia has a significant local market for legal services. It will be interesting to see how Australian practices respond.

Why active listening is important to all professionals

Just back to duty and still very saddle sore.

The only really professional thing that I have done this week was a consultation for a manager seeking advice on how to manage a particular problem. This got me thinking.

Most professionals know, I think, that the capacity to listen is a key professional skill. This holds equally true for a lawyer, management consultant or doctor. The problem for most of us, however, is that time is limited and that as soon as we identify a problem we switch into problem solving mode. See problem, fix problem.

The difficulty here is that the first identified problem or problems may not be, often is not, the key problem. This is true whether dealing with individual or corporate problems. Too often, the first identified problem is either one of a number of problems or simply a symptom of a deeper underling problem. So we need to probe through active listening.

Active listening involves several different processes.

One is simply the gathering of information. We do this by listening and by asking questions. We also have to analyse the information as we go along. What does it mean? What additional information do we need? This leads to further questions. 

We also have to test the ideas we are forming. This may be done by asking questions or by summarising, testing our conclusions with the client.

Summarising can be used as a validity test, but it is also used to change a direction in the discussion. In this second case, we summarise and then ask a question, taking the conversation in a new direction.

We can all consciously practice these steps.    

Welcome to visitor 25,000 and Happy Christmas to all

Time pressures this year have really limited my ability to post to the point that I almost decided to archive this blog. Then, for a number of reasons, I decided to continue.

Noric Dilanchian was one reason. He sends me a steady stream of material that he thinks, correctly, is worthy of comment. Then, too, the blog still attracts traffic despite my poor posting. In this context, welcome to visitor 25,000 who came from Finland.

A lot of the traffic is attracted by the nuts and bolts posts I have written, the how to do material. This seems to meet a real need. Just yesterday I got an email from someone seeking advice on resolution of a very specific problem.

Finally, there is other writing that I should comment on. Yesterday in Pin Striped Prison, for example, Legal Eagle reviewed Lisa Pryor's The Pin Striped Prison, dealing with some of the issues that I have written about.

I find it hard to maintain a very active posting pattern. What I will try to do, however, is to maintain a regular posting pattern to keep the blog current.

For those to whom it is relevant, have a happy Christmas. May 2010 be a good year for all of us.   

Problems with authority and responsibility - are you guilty?

I have written a fair bit on this blog over time about problems with delegation. A key problem lies in the the grant of responsibility without real authority. This often links to a related problem: constant changes and interventions that further undermine the authority of the person meant to be doing the job.

These problems are often linked to two of the management styles I have discussed: the micro-manager and the over-enthusiastic manager.

You can check whether or not you belong to either class. Simply take a small handful of delegated jobs and monitor your own involvement. Actually write down what you do.

The observer always affects the observed. The fact that you are monitoring your own behaviour will affect that behaviour and for the better. However, you can tell what type you are by your gut reactions.

Does the act of standing back make you uncomfortable? Do you find that you have to discipline yourself not to give staff new assignments before the previous ones are completed? Do you, in fact, have a tendency to delegate and then forget, fail to follow up? Do you give one set of instructions and then actually countermand them?

You cannot change your personality, but can change the way you manage your personality. All these things give you clues that you can use to improve your own perfomance.
     

Decline of the professions in Australia

Over on my personal blog I have been reviewing Professor Don Aitkin's What was it all for? The Reshaping of Australia. (Allen & Unwin, Crows Nest, 2005). The first post is here, the second will come up tomorrow.

The book itself examines social change in Australia over the last fifty years in part through a prism set by the Armidale High School leaving certificate class of 1953. 

I don't think that anyone of us would not accept that the professions have declined in status and not just in Australia over the period covered by Don.  I mention this because he has some interesting material on what he perceives to be the causes of the decline in the professions in Australia.

The first thing he points to is the sheer increase in the scale of the professions. They grew and grew. Further, the growth was associated with the emergence of mini-professions, constant subdivision into smaller areas of knowledge, each with their own societies, journals and specialist knowledge.

As the numbers in the professions increased, as the number of professions also increased, so the general respect in which professionals were held declined.

The growth in the professions was linked not just to the growth of knowledge, but also to a broader process, the "professionalisation" of work. Here I want to quote Don:

Name and fame went with specialised knowledge, and the generalist became seen as someone who knew very little.

The problem is that this professionalisation process and the consequent rejection of the value of broader knowledge has aided the process of locking the professions into narrower silos that have, of themselves, reduced the effectiveness and power of the professions.

Here we get into somewhat slippery territory.

Central to the concept of a "profession" is the idea of professional independence. Without this, a profession becomes simply another occupation. I accept that the concept of independence is a difficult one. In practice, no profession has ever been completely independent, yet the ideal is still central to the professional ethics that lie at the heart of any real profession.

The killer today, as Professor Aitkin notes, is the rise of the concept of "compliance", a concept that has come to replace the old idea of professional independence,

In simple English, to comply means to obey. That is exactly the way the term is now used.

When people speak of compliance, they mean that the profession in question must comply with rules. Of course professions have always had rules, more precisely sets of ethics. However, now we are talking about externally, especially government imposed, rules.

One can mount a case for Government regulation. However, the modern use of compliance is in fact far broader than simple regulation. In a practical sense, it increasingly substitutes rules for ethics and professional standards.

To my mind, this lies at the heart of the decline of professions as professions.