I must admit that I never knew the name of the rule known as The Pareto Principle, which I had often called the 80/20 rule. Susan Cartier Liebel, the Founder and CEO of Solo Practice University®, recently used the phrase in an article for ALPS (professional liability carrier) advocating better use of one’s time for marketing and business matters. It seems Italian economist Vilfredo Pareto observed in 1906 that 80% of the land in Italy was owned by only 20% of the population; he further developed the principle by also observing that 20% of the pea pods in his garden contained 80% of the peas.
I am told business management consultant Joseph M. Juran later suggested the principle and named it after Pareto. Apparently it is one of those business school concepts founded in math from the law of the vital few, and the principle of factor sparsity and it states that, for many events, roughly 80% of the effects come from 20% of the causes. Hey, I went to Law School because I was lousy in math. How does this relate to my law firm’s practice?
Like me, how many times have you heard these statements mentioned?
• 80% of the problems in a firm come from 20% of the people (what happens if you get rid of the smaller percentage?)
• 80% of your profits come from 20% of your customers (maybe concentrate more on the 20%);
• 80% of your complaints come from 20% of your customers (maybe get rid of the 20% complainers)
• 80% of your profits come from 20% of the time you spend (maybe readjust your efforts to the ones supplying most of the profits);
• 80% of your sales come from 20% of your products (maybe eliminate some of the products).
All of this is heady stuff for a math challenged loss prevention lawyer. I submit there are lessons to be learned here for law firms about efficiency and better use of your time, all by making math your new friend. Instead of chasing the elusive new start-up, what about providing better service to your client base that gives you 80% of your business? I and many others preach that good loss prevention makes for very good marketing, so maybe this principle applies there also.
So, in concentrating upon your good clients and better quality of service, why not just get rid of your problem clients who are causing you issues, taking up your time and likely to make claims against you? Tell the member who represents these pesky high-maintenance and late-paying marginal clients my favorite double entendre: “We do not deserve to be their lawyers.” Firing a bad and problematic client, appropriately of course, may just make you feel so much better and be so much better as a firm. Think of all the available time you will have to better serve the company or individuals paying much of your overhead. Go make them happy instead of constantly trying to collect from this small group of late-paying and demanding clients who are trouble. Do not be so bashful — go out there and just fire them as clients.
Likewise, why are you spending time with problem lawyers in your firm who will not turn their time in, will not comply with firm loss prevention policies, cause personnel problems, and on and on? Really, everyone justifies it by saying he/she is a really good lawyer and we just need to work with them. Sure, but why keep doing it year after year? Look back over the last year and see who has dominated your firm’s management time, and again ask yourself why keep doing that when most of your lawyers are knocking it out of the park with no required attention (probably 80% of them)? Bruce MacEwen who writes the legal site Adam Smith, Esq. tells firms to take one of the recurring offenders out and hang them. The message will be clear and your problem load is lightened.
A little harsh in my old age some may say. No, it is like snow skiing, where there will be changing terrain and changing conditions. Times have changed quickly and in the legal profession we need to adapt to the changes much quicker. The old law firm systems painted over many of these issues in firms and no one dealt with them. I suggest you better change your methods to deal with these changing conditions or you may appear in a legal blog article on the demise of …..(insert you). Maybe math can help you do the necessary — to adapt and change quickly using Mr. Pareto’s Principle.