TRP 304: [Legal] Connecting the Dots: Pricing, Practice, and Profits with Tim Corcoran

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high-stakes headhunter, author, and professional speaker, Scott Love You're listening to The Rainmaking Podcast, and my name is Scott Love Thank you for joining me on the show, and thank you for making this show a success Today's episode is part of our legal-specific series, where we talk about those issues, trends, and ideas that relate only to the legal profession

[00:00:40] And our guest is someone you may have heard of, his name is Tim Corcoran Our topic title today is Connecting the Dots, Pricing, Practice, and Profits We're going to dig into that, and I promise this is going to be worth your time Now, if you're not familiar with Tim, let me tell you a little bit about him He guides law firm and law department leaders through the profitable disruption of outdated business models He's a former CEO, a fellow and past trustee of the College of Law Practice Management

[00:01:07] He's past president and Hall of Fame member of the Legal Marketing Association He's an American Lawyer Research Fellow, and he's a frequent facilitator and presenter at lawyer retreats and legal conferences Also, both Tim and I are speaking at SharePoint's Managing Partner Lab on May 14th and 15th in New York City All the information for that is on the show notes, as well as Tim's contact information In the Managing Partner Lab, it's a collaborative two-day in-person workshop

[00:01:35] designed exclusively for managing partners and executive directors of law firms This is a working session built to help senior firm leaders step away from daily demands and focus on the issues that most directly influence firm performance Again, check the show notes of wherever you hear this podcast and you'll get more information directly about SharePoint's Managing Partner Lab As always, this podcast is sponsored by SharePoint Legal Insights formerly known as Leopard Solutions turning legal intelligence into opportunity

[00:02:03] and also is sponsored by the Rainmaking Magazine Don't lose business to the competition Read our sister publication to the show and keep business development top of mind Visit therainmakingmagazine.com today to chart your course to greater rainmaking success Thanks for listening, and I hope you get some valuable ideas from my conversation with Tim today Hey, this is Scott Love with the Rainmaking Podcast

[00:02:32] Our special guest today is Tim Corcoran and we're talking about connecting the dots Pricing, Practice Management, and Profit Tim, thanks for joining me on the show today It's my pleasure to be here, Scott This is great I'm really excited about hearing your perspective on pricing, practice management, and profit And let me ask you this Among those three things and the person that's listening to this is either a law firm leader or a partner in a law firm Which of those do you think they should focus on

[00:03:00] in terms of generating business, earning trust, and doing the work for their clients? Well, of course, they're all connected That's sort of the point But I would say that profit should be the focus And I don't say that in a way that connotes that they should be greedy and always trying to make the most money What I mean is if you understand your service offering and you understand your client what their needs are what their propensity to buy is then ultimately everything you do

[00:03:30] is designed to serve that need and to do so profitably But the whole profession has been focused for several generations on the inputs, the productivity the workflow metrics rather than the outcomes Despite the fact that we promote from the top of the trees every year profits per partner That's really not the goal That's an outcome that we don't think about So I think if they shift their mindset to focusing on profit everything else becomes a lot easier to understand how it ties together Well, do you think a partner

[00:03:59] if they focus on profit do they feel like they're not serving their clients? Do you feel that's going to be contrary to their focus on client service? Well, I think it actually makes it less adversarial The entire business model is adversarial I price based on how long it's been since I was in law school not based on the value of my advice I must act as if everything's bespoke and yet I'll also at the same time say look, I'm band one in this famous ranking showing that I'm the best in the world

[00:04:29] but I have to treat this as if I've never done it before because I bill by the hour And so the whole model currently is adversarial because we're focused on the inputs the production But if we're focused on the profits then I can say it doesn't matter how many hours I charge if you find value in what I say and what I do my decades of experience then I'll charge you a legitimate fee based on, you know how important this is to you and my knowledge and we don't have to count how many hours it took me Right?

[00:04:58] And so I think it actually creates a better opportunity to serve client needs So let me ask you for an example You don't have to mention the name of the firm or the individual you've worked with but tell me about an organization tell me about a law firm that has just nailed it They've done all these things that you're talking about Let's kind of start with that What does that ideal template look like? So I think one of the first things to note is that very few law firms do anything collectively well Right?

[00:05:26] Law firms are really an exercise in how to have silos come together with the same logo on the business card but we're operating like independent businesses So I don't believe that there is a law firm everywhere anywhere that's doing all of this well There are absolutely pockets of innovation where they really truly get it And sometimes they get it only because the clients have demanded that they change their behavior And of course, if you're at risk of losing the client, you'll wake up But if the client's not complaining

[00:05:56] we keep doing what we do So that's the caveat is even if I were to name names I couldn't name an entire firm They all do it in a sort of haphazard fashion But what I have seen is that where there is a client demand or there is an opportunity to differentiate through pricing or service delivery and they see the success of that then lawyers will embrace this again and again But typically

[00:06:24] we do innovation at the point of a spear The client has to either demand it or threaten to leave or we get signals such as RFPs outside counsel guidelines We're asked to pitch for the work we've always had from this client And so the signal is hey, you know we're starting to really pay attention to this and maybe we're going to start chiseling out on price and, you know you're going to have to compete for the work now And so those signs even if it's not explicit indicate that you should try something different

[00:06:53] try to be innovative because otherwise you know you may be at risk Let me go back to something you said and I appreciate what you just shared also You talked about where there is some sort of differentiation such as in pricing or in delivery I think in concept I totally agree with you I think that firms need to show how they're different and not just that how they're distinct In fact, one thing I've done when I meet with law firm leaders I'll ask them this What can you say about your firm that nobody else can say about their firm? And you would have thought

[00:07:22] I've asked them for a moment of silence but I'm trying to pull through something that is totally rare that starts a conversation because when something is rare I'm making a pitch of a firm to a prospective candidate or group leader to join that firm if I have something that let me tell you something that's different about this firm that no other firm is like now I've got their attention Give me examples How can a firm show that they're different? What are some examples of differentiation and even distinction

[00:07:52] that you've seen, Tim? Well, we could talk for hours about the various ways you can market your services differently and how you can demonstrate expertise but I think those are helpful but the secret magic sauce I found when I launched the very first legal project management practice years ago before it was Vogue but it was something I had learned in my business career and so I traveled the world teaching lawyers how to do project management

[00:08:22] even before it became LPM you know we had to had to give it the legal name to make sure they understood it was special for lawyers but here's what I learned while they perceived project management and process improvement to be some way to commoditize the work so it can be cheapened and paid you know pay less for it what it really presented was an opportunity to differentiate that I know how to do this work by way of example if a client says I want a budget for this matter the lawyers say

[00:08:51] always in whatever language of the country I'm in some version of well it depends well of course it depends right that's the whole point is I'm asking you for a budget to help me understand the scope of this and so the answer for an amateur is it depends the answer from a professional is it depends and here's what it depends on and so if you've actually broken down how you do this work you flow charted out and you understand the various pieces and what pieces are fairly routine

[00:09:21] what pieces have some variability what pieces of this work have significant volatility what stages you can predict right now with some certainty versus what stages are too far away to predict because we don't have enough in our fact pattern to give any advice what you're doing is you're speaking the client's language because for them a budget is an exercise in probabilities every quarter sometimes every month they've got to sit with their CFO and explain their upcoming spend and managing expectations

[00:09:51] is critically important in most businesses and so no one wants to be the person that says I can't control my supply chain my vendors are rogues so I told you what the budget was last quarter and it turns out to be 2x that now we'll have to pay that because they're a supplier and they've delivered services that we needed but the CFO wants to know in advance at least give me some heads up because you don't understand how much scrambling we have to do to cover that but if you had just told me right and so lawyers think the answer is reduce the price

[00:10:21] and it's not it's manage the expectations so if a client says how much does it cost I would love to get out a yellow legal pad and a marker and say well let me walk you through it so first we have to do litigation an early case assessment and based on that we understand the fact pattern we understand is there a smoking gun is there not do we have facts on our side and that will define whether we're going to defend or settle and if we're going to defend well we have to go in this direction we've got to do some discovery and we're going to learn more now we don't know how many depositions

[00:10:51] we'll take we don't know what we'll learn in discovery so I can't predict the full stream of how this work goes but I can tell you if we decide that point we're not going to defend we're going to settle well this whole other path of iterative conversations back and forth but it's far less expensive and takes far less time typically than if we're going to have a multi-year case defending and so it's like that so whether it's early case assessment or it's due diligence in a transaction

[00:11:20] we lay out here are the steps and then we talk about which of these steps has some variability and volatility which is pretty routine and through that process whether we've set a number at all we're conveying that I've done this before right we can listen to the 22-year-old journalism grad that lives in London and tells everyone they've researched all their clients and we've decided who's band one or you can listen to the lawyers talk about how they do the work and it becomes crystal clear and so what that

[00:11:49] process does is it conveys expertise and it also helps manage expectations because if they come in with a number and that number is completely out of the scale for what they're asking for we can either tell them they're crazy and you know they're gonna have to find someone else or they're gonna have to change their expectations or they're gonna have to accept far more risk which is the client's choice right so anyway the point is I think if you focus on how to do the work differently then you can manage expectations you can budget you can improve predictability

[00:12:18] minimize the surprise that is the bane of law firm invoices in every corporation and differentiate because everyone else says we're the best we're good looking we're tall we're really nice we're a big firm with a small firm feel so we're different and yet we all say that and we say it on a website that has you know hands shaking and we have you know skylines and we have scales of justice and we say but we're different so I think the true differentiation comes from showing how good you are

[00:12:47] and that means you have to understand how you deliver the work absolutely right and I think that does tie it all together as you said something I heard from a very successful partner and I can't remember who it was I don't know if it was a guest that we had on the show but somebody said this they said when you're getting work make sure the CFO is involved in the decision what do you think about that concept absolutely that's I mean I spend time talking at the various associations for procurement and legal operations and I was doing that before they existed and what I was trying to convey was

[00:13:16] the legal department is a business function right it's not a little law firm inside a business ultimately what the business people want and which is where I grew up right with multiple times the department of no always telling us no we can't do something because they saw risk as binary don't do it there might be risk can't do this contract there might be risk and what we were saying we're trying to launch a product we're trying to get something out the door we're trying to beat the competition we're trying to become the reference brand for this space and we were always trying to get what I call

[00:13:46] business velocity and so the legal function its job is to manage the organization's risk while also helping to manage business velocity and when you have a lawyer who sees it as an academic exercise and then hires outside counsel who sees it as an opportunity to write a you know 90 page memo when what I really want to know is can we proceed with this and if there's going to be risk help me understand what the various avenues are to overcome that risk or mitigate that risk and also there's a budget at all times always

[00:14:16] and so if you're understanding the whole supply chain in the business before the law department gets involved then you absolutely recognize the importance of the CFO and you should also recognize the business people behind the scenes because they have the build versus buy calculus going on all the time so they're the ones who ultimately are deciding whether or not we proceed and I think that's a missed opportunity so let's say somebody's hearing all this and there's a practice group later and he's nodding his head and he said he's saying to himself or she's saying to herself

[00:14:46] Tim I totally agree with you in terms of the pricing and the practice management but my hands are tied I want to have a conversation with my leadership to get some help not from them in terms of changing the pricing maybe making it more flexible or other changes we can make what do you think that frustrated person should do in terms of having a tough but real conversation with their leadership about these issues? Well I think the challenge in many law firms is that we believe we're managing

[00:15:15] but we're actually being pretty lazy so when we say we've declared a 6.5% across the board price increase or rate increase that is astoundingly naive this is a multi-line business we're operating across geographies we have different client segments we have we're operating in economies that are in fundamentally different ends of the business cycle and we have commodity services and we have leading edge services that no one else can touch and to think

[00:15:44] that the revenue opportunity and the propensity to buy and all of those markets at all at the same time has the exact same likelihood of spending 6.5% more next year is just astoundingly naopic and so I'd rather come into conversation with data so if I am looking at my realization rates but you know what I'm what time I'm recording versus what I'm invoicing right? Billing realization or what I'm invoicing versus what I'm collecting so collection realization

[00:16:13] or the combination of those two and I find that there are certain services that we offer that have low realization right? In particular if they also come with outside council guidelines and we have to pitch for the work right? The client is sending a clear signal you're charging a rate that you think is you know tied to the value but we can find this offering for far less whereas practices with services that are you know high realization sometimes even more than 100%

[00:16:42] with success fees well those rather than say 6.5% like that's great what they should be saying is maybe it should be 16.5% right? If we're at the top of the market and no one can touch us and the value is immense why do we link it to how many years I've been out of law school plus some cost of living increase right? So the nuance there is we have to know the data so if I'm going to go to firm leadership and say I need to make some adjustments I'm okay with a 6.5% price increase for certain things

[00:17:12] but in these other areas we're going to explore some ways to price more competitively possibly flat fees fixed fees you know collars and maybe as we do that we're going to re-engineer some of the ways we do that work because efficiency now will work in our favor and for these other services that we offer that we have high realization we're probably going to actually make our standard rate higher that's the kind of conversation I'd love to have with a firm leader rather than I'm trying to you know look at my big book I have clout

[00:17:42] let me you know negotiate my own terms I'd rather say no I have data so let's do it that way that's interesting how does benchmarking come into play in these things that we're talking about well I think it's the most common way to compare firm performance but looking at a dissimilar firm with a dissimilar practice mix in a dissimilar geographic footprint offering dissimilar services to dissimilar clients and saying well let's do it like them is no better

[00:18:11] than an MLAW 200 firm saying we're exactly like the MLAW 10 so let's copy what they do right so benchmarking is helpful to a point but what we're really talking about with benchmarking I think is part of the challenge that underlies everything we're talking about and that is risk aversion we don't innovate in law firms not because lawyers are not innovative they're extraordinarily innovative the level of intellect I see in the creative solutions and the business

[00:18:40] and the litigation side crazy good people smart people but when it comes to their own business they are risk averse if they haven't seen it work they want to know if 10 other firms they respect or despise but you know value that they're like us they want a benchmark and they want a baseline against those other firms and that's really about I don't want to be first I want to be first to be second maybe but I don't want to be first right the good news is if you're still thinking about it there's no chance of you being first anymore

[00:19:10] right innovation has passed you by if you're still thinking should we try something different so great now you can go with the herd it's a lot easier now than it was 15 years ago when doing something like a flat fee or embracing process improvement to reduce the amount of hours you spend delivering something to meet a client's demands like that was seen as your career suicide why would you do that but now innovation as I said in pockets everywhere is happening and it's proving that it's very lucrative so I think the benchmarking

[00:19:40] and baselining is a bit of a distraction but if we find comfort in numbers there's plenty of numbers to point to well thank you Tim for that and thank you for being here and I'm going to talk more about the managing partner lab in a second but in terms of three action steps somebody can take to implement some of these ideas what would those be if they can be what would be a good look at the data would help so most firms of some size have either a finance team or a business

[00:20:09] development team that has access to the firm financials and I would try to understand what are we getting paid to do and so that's a combination of your billing realization your collection realization it's the outside counsel guidelines it's what's on an RFP like understand the services that you offer and many practices are immense so we can do it at the matter type level or sometimes we can do it at the task level depending if we have the data and understand where you're getting price pressure because price

[00:20:39] sensitivity is not universal a client that is going to push back on rates in one area might be delighted to spend 2x your current rate now to solve a different problem and so I'd try to understand where that is and then once we can isolate those differences we can act differently the second thing I'd look at is understanding where your incentives lie so if you want to grow your practice but you're in a firm that has incentives that are misaligned so if I hunt in a pack

[00:21:09] if I bring someone else into my matter and at your end I have to split that credit and it costs me money then I won't say it out loud necessarily but I'm not going to be as cooperative as if I'm with a firm that values that and so the more practices working with a client the more compensation is available to those who have made it so because that creates a pretty significant switching cost right if one of us were to leave that client in total won't leave because they're working

[00:21:39] with multiple parties here and so understand where the incentives lie and I spend most of my time unwinding misaligned incentives and I can tell you that it's not something any practice group leader can solve on their own but first of all truly understanding where they're misaligned can be helpful we could have a whole conversation just on that right we could for hours and hours that'll be our next show and what's point number

[00:22:31] three

[00:23:01] right later later on later on for the work stream you're in you're setting up your colleagues to make sure that the client knows your firm has those capabilities to do that work even if it's not contiguous so it's not the next thing on the supply chain for the client to do and the same thing upstream your colleagues who are doing some work that could benefit you but it's a couple stages up the supply chain engineer that cross sell sit down with them and say what can we offer at that point early on can it be an assessment or an audit of how they're doing

[00:23:31] things or a risk management profile to help them so by the time they're ready to hire a law firm to do what we do they've already been talking to us right and we're in position so it's way more valuable than trying to spend Saturday mornings memorizing your intranet so you know what everyone else does this is great Tim I'm really glad we had you on the show and tell our listeners about your offerings what do you have that you like everybody to know about and we'll put all of your contact information on the show notes so people can reach out to you

[00:24:16] practice management so it's really how does a boardroom understand what are the KPIs we should be looking at versus what have we been looking at and are we rewarding partners for doing the right things or are we rewarding partners for doing what serves their needs but hurts the firm's interest so those are the things I do I speak a lot I run workshops my

[00:25:15] and be able to register and get more information about that managing partner lab directly Tim thank you for being

[00:25:48] conference sales meeting or executive retreat visit