The Bottom Line
December 2002 VOL. 24, NO. 2
Statements or expressions of opinion or comments appearing herein are those of the editors or contributors, and not necessarily those of the association or section.
Contents
* Reinventing your law practice: 25 tips for implementing change
* Disgruntled employees in your law firm: The enemy within
Reinventing your law practice: 25 tips for implementing change
By Dr. John W. Olmstead, Jr., MBA
During the next 10 years, law firms will either undergo dramatic change and transform themselves or they will cease to exist. Present business and management practices will no longer serve practitioners well in the global electronic marketplace. The Internet and e-commerce is changing the rules of business on a global basis. New business models for virtually all businesses are being formulated on a daily basis. Law and other professional service firms will require new business models as well.
Historical backdrop
In general, practitioners in law and other professional service firms are often at a disadvantage when it comes to business management issues. The professional goes to school, learns a professional skill, and forms a business firm to practice his or her professional skill. Staff employees are hired and eventually additional professionals. Down the road various members of the professional staff are made partners in the firm and the cycle continues. Throughout this process the central role of all members of the professional staff, including the founder, was to provide professional services to clients. This is what the professional was trained to do.
What about management? In many cases management in law and other professional service firms is lacking or nonexistent. Leadership is nowhere to be found. There is no strategy, no vision, no long-range plan, and no sense of direction. When such firms do try to tackle various management issues they get stuck in the mud and are unable to move anything forward. The firm has no management scheme or plan of action whatsoever. There is no long-range plan, no overall goals, no production goals, no marketing plan, and no client service delivery plan. Often firms are strong on ideas but weak on implementation. Typically, there is lack of management and structure and a general lack of leadership and focus. Communication is generally poor. Compensation systems for both the professional staff and the support staff are often not defined nor tied to goal attainment or performance.
Many law firms have made some recent progress on management initiatives. Computer systems have been implemented and office administrators have been hired. Marketing activities have been placed in motion. However, very little action has been taken in the more strategic areas that effect firm performance and the bottom line. Work in the areas of firm strategy, vision, and general leadership have been limited. There has been very little effort in redefining work processes, leadership development, and changing the mindset of the firm to a client-focused culture. Many firms are still suffering from not having a goal, charted sense of direction, or management scheme. Firms are still having problems with accountability and implementation.
While progress has been made, more needs to be done. Many projects that have been implemented by many firms were the easy ones. They were operational or administrative projects as opposed to management projects which require initiatives and leadership at the partner level. Management projects are much harder and they often require changes in skills, behaviors and working relationships. What makes management projects so much harder is that they are more complex and results are not immediate and are often delayed into the future. It is extremely hard for a group of attorneys to focus on strategic long-term projects when they are up to their elbows in daily crisis. Lawyers must learn how to effectively partition their routines to enable an appropriate focus on long-term projects. Lawyers must learn to think differently. This will require changes in skills, behaviors and working relationships.
Nature of the problem
The primary problems facing law firms are accountability, implementation, follow-up, and a reluctance to explore new ways of delivering legal services. Partners must begin to raise their hands and sign up for special firm management projects and be accountable to other members of the firm. The marketplace for legal services is changing rapidly and law firms must change in order to survive and compete in the future. You can either be a change leader and control your destiny or be victim of change.
This dismal track record of the past could doom the future of may law firms. Inaction and compliancy is no longer an option. For many firms incremental change will not be enough--total transformation of the practice will be required with new business and client service delivery models.
Tips for implementing change
The future of virtually all businesses within the next decade, including law firms, will rest on the ability to successfully implement and manage change. The following tips are offered as guideposts as you begin your journey down the road to implementing change and reinventing your law practice:
Tip #1: Develop a business mindset. Become an entrepreneur and learn how to think like a businessman. Look at the world from your client's perspective. Consider your client your business partner.
Tip #2: Select your clients carefully. Establish client acceptance criteria. Learn how to say no. Dump undesirable clients.
Tip #3: Brand yourself. Look for ways to differentiate yourself from your competitors. Become the only attorney that can do what you do. Make a decision--what do you want to be known and remembered for? Unique services, unique client groups, different service delivery strategy, personal style. Create a five-year plan for goal accomplishment.
Tip #4: Learn how to become "solutions orientated" and become a consultant to your clients as opposed to simply their attorney. Solutions may involve activities and services other than legal services. Think out-of-the-box and outside of typical frameworks in which you are comfortable.
Tip #5: Conduct a firm-wide management and leadership assessment and identify strengths and weaknesses. Enhance management and leadership skills through skill development training and personnel acquisitions.
Tip #6: Begin formulating change goals at the firm and the individual level. Consider using outside coaches and consultants where feasible.
Tip #7: Get out of the office. Visit a client's office or work location once a week.
Tip #8: Make work fun everyday. Involve all members of the firm and solicit ideas on how to improve the office work environment as well as the actual work as well. Try to reduce the intake of work that is not enjoyable, challenging, and rewarding.
Tip #9: Begin getting ready for Multidisciplinary Practices. Formulate alliances with other professionals. Experiment with alliances and strategic referrals with other professionals when such alliances will provide appropriate solutions for clients.
Tip #10: Begin surveying you clients within 30 days. Complete the project within 90 days. Review and analyze the quality and status of all active matters.
Tip #11: Diversify your people--ethnic, race, age, creed, and culture. Only through diversity will client focus and creativity be maximized. Opportunities cannot be maximized without diversity.
Tip #12: Require all employees, attorneys and staff, to develop personal goal plans for the year. Incorporate these plans into performance appraisals.
Tip #13: Socialize outside of your comfort zone. Have lunch with young people in your office, staff members, and others with different points of view. Learn how they see the world. What do they see as opportunities and challenges?
Tip #14: Transform the firm from a culture of individualism to a team culture. Begin fostering the development of team skills. Begin rewarding team accomplishments as well as individual contributions. Incorporate team-based measurements into the firm compensation system for both attorneys and staff.
Tip #15: Fall in love with the Internet. Look for ways to use the Internet to enhance the ways legal services are delivered. Successful law firms have gone past e-mail and Web sites. They are now using intranets and extranets to collaborate directly with clients. Case management databases are updated by both the client and the law firm in real time via the Internet. Video conferencing is being used to conduct client consultations. Some attorneys have begun representing clients in new geographical areas without having an office in that area by conducting "virtual consultations" over the Internet. Voice over the Internet is being used to expedite client communications. Document collaboration is being done in real time.
Tip #16: Evaluate other key technologies that will revolutionize the way in which law is practiced in the future. While voice recognition software is not yet ready for prime time in a production environment, improvements are being made daily. This will be a key technology within the next few years that will have a major impact upon law firm business models. Knowledge management systems which leverage the firm's work product and experience should be investigated. Stay on top of innovations in virtual networks and expert-based systems and be ready to deploy rapidly when the time is right.
Tip #17: Look outside your local market. Evaluate client opportunities outside your present market boundaries. Consider opportunities throughout your state, nationally, and internationally. Do you have to be restricted to your local city or town?
Tip #18: Invest in skill development training for all firm members, attorneys and staff, in marketing and client service. Everyone in the firm should be a marketer.
Tip #19: Get a dedicated Internet connection and acquire all of the Internet bandwidth that you can afford.
Tip #20: Break the pattern of making decisions based upon precedent. No one cares who is second. Strive to be first rather than second. Be a winner. Don't wait to see what the other firms are doing.
Tip #21: Consider using a client advisory council. Twice a year hold a client advisory council forum in which the firm solicits feedback from clients.
Tip #22: Break the rules. Encourage all members in the firm to think out-of-the-box and innovate. Look for new ways to solve client problems. Look for new solutions. No topic should initially be considered out-of-bounds.
Tip #23: Begin developing global contacts and alliances. Become familiar with other cultures and customs.
Tip #24: Join a client's trade association and make contributions in the form of articles, speeches, conference attendance, etc. Learn the client's business from top to bottom.
Tip #25: Develop action plans for reinventing your practice. During the next decade we will experience unprecedented change driven by the technological revolution that is presently underway. The Internet and e-commerce will drive change that will force all businesses to develop new business models or perish. Law firms and other professional service firms will be no exception. Law firm leaders should be reinventing their firms now so they can be in the driver's seat rather than an unwilling victim.
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John W. Olmstead, Jr., MBA, Ph.D. is a Certified Professional Consultant to Management and the president of Olmstead & Associates, Legal Management Consultants, based in St. Louis, Missouri. He also serves as a member of the ISBA Legal Economics Section and the Legal Marketing Association (LMA) Research Committee.
Disgruntled employees in your law firm: The enemy within
By Sharon D. Nelson, Esq. and John W. Simek
© 2002 by Sensei Enterprises, Inc.
"I can cut off their air supply whenever I want" - a law firm system administrator
Scary, but it is all too common for disgruntled employees to strike at their employer by causing technological calamity. Whatever the reason for their disaffection, the calculated mischief that can be caused electronically has become an epidemic.
An example: the head of a local lawyer referral office resigned under pressure. Angry at her bar association, she performed wholesale deletions on the server, wiping out agency forms, procedures, correspondence, and historical records. Fortunately, she was not technically adroit and, with a little technical wizardry, all the deleted material was recovered despite the absence of backup tapes. Not every employer is that lucky.
What employers tend to worry about are power failures, system crashes, hackers and viruses. To be sure, those are all things that can and should be worried over, but the greatest danger is often close to home. It is much easier to plant worms, viruses, Trojan horses and to create all manner of other mayhem from within given an insider's knowledge.
Real-life nightmares
So what are disgruntled employees up to? Here are some striking and frightening examples.
* John, a computer programmer for a Fortune 500 company, had a feeling he'd be fired. So he created his own insurance policy. He wrote a program that instructed the computer to delete the entire customer database if John's name was ever deleted from the personnel database. Sure enough, he was fired. The customer database vanished. The company, brought to its knees, hired him back as a consultant at more than double his previous salary to rebuild (and now secure) the customer database.
* An employee, knowing he was about to be fired, took the entire customer database from his company and sold it to the highest bidder among the competition.
* A Forbes computer technician, angered at his termination, brought down five of eight network servers. All the data in those servers was deleted and none of it was recoverable. Forbes was compelled to shut down its New York Office for two days and sustained losses of more than $100,000.
* A Lockheed Martin employee crashed its e-mail system by sending 60,000 colleagues a personal e-mail message requesting an electronic receipt. Lockheed Martin had to fly in a Microsoft emergency response team to repair the damage.
* Prudential Insurance Co. had an employee merely frustrated with his sense that he was underpaid. His revenge consisted of purloining electronic personnel files for more than 60,000 Prudential employees. He not only sold the information over the Internet, but incriminated his former supervisor in the theft.
* Omega Engineering suffered $10 million in losses when a network engineer, agitated about his termination, detonated a software time bomb that he had planted in the network he helped to build. The bomb paralyzed Omega, which manufactures high-tech measurement and control devices used by the Navy and NASA. When the bomb went off in the central file server, which housed more than 1,000 programs as well as the specifications for molds and templates, the server crashed, erasing and purging all programs. The incident resulted in 80 layoffs and the loss of several clients. The programmer is now serving a three-year sentence and has been ordered to pay $2 million in restitution for his violations of the federal law "Fraud and Related Activities in Connection With Computers."
* A fairly common law firm nightmare is the disgruntled employee who turns the law firm into the Business Software Alliance for using unlicensed software. Very frequently, the firm has failed to monitor its licenses carefully or employees have installed unauthorized software. Since the court-imposed penalty can be up to $150,000 per copyright infringement, and since the firm is often guilty to one extent or another, it must pony up a settlement fee to avoid negative publicity, as well as covering considerable legal expenses. At least half a dozen law firm in the D.C. area have had this unhappy experience.
As horrific as these stories are, they are only the tip of the iceberg. Don't assume that disgruntled employees are all you have to worry about! There are other, often overlooked, "insiders" such as independent contractors, vendors, customers and clients--and yes, those cleaning folks who come in late at night. If you left everything up and running, you have no idea what your computer may be doing at midnight.
Many people who have access to your systems, in addition to employees, may have the wherewithal to alter or destroy data, hack into your systems, embezzle, lift proprietary data, harass, create a hostile work environment, or destroy your good will by inappropriate usage of your name. The nightmare scenarios are almost endless.
Statistics
The FBI reports that 85 percent of the companies it surveyed in 2001 had a computer intrusion. Of these, 30 percent came from external sources and 70 percent came from people associated with the company. Total losses from those willing to share information amounted to $378 million, a 43 percent increase over the preceding year. So why do we hear so little considering the apparent prevalence of the problem? Overwhelmingly, companies shun publicity, fearing the negative publicity. They greatly prefer to solve the problem internally and swallow the economic damage without the glare of the public spotlight. Only 36 percent of companies who have suffered intrusions reported those intrusions to law enforcement authorities, a figure which is at least growing from the previous year's 25 percent. Estimates place U.S. corporate spending on computer security at more than $300 billion per year.
IT staffers: The better they are, the more danger they pose
Your IT (Information Technology) staff carries the greatest threat because they have the greatest knowledge. Yet they are frequently treated just like any other employee. Once, just once, the authors had a client who actually listened to our advice and instituted logging and other defensive measures prior to dismissing a systems administrator, just in case he had wind that something was up. The administrator was thought to be somewhat unstable and had made various threats against the client previously. We arrived at dawn and removed all of his access to the client's system, both on-site and remote access. When he arrived, he was given an exit interview and left the building with an escort. His personal items had previously been boxed for him. For several weeks, we monitored activity on the servers looking for signs of a "back door" or unauthorized access. Our client was lucky and the measures proved unnecessary. But it was still the "smart play" and the client never regretted the monies expended given the damage they knew the administrator might have inflicted.
The dark side of security
All law firms have come to recognize glumly that some level of security is necessary. With further reluctance, they acknowledge that they will have to spend serious sums on security. But they usually underestimate their needs, especially if they have not yet been burned by a security breach. It's no joke to say that security comes at a price, both literally and figuratively.
Security done right can be doggone expensive. Without question, it is always an extensive burden, and the aggravation factor doesn't decrease over time. Implementing security can slow systems down and impair productivity. There is almost always a tradeoff between security, system access and productivity. Yet the absence of security is always sorely lamented--after the fact. Tracing security breaches, remedying their effects and preventing recurrences--all of this costs a great deal more than careful preventive measures.
How to achieve security and sleep at night
Have firm policies about computer/network/Internet usage. Tell people what they can and cannot do, clearly and simply. Do not file and forget these policies! Review them periodically and, for heaven's sake, enforce them!
Have computer security training for new employees. This can include everything from making them skeptical about opening e-mail attachments from senders they don't recognize (or unexpected attachments from senders they DO recognize) as well instructing them in the dangers of social engineering. People are by-and-large helpful and well-meaning. Faced with someone who says they have lost a password and need it right away, we tend to give them the password or reset it without thinking through possible implications.
Check references! If you employ an outside firm to provide you with computer services, check references carefully. Trust is an enormous issue when you outsource your IT work. Be sure the company has a stellar reputation itself and that its employees are regarded as trustworthy. If you hire your own internal IT staff, do the same thing. Frequently, the need is so pressing that employers admit to hiring quickly, without background checks, happy to find an IT professional who seems well qualified.
Use firewalls. Determine where access is needed and prevent it where access is not needed. Be especially careful with access to intranets and extranets.