Post Category → BigLaw

Lawyers and NPS

TL;DR: Net Promoter Scores provide a clear, simple opportunity for law firms and clients to cut through the obfuscation and marketing nonsense of the legal industry, and understand who really delivers.

From my earliest days of law school, I knew I was going to have a little trouble relating to my chosen profession. Virtually all of my peers were devoting large amounts of their non-class time to something called “blue-booking,” which means learning a bunch of arbitrary rules for proper formatting of citations in legal journals, and “spotting” the errors in a long list of citations; a kind of hazing ritual to get onto a journal. I simply could not get over how the entire thing looked like a spectacularly boring, unproductive waste of my time. I was the only law student in my class at Harvard that I was aware of (I’m sure there were a few others) who never even applied to a journal or law review, and never touched a blue book.  I’ve done alright.

This “WTF are you all doing?” feeling carried on post law school. Moving into a large law firm setting, it was absolutely breathtaking how backward the workflows of lawyers were, and how powerless law firms, as institutions, were to change it. Why are they powerless? Here is my core diagnosis for the “problem” of most large law firms: they are not really firms. Or perhaps better said, no one is really in control. The vast majority of large law firms are decentralized, weakly unified collections of fiefdoms, each controlled by a partner who isn’t truly accountable to other partners, or a central hierarchy. Within a “firm,” a small group of people may have a great idea, or tool, for implementation, but absolutely zero ability to get it adopted firmwide.

Combine that with a power structure concentrated in the hands of (usually) traditional 50 and 60 year olds, and the fact that you usually have dozens of totally unrelated practice groups with independent needs, incentives, etc., and you see that the inertia and inefficiency of law firms is structural and cultural. People who blame the billable hour are focusing way too myopically on one thing, and ignoring the broader, deeper problem. Most law firms are simply too large, too broad, too decentralized, and too lacking in institutional brand power relative to the personal brands of their old school partners to implement needed changes. The only solution, in many cases, is a reset button.

So joining and building out a small boutique firm was my opportunity for a reset button, and I got it, along with an AMEX card to buy what I needed, without having to ask anyone for permission. Starting with a clean slate, and supported by a handful of senior partners with the right mindset, I was able to build a law practice that cut out all the bullshit and delivers what good clients want. What do clients really want, btw? Here are a few examples of what they don’t want:

What isn’t bullshit?

(i) awesome lawyers with specialized expertise,

(ii) who are responsive and DON’T LOSE E-MAILS,

(iii) provide real strategic insight and not just paper pushing,

(iv) are transparent about costs (w/o BS-ing that legal can be cheap), and

(v) can demonstrate their consistent efficiency and quality.

In building out our firm, I searched for a single, objective metric, minimally exposed to BS, for building accountability and clarity around our mission of delivering the above, and I found it: the Net Promoter Score. Our most recently calculated NPS is 77. Apple’s, Amazon’s, and Costco’s NPS range from the 70s and 80s, depending on where you check. Is it as high as we want to be? No. Every year we learn more, and iterate as we scale sustainably. The beauty of NPS, in addition to its simplicity, is how every client’s voice counts. Many law firms have built their brands around the 1% of their clients, with the complaints about slowness, low quality, conflicts of interest, costs, and other issues of the 99% drowned out.

NPS imposes a level of transparency that punishes anyone who isn’t disciplined with what clients they take on, to ensure consistent quality. It actually forces you to focus, because the needs of an unfocused client base are so broad, that you can’t deliver consistency. NPS punishes bloated, unfocused, overly extended scale. 

While we don’t have the structural problems of large firms, we definitely deal every day with the training, recruiting, technological, cultural, and business development challenges of any high-end service provider that handles complex, high-stakes human (as opposed to automated or manufactured) services.  But what matters most is that we have a score for today, for last year, and for next year, to gauge whether we are doing our job, instead of the 100 other things that other people love to talk about, but are not actually our job.

And what I’ve found most interesting, and compelling, is how when you focus your strategy around NPS, the competitive advantages you build are durable. So many of the ways that law firms try to compete in the market can be easily bought: a piece of software, a key lawyer with a big book of business,  a sponsored event where influencers get together, a side deal to a market player in exchange for referrals. But by being purchasable, they’re also easily replicable by anyone else with money.

Delivering scalable, consistent, long-term quality – what results in a high NPS score – is infinitely more complex and time consuming to build, especially when you’re dealing with lawyers. There’s no main “secret” behind what we’re doing. It’s 1,000 little insights and implementations, compounding daily.

My advice to lawyers contemplating starting their own firms is to always, first and foremost, get absolute clarity around (i) what clients they want and don’t want, and (ii) then ask those clients what they want; then start building, and collect your NPS regularly. Focus, and the ability to learn and iterate quickly, is the core strategic advantage of the boutique law firm ecosystem.

And my advice to potential clients when diligencing lawyers is to start out with one question: “What’s your NPS?”  The answer, even if it’s not a number, always speaks volumes.

The problem with chasing whales.

TL;DR: Always trying to work with “the best” people in any category – investors, advisors, accelerators, service providers – can result in your company getting far less attention and value than if you’d worked with people and firms who were more “right sized.”

Background reading:

Founders instinctively think that pursuing the “best” people in any category is always what’s best for their Company. Need VC? Try to get Sequoia or A16Z. Need an advisor? Who advised the founders of Uber and Facebook? Need an accounting or law firm? Who do the top tech companies use?

The problem with this approach is that it confuses “product” value delivery – where what you get is mass produced and therefore uniform – with “service” value delivery – which is heavily influenced by the individual attention you are given by specific people of varying quality within an organization.

If you buy the “best” car, it doesn’t matter whether you’re a billionaire or just comfortable, you paid for it, and you get effectively the same thing. Buying the “best” product gets you the best value.

Don’t chase whales if you’re not a whale.

However, if you hire the “best” accounting firm, that firm will have an “A” team, a “B” team, and possibly even a “C” team within it. That is a fact. Every large service-oriented organization has an understanding of who their best clients are, and allocates their best people and time to those clients, with the “lesser” clients often getting terrible service. To get the “best” service from one of the best service organizations, you need them to view you as one of their best clients; otherwise you’re going to get scraps.

To get real value from a “whale,” you need to be a whale yourself. Chase whales (the absolute best people in their category) without having the necessary weight to get their full attention, and they’ll just drown you. In many areas of business, getting the full attention and motivation of someone who is great, but not olympic medal level, can be far better for your company than trying to chase those who may take your money or your time, but will always treat you as second-class, or a number. I call this hiring “right sized” people. 

Firms matter, but specific people matter more.

I use this reasoning a lot in helping founders work through what VC funds they are talking to. The brand of the firm matters, but you want to know exactly what partners you are going to work with, and you want to talk to companies they specifically have worked on, to understand how much bandwidth you’re going to get. There is a wide range of quality levels between partners of VC firms, and going with someone local who will view you as their A-company and give you the time you need can be much more important than being second or third fiddle at a national marquee firm.

We also use this reasoning in explaining to clients how we see ourselves in the legal services market. We do not work for Uber or Facebook, and we are not even trying to work with the future Ubers or Facebooks, or other IPO-seeking companies of the world. The very high-growth, raise very large rounds in pursuit of an eventual billion-dollar exit via acquisition or IPO approach is suited for certain kinds of law firms and practices designed for those kinds of companies. Most of those firms are in Silicon Valley, because most of those companies are in Silicon Valley.

There was a time when every tech ecosystem looked to Silicon Valley for guidance, and did everything it could to get its attention. Now a lot of people outside of the largest tech ecosystems have come to realize that, in fact, Silicon Valley isn’t really that interested in them; and thats ok. Those SV funds, firms, and people are whales looking for other whales. That is totally fine – the world needs whales, but the rest of the world needs help too.

If you are a unicorn, or legitimately are viewed as on the track to be a unicorn, then working with VCs, advisors, law firms, and other service providers that cater to unicorns will get you great service by ensuring you are working with the top quality individual people within them.

Hire within your class.

However, a recurring trend we’ve seen in many areas, including legal, is companies initially hiring one of the national marquee firms because they wanted the “best,” only to realize that not only were they working with that firm’s B-player or C-player, but even getting responses to e-mails from a specific person was a matter of days and even weeks. By “right sizing” their service providers, they fixed the problem.

In short: be honest with yourself about what you’re building, and then be honest about whom you should build it with. If a $100MM or $200MM, or whatever non-unicorn number, exit would be a true win for you, that is nothing to apologize for. The world needs those kinds of companies; lots of them. But to avoid a nightmare, align yourself with people truly “right sized” for a company on that kind of track.

When hiring any firm in any service industry, ask who exactly your main contact will be, and talk to the clients/portfolio companies of that specific person. Does their client base look a lot like the company you’re building? How responsive are they to you in your initial communications? That can tell you a lot about what level of bandwidth/priority you’re going to get from them.

For the kinds of strategic relationships that really matter, where the quality of advice depends on specific people and the attention they’ll give you, focus on “right sized” people; not just engaging the “best” firms. Don’t get pulled under water by chasing a whale that isn’t really that interested in you.

Scaling Strategic Counsel

TL;DR: There is no shortage of entrants into the legal market who pretend that some magical formula, or piece of technology, or amount of money, is the key to “disrupting” law firms with prominent reputations. For the kinds of lawyers who do far more than just push paper, it usually ends up as different versions of the same flawed story.

Background reading:

I’ve spent a lot of time analyzing how the consumers of legal services think and behave. In doing so, I’ve had a fun time watching the evolution of various hypotheses held by legal market entrants (firms, solo lawyers, technology companies), and predicting where they would go. Success in any business (including the legal business) doesn’t require psychic abilities, but if you have good instincts for human behavior and psychology, you can surprise people with how accurately you can predict the future.

“Faster and cheaper” can take you far in many industries. And while “startup law” isn’t entirely an exception to that rule, there are subtle but extremely material factors that make it particularly challenging to build and scale a serious emerging tech law firm.  The below are some personal thoughts on how emerging companies (startups) select their lawyers, the flawed hypotheses that lead many players in the legal market to fail or stall, and principles we’ve held as we’ve patiently grown E/N from a handful of people into a leading emerging tech/vc boutique law brand scaling outward from Texas.

1. Long-term, quality really matters. A lot.

“The bitterness of poor quality remains long after the sweetness of low price is forgotten.” – Benjamin Franklin

When you purchase a family vehicle, or select a surgeon, more likely than not price is not the final determining factor in what you end up buying. But for a lot of people, I would bet price plays a bigger role in purchasing a meal, or a piece of clothing.

Why? Because the stakes, and consequences of a serious error, are much higher for the former. Long-term thinking purchasers of legal counsel understand this extremely well, and it’s the reason why despite there being a glut of lawyers broadly, those in the top quartile, particularly those who serve the C-level among companies, have never done better. “Minimally viable lawyers” are not doing very well.

“Move fast and break things” is an extremely valuable philosophy in a context where mistakes are easily, and unilaterally, fixable; which is why it emerged from software entrepreneurs. In the legal world, where something broken very often cannot be fixed, and something as minute as the absence of a few words, or a single missed step, can completely and permanently alter the outcome, it is a stupid and dangerously reckless way of approaching things.

Efficiency is absolutely important. To say that quality really matters is not at all to say that cost is irrelevant, or that smart clients don’t dislike seeing waste. We love adopting new technology, and the speed at which we (as a boutique) can do it makes us a magnet for legal tech startups. However, a foundational principle of E/N’s sustainable growth has been that we deliberately filter out prospective clients who clearly do not value legal counsel; no matter how promising their business may be.

Just like the economic viability of Tesla, or any high quality brand, requires consumers who are willing to pay what it takes to deliver quality, the viability of any serious law firm requires clients for whom low cost is not their primary principle in assessing legal services. All early-stage startups face challenges with legal budgets, but smart law firms learn to identify when the issues are coming from real budget pressures that can be accommodated v. a personal sentiment that legal services are just overhead spend to be minimized.

I’ve seen many law firms fail by thinking that “we can do it cheaper” is, alone, an effective business development strategy. First, that strategy inevitably attracts the worst, most disloyal, clients; who treat lawyers as fungible commoditized vendors. Second, the smartest clients know that, without trustworthy evidence that quality has not been hit, very low prices signal very low quality, which is too risky for a high-stakes service.

2. For strategic advisory, independence and creative judgment really matter.

There are two levels of legal work that a serious corporate law firm can provide. One is transactional counsel, where the goal is to get it done, correctly. Precision (quality) and efficiency are the primary values for transactional legal work. You definitely want a law firm that can demonstrate that they take precision and efficiency seriously.

The next level of service is a lot rarer in the market, but the smartest clients seek it out: strategic counsel. Strategic counsel isn’t about executing a plan of action with precision.  It’s about creating a plan, and that requires creativity (stepping outside of a standard playbook) and social intelligence (what does this specific client care most about?). What should you do? Why should you do it? What will happen if you do X or Y? How will other players respond?

To use metaphors, merely transactional lawyers help you play checkers, but strategic counsel helps you play chess. And at the highest C-level issues in complex markets, you better believe you are playing chess. For that kind of work, the judgment of the particular lawyer (apart from the firm) you are working with is extremely critical, and it’s why I’ve written before that avoiding “captive” counsel (getting independent judgment) in this context is essential. For startups/emerging companies, very very few advisors are able to integrate deep knowledge of legal issues, market norms, contract comprehension, financial structures, and strategic analysis the way that a top VC lawyer can.

A big area where I’ve seen law firms fail in recruiting is a lack of appreciation for this transactional v. strategic divide. They care so much about credentials and “IQ” skills, which are important for accuracy, that they neglect to hire for the kind of strategic judgment that the smartest clients seek out, and are willing to pay for. Good strategic judgment is as much about instincts, situational awareness, and character as it is about intelligence. Fail to recruit for them, and you’ll get high-precision paper pushers. 

Even within large firms with very prominent brands, you often notice a wide disparity among partners in terms of their ability to attract clients. The driving force behind that disparity is judgment. Clients know most of the lawyers at that firm can execute a task properly, but the number of lawyers who can really advise on core strategic matters (like a term sheet, or a key hire) – and particularly the ones who will do so for a small (but promising) company – is significantly smaller.

3. You cannot assess quality without diligencing reputation.

As I wrote in “Ask the Users,” for the most important people building your team of advisors, service providers and investors, you cannot afford to rely on highly ‘noisy’ signals like social media, PR, public reviews, or even blogs. The level of BS spin that money can buy you on the internet is boundless. You must go directly, and confidentially, to people who’ve worked directly with those people, and get their off-the-record feedback.

There are certain qualitative aspects of legal counsel that are highly visible to a client very quickly in their relationship with a law firm. These are usually things like responsiveness, soundness of advice, efficiency, technology, etc., and they are very important. Delivering on these variables is very complex and hard for a law firm, so hearing good user feedback on them is a good sign.

However, legal services are somewhat unique in that the full truth about their quality can take years to reveal itself to a client. At very early stage, where a lot of documentation is heavily precedent driven and transactions move fast to keep bills down, founders/executives often don’t spend very much time actually reviewing the work product of lawyers in depth. They assume it says what it should, and they often don’t even know what it should say. 

It’s in Series A or M&A diligence, with serious counsel on the other side of the table reviewing the legal history, that the wheat really gets separated from the chaff among VC counsel. And people who’ve played the VC/Emerging Tech game in depth know that there’s a lot of “chaff” even among prominent law firm brands.

You can think of the end-product of a law firm as software code that truly only gets reviewed/run every few years in major milestones. Major “bugs” can sit there for years, compounding enormous legal technical debt, without anyone on the business team being aware. When you diligence counsel, you want to hear about what errors/mistakes were discovered in VC or M&A diligence, which means talking to companies that actually got there. Doing a great job at pumping out option grants or convertible notes is not a reflection of the kind of legal quality that matters long-term; nor, frankly, is having worked for a few years at a prominent law firm brand. People deep in the game have many horror stories about how the B or C-player at a firm with a marquee brand screwed something up badly. 

Conclusion: This sh** is hard. Really hard. Way more complicated, if you want to scale sustainably, than putting together a few half-decent lawyers, having them put on jeans, and buying them MacBooks; which is pretty much the extent of what many boutique firms do.

With respect to serious emerging tech legal services, including strategic counsel, you’re talking about building something at scale that addresses all of the following:

(i) extremely small details can have extremely large and often irreversible consequences that are undiscovered until years later;
(ii) because every client’s needs are widely different, you are squarely in highly customized services, not automatable product, territory;
(iii) your ability to attract (and pay for) highly-educated human talent with very subtle behavioral differences dramatically influences the quality of your highest level service;
(iv) you have to be able to filter out the prospective clients who simply won’t pay the real cost of your service, regardless of their budget or how efficient you are, while being flexible/patient on budgets with (hopefully) good clients in their very early days;
(v) there is a part of your industry that is hell-bent on proving that some magical piece of technology is suddenly going to render you irrelevant; and
(vi) aggressive, influential players are sometimes trying to undermine your ability to provide your clients honest advisory.

Though you will endlessly hear opinions to the contrary, there simply is no “move fast and break things,” “mvp and iterate,” “just throw lots of money at it” formula that gets the job done in complex legal services; not if you take quality seriously. And this is why “disrupting” the status quo has proven so difficult despite the fact that it’s a large industry totally exposed to people whose entire MO is to disrupt things.

And yet here we are, patiently putting together the intricate pieces of this unique puzzle, and continuing to grow. Lawyers have popped up claiming to be cheaper, and yet we’ve kept growing. Software tools have popped up pretending that the primary challenge of our industry is a technological one (it’s not), and yet we’ve kept growing. Influential market players have tried to convince our clients to switch to “captive” firms, and yet we’ve kept growing. This is not some “scale fast at all costs” game we’re playing; not when the cost would be exposing good, hard-working people to extremely costly errors.

While we’ve definitely broken more than a few rules of conventional wisdom for how law firms are usually run, we are still here to do our job, correctly, honestly, and efficiently; and to win the trust and loyalty of people who truly value what we are built to deliver.

And for the many people out there who might find all of this a bit passé, no worries. There are plenty of alternatives out there to suit you.