Connecting the Dots Between Data, Analytics and Law Firm Success with Patrick Fuller, VP and GM of ALM Intelligence
In this episode of On Record PR, we go on record with Patrick Fuller, vice president and general manager of ALM Intelligence.
Patrick Fuller is the Vice President and General Manager of ALM Intelligence. He has been in the legal industry for more than 20 years, holding a variety of business development, consulting, and senior leadership roles. Before joining ALM, Patrick served as the VP of Business Development for the artificial intelligence start-up, Neota Logic, and as Director of Legal Analytics for Wolters Kluwer’s ELM Solutions, working with legal departments to define, measure, and take action on key performance indicators for legal departments and operations. His career also includes stints with Martindale-Hubbell, Thomson Reuters, Hildebrandt Consulting, and LawVision Group. Patrick is a frequent author and speaker, with more than 200 speaking and authorship credits within the legal industry.
Active in his community personally and professionally, Patrick is a member of the Board of Directors for IgniteOKC. He serves as an advisory board member to a Silicon Valley LegalTech start-up and as a Community Leader to Diversity Lab’s Move the Needle Fund. Patrick is a member of the Leadership Board for the University of North Texas’s prestigious College of Information and is a Fellow in the College of Law Practice Management.
This episode was recorded mid-April 2020 during the seventh week of the U.S. lockdown due to the coronavirus pandemic. Gina and Patrick were working from home. The world had changed. The two discussed the legal industry and strategies for the future practice of law.
Gina calls Patrick the “dot connector,” the person who, whether it is connecting the dots between two people who should know each other or the data that supports business growth and corporate decisions, Patrick is that person.
Patrick says, “Everything in law is based in precedent, but business is forward-looking – smart law firms know this and apply data to their strategy.”
Patrick Fuller: I’ve known you for a long time, Gina. It was back when it was the LMA listserv that we were on. I worked for Tim Corcoran, a buddy who went to corporate and who’s been an amazing mentor and friend to me over the years, and an incredible influence on a lot of things. You and Tim are all part of that New Jersey, Philadelphia, Bucks County triad-area. And Tim has an incredibly high level of respect for you. Tim introduced us and a stellar team – all of whom have gone on to stellar careers inside legal marketing and legal data analysis. We all come from the Tim-Tree.
Gina Rubel: It’s humbling to hear something like that because I met Tim when he did a presentation to the Philadelphia Bar Association’s leadership when he was with Altman Weil. I really was still a fledgling in understanding the industry of legal marketing. I, too, am one of his mentees, who has grown up learning from such incredible thought leaders. I love that the three of us can sit down and have a conversation and we laugh, we talk sports, we talk music and, and we talk some serious high-level legal industry strategy. That’s one of the things I love about being a part of this niche industry. We support one another. You will do everything and anything to help our friends and fellow LMA members, especially as we’re dealing with coronavirus and people are getting furloughed. Tim is doing the same. It’s just an incredible network of people.
Are law firms being more empathetic during this financial downturn in comparison to 2008?
I think they learned a lot of lessons back then. We saw one of the things that we saw quite a bit of which was a lesson that too many firms learned painfully. In 2008, they looked at it and said, there are certain people, especially attorneys, and in some cases partners, that were not generating a lot of revenue. Those attorneys were de-equitized. Meanwhile, they identified the business generating partners, we call them rainmakers. The law firms had them come in and stop doing what they were good at and start doing what they’re not good at, which is sitting down and billing hours and being efficient. Those firms took a hit in a couple of different ways because the people that they were getting rid of were efficient, they knew the work, they did the work efficiently and effectively. They billed the hours. That had a huge impact. At the same time, we started seeing it with professional staff. And then when the business came back, they were playing catch up.
There’s a lot of uncertainty right now, and nobody really knows how long it’s going to last or what the pure impact is going to be. I applaud the firms that are taking a measured approach to the coronavirus pandemic.
Six weeks ago, we were in New York interacting and doing what we normally do at ALM’s LegalWeek Conference. Weeks later, we are in isolation and locked down in quarantine. And the world, as we know, is changing. As a result, law firms are taking a measured PR approach, which is smart. We know from history the economy is going to come back the legal economy is going to come back. Demand will increase. Certain practice areas and industries may take a little while, certain areas may not.
In 2008 when the housing crisis hit, there was a dip in revenue and profitability, et cetera. But what people sometimes forget is there were two other events that happened in 2008: the ACC launched the value challenge and performance data became available via e-billing companies.
Susan Hackett (now the CEO of Legal Executive Leadership, LLP) was the head of the Association of Corporate Counsel (ACC). She helped bring in the ACC Value Challenge. We also had e-billing companies that had been collecting data over time. They started giving that back and making it available to their clients. And it was performance data that was enabling buyers of legal services to understand what everybody was paying for. They were able to identify certain types of work in certain areas and how those matters were being staffed and what the rate structure was. They looked at the total matter costs. Suddenly, we had more educated buyers of legal services dealing from a position of strength with intelligence and data. The legal industry transformed from a sellers’ market to a buyers’ market. Corporations were putting new restrictions on outside counsel guidelines and what they would and would not pay for.
And at the same time, the economy was in a meltdown. You had all those sorts of things happening at once. In the early to mid-2000s, law firms were at their peak of revenue.
I used to show the growth over a multiyear period of the Am Law 200 versus Major League Baseball’s growth over the same period, collective revenue growth in the NFL, NBA, and Fortune 500.
The NFL was just crushing everybody. From 2002 to 2007, we had rapid growth. During that time, when you look at the profit margins of the law firms, they were all over the board.
We talk a lot about volatility where you have that change in growth from one year to the next. Key metrics and profitability were doing a lot of roller coasters during a period. As a result, you have this interesting thing where revenues were at an all-time high, but profitability was not that great. You have the financial meltdown, there’s a dip in revenue. Then law firms got better at the business of law and profit margins increased to 38 and 39% in the last five to six years. They have held consistent. Firms have gotten better at making money. They are in a better position now to deal with the pandemic because of the lessons learned in 2008, 2009, and 2010.
How can law firms approach long-term strategy during the uncertain insanity of the coronavirus pandemic, whether it be stability or growth, and what should they be thinking about?
Every situation is obviously a little bit different. I like looking back at other lessons, and I like looking away from legal to some degree. I’m somewhat biased because I did my management training with Walmart in 1992. Store number two was in Harrison, Arkansas. Walmart was interesting back then because I was put in charge (I am using air quotes). I was in charge of people who were hired by Sam Walton. And when you are 21 years old, you think you’re smart. You realize very quickly you do not know anything. It was one of the single best lessons I ever learned.
It was the first time I was ever exposed to the fact that there was a lot of frustration with Walmart from some people because they had been perceived to have “destroyed main street,” rural America. I did not understand why at that point. And looking back on it, it was smart business. During the oil crash, Walmart did not necessarily go into the bigger cities, but they went into areas where they could expand profitably. For law firms, there is uncertainty and opportunity to be smart and aggressive by going after talent that is going to be a little bit cheaper.
There is nothing worse than trying to buy a house during a period where house prices are at an all-time high. It’s great to sell during that period. Not so fun to buy during that period. Likewise, trying to acquire talent. You want to try to acquire talent and expand in times where you can buy it, for lack of a better term, at a bit of a discount. Every firm’s a little bit different, but it could be an opportunity to grow intelligently in certain pockets where they will be able to facilitate growth down the road as well. Whether it is getting talent at a reduced cost or moving into markets where maybe it was not quite on your radar before, there are opportunities for growth.
Does the same hold true for the mid-size firms whose strategic plan is growth as far as diversifying their offices and their locations and, for some, of their practice areas?
Mid-size firms are in a unique position because many are really niched. They have carved out a tremendous market for themselves. There are others that are a bit more susceptible to fluctuations in the market. Then you have another group that is unique because they must deal with smaller firms, and they must worry about the price implications of smaller firms. They also compete with much larger firms and they are a little bit of what we refer to in sports as a “tweener.” They are not quite one position or another position. This is an opportunity for them to increase their footprint a bit.
The challenge with that is that when I look at the data, for example, we see a lot of correlation between lower profit margin and firms with a lot of offices, but not a lot of headcount. You do worry from time to time about spreading yourself too thin to where when there are fluctuations and uncertainty in the market, you do not have the cushion necessary to be able to withstand it. I get a little bit more nervous about expanding the footprint dramatically during that period. But I do think it’s an opportunity in some cases to get talent that could possibly bring business in and be able to provide a springboard for growth.
In addition, while attorneys are working from home, it gives law firms the opportunity to originate in higher-cost markets, and for certain types of work, it is going to get done in those markets. In other cases, law firms should relocate some of that work, especially where it is repetitive knowledge tasks, or it is lower-value work or non-jurisdictionally driven work. Law firms should find opportunities to get that work done in lower-cost markets with lower overhead, increased efficiency, and be able to deliver back to the client. A better work product at a more consistent, predictable cost wins the game.
What is Diversity Lab’s Move The Needle Fund? Can you explain the business case for diversity, inclusion, and equity from a data-driven perspective?
The Move the Needle Fund is the first collaborative effort designed and funded with $5M to test innovative initiatives to create a more diverse and inclusive legal profession.
Let’s step back. Caren Ulrich Stacy is the founder of the Diversity Lab. She has had an incredible career, both inside law firms on the talent management side and externally. She was one of the founders with Bill Henderson and Evan Parker of Lawyer Metrics. She started Diversity Lab’s OnRamp Fellowship. And she is awesome. I do not know how else to say it other than the fact that Caren is amazing.
They started something at a Hackathon called the Mansfield Rule. The Mansfield Rule was rooted in the Rooney Rule, which comes back to the Rooney family which owns the Steelers. That’s also one of the named partners in Buchanan Ingersoll & Rooney. The Rooney Rule was one of the things that helped drive minority hiring in the NFL. There were too many good coaches that were being overlooked for either head coach positions or general manager positions.
Some could argue, and Hall of Famer Tony Dungy has said this, that without the Rooney Rule, he may never have become the Ram’s head coach. And that absolutely matters.
Diversity Labs took the Rooney Rule and created the Mansfield Rule, which was named after Arabella Mansfield, the first woman admitted to the practice of law in the United States. The Mansfield Rule did not just say, “we want to make sure that 30% of your lawyers are women.” What it said was, “We want to make sure that the committees have gender diversity, racial diversity, etc.” This filtered to compensation committees, partnership committees, lateral hiring committees, etc. And then they got a bunch of legal departments to come on and say, “We’re going to support this.” This was much like when Rick Palmore (now an attorney with Dentons), the GC of Sara Lee wrote his call to action letter, demanding diversity in the legal profession, which generated a lot of publicity.
Read more: https://www.abajournal.com/legalrebels/article/demanding_diversity
Now, there’s technology and social media. There is a lot more immediacy around capturing and measuring and sharing the measurements of diversity data. So, the legal departments got involved. Forty law firms immediately got Mansfield Certified. Then it went up to more than 60, and more than 70 different legal departments were engaged. It has been a tremendous success.
During a program that I presented at the 2020 LegalWeek Show, we looked at the law firms from the 2019 Am Law 200 which had been listed for the previous five years. We looked at those that grew in the rankings versus those that dropped. What do they have in common? A lot of it predictably was around headcount changes. However, the firms that moved up in the rankings promoted women to partner at three times the rate of the firms that dropped.
As a result, Caren Ulrich Stacy came up with a big, audacious idea which she executed on. She said, “I’m going to get five law firms to donate $5 million each to set up a fund to measure diversity and inclusion.” And so she did. Eversheds Sutherland, Goodwin, Nixon Peabody, Orrick, and Stoel Rives signed on as the trailblazing MTF law firms. She then recruited 25 to 30 general counsel to get involved. And they’re actually doing it on the legal department side. Most of these companies have aggressive diversity mandates for their outside counsel guidelines. Their legal departments are walking the walk. That, to me, is critically important. Diversity, inclusion, and equity are about walking the walk.
Side note: Episode 7 of On Record PR is Achieving Your Dreams Through Resilience: From Homeless to Ms. Pennsylvania with Nikki Johnson-Huston. Nikki grew up homeless, ended up going to law school. She is now Ms. Pennsylvania. She sits on many boards and is a homeless advocate.
What can law firms do now and, in the future, as it relates to approaching client service? What are some of the data points around client service that they should be looking at? Why does it matter?
Law firms must look at client acquisition costs and client profitability. You can’t get away from that. None of us are doing anybody any good if we’re a part of a business and we’re serving somebody serving our clients or our clients are relying on us for things and then we were not staying in business. There must be a service posture. I’m a big believer in the fact that that as a service provider, and I’ve been one my entire life, our jobs to make the people who we serve look like rock stars.
It’s not about I, it’s about the greater we and, and I am a big believer in rising tide raise all boats. The reality of it was that law firm metrics were internally focused. They were measuring the internal timekeepers. That’s a problem; a missed opportunity. I tell every law firm that you need to ask as you’re getting into an engagement, how are we being evaluated? What metrics are you utilizing to evaluate us? And, how are you going to track those? And then the follow-up question is, how are you being evaluated? What metrics are they doing to evaluate law firms? And then the final question is, is what can we do to help you make your bonus? And because of that, lawyers will continually stay in their good graces. If you’re doing the little things, that’s going to make their job easier, make their life easier.
First and foremost, take the approach that you are serving the client and put their needs in front of your wants.
From a metrics perspective, I tend to look at a couple of things: cycle, time, and budgets. I cannot say enough about budgets. I think that is a critical component. Most legal departments now are requiring budgets for pretty much every matter. What’s interesting about that is I’ve worked with legal departments on one hand that are they are thinking firms if they make too many adjustments to that because you’ll see these firms that will just throw out the same number every time as a starting point to say that they only get the budget in there as they go forward.
You’ll see others that are really taking the time upfront, scoping the matter, and putting it in there. And then they’re also being very proactive and making changes as the situations change.
There’s a lot of revenue that is lost because it wasn’t scoped properly. You start thinking about what can be done differently. It’s not necessarily going out and getting more clients. It’s not developing more business. It’s not billing more hours. In some cases, it is just scoping the matter correctly; putting the budget together the right way so things are not write-offs down the road. That to me is a huge aspect of things. It also provides better insight into the profitability of the client.
I would start there with budget to actual and track very closely, the accuracy of your budgets and the write downs associated with it from a metrics perspective.
In closing, please tell us a bit more about ALM Intelligence.
ALM Intelligence is the data component of American Lawyer Media. And we get to work very closely with our editorial brethren like Gina Passarella, who you interviewed in your very first episode of On Record PR: How Best to Work with Legal Media. I get to work with Gina, and I get to see what goes on behind the scenes. The care and approach that she takes to her job forces everybody to raise their game. We are the data arm behind that. We collect data in a variety of different ways. Some data is submitted and gathered through surveys; some is gathered through scraping and automated methods. We look at financials. We look at lateral moves and staffing scenarios. We look at events and look for patterns. We look at firm financials with the global and domestic law firms including Am Law 100, 200, Global 100, 200, and others. We analyze a lot of global trends. We do reports on all 200 firms. We also do work in the consulting industry and work with the Big Four.
What are some of your favorite books?
- Dig Your Well Before You’re Thirsty by Harvey Mackay.
- Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne is one of the best books that deals with creating non-competitive market space. That book to me is a Bible from a business perspective.
- Anything by Daniel H. Pink.
- The Challenger Sale: Taking Control of the Customer Conversation by Matthew Dixon
- Anything that John Kotter writes, especially on organizational change and creating buy-in internally is a must-read.
- Bill Taylor, who was a founder of Fast Company, I love his work because he does take a very unique approach to age old problems.
- Dr. Richard Thaler, who is probably the father of behavioral economics and the book nudge. And that to me is essential reading for anybody, to understand the correlation between changing behaviors.
Gina Rubel: It looks like I have my reading cut out for me. I am going to throw out one other one since you mentioned Blue Ocean Strategy. My friend, Andi Simon, wrote the book, On The Brink and she’s a blue ocean strategy expert. She also has a podcast, On the Brink. I have learned so much just reading that book.
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