Out with Billiable Hours, In with Alternative Fees

In a Legal Rebels blog post titled "Time to Blow Up the Billable Hour Formula," author Michael Roster writes:

It’s time we face a fundamental problem that’s existed for the past 35 years after we moved away from fixed prices, retainers and other approaches that had previously been used and instead went to fees based solely on hours. Hours are performing two diametrically opposed functions.

First, they are being used as a unit of production where we can budget how many hours are needed for tasks and then see if there aren’t ways to improve efficiency. But that means—as we do in manufacturing and everywhere else—looking at ways to reduce the number of hours for a task and ways to reduce the cost of those hours (that is, the internal cost of production).

Yet law firms simultaneously have made hours the basis of profitability, which means benefiting from more hours being applied to a task and continual increases in hourly rates.

You can’t have the same unit (hours) functioning simultaneously for these two opposing purposes. The problem has always been with us but has come to the forefront as clients and firms increasingly use fixed fees and other alternative arrangements.

Which means it’s time to blow up the formula.

As corporate clients continue to look for ways to cut costs in 2013, the law firms that can respond with value-based billing arrangements for high quality legal services are likely to have a happy New Year (or at least more so than those firms that maintain high overhead cost structures).

Legal Marketing Consultant

Legal marketing consultant Margaret Grisdela is available to discuss business development goals for small to mid-sized law firms. Contact her at www.legalexpertconnections.com, www.insurancedefensemarketing.com, at 1-866-417-7025, or via email. 

Patent and Trademark Office Reviewing Professional Responsibility Rules

The United States Patent and Trademark Office (USPTO) proposes to align the USPTO's professional responsibility rules with those of most other U.S. jurisdictions. Patent and trademark attorneys, as well as their legal marketing teams, will want to take note.

The proposed plan is to replace the current Patent and Trademark Office Code of Professional Responsibility, adopted in 1985, based on the 1980 version of the Model Code of Professional Responsibility of the American Bar Association (“ABA”), with new USPTO Rules of Professional Conduct, which are based on the Model Rules of Professional Conduct of the ABA, which were published in 1983, substantially revised in 2003 and updated through 2011.

Changes approved by the ABA House of Delegates in August 2012 have not been incorporated in these proposed rules. The Office also proposes to revise the existing procedural rules governing disciplinary investigations and proceedings.

Click on the link for more details on the USPTO proposed professional responsibility rule changes.  Written comments on the proposal must be received on or before December 17, 2012.

Legal Expert Connections is a Presidential Debate Partner

We are proud to be an Official Small Business Partner for the third and final 2012 Presidential Debate being held at Lynn University in Boca Raton, FL on Monday, October 22, 2012.

On the ground media coverage is expected to exceed 3,000 journalists and support staff. Television viewership is projected to be between 52.4 to 63.2 million viewers.

The format for the debate will be identical to the first presidential debate and will focus on foreign policy. Bob Schieffer (Host of Face the Nation on CBS) will serve as moderator.

Cybersecurity Draws Attention in Insurance Defense Market

A Cybersecurity Council led by the Department of Homeland Security is a central element of a national data security plan under consideration by the White House, according to a recent Washington Post article titled “White House drafting standards to guard U.S. against cyberattack, officials say.”

A uniform set of national cyber security standards may result if an interagency government council evolves to the point of establishing minimum guidelines. The goal would be to protect against data breaches in the nation’s network for communications and major utilities.

Insurance coverage for cybersecurity policies may potentially benefit from national standards, claims the article, by contributing to a framework for insurance policy provisions.

Consideration of national cybersecurity policies follow closely on the SEC’s October 13, 2011 release of the “CF Disclosure Guidance: Topic No. 2” relating to cyber-security risks. “Registrants should address cybersecurity risks and cyber incidents in their MD&A if … costs … represent a material event, trend, or uncertainty …,” according to the SEC.

You can also read the White House analysis titled “Cyber-Insurance Metrics and Impact on Cyber-Security.”

Insurance Companies Continue to Launch Cybersecurity Insurance

NAS Insurance Services, Inc. (www.nasinsurance.com) recently announced the availability of BrandGuard™ insurance coverage that pays companies for lost revenue in the event of a cyber breach. The expanded cyber liability insurance is designed to provide organizations with an extra layer of financial support while they work to restore their customers’ trust following a data security breach.

NAS policies will provide protection for privacy-related data breaches and recovery efforts, including the cost of legal support, IT forensics, public relations, customer notification, credit monitoring, identity restoration, and compensation for lost income.

Chubb, Chartis, Beazley, Philadelphia Insurance Companies, and Hiscox are among leading insurance companies for cybersecurity coverage.

Many Companies Risk Self-Insurance on Cyber Threats

While data security is increasingly recognized as a major risk factor in the world of “big data,” many companies are not yet seeking insurance coverage.

According to the 2012 Risk and Finance Manager Survey conducted by Towers Watson and released in April 2012,

Nearly three in four respondents (72%) are not purchasing a network security/privacy liability policy, virtually unchanged from last year. And those that did purchase policies (28%) opted for limits that were on the low end of the spectrum. In fact, 43% said their policies had a $1 million to $5 million limit. When asked why they had not purchased a policy, 41% believe their own internal IT department and controls are adequate, while 25% indicated they do not believe they have a significant data exposure.

The Case of Heartland Payment Systems

Heartland Payment Systems, Inc., one of the nation’s largest payments processors, publicly announced the discovery of a “Processing System Intrusion” on January 20, 2009. According to the company’s 10K for the fiscal year ended 12/31/11, the Intrusion prompted regulatory investigations by:

• Federal Financial Institutions Examination Council
• Federal Trade Commission
• Louisiana Department of Justice Office of the Attorney General
• Canadian Privacy Commission
• Other government agencies

Since its disclosure of the Intrusion on January 20, 2009 and through December 31, 2011, the company has expensed a total of $147.1 million, before reducing those charges by $31.2 million of total insurance recoveries. The majority of the total charges, or approximately $114.7 million, related to settlements of claims. Approximately $32.4 million of the total charges were for legal fees and costs incurred for investigations, defending various claims and actions, remedial actions and crisis management services.

The Wall Street Journal CIO Blog covered the topic of data security in a May 29, 2012 article titled, “As Flame Spreads, Most Companies Lack Cybersecurity Coverage.”

About the Author: Legal marketing consultant Margaret Grisdela is available to discuss insurance defense marketing campaigns. Contact her at 1-866-417-7025 or via email.

Law Firm Proposals on the Rise

Key findings about law firm proposals and RFPs, taken from a new LexisNexis survey on legal marketing and business development practices, are highlighted below:

• Overall, firms are responding to an average of 5 to 16 proposals each month. As expected, larger law firms are engaged in a higher volume of RFP activities than their counterparts in smaller firms. Although 68 percent of firms are handling an average of 10 or fewer RFPs every month, it’s a different story at the high end. 15 percent of respondents are juggling more than 21 activities each month, which equates to a run rate greater than 250 proposals a year.


• 42 percent of respondents saw an increase in RFP activity at their firms over the past 12 months. An identical 42 percent believe the volume of RFP activity has stayed the same.


• Responding to RFPs, pitches and proposals puts a strain on practice resources. While some 46 percent of RFP responses can be handled with fewer than 20 hours of effort, that total also means the majority of work takes even more time. The survey selections topped out at 40+ hours per RFP response, a category that still garnered 7 percent of the replies.


• Based on all the replies, the average hours-per-proposal figure increased with firm size … ranging from 19.6 to 25 hours. Interestingly, this question also earned a relatively high “don’t know” response rate of 22.6 percent. Although the survey audience could address volume and growth rate questions, they were unaware of the amount of effort required from the firm to handle that workflow.


• By combining average RFP volumes and average hours-per-proposal, it’s possible to assess the growing impact of these kinds of activities on legal firms. For smaller sized firms, the lower proposal count and hours required per response still adds up. On a yearly basis, it totals 1,175 hours of effort which is enough to fund more than half of a full-time equivalent (FTE) employee. For the largest firms, the average yearly total came to 4,800 hours, representing 2.3 FTEs.

About the Survey

The online “LexisNexis InterAction RFP Activity Survey” was conducted between July 23 and August 3, 2012, and included more than 350 total responses. Survey participants were asked to provide basic demographic information on the size and location of their law firm and to answer questions designed to quantify the time and resources dedicated to proposal generation efforts as well as any year-over-year change in law firm involvement in such efforts.

2013 Law Firm Revenue Outlook Slows

Law firms are seeing a "material decline in demand" in the second half of 2012, according to a Bloomberg Law interview with consultant Kent Zimmerman of Zeughauser Group that was posted today on JD Supra.

Reinforcing the recent Citi Mid Year outlook on law firm financials, Zimmerman predicts a continuing decline of law firm revenues and profits through the close of 2012 and most likely into 2013. Watch the interview below.



Citi cites three primary reasons for concern:

1. Demand growth slowed during the second quarter from an already tepid first-quarter level;
2. Inventory as of June 30 had grown little from the prior year; and
3. Realization is likely to decline again in 2012.

Slow job growth is at the heart of the problem, notes Zimmerman. The economy added only 96,000 jobs in August 2012, for example; well below expectations. Given the uncertainty surrounding the November presidential elections and the looming "fiscal cliff," employers are holding off on adding new workers.

Corporate Clients Put Pressure on Law Firm Pricing

One bright spot in the legal industry is the "LPO" sector, or legal process outsourcers. Low value (yet expensive) legal work like due diligence research and litigation discovery is increasingly being done by third parties, many of whom hire low cost contract attorneys on a contract basis.

Corporations are frequently driving this change, as they refuse to pay partner or even associate hourly rates for work that can be outsourced relatively easily with comparable quality levels. GCs are also increasingly choosing BigLaw firms for select bet-the-company transactions, while taking routine work to regional law firms or boutiques for lower rates.

Law Firms Advised to Lower Costs Now

"Get lean" is Zimmerman's advice to law firms. Proactive executive committee members who move rapidly to position themselves for more tough times ahead have the best chance of long term success, says Zimmerman. Depending on the depth of the decline, failures and/or strategic mergers are probable.

Suggested retrenching efforts include:

• Take the tough steps of cutting under-performers
• Reduce excess real estate
• Sharpen the knife on fixed overhead expenses
• Shrink in order to grow financially stronger

Focus on Strengths

This @RainmakingLady agrees with the advice that law firms should focus on the few key practice areas where they offer a distinct competitive advantage. Stand out and get on the short list by staking out clearly defined claims.

Legal Marketing Consultant

Legal marketing consultant Margaret Grisdela is available to discuss business development goals for small to mid-sized law firms. Contact her at www.legalexpertconnections.com, www.insurancedefensemarketing.com, or at 1-866-417-7025.

Law Firm Logo Guidelines

Legal marketing campaigns designed to get more clients work best when based on a professional, consistent appearance for law firm marketing materials.

A law firm logo is an important element that can tie together a firm's website, stationery, brochures, promotional products and more.

Here are a few marketing tips to help you create the right law firm logo for your practice.

• Attractive logo designs can be based on stylized text, or may include graphic elements. In either case, it is ideal if your logo reflects your legal industry and services.


• The logo needs to present well in both 4-color and black and white.


• Logos should be simple, since small details do not convey well across all media.


• Your logo needs to be versatile, since it will be used across stationery, business cards, websites, pens, caps, and other marketing applications.


• Wide horizontal logos are attractive, but can be problematic in usage due to space constraints. Fitting a wide logo into a small space frequently makes it difficult to read.


• The font style used in the logo should be easy to read.


• Get your logo files in both high and low resolution, frequently rendered as a JPG. High resolution is for printed use (i.e., stationery), while low resolution works well on the Internet. You may also want to get your logo file in an EPS format, which is popular with printers since the artwork scales well proportionately.


• Keep your original logo files in a safe place, since you are likely to use them for years to come.

Guard the use of your logo from inappropriate formatting. If you have a large law firm, it is easy to build up logo variations over time. For example, your logo should always be presented against sufficient white space to deliver the full design impact. If you need multiple formats for your logo, ask your graphic designer to prepare them at the time your logo during the initial design stage.

Legal marketing consultant Margaret Grisdela is available to discuss your business development goals. Contact her at www.legalexpertconnections.com or at 1-866-417-7025.

Creating Israeli-U.S. Legal Alliances Online and Offline

New U.S. business opportunities await U.S. and Israeli firms willing to invest some time and effort in cross-border legal marketing campaigns. Internet marketing and personal networking minimize the cost of implementing strategic solutions.



U.S. attorneys are increasingly becoming specialized, which means that your business development campaign should target very specific markets both geographically and in regard to practice areas. For example, you might want to focus on intellectual property attorneys in Los Angeles, or the Jewish business community in New York.

A personal referral network of non-competing attorneys, accountants, bankers, clients and others is the most common way for U.S. attorneys to get business. An equally effective international referral network can be built through LinkedIn, blog posts, and international membership organizations.

Current clients are your best source of new business, so tell them that you are available to provide cross-border legal services on matters involving the U.S. and Israel. Give examples of the type of work you can provide. Spread the word far and wide on a regular basis to stay “top of mind” when a need arises.

Maximize the ability of your website to attract international attention with the right landing pages, meta tags, keywords, and frequently updated copy. A subject-matter blog will supplement your site and help you build an international following. Online ad campaigns using the geo-targeting features in Google AdWords can be highly effective in cross-border lead generation. In terms of social media, LinkedIn is the number one choice of U.S. attorneys and other business professionals.

Build your reputation for Israeli legal services among American prospects by speaking at international conferences. Webinars also offer a low cost alternative when reaching an international audience. Publishing articles is another effective way to attract cross-border clients, without the need for expensive travel. Consider co-authoring with a U.S. or Israeli counterpart to gain easier access to U.S. legal publications or trade magazines.

Read the full article on U.S.-Israeli legal marketing strategies, written in conjunction with my co-author Adv. Zohar Fisher, the CEO of Robus (http://robus.co.il/about-robus/), Israel's leading legal marketing company.