The Power of a System

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How to build the law practice of your dreams

power of a systemReaders of this blog know it includes a random book report from time to time, and this is one of those times. I read John H. Fisher’s The Power of a System; How to Build the Injury Law Practice of Your Dreams last summer and I have bought it for more than one real estate practitioner. Today, I recommend it as excellent reading for the readers of this blog.

At the beginning of his medical malpractice firm, Fisher wished for a step-by-step manual for running a profitable practice because, like the rest of us, he was not taught strategic planning, goal setting, business metrics, managing employees, managing clients and marketing in law school.

The author has developed that manual for a personal injury law firm, not just technical systems for running a business, but also the managerial and entrepreneurial principles to keep a constant stream of new cases and clients coming down the pipe.

The three parts of the book, The Technician, The Manager and the Entrepreneur, are based on Michael E. Gerber’s classic book, The E-Myth Revisited, another favorite of mine for law firm management. Gerber’s message is that every lawyer should set aside time each day to work on the business through strategic thinking instead of only spending time working in the business through technical legal work. Fisher’s book provides systems for all three roles the law firm owner must play.

Mr. Fisher provides us with a glimpse into his daily work life through his office rules. Those rules are based on the theory that staff members should handle every aspect of a practice that don’t absolutely have to be handled by the attorney. In the residential real estate practice, the functions the attorney must handle would include the closing, the second review of title, and the resolution of legal issues that arise in connection with conflicts, title and closing. Rules in a residential practice would be in writing and would make it clear that staff members are responsible for keeping attorney time free to touch those matters that only the attorney can handle.

The author’s rules deal with dress code, internet use, cell phone use, personal errands and timeliness, how to avoid interruptions and completing assignments. He has “scripts” in place for handling telephone calls, and insists on answering the phone with a smile. My favorite is his “no-gossip rule”. His rules are robust and demanding. But putting those guidelines in practice and enforcing them would ease day-to-day conflicts and stresses that arise among staff members.

This law firm outsources manual tasks by using companies such as Elance.com (now Upwork.com), Your Man in India (YMII) and Brickwork. The author believes that outsourcing has allowed his business to become a 24 hour/day law firm.

Fisher’s emphasizes treating new clients with “shock and awe” to demonstrate that he “shows up like no one else”. His package includes his book The Seven Deadly Mistakes of Malpractice Victims. Each book is personalized and signed, for example, “Dear Mary”. The package also includes audio informational CDs and a binder of office policies including a “Client Bill of Rights”. Each client should understand communicating with his or her lawyer from the outset of the relationship.

Mr. Fisher believes in setting goals and measuring everything. Measuring law suit time frames reduces costs and increases profitability. Real estate lawyers should set goals and measure time frames for closings. By measuring time frames for title work, surveys, termite letters, receipt of closing numbers, receipt of lender closing packages, commitment preparation, closing document preparation, recording, disbursement, satisfactions and distributing final documents, a real estate practitioner would ascertain where systems are routinely bogged down and would be able to work toward fixing those pressure points.

The author believes in marketing to the “ideal client”. While I usually have to translate books like this for real estate practices, Mr. Fisher did the translation for me in this regard. This is his paraphrased message to us:

If you are a real estate lawyer, are your ideal clients the homeowners buying a new house? No! The homeowners will use your services one time for a fee of $750, and you will likely never hear from them again until they buy another home. You will be broke by the time the homeowners need you again. The ideal client for a real estate lawyer is the real estate agent who refers a steady stream of new homeowners. The goal is not to make money on a single transaction. Rather, the goal is to develop relationships with your ideal client that will generate new clients and a steady stream of income for the rest of your career. The lifetime value of your ideal client is far greater than the value of a single transaction.

The book outlines three simple marketing rules that the author says will place a lawyer ahead of 98 percent of the competition:

  1. An informational-powerhouse website that provides killer content on a daily basis;
  2. A monthly newsletter targeted to the ideal client; and
  3. Regular seminars and workshops that provide valuable content to the ideal client.

He gives details on producing the monthly newsletter and establishing regular event marketing in the form of seminars and workshops.

We could all use an entire school-year class in law office management including each aspect of the work Mr. Fisher emphasizes. Since that class doesn’t seem to exist, I will do my best to obtain and communicate the information dirt lawyers need in this regard. As a favorite political pundit routinely says, “watch this space.”

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Nat Hardwick sentenced to 15 years

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Nat HardwickThis blog discussed Nat Hardwick, a name familiar to many South Carolina real estate lawyers, last fall when he was convicted of embezzling more than $25 million from his former companies, including his former law firm, Morris Hardwick Schneider. Last week, he was sentenced to 15 years in prison. His co-conspirator and controller, Asha Maurya, was sentenced to seven years after she cooperated with the government.

Nathan E. Hardwick IV, 53, described himself as the face of Morris Hardwick Schneider, an Atlanta residential real estate and foreclosure firm that grew into sixteen states, including South Carolina. The firm once had more than 800 employees and boasted of offices in Charleston, Hilton Head, Columbia and Greenville.

On October 12, Hardwick was convicted in federal court in Atlanta of 21 counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of making false statements to a federally insured financial institution. In federal court, sentencing is typically delayed, and the convicted person is released and allowed to get his affairs in order. In this case, however, Hardwick had been released pending trial on bond. After his conviction, he was described by the U.S. Attorney who prosecuted him as a flight risk and was handcuffed and taken to jail immediately.

This story hits close to home. My company was one of the victims of the crimes.

The prosecutor described an extravagant lifestyle that Hardwick enjoyed at the expense of others. The case was said to be particularly troubling because the illegal activity was orchestrated by a lawyer who swore an oath to uphold the law and represent his clients with integrity. The U.S. Attorney said he hoped the case sent the message that the FBI and the U.S. Attorney’s office will not tolerate this type of white-collar crime.

According to the evidence, from January 2011 through August 2014, Hardwick stole more than $26 million from his law firm’s accounts, including its trust accounts, to pay his personal debts and expenses. The firm’s audited financial statements showed that the firm’s net income from 2011 through 2013 was approximately $10 million. During that time, according to the evidence, Hardwick took more than $20 million from firm accounts.

Asha Maurya, who managed the firm’s accounting operations, reached an agreement last May with the U.S. Attorney’s office and pled guilty. She was expected to testify at the trial, but was unexpectedly not called as a witness.

Hardwick did take the stand in his defense and attempted to blame Maurya with the theft. He said that he trusted her to his detriment, that he was entitled to the funds, and that he was unaware that the funds were wired from trust accounts. Hardwick testified for more than a day and explained that he believed Maurya followed proper law firm procedures.

On the stand, Hardwick, described as the consummate salesman, said that he gave his cellphone number to almost everyone. He said he returned calls and messages within a few hours and instructed his employees to do the same. He apparently believed himself to be a master in marketing and customer service and prided himself in focusing on the firm’s expansion strategy. He hoped to expand to all fifty states and make money through a public stock offering.

With his ill-gotten gains, Hardwick bought expensive property, made a $186,000 deposit for a party on a private island, spent $635,000 to take his golfing friends to attend the British Open in 2014, paid off bookies, alimony obligations, and sent more than $5.9 million to various casinos, all according to trial evidence. Hardwick’s activities lead to the loss of his law license and the bankruptcy of his firm.

Forgive me for repeating myself

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But practitioners really need to read The Lean Law Firm

In October, this blog discussed a book I had just read,  the 2018 ABA Law Practice Division book, The Lean Law Firm, How to run your firm like the world’s most efficient and profitable businesses.  Now that I have attended a South Carolina Bar seminar by the authors, I am even more convinced that the methodology this book embraces is exactly what residential real estate practitioners need to adopt to assist them in reducing stress and growing value in their practices.

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One of the authors is Columbia consumer lawyer Dave Maxfield, who happens to be the brother-in-law of my co-worker, Dorothy Boudreaux. The other lawyer, Larry Port, is CEO of Rocket Matter, the cloud based legal practice management software company. The January 31 seminar made an impactful initial point: most law firms are in survival mode. They won’t progress unless the lawyers step back and take a look at the business to gain perspective.

What is a lean law firm?  In the words of Larry Port, being lean is not about cost cutting. “It’s more about creating systems and then finding the constraints and inefficiencies that impede them. Lean lawyers believe in measurement, reducing waste, and producing as much value as they can for their clients. And more than anything else, Lean is about experimentation and continuous improvement.” The processes set out in this book are intended to teach lawyers how to increase their income while they are reducing their stress.

Unfortunately, most lawyers have little or no awareness of the value of creating systems. We are not taught to run businesses in law school. The lawyers I know and love are so busy practicing law that they don’t take the time to modernize, to focus on processes, and to create the systems that will allow them to run their firms like efficient and profitable businesses.

Wouldn’t your closing process be improved if you were able to figure out and reduce or eliminate those matters that cause delay? I was in an office recently and noticed a great deal of foot traffic by staff members. I asked where everyone was heading and was told they were all probably looking for files. Wouldn’t that office’s process be improved by using closing software that makes every file constantly available to every person involved in the closing? I was in another firm with multiple branches and learned one branch had templates for the title work for each subdivision, but the other branches didn’t have access to the templates. Sometimes, just stepping back to take a look will reveal small tweaks that can vastly improve systems.

One of my favorite suggestions from the book is the use of Kanban boards, a project management tool used to visually depict work at various stages. The simplest Kanban boards would have three columns: “to-do”, “doing” and “done”. A Kanban board for a residential closing office might have these columns:  “file opening”, “pre-closing”, “title”, “document preparation”, “closing”, “recording”, “disbursement” and “post-closing”. Each closing would be depicted in the appropriate column. By paying attention to this workflow tool, a closing attorney would learn quickly where work bottlenecks, and improvements could be made efficiently.

I believe the advice I once heard:  every time you touch a closing file after the closing, you lose money. A Kanban board might reveal whether reducing the numbers of post-closing touches in your office would increase the income from each closing.

Does the book sound like dry reading to you? It is not that at all. In fact, it is the first book published by the ABA to employ the graphic novel approach. It is written in the form of a story about Gray Law Firm, a small struggling firm, it’s newly-hired, former big law lawyer, Carson Wright, who wants to help  “fix” the law firm, and Carson’s friend, Guy Chaplin, who runs an extremely successful racing bicycle manufacturing and distribution company.  Guy slowly teaches Carson the business principles that make his company successful. And Guy helps Carson figure out how to apply those principles to his law firm.

I have to warn you that the book contains a lot of math. I am not a math scholar by any stretch of the imagination, and I was able to follow the formulas and to see how they would work well in a law firm that handles real estate, especially residential real estate. In fact, my only complaint about this book is that it is not geared specifically to real estate practitioners.

The book gives very specific advice about the basics of management, standardization, written procedures, checklists, marketing, goal setting and technology. A South Carolina real estate lawyer might find that some of the advice doesn’t apply, but I’m betting that most of it does apply, and I am encouraging everyone to order a copy of this book at www.ShopABA.org and to take its advice to heart.

I am now in the process of twisting Dave’s arm to translate “Lean” to residential real estate. If I am successful, I will certainly share his wisdom with my friends who practice residential real estate in South Carolina who are probably battling survival mode as they read this.