TLOMA Today

Fall in love with your job all over again.

You enjoyed your job once, but at some point down the line, maybe that passion and enjoyment for your work tapered off. You may not know when it happened or why, all you know is you now find yourself dreading Monday, or watching the clock. You don’t want to be here and everyone knows it. To some of you, this may sound a bit “pie in the sky” but I am asking you to trust me while we take a journey and explore how you can LOVE what you are doing again.

We are not always aware of how our perspectives shape our mood and outlook, and it becomes easy to complain about our work under the guise of “venting.”

The problem with venting on an ongoing basis is that we are actually dragging ourselves down. So much so that it can seem near impossible to pull ourselves back up again. We are usually also oblivious to the impact this has on those around us, and how our co-workers and friends perception of us gradually changes.

Pause for a moment and think about that one person who never seems to have anything good to say and everything is wrong in their universe. How do you feel listening to them? Do you love when they show up at your door or ask you to lunch? I don’t think so. Misery loves company. They are mentally draining and energy suckers in an attempt to bring you down to their level and they are not typically open to your advice on changing their outlook.

The key to changing this state of mind is to become truly aware of what you are thinking and saying. Challenge yourself to only think and say positive things while at work. This sounds simple but it’s easy; most of us have made negative thoughts and talk a habit. The good news is that habits can be changed; it just takes self-awareness and effort. I challenge you to try it for a month, a week or even one day. Enlighten yourself and avoid negative speak and negative thinking. Eventually, it will no longer feel like a challenge. It’ll just be.

While you are focusing on positive thoughts and talk, take time to think about your strengths and what makes you happy. Maybe you love continuously learning, helping others, sharing your experiences and wisdom, finding new challenges, or volunteering your time. For each of us the list will be different. Once you find the things that you love doing that draw on your strengths, you can then figure out ways to do them right where you are. Injecting the activities you love in your everyday work, will transform how you feel about what you are doing.

Maybe you can succeed at this on your own, or maybe need help from others, and that is okay! Don’t be afraid to call on a trusted advisor, a managing partner, director or manager; they can help… they want to help.

No matter where you are on the job satisfaction spectrum, we all have our good days and our bad days, and could use a surge of positive energy and thinking from time to time. Let’s take this journey to positive thinking together and fill 2019 with more good days than bad!

I mentioned in January that we were continuing our strategic planning work from November. I am very happy to report that the Board, which is made up of existing and incoming members and our TLOMA administrative team had a very productive meeting. We took time to perform an updated SWOT analysis to help create our 2019 Strategic Priorities. It was a huge success, one for the WIN column.

The 2019 Action Plan will include strategies that support TLOMA’s mission where members are offered best practice opportunities to learn, share and network among legal management professionals. We will be exploring new Professional Development formats, learning platforms and further approaches to member engagement and recognition.

We always want to hear from our members regarding their needs and vision. I invite you to reach out to me anytime. In fact, I’ve decided to enter the intimidating world of Twitter. Please find me and connect with me on social media to receive further TLOMA updates. @TLOMAPres.

It has been a pleasure sharing this message with you, and I look forward to more to come!

Pam

WE NEGOTIATE EVERY DAY, whether with a colleague, a boss, a vendor, or even a significant other or kids. In fact, our ability to effectively negotiate may be the most critical skill we possess.  Yet most negotiate instinctively or intuitively. This article – and future negotiation articles - will focus on helping us approach negotiations with a strategic mindset.  There’s been a great deal of research on negotiation in the last 40 years. Let’s see how these proven strategies and tactics can help us get what we want.

We will start with three pieces particularly impacting common internal negotiations we all face at some point: 1) Personal Styles in Negotiation; 2) Salary Negotiations; and 3) Team Negotiations. Here’s the first.  

You know the type: super-competitive, hard-nosed risk-takers always out to “win.”

You also know the opposite type: conflict avoiders. They dislike any conflict, especially the interpersonal kind. And they value peace and quiet above most everything.

How we naturally approach conflict impacts our ability to get what we want. Of course, these are general tendencies, and everyone exhibits some of each.

But we all have dominant tendencies, and knowing and effectively managing them will help you navigate often challenging negotiations.

I have found a continuum of negotiation personality types, with competitors on one end and avoiders on the other. In the middle, you find accommodators.

So how can you identify these and what should you do about them?

Start by asking a few colleagues to evaluate your personal style. Become more sensitized to your tendencies. Then find out your counterpart’s style. Contact others with whom they have negotiated. Past experience is a good predictor of future action.

In all your negotiations, identify the following:

COMPETITORS

Competitors generally exhibit the following characteristics: They enjoy conflict and competition; like to overtly control issues; are not great listeners and often have significant egos; and they use direct tone, language and body language.

How should you negotiate with “competitors?”

First, the overall strategic elements of negotiation universally apply to different personality styles. In all negotiations, information is power, and you want to get it. And you should always maximize your leverage, find independent standards, design an offer and concession strategy, and control the agenda.

With different styles, however, you should emphasize some elements more than others.

With competitors, emphasize the following:

• Ask and listen. Competitors love to talk and try to persuade. Let them. The more they try to persuade you they have the better case, the more negotiation power you’re getting. Find out their critical issues. Then negotiate them.

• Stick to your principles. Gain their respect. Competitors respect strength. But don’t necessarily do it in an adversarial way, although this might be needed at times. Instead, find out what standards underlie their offers. Then compare them to your own. And stick to your guns.

• Frankly emphasize your leverage. Competitors will not be offended by direct language about your leverage. If your counterpart has a bad alternative to doing the deal with you, emphasize it. Lower your voice, look them in the eye, and just lay out the facts about both sides’ needs and alternatives.

ACCOMMODATORS

Accommodators generally exhibit the following characteristics: They highly value good relationships, love to be liked, dislike open conflict and may unnecessarily concede if these are threatened; they exhibit effective listening skills and attitude reflects concern, compassion and understanding; and they fairly accurately show nonjudgmental understanding of others’ concerns.

How should you negotiate with “accommodators”?

• Resist the temptation to just talk and ask back. They are master information gatherers. They will sincerely express interest in you, and it will be tempting to share a lot of information with them. Resist the urge, at least initially. Determine early on what information to strategically share and what not to share. Then keep to your plan.

Also, don’t forget to get them to share information with you.

• Recognize the value in relationship issues. Be sensitive to the interpersonal dynamic that often develops with accommodators. They largely view the negotiation dynamic through how it impacts relationships. Often, they will shy away from choices they perceive as harmful to the relationship.

• Focus on independent standards. Accommodators love independent standards like market value, precedent, and expert opinions. Why? Because focusing on standards can take the focus away from competing personal opinions.

CONFLICT AVOIDERS

Conflict avoiders generally exhibit the following characteristics: They have a strong need to avoid conflict; are skilled at avoiding answering questions; are creative in exploring options that may avoid open conflict; and can appear unengaged.

How should you negotiate with “conflict avoiders”?

• Be patient. Why? Because it will take a great deal of time and effort to fully explore conflict-related issues.

• Focus on your long-term goal. It’s easy to get off track when your counterpart can skillfully avoid issues. Keep a laser-like focus on your goal, and persevere when necessary.

• Aggressively probe their interests. Aggressively probe conflict avoiders’ interests and find out what they need and want. They will try to hide these if they believe discussing them will lead to conflict. Your likelihood of success will increase the more you find out what they truly want and need.

Competitors. Accommodators. Avoiders. What are the parties in your negotiations? Find out. You’ll do better as a result.

It’s been 48 hours and you have yet to hear back. You sent an additional email to make sure they’ve received your original message, but still nothing. With each passing moment, the undeniable truth comes closer to becoming a reality. Finally, you receive a response back, and it’s not what you’ve been expecting. The emotions hit you all at once and it’s not the greatest feeling.  

What am I referring to? The rejected offer of course. Have you been there before? You extend an offer to a fantastic candidate, only to have them turn it down. Your mind begins to race. “Why did this happen?” you ask yourself. Was it something you said? Maybe it was something you did? Could you have done anything differently?

These are all very common questions to ask yourself when you lose out on a desired candidate. The truth is, in some cases, there is unfortunately nothing you could have done differently. The candidate perhaps had multiple offers and went with the one that best suited them for reasons that may be completely out of your control, such as location of the firm.

However, in other cases, there are things you could have perhaps done differently and drastically decreased the odds of having that offer rejected.

The legal candidate pool is becoming smaller by the day. The war on talent is becoming ever-increasingly fiercer. Top talent has a say in where they are going and, as such, it is imperative that in your first meeting with them, you do as much as you can to successfully court them. It may be the only meeting you get with them.

With this, today I wanted to highlight a couple of critical concepts that should always be considered when looking to increase your chances of securing top talent. 

First, you need to take genuine interest in the candidate (obviously). An open, two-way, fluid dialogue is key here, especially when seeking honesty and sincerity within the candidate. Gone are the days where frosty welcomes, rapid-fire questions and leaving the candidate feeling uneasy, are considered strategic interview tactics. I know of businesses that, to this day, enact these tactics to test how the candidate responds. Sure, this may work if the situation is rectified prior to the completion of the interview, however, you do not want the candidate leaving your firm with feelings that accompany these actions. In a candidate short market, this method will not leave you attracting top talent. 

Hiring is about finding the best match for your firm. The only way you can make the best match is by really getting to know the person. Though 30 minutes is a short time, you need to make them feel as comfortable as possible so that they are more likely to move away from their scripted interview responses and show more personality.

Interrogating the candidate with questions will not show you their true self. Yes, it may show you whether they can do the job from a technical stance, but you will miss out on obtaining information about their personality and motivations.

Putting the interviewee at ease with a couple of easy, relaxing questions to begin, followed by some open-ended questions, will allow you to take a more inquisitive approach and less of an interrogative one.

By making them feel comfortable and asking the right open-ended questions, you will be able to gather as much information as you can about the interviewee’s individual needs and motivators. You first want to learn what makes them tick, or what really matters to them in a job and firm. The aim here is to get a true understanding of the push and pull factors the candidate may have. Why do they want to move from their current firm, and what will specifically attract them to a new opportunity? 

Most legal support professionals we work with are not simply motivated by money. Yes, money is a factor, but they are also very much interested in career progression, scope of work, complexity of files, as well as independence and autonomy. There are several factors beyond money that they are in search of.

Second, ask yourself this – in the last interview you conducted, did you sell the benefits of your firm? If you did, did you link those benefits to what the candidate was looking for? When it comes to selling candidates on the benefits of your firm, I know that not every law firm can be the largest, or offer the most money, however there is something unique that each firm can offer. It is critical for you to know what that is and to make each candidate you interview aware of it. The goal here is to sell the benefits of your firm which best associate with the candidate’s main pull factors, or tailor the way you present your unique selling points to fit the candidate’s motivators. These should be the pull factors which you have discovered throughout the interview. You need to tailor your brand message to emphasize the parts of your employee offering which suit the person’s individual needs. Match what your firm can offer to the motivators they are looking for.

Perhaps this sounds obvious or basic, but it is critical that you do this with every strong candidate you meet with. You cannot assume that your firm’s reputation, history or name alone will win the candidate over. In this market, we cannot afford to be this presumptuous. Ultimately, having a genuine conversation with the candidate and specifically pinpointing the link between their pull factor and your firm’s offering, will increase your chances of securing them. 

Content marketing is pretty simple, it involves the creation and sharing of online material (such as videos, blogs, and social media posts) that does not explicitly promote you or your brand but is intended to stimulate interest. It is a proven strategy for finding new leads and for being thought of as an authority on the topic. For lawyers, especially those early in their career, it has become almost a rite of passage.

I was recently asked to review a book authored by a number of lawyers across Canada. The material was excellent but it became quickly obvious that although everyone knew the material generated was for a book, no one considered how to pull it all together. The book lacked readable flow and there was repetition through the chapters. Unfortunately, it felt like the authors may have been better off sharing their writings individually rather than in a consolidated form.

We have all started to read books and not finished them. Typically I will read the first 100 pages or so before tossing a book aside if it fails to catch my interest. In this case, it appeared that the authors chose quantity over quality. They wanted to ensure everyone had an article so they assigned tasks accordingly. This ensured that there was enough content to make printing a book worthwhile, however, failing on the quality and an understanding of how the audience will consume the content means reading this book will be a challenge.

If legal content marketing is something you are interested in than you want to keep a few things top of mind:

• Write for your audience
• Do not over sell yourself
• Give the reader something to think about
• Unless the audience is other lawyers, think short story rather than dissertation

And if you are putting together a book, consider hiring an editor to smooth transitions and make the book easier for the audience to follow.

Historically, the Income Tax Act allowed designated professionals such as lawyers, doctors and qualified accountants to exclude the value of their year-end work-in-progress. This approach was commonly referred to as billed-basis accounting (or BBA) because the income was recognized as taxable income when the client was billed. 

Last year, the federal government eliminated BBA, albeit in a phased-in manner, for all fiscal years beginning after March 22, 2017. For the designated professionals, WIP is now deemed to be inventory as required by paragraph 10 (5) (a) of the Act.

This change on accounting and costing of WIP will have an impact on law firms.  Here is how they will be affected.

Impact of changes on accounting and costing of WIP

In the past, law firms didn’t have to present their WIP in calculating their business income. The calculation of WIP for tax purposes was not a priority. That has changed as it is now required. Making matters even more interesting, there is no legislative definition of WIP in the Act. Accounting and costing of WIP will involve some degree of judgment, which I expect will result in different approaches.

Even so, to determine the right approach for this evolving area, the goal should always be an accurate presentation of the tax filer’s profit for the fiscal year.

Currently, inventory is valued at lower of cost (LCM) or fair market value (FMV). This would be acceptable for WIP accounting and costing for law firms. However, there is an option to record WIP at FMV or in a prescribed manner. But depending on the situation it may result in higher business income.

Let’s look at what fair market value and costing of WIP entails.

Similar to other professional services firms, law firms typically carry their WIP based on billing or charge-out rates of lawyers on the file and it’s reasonable to assume this is the expected amount to be billed. From an accounting standpoint, it is the carrying value of the WIP’s approximate fair market value (inclusive of an implicit profit margin).

There are two reasonable ways to determine the WIP cost,  based on how the calculation of inventory ought to be done, as discussed in the CRA’s past administrative guidance.

Under the first — the direct costing method — firms must allocate variable overheads to WIP. That will mainly include professional costs in case of law firms. However, it’s important to note that there is no clear guidance in the Act or in CRA’s administrative position, or even in accounting guidance (both under International Financial Reporting Standard or Accounting Standards for Private Enterprises) for professional services providers, like law firms. So, law firms must use their judgment.

Under the second — the absorption costing method —  the firm will allocate variable and fixed overheads in the determination of the WIP. This way, in addition to variable cost, the firm must allocate general overhead expenses.

For matters on contingency, the idea is to set an amount that one would reasonably expect to receive from the arrangement. That means, until the contingence is solved and the right to collection of an amount is established, it may be acceptable to recognize no amount in the firm’s taxable income.  

Finally, exercising judgment in valuing WIP still requires “correctly” and “accurately” presenting the firm’s income for the year. Accordingly, I would expect each law firm to make a determination taking into account consideration its situation, type of service provided, and related transaction flow.

Transitional Rules

All of this amounts to a radical change in accounting and costing WIP for law firms. To help them adapt, the rules allows for a five-year phase-in period for taxation years beginning the effective change date of March 22, 2017. For calendar year law firms, the first tax year affected is the year ending on December 31, 2018. Depending on the level of unbilled activities, law firms may face unexpected tax liability (i.e. stain on cash flow) on unbilled WIP. However, during the transition period they can include 20% of WIP (depending on the approach discussed above) in the first year, 40% in the second year and by fifth year, include 100% of the WIP.

Transition Issues

Many law firms have traditionally used the exemption to exclude WIP in the calculation of their taxable income. So, this change will require updating the current system, accounting and costing processes of tracking and reporting WIP. A determination is required of various costs elements within WIP to ensure there is proper supporting documentation for the law firm’s position on the yearly tax filing. Also, law firms should revisit their internal processes to potentially accelerate the billing and collection (where possible) to better manage the cash flow impact of tax liability. Finally, they should assess whether these changes require revisions or amendments (with relation to draws, retirements, taxation income allocation, etc.) to the partnership agreement.

This article is a generic overview. Talk to a qualified tax professional to discuss the tax implication based on your specific circumstances. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. CloudAct CPA Professional Corporation cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.