Happy Valentine's Day! Today, we fittingly write about relationships. In this context, a question about how much law firm management can ask of its partners.

I'm Roy Strom, the author of The Law Firm Disrupted, a weekly Law.com briefing on the changing legal services market. Reach me here or sign up to receive this newsletter here.

A Top-Down Change Management Approach, With a Scary Word: “Mandatory”

I have written before about what I've called a “ground-up” approach to driving change inside law firms. By that, I have meant encouraging and empowering (typically younger) lawyers to find new, more efficient ways to handle legal matters.

But that shouldn't preclude “top-down” styles directed by management. And I wrote about that kind of approach today in a story for The American Lawyer about an Am Law 200 firm, Thompson Hine, that has “mandated” its lawyers create budgets for their matters. The mandate carries what one Thompson Hine partner described as a “nuclear option:” If a matter over a certain dollar amount does not have a budget after it is opened, the partners on the matter cannot send out bills related to that matter.

Hit 'em in the wallet!

While law firm partners have always been required to work, it is rare that law firm management mandates how lawyers approach their work. But the mandate seems to have worked fairly well at Thompson Hine.

Since one practice group leader won a vote from the partners in his 80-lawyer business litigation group to adopt mandatory budgets, two more practice group leaders have taken a similar approach. And now, the firm is working to implement required budgets in aspects of all its practices. In total, about $127 million of the firm's matters are currently managed under a proprietary budgeting system. That is more than half of the firm's $221 million in revenue last year.

The story of how the firm implemented those budgets is what I focused on in the story for The American Lawyer. There is also another part of the story, which is how those budgets have led to better communication between the firm's partners and clients. And that is really the crux of much of the change that clients say they want.

Brian Lamb, the head of the firm's business litigation group, said the tool has led to better communication with clients.

In one instance, the firm was handling a piece of litigation that was very similar to a case it had just finished for the client. That case went to trial, and the firm helped the client achieve a victory.

The partner sent over a budget that wasn't far off from what the first case actually cost: A seven-figure sum. But the client balked at the fee. Not because they were upset at how much the original case cost. But because they did not consider the second case to be equally important. They were looking to spend about 20 percent of the original matter.

“We were just assuming the client wanted to do what they did last time,” Lamb said. “When, in fact, shame on us, we had never asked is there something different about this case? And they had never opened up about that before. It led to this 'Aha moment' for both us and the client.”

I don't mean to say that budgets are a cure-all for law firm-client relationships. But when used in a proactive fashion, they can deliver the type of predictability and alignment clients are demanding from law firms. And managing partners should not be afraid to make that case. Even if it requires a mandate.

“Predictability has been a core area of focus for law departments,” said Andrew Baker, a principal at HBR Consulting who has worked with Thompson Hine. “That's now reflected in RFP processes, firm selection, and matter allocation in many ways, including more requirements related to matter-level budgets by panel firms. When clients dive deeply into the specific capabilities and behaviors of their current and prospective firms, that's good for firms like Thompson Hine, and can help them 'punch above their weight class.'”

Roy's Reading Corner

On Law Firms as 'Shopping Malls': Here is another piece on the delicate relationship between law firms and equity partners, from Jordan Furlong, a consultant for law firms and legal departments. Furlong compares law firms' disparate practice groups to the stores in a shopping mall and suggests that successful firms will be the ones that wrangle those offerings to work together. Not a revolutionary concept, per se, but it is another argument, as I read it, for stronger centralized management within law firms. Furlong's article picks up on this piece from another law firm consultant, Joshua Kubicky.

As Furlong writes, successful law firms will be those that “figure to be those firms that are both culturally cohesive and operationally agile. The cohesion allows the firm to have a more mature and sophisticated relationship with its equity partners than simply landlord and tenant, and to persuade the partners that spending money to improve the competitiveness of one business unit will generate more profits and opportunities for everyone in the firm. The agility will allow it to assemble and plug into the firm's infrastructure the specialized pieces that each business unit needs without bringing the whole platform down in a heap.”

On Mental Health: The ALM umbrella of publications has had a couple of important stories this week on the topic of mental health in the legal profession. One piece, published in The American Lawyer, is a first-hand account of dealing with depression in a Big Law firm, written by Reed Smith counsel Mark Goldstein. Another is an interview with NetApp general counsel Matt Fawcett, who himself penned a LinkedIn letter imploring the industry to “Get Real” about how to better handle stress and mental illness in the profession.

On Litigation Funding: The American Lawyer and litigation funding firm Validity Finance are conducting a survey on law firms' and clients' experiences with litigation funding. As the battle over disclosure of funding heats up in Congress, it may be helpful to hear from actual users of litigation funding about what is happening in this growing industry. You can take the survey here.

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.