Last weekend I decided to try out an escape room. If you haven’t heard about these, you are temporarily locked in a room and given a series of clues to solve various puzzles in order to “escape.” It was a ton of fun, very challenging, and we were able to escape with just ninety seconds to spare. Three of the six of us were attorneys, so before we entered we asked the operator of the escape room, “How do lawyers do? Are they better than average at figuring out how to escape?” The answer was somewhat surprising. “The young groups of lawyers do extremely well because they work together to solve the multiple problems they face. The worst I’ve seen was a group that included the firm management. The leader was so focused on being in charge, they couldn’t get anything done.” It was very interesting figuring out the multiple combinations and locks in the escape room, even though we had a group of six very bright people, there was no real star. Each person figured out different types of problems, and without all six of them I’m not sure we would have escaped. Since the escape room, I can’t stop asking one question: when will law firms figure out that they don’t know everything? Or to put it another way, when will law firm management accept that a large committee of senior lawyers, no matter how smart, is an extremely problematic organizational structure.
This past week at LSSO Raindance in Dallas I learned that among the AmLaw 100, (the top 100 firms according to revenue in the United States) only twenty-five percent have a CMO that serves on the Executive Committee (according to LexisNexis). When I shared this fact with a large legal marketing Facebook group I’m part of, most marketers excused it by saying, “Our firm’s organizational structure doesn’t allow it” or “We do participate in the Marketing Committee meetings.” But think about it this way, seventy-five percent of these massive organizations with thousands of employees and over one hundred million a year in revenue are being led with no participation at the top from experienced marketing professionals. That’s like running a massive business without a CFO. That isn’t even the most concerning revelation coming out of the event in Dallas. I also learned that most large law firms spend less than two percent per year on marketing. I’m not talking about billboards and website either. I’m talking about two percent total for the payroll of the marketing team, website, and all other marketing expenditures. To put this in perspective, most businesses spend 10.2% or more on marketing (according to Gartner Research). Salesforce spent over fifty-three percent on marketing last year. Per lawyer, the average spend by a law firm is a meager $4,000 per attorney.
“But law firms aren’t like other companies.”
I don’t buy the excuse that law firms are different. Law firms are now competing with regular companies every day and those companies are cutting into the traditional law firm market share in ways most firms aren’t even noticing. Here are just three traditional businesses that didn’t exist ten years ago, but now have become billion dollar industries that could have belonged to law firms:
(1) The Legal Process Outsourcing business crossed one billion in annual sales back in 2012 (The LPO Program 2012) and has experienced an average of over thirty percent annual growth. Anybody think for a second they are investing two percent or less in marketing? (2) document automation services companies like
(2) Document automation services companies like LegalZoom (valued at over $425 Million in the most recent round) will continue to hack away at more and more complex work that lawyers felt they would keep. LegalZoom may be the biggest, but there are now hundreds of companies offering automation services that almost completely cut out the traditional law firm market.
(3) Perhaps the biggest threat law firms face comes from a less likely source—the accounting industry. More specifically the big four. PWC now has over nine hundred lawyers handling work that would have been traditionally sent to large law firms. How much did they grow last year? Twenty-four percent (statistic shared by Rick Davis of RSM at LSSO). I can guarantee that PWC spent more than two percent on marketing to achieve a twenty-four percent growth rate.
Law firms need to start thinking and acting like companies, not law firms. For the past fifty years, they had the luxury of only having to compete with other law firms. Some may argue this made them complacent, but I don’t think complacency is the real story. I think wealth has been the bigger issue. Richard Susskind famously stated, “It’s tough to walk into a room full of millionaires and convince them they are doing it wrong.” As Kodak learned a few years back, it is possible to be rich and wrong.
“Our firm is just a couple of funerals away from real change.”
This was a quote shared with me at LSSO that I absolutely loved. It’s really kind of sad, isn’t it? Why does seniority matter so much in these large firms? Why do firms need to wait for the old guard to die off to think strategically? I heard about one firm where a senior partner, with no training or experience in marketing, named themselves CMO. What? Could they have named themselves CFO without any experience in accounting? Or maybe call themselves a doctor without going to medical school? The reason marketing spend is so low at law firms is because most lawyers don’t truly understand business. They think there are only two ways to grow (1) hire more lawyers and (2) raise rates. As long as firms are stuck in this mode of thinking, there isn’t much hope. The biggest threat facing law firms is ignorance. They are so extremely bright, but they don’t know what they don’t know. Every few years there is a massive branding craze among these big firms and they may spend two hundred thousand or more to “reinvent themselves” with one of the same branding agencies that help all law firms reinvent themselves in a similar way. The only problem? By the time they are done “rebranding,” not only have they spent their entire marketing budget for the year, but all of their marketing and business development folks have been so focused on rebranding that they haven’t been able to get any other work done.
“Of course you think firms should spend more on marketing, you have a marketing software company.”
Fair point. It doesn’t mean I’m wrong. Marketing is fundamental to growing business. Don’t take my word for it, just look at every single other business that is successfully growing. Look at every single Fortune 500 company and Forbes 5000. They all are investing heavily in marketing. This is not a carefully guarded secret.
There was a moment during our time in the escape room when the six of us had broken up into three different groups and we were frantically solving three different problems because we only had nine minutes left to “escape.” Almost simultaneously, the three different puzzles came together, we found the last three clues, and we escaped at the last minute. If we hadn’t trusted each other and really collaborated as a team, I’d still be stuck in that escape room. (Full disclosure: they make you leave after your sixty minutes are up, even if you don’t solve the clues.) What will it take for law firms to learn the same lesson? They need collaboration from CFO’s and CMO’s that fill in the gaps for what they don’t know. They need real investment in growth and marketing. They need to learn from other industries or they will stop growing. Once firms or companies stop growing, it’s the beginning of the end. In the escape room, if you get stuck on a single puzzle for too long, the operator will sometimes slip a “clue” under the door to help you. I’ve got one final clue for law firms, “To escape the coming storms of competition from outsiders, you must quickly learn to run your firm like a real business.”
Adrian Dayton is the author of two books on business development for law firms through social media. He has consulted with and spoken to over one hundred firms and more than thirty AmLaw 100 firms. He has trained over fifteen thousand professionals on the effective use of social media to bring in business. He is also the Founder of ClearView Social, and recently it was announced that this October, the College of Law Practice Management will induct him as a Fellow.