Are we there… Yet?

There is none like the piercing sound of a little voice breaking the silence only to gauge the point of arrival at the destination. On a trip, the arrival at a physical destination is populated with signs; however this may not be the case when anticipating change without progress markers. More often than not, change; personal or corporate does not occur in isolation. But rather it is a cog in a highly complex environment that is constantly undergoing transformation.

As the global economy continues its daily oscillation between financials bearing red or black, organizations continue to search for the silver bullet; that one illusive ‘magic’ fix that will catapult their organization out from this current economic turmoil. One needn’t look far to experience the explosion of seminars, webinars, articles and the like meant to help you catapult to a better tomorrow. What is so amazing is that many of them come at the right price – FREE. This pricing model is something that subversively attacks the very definition of value.

Several years ago I wrote on the concept of a market continuum, where organizations in a similar market niche become placed along the ‘success continuum’ based on their inherent nature to adopt change. At that time I argued, that their placement on the continuum is the result of organizational culture and its related risk sensitivity. Although I believe this still continues to be the case, I believe that market forces have exposed more elements to these phenomena. To get to these other forces, I believe we need to begin with an understanding of organizational change.

The only thing that is constant in the world is change and this is especially true at the corporate level. Organizations are under constant bombardment from economic and social forces that continuing along the status quo is the road to extinction. Organizations must continue to respond to their environment by making alterations [change] to continue to hold their place along the market continuum. It is the progressive organization that is able to leap out and upset the market continuum as a means of gaining the competitive advantage.

As an attendee at a recent symposium on change, I listened intently for something that I hadn’t heard before – me and 500 other attendees. What was spoken was none different that any 1^st year MBA student would gleam from a text book. After hearing it and reading it 100+ times, this time something was different. This speaker espoused his acronym that is the pivotal point to long lasting change – VIM.

Long lasting change is built on VIM - Visualization, Intention and Methodology. Although very simply in vernacular the essence is very deep. For successful change to occur, the change agent must be able to ‘see’ what the end result of the change will be – somewhat like arriving at the planned destination of a long trip. Without this visualization – any end result will do. In the corporate environment, this visualization must be in the hearts and minds of all. If there are nay sayers on the team, their negativity will be a force that derails the entire plan.

The second major facet of lasting change is the Intentional aspect. Intention is the motivation which is the force to continuing along the road to the visualization. The element of intention is the determination to achieve the end goals, this, however is where greater elements of leader ideals become apparent. The last and probably most important factor in change is ‘methodology’. Without having a clear plan of orchestrating the steps to long lasting change, all other elements of VIM are rendered useless.

The important thing to recognize is that these elements do not operate in sterile isolation. There are two major forces, I feel, at work in adopting change. There is the organizational stimulus to the market and the market response. The one thing that is never considered during change is the human element; those inner psychological workings that impact the very foundation of change. This element is probably not addressed possibly because one could assume that talent and human traits are evenly distributed in the market place, or possibly that authors are only attempting to extricate the human element and profess the academic side of change.

In his recent article 'Creating a Master Plan', Mark Wadell professes the road to reaching an objective begins with an examination of the present; the famous S.W.O.T analysis. For the MBA student, S.W.O.T analysis becomes second nature. It is easy to examine a sterile organization on paper and work out its position on the market continuum. But how do the challenges of present analysis and ultimate change become distorted when the conductor is not objectively looking in from the outside. Once inside the organization, all leader actions are veiled by inner persona which can be riddled with neurosis and even psychosis. Couple the myopic leader with a subordinate staff who, because of the economy, are fearful of being made redundant and the possibility of a distorted group think will run rampant.

The question begs, how are organizational goals to be achieved when there are so many forces acting on the organization? Should there be greater internal controls to mitigate the possibility of oppression of the narcissistic leader? Creating a model of greater internal controls meant to nullify the flurry of psycho-oppression may; in fact, stifle the brilliant eccentric who has the ability to catapult the organization beyond its current abilities, may be conceivably possible. Alternatively, the organization could be dealing with the myopic narcissist, who is taking the organization into an abyss.

Probably the best way to identify and thereby react to the organization’s leader comes from the culinary adage "The proof of the pudding is in the eating". The quality of an organizational leader is only discerned by the results of their actions. All leaders will indelibly change an organization, whether it is through tremendous innovation or sanguine financials.

Value – The Measure of Success

The last decade has demonstrated how no individual is immune to economic decimation. The Great Recession, as termed by many scholars, could be as devastating as the Great Depression of the 1930’s. It is undeniable that almost overnight shareholder value vanished. As we look in the economic rearview mirror, many contend that this economic pulse was the direct result of failure to manage risk. The result, a cascade of events that obliterated value as it made its way across the globe.

The cause of the Great Recession will probably be debated for years to come, as economies continue to rebuild. What did we learn from all of this? Depending how the economic dynamic of the day touched our lives, the lesson learned will be in direct alignment. If the impact was nothing more than a graze like that of a bullet – then we will continue along unaware of the breadth and depth of the economic devastation. Alternatively, the suffering of economic hemorrhaging will indelibly alter our behavior for years to come. These findings are beginning to pepper economic and psychology journals.

One article that caused me to stop and take note was Shareholder-Value Based Auditing by: Kevin Shen. Shen argues that the casualties of the Great Recession could be traced back to management’s failure to mange risk. Shen postulates that auditors may be too focused on risk and not enough on value, or rather the origins of value. Shen contends that shareholder value can be traced back to lines of activities and the audit process should focus on the risk of those lines of activities.

Shen draws on the derivation of shareholder value, along with the Gordon Constant Growth model and the Capital Asset Pricing model to derive a model that quantifies value. The model defines value (V) as the result of the quotient of earnings/profits (E) by the net of cost of capital (K) and growth (G).

V = E/(K-G)

Shen continues to refine the model from the corporate level down to individual activity level and contends that the audit should examine these value contributing elements to be effective in preserving shareholder value.

It is undeniable that the souvenir of the Great Recession is understanding and preserving value. The thought that immediately came to mind was how value is identified in organizations that have a completely different dynamic such as governments and non- profits. One could argue that they don’t have value and are simply an anomaly not to be test scrutinized.

I believe Shen’s model holds merit in the for-profit entities and also for the non-profit (NFP) entities. The transition for the model, however, requires an unpacking of the terminology. Shen proposes the basis of the model as the value accruing to shareholders. But who are the shareholders; those who have an investment in a nonprofit. I feel that the shareholders or better the stake holders in a NFP or government are the community which it serves. The community accrues value by virtue of the NFP, whether by feeding the homeless, aiding the needy or providing safety for persecuted. This value can be quantified by the easing of the burden on the community’s services.

This value is derived by extrapolating on Shen’s model. Earnings (E) cannot be managed in the usual sense as these organizations must expend all of their grants/donations in a specific time frame. However, the Earnings component could be more of savings derived by less demand placed on community and emergency services. Possibly a second tiered level of earnings could be the economic value derived from individuals who have been retrained to be economic contributors in society.

To a NFP or a government body there really is no cost of capital. Funds are either the result of grants, donations or taxation. However these funds do come with a cost. Grants and donations require considerable effort on the agency to attract these contributions. These costs can be hard, soft and opportunity in nature. Once quantified, these costs can be applied to the Shen model.

The last and possibly the most difficult to quantify is growth. Shareholder growth is easily quantifiable. However, how does one quantify the growth of a NFP or government? Maybe growth is not the correct term as it conjures up heavily bureaucratic organization that achieves volumes of red tape. Maybe growth represents the change in the social service the NFP is meant to address. By way of an example, if a NFP has undertaken to serve runaway teenagers in a community. The figure for growth would represent the annual percentage of runaway teenagers in the community year upon year. As the percentage increases (denominator) the value of the organization addressing the issue increases. Likewise as the NFP increases their service and lessens the injustice, their value decreases.

It is undeniable that value has become the new measure of success. Value must be a yardstick to quantify the contribution of every entity.

That’s not Fair!

Never a more common phrase barked amongst children as the inequities of a situation. Interestingly the phrase never dies, as adults; we continue to comment on the inequities of life. Not surprising that the very basis of the assessment isn’t the result of looking at those around us, but rather to those who we feel have somehow benefited more than we have. The yardstick of fairness is purely external. The most interesting thing about speaking up about inequities tends to surround our ‘lesser’ position compared to others. Should we possess a greater allotment than another – we are never the first to cry out ‘That’s not fair’. Granted, there are those who have compassion for the less fortunate, however the cry to fairness is deeper and more heartfelt when our ‘account’ is under review. I would love to meet the executive who receives a sizeable compensation increase, far in excess of her colleagues, and expeditiously approaches the executive committee with the inequity of her outrageous compensation The establishing of fairness, however, takes a different tone as one moves from the area of the school yard to the functioning adult of society. Inequities of the school yard are managed through primal instincts of ‘fight or flight’. The disparity is either resolved through force or the oppressed slinks away. As adults, we haven’t evolved beyond ‘fight or flight’. The passionate minority will take up signs, pump-up adrenaline and hit the streets. Then, often their passion for the oppressed runs right in the face of TV cameras and police night sticks. Conversely the majority, complain to everyone they meet of the inequities in the world and how they are hard-done by. Either the majority adults are passive-complainers who thrive on perceived injustices simply to have something to talk about. No change has come about from profuse complaints to a self-absorbed insular audience. Change in any forum requires commitment to the cause and using the established channels to achieve objectives by non-radical means. History has been indelibly altered by such greats as Nelson Mandela, Martin Luther King, and Abraham Lincoln who identified disparities and focused on bringing about change. On March 25 news hit the web of General Electric, America’s largest company, who had no tax liability for 2010 and received a $3.2B rebate from the federal government. This news took on a life of its own becoming almost viral. All of sudden there became a clamor of voices how ‘unfair’ this is. Even one media giant openly condemned GE for their ‘use’ of the tax system, only later to be exposed they had taken advantage of the same tax situations. What these pundits fail to realize is that GE and other huge organizations have done nothing wrong. They have chosen not to seek out inequities but rather focus on self preservation. They, like every tax payer, have access to the same Income Tax Act. They, like every taxpayer, have access to a marketplace of tax professionals. Last time I check there is nothing that precludes anyone from exercising their rights under Income Tax law. During my tenure in public accounting and even to this day I listen to the complaints of how the tax system isn’t fair. My only retort – if you don’t like it, vote to have it changed. Ironically, a well known Canadian Tax lawyer, Vern Krishna, C.M., QC, LL.D, FCGA, in his article Tax Simplification is Imperative, recently wrote how tax simplification is an economic, political and moral imperative. I believe we have come down a long and winding road of an enactment of statute to fund vital initiatives to a monolithic and virtually complex law. We should focus our attention away from those, like GE, who have enlisted the expertise of those who have assisted in their commendable tax position. We need to focus on two real issues at hand, those who have, in retaliation or otherwise have taken the ‘flight’ response and are thereby costing tax authorities hundreds of millions of dollars per year in searching efforts to bring these people to justice. We also need to take up our pens to write letters, to cast our ballots and to build coalitions to enact long term ‘fairness’!

Cost of Accuracy

Organizations, for the most part, tend to fall into one of two analytical camps. There is the small, non-public organization which undertakes the drudgery of keeping a set of books only to appease the laws of the land. Their extent of their financial analysis is determined only by way of having enough cash in the bank to make payroll. In the other camp are the public and government associated organizations that are steeped in financial analysis. These organizations live and breathe on the dicing and slicing of analytics.

After spending considerable time assisting organizations in getting a handle on profitability, I feel a certain degree of financial analysis is paramount to a successful organization. To the small organization, an exercise in financial analysis will direct the decision makers to those critical areas where change can be made. Interestingly, “what isn’t reported isn’t important”. I learned this mantra many years ago when assisting a professional services firm to get a handle on its profitability. Through very simple analytics it became blazingly clear which lines of business were profitable and which were a drain.

In the other camp, I feel that financial analysis has hit the zenith of analysis paralysis. It is almost as if the analysis is undertaken for the sake of analysis. In one organization where I had exposure, their level of analysis went down to the 1/1000 of a penny! One only has to stop and wonder where the sense in this is. With their technology, reports were run and the data keyed and re-keyed in to spreadsheets and databases to undertake such granularity in accuracy. I have to wonder the cost behind this degree of accuracy. Then with two resource competing opportunities, is one selected over the other because it was more profitable by more than 1/1000 of a penny.

One of the most intriguing aspects of this degree of analysis is the allocation of costs. I have found that so many organizations fall into the trap of ‘what was done before must continue’. It is almost like paying homage to the Mecca of the author of the analytical model. These firms often never question why they undertake their processes but perpetuate the same logic decade after decade. Although I don’t profess to be a cost accountant, I do feel that cost allocation should be based on a reasonable natural dynamic rather than a theoretical model, which often cannot be justified.

In reviewing the literature on overhead cost allocation, I have found that probably no subject in all of managerial accounting has as much controversy as direct costing. The theoretical argument of overhead allocation is between direct costing and absorption costing. Advocates of direct costing argue that fixed overhead costs related to the capacity to produce rather than to actual production. While the absorption costing school argues that each segment must bear a portion of all costs associated with its production. So, who is right?

In the reality, the debate often comes down to square footage of use in the production segment. I prefer to think of the production segment as either a manufacturing area where specific products are manufactured, or an office setting where specific types of work are undertaken. By way of an example an office segment in a professional services firm would be that area that houses audit, tax and accounting teams. The allocation model takes on a whole new tone when teams argue about office size and the allocation of common areas. Of course this is reasonable as each segment seeks to mitigate their cost of production and thereby justify their existence on the basis of profitability.

What happens to this model if the number of large offices is exceeded by the number of small offices? Are segments unfairly discriminated against because of the size of their office allotment and their related cost of common areas? Organizations can’t, logically, squelch this argument by undertaking leasehold improvement simply to put some type of ‘fairness’ to the allocation method through drywall and paint.

Recently I had such a debate with a very progressive management accountant on this topic. As we dialogued about the inherent flaws in the square footage model it became clear that a natural dynamic was at work. The conclusion we came to was based on reality; what is segment costs were not allocated by square footage, but rather by the number of FTEs in the segment. As the number of FTEs grows so will their space requirements and hopefully their profitability, as their growth would be driven by basic market demands. With this model, the overhead cost allocation per segment seems to be more objective.

Taking this dilemma a bit further, what happens if funding for a segment originates from two very diverse sources, how should costs be allocated then? The segment produces indistinguishable outputs but the revenue stream is from two very different sources. Given this situation the square footage model is blown out of the water as is the FTE model. Since separate funding sources dictate that costs be allocated one must find a natural basis, I feel, of allocation. Recently I was faced with this very situation. Through careful examination of the segment I found the natural differentiator; it was a unique characteristic of the users of the segment. As it turned out, there were users that had a behavior that could be traced back to one single funding source and other users to the other funding source. Once this model was applied, costs and revenue recognition became perfectly clear.

I believe that organizations need to closely examine their activities to ensure that each segment is adequately contributing to the overall health of the organization. The onus rests with the analyst to exercise reasonableness in overhead cost allocation and the level of granularity to be managed. More often than not the cost of extreme granularity outweighs the value of the analysis. More over recognizing the natural dynamic of the segment will lead the analyst to the true differentiator of cost. Relying on historical model or textbook musings will not lead to valuable information but rather a situation where the baby slips down the drain, following the bathwater!

Cash: Master or Slave?

As the economy continues to sputter along I continue to see more organizations tightening their operational belts, sometimes at the expense of future growth. As sales begin to decrease organizations cut the ‘extras’, these include R&D, marketing and many times sales staff. Often these core functions, although conserving immediate cash, acts to cripple the future of the organization; when the economy does begin to run again.

What should organizations do? Warehouse cash until things turn around or spend what cash they have on hand. I believe the answer lies within the culture of the organization and its place on the competitive continuum. Over the past couple of years I have written how organizations sit on an economic continuum predicated by their competitive advantage and their culture. I believe the organization’s place on the economic continuum will strongly influence how they manage their existence during this, and any, economic season.

Of late, for many organizations cash flow has been and will be generated by ‘slash and burn’ models. Basically these organizations cut expenses to the core to keep the lights on, pay down debt or act as a backstop to future financial meltdowns. For many of these organizations, the drop of the gavel has meant cuts to corporate assets, like property, plant and equipment; the very assets that could be leveraged towards a greater competitive advantage both now and into the future.

As organizations have slashed their spending, the free cash flow generated from this behavior, as a recent study shows – has been warehoused. According to a study by the Georgia Tech Financial Analysis Lab using data provided by Cash Flow Analytics, from December 2008 to March 2010 the amount of free cash held by 4,000 U.S. public non-financial services organizations doubled, from $14 million to $28 million. This represented the highest level of free cash flow in the decade. While over the decade capital expenditures as a percentage of revenue fell from 5% to 3%.

For many organizations has become, swap long-term economic health or enhanced competitive advantage for a short term ‘glow’. There is no doubt that holding cash in an uncertain economy makes sense. But warehousing cash without consideration to making the organization stronger and more resilient makes no sense. This behavior mimics the human physiology, in that a rapid drop in the food supply puts the body into survival mode and all fat burning stops. While a more concerted approach leads to consistent weight loss.

According to a study by Charles Mulford, a professor of accounting at Georgia Tech, a few larger public organizations have maintained an upward trend in their capital expenditures along with maintaining a healthy cash flow. Are these organizations operating in a vacuum? Are they not experiencing the daily ups and downs of this sputtering economy? Or do they know something else, some thing other organizations simply haven’t seen. These organizations, I believe, have a clearer understanding of the different types of organizational capital and their position on the economic continuum. From the study, these organizations had different reasons for their commitment to continued capital expenditures. However the most common reason was to maintain their market leadership (domestically or internationally) and keep competition at a considerable distance. The resounding mantra of these organizations was their adherence to a long term strategic plan

A commitment to a long term strategic plan carries more than consistent spending on capital expenditures it requires a complete commitment of the organization to managing a working capital portfolio of funds to meet current, mid-term and long term needs. An organization who hasn’t worked out the nature of their capital, their culture and their vision is destined to crash and burn under the weight of being a slave to cash. While the organization that is committed to their place in the future while having a strong understanding of their working capital composition, and their cash flows will be the master of their free cash.

Time to Reformat?

Are we there yet? Try to sift through the media hype and you will come to the ‘I don’t know’ answer. It is extremely difficult to determine if the global economy is climbing out of hibernation or slowly sinking into a state of coma. The equity markets continue to behave like a buoy in the middle of hurricane Paula. However, from my vantage point there is still free cash and buyers in the economy; consumers are still making purchases. Granted not to the degree of a decade ago, but big ticket items are changing hands.

With the ebbs and flows of consumer spending, and with a hungry pool of commercial entities, how does an organization attract buyers to itself; in essence, away from other vendors? For many organizations they undergo a myriad of ‘strategies’ in hopes that something sticks. Success in this economic climate and beyond rests on, I believe, two main ideas. Success comes down to attitude and economic agility.

The attitude for successful sales is one of understanding your clients and prospects. The organization needs to understand the needs of their audience with the correct products and services. In unison with the right products and services comes the understanding of who the organization is; a niche high-end supplier vs. a low cost volume discounter. Through the understanding of the vendor’s market niche, sales are gained on a definitive quantity; value, price, options, etc.

Bottom line profits are the result of two entities, sales and managing costs. To drive the life blood [profit] of survival internal cost management must be scrutinized. For many the word ‘scrutinize’ equates to radical cost cutting measures similar to ‘slash and burn’. I have seen many organizations slash the very budgets that keep them visible in the market place. These line items include marketing, sales and R&D initiatives. It boggles my mind how an organization can expect long term survival, when it eradicates the market presence initiatives [marketing, sales] and the basis of product evolution [R&D].

What these organizations fail to realize is that their real wealth rests within wasted processes in their organization and not in programs that will assist in weathering the storm. For many years I professed the mantra of continuous process improvement. To that end, I always professed that an organization must view its processes and procedures under the microscope and at each step ask the question ‘why’. It is only through questioning whether a process or a step adds value will one determine those defunct processes.

For many firms, time has overlaid new policies on the tails of old policies, new procedures get back-ended onto existing procedures and at no time does any one stop and try to unravel this thick mat of policies and procedures. I always believed that in every organization there are a few processes that are near the peak of efficiency, and only minor adjustments are needed to gain optimization. However, after an in depth analysis of several large organizations I have realized this was not the case.

I have always believed the best way to gain new insight into existing processes is to bring an in outsider to oversee that process area. Many years ago I had the privilege of working with an organization which had all of their senior executives on a three year rotation through the executive management ranks. The philosophy of the organization was to increase sensitivity of the executives for various departments. However, a byproduct of which turned out that efficiencies in processes were gained. Bill Taylor, in his article Trading Places: A Smart Way to Change Your Mind, expounds on the value of how the most innovative ideas come from outsiders.

I believe the greatest success in effectively scrutinizing processes comes by way of an outsider with the idea of breaking what isn’t broken. In their book, If it Ain’t Broke, Break it!, Kniegel and Patler demonstrate that organizational success isn’t the product of doing things the same old way. Success is the product of breaking the existing rules and thereby breaking away from the pack. The pack of current competitive forces.

So after years of adding more applications to the system, more processes and procedures to the mix, the agility of the organization is crippled by the weight of all of this ‘stuff’. Just as computer geeks profess, when applications start running slow – it is time to reformat the drive and reload the operating system. For most organizations, now is the time - clear the clutter, get a fresh perspective and reload the organization with a fresh ‘operating system’. This may be your last chance before a system crash!

Is that Blue in the Red Ocean?

The economic recession of the 21^st century has impacted more lives than any other recession in modern times. Some economists contend that the current recession has had a greater financial impact than the Great Depression. However grave the impact, this recession has, and will continue to, provide the soil of survival. People and organizations alike, being pushed to the limit must survive. Survival is an interesting concept; in the animal world it is the fight or flight response. In the modern day economic world it is downsizing to reengineering. What ever the action, the strong survive.

Organizational survival depends on culture and the willingness to change. Change is the tool of organizational survival. The ability to change puts an organization ‘in’ the game, not on the sidelines. All too often organizations, who reach a monopolistic level, believe they can weather any storm, only to find that they have been left behind because of their unwillingness to change. A while ago I had the opportunity of speaking with a senior board member of a global financial institution. As we were discussing organizational evolution she shared a story of the hiring process for a new CEO of the company. When the incumbent was asked what would be their first task as a new CEO, the reply was ‘I will make change’. It was this phrase that sealed this candidate in the CEO chair. The company’s resistance to change made them antiques in the marketplace.

In Spencer Johnson’s book, Who Moved my Cheese, the author takes a look at human behavior and how the unwillingness to change leads to death. The most riveting quote, I feel is, “If you don’t change, you become extinct”. It this inability to change that has lead to the fall of many organizations.

Over the past few years I have written on how organizational culture places organizations along the ‘survival’ continuum. The organization’s willingness to step outside of current and historical practices to find a new way to survive will be the organization that not only survives, but the one that becomes the leader of the pack. How do organizations ‘step out’? Stepping out requires a new perspective on how the business model operates. It is ALL about perspective. In the 1989 movie Dead Poet’s Society, John Keating, played by Robin Williams, has the students stand on their desks to get a “new” perspective on their class – world.

A new perspective on a historic vocation brings new demand from the quagmire of stagnation. How have companies, amidst heavy competition and economic downturn, like Casella Wines, Cirque du Soleil and Southwest airlines stood out head and shoulders beyond their peer groups? These organizations chose a new perspective and redefined their market space.

I believe the economics of the present day is the impetus for organizations to redefine themselves. Since 2008, North American law firms have shed thousands of legal and support staff. In addition, many legal practices have simply locked the doors and turned off the lights. Those that remain have either been sufficiently large to weather the storm, or have cut back costs to stay afloat. With little view of economic recovery in the near future, the pressure on professional services will continue to be high. The market place has become a red ocean; a kill or be killed strategy. What professional services need to do is recreate their market space away from a zero sum game. This re-creation is creating a Blue Ocean Strategy, according to W. Chan Kim and Renee Mauborgne; in their book of the same name.

Professional services have long been a self-fueling machine of inefficiency. What other organization charges their customers for training staff and being inefficient? The infamous billable hour is the ball and chain of inefficiency, and clients have unhappily dealt with it. One perspective contributed by “HK” on social media exemplifies the feeling “The billable hour, with its bizarre, client-unfriendly incentive structure, has made lawyers and their clients miserable for long enough.” In any other industry, paying for incompetence would not be tolerated. To parallel this archaic model, one would be faced with an increasing cost of groceries the longer one had to wait in the check-out line.

Historically, I have argued that the billable hour is archaic and inane. Over the years, such approaches as fixed fee engagements and contingent cases have stepped onto the scene, but nothing has really taken hold. Realistically with all of the wealth of knowledge and precedents within the legal community, surely something better than the billable hour should have made its way from the swamp to dry land!

Change happens. I believe the fertility of the marketplace is at its highest for a new approach. Recently I stumbled across an article of a law firm with a fresh new approach. Sue Wang, partner at Clarity Law Group, uses the following description for her firm, “Clarity Law Group is designed like a timeshare, where clients pay a set fee for access to the entire firm.” According to their website, the firm provides the convenience of in-house counsel without the costs and headaches associated with the employee/employer relationship. In addition, the firm exploits 21^st century technology to minimize cost and inefficiencies.

Clearly the billable hour is inane, just look at the receivables of any legal practice. Clients simply hate to be charged for ‘training’ and inefficiencies. If the business model was fair and reasonable, firms would not carry such huge receivables all year and have to discount them within the last ten weeks of the year! It is very possible that the Clarity Law Group may have created their own Blue Ocean and, in time, will leave the billable hour mongers wondering “where did my clients go?”