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Rethinking client relations

Janet Stanton


Recently, I had the pleasure of visiting the vibrant city of São Paulo. My partner, Bruce MacEwen, and I were on a fact-finding mission to learn as much as one possibly can about the economy and the legal landscape in a mere week. That said there's nothing like being on the ground and we came away with a heightened appreciation of the dynamics of the economy and the sophistication of the legal marketplace.

Our other primary motivator to come to São Paulo was to speak at a conference hosted by our good friends at Hudson Legal, who provide recruiting and human capital solutions globally. I spoke on the emerging trend of law firms establishing institutionalised client relations programmes. Within the increasingly competitive legal landscape and difficult global economic environment, firms are seeking ways to offer tangibly advantaged service to their clients. This goes beyond providing superb legal expertise, which is increasingly viewed as 'table stakes'; that is, a sine qua non but not a differentiator.

Firms are recognising the value of deepening relationships with their current clients, especially those that are financially or strategically important to the firm's well-being.

The strategic benefits to firms from stronger relationships with current clients are manifold. Maintaining and deepening relationships with clients already on a firm's roster increase the stability and sustainability of a firm.

Importantly, enhanced client retention makes the firm less dependent upon the uncertainties, expense and disruption that inevitably surround pitching new clients. Firms with greater client continuity can be more discriminating about which new clients they do choose to go after – those with a better likelihood of success and compatibility with the firm. Moreover, growth from current clients is generally recognised as being more profitable than gains from landing new clients. The need to pitch new clients will never go away, but a more stable roster of clients will provide firms more choices and the advantage to pitch more strategically and selectively.


Why rethink client relationship management?

The developments that have compelled UK and US firms to establish more formal programmes with established protocols are fairly stark: Annual attrition of existing client hours averages 15 per cent, according to a report by LexisNexis Redwood Analytics. Taking that to the extreme and with no remediating efforts, current client hours could shrivel to zero in just seven years. Also chilling is that 53 per cent of corporate counsel fired one of their primary law firms in the past 12 months, as found by a BTI Client Service Study.

Further, the trends that are leading many UK and US firms to institutionalise client management programmes are beginning to be evident in Brazil. An excellent study conducted by Gonçalves & Gonçalves Marketing Jurídico, under the aegis of LexisNexis Martindale-Hubbell, revealed disturbing developments in the relationships between legal departments and law firms. Jarring to many, the study reported that in Brazil, 28 per cent of companies interviewed stated their intent to reduce the number of law firms they work with in the next 12 months.

Beyond the financial scrutiny and accountability that are an increasing reality for general counsels and legal departments, there are trends in how legal departments view the servicing law firms provide which have exacerbated the marketplace volatility. And these have been on the rise in recent years. In the US, only 25 per cent of corporate counsel agreed with this question: Are your primary law firms the best at client service? More alarming is that this is down from 35 per cent in 2003, according to the BTI study.

Further demonstrating the gap in perceptions of service between in-house counsel and law firms is the 'report card' developed by Inside Counsel. The following chart shows how clients and law firms grade law firms on the level of overall service provided by the firm.


Law firm report card overall service

Grade

In-house counsel

Law firms

A

19%

62%

B

70%

35%

C

10%

3%

D/F

0.5%

Not applicable

The importance of client service in Brazil was demonstrated in the Gonçalves & Gonçalves study, which among other things, asked clients their reasons for firing a firm. Not surprising, virtually all clients responded that lapses in areas fundamental to the practice of law would cause them to fire a firm, including:

  • low quality of legal services: 99 per cent;
  • lack of ethics: 98 per cent; and
  • lack of confidentiality: 94 per cent.
    (Percentages represent the proportion of respondents who mentioned a particular element.)

That said, equally damaging to the relationship were failures in servicing elements clients view as most critical to them. The following were also mentioned by virtually all client responders as reasons to terminate a relationship with a firm:

  • lack of communication: 99 per cent;
  • lack of availability (client service): 98 per cent; and
  • lack of knowledge of client's business: 94 per cent.
    (Percentages represent the proportion of respondents who mentioned a particular element.)


What are firms doing to provide exceptional service?

Now that I hope this has demonstrated the importance of client servicing beyond providing excellent service and advice, let's ask what measures are firms taking to ensure clients are receiving an advantaged and distinctive level of service?

First, let's look at the basic elements of client service:

  • legal expertise and advice;
  • communication and collaboration internal, external;
  • availability and meaningful responsiveness;
  • anticipation;
  • business solutions beyond legal answers;
  • innovative ideas;
  • connections, referrals, networking;
  • knowledge sharing; and
  • efficiency and cost management.

Certainly, lawyers and firms should spend the far preponderance of their time and attention on the first element, providing superb legal expertise and advice to their clients. It is notable that that is only one aspect. However, high-quality lawyering does not provide a meaningful differentiator for firms; clients expect it. Therefore, a firm can stand out from its competition by providing those 'non-lawyering' services of greatest importance and value to each client.

To ensure strategically and financially important clients receive the optimal level and kind of service, some firms in the UK and US are initiating institutionalised client relationship (CR) programmes. The initiation of formal CR programmes is generally fairly new. In a recent pilot study we conducted among six firms with CR programmes, two programmes were started at the end of 2009. Three are less than two years old. The oldest programme was launched in 2006. This confirms other market intelligence we have.

Not surprisingly, the goals of these CR programmes are to institutionalise the client and increase revenues and profits. This was confirmed in another study we conducted this year.

As with traditional client servicing, structured CR programmes should be customised to the unique and evolving needs of each client. That said, the more formal CR programmes are more systematically approached. Critical drivers of these programmes are to:

  • understand the client's business;
  • know the capabilities of the firm; and
  • understand the firm's strengths and weaknesses versus other firms servicing the client

There is increasing agreement on the components found in institutionalised CR programmes at firms. These include:

  • established, long-term client-service teams;
  • annual client service plans with financial goals and action items to be accomplished over the course of a year – these plans include both legal servicing as well as the non-lawyering services most germane to each client's needs;
  • regular client feedback mechanisms;
  • training to instil necessary business skills; and
  • recognition and rewards for desired results and behaviours.

Formal CR programmes differ in other ways from the more traditional approach to client servicing. Understanding that the challenges of providing competitively distinctive service go beyond good, or even great lawyering, firms are increasingly representing their other, non-legal professional capabilities on these teams. Our study found that client teams often include representatives from marketing, IT and finance as well as partners, associates and paralegals. Insights from finance, marketing, competitive intelligence, IT, among others help inform the broader advice and business partnering between firms and their clients.

CR programmes are generally more data driven than traditional servicing. That is, data is secured internally and from external sources to more objectively plan, execute and assess CR programmes. These efforts also call for disciplined coordination; frequent meetings and fluid communications. Some firms have identified director-level staff focused on CR, with staff and budget segregated from the overall marketing or business development departments.

Though still controversial, CR activity should be considered as an element in compensation. Few things speak louder than money. It is 'Business 101' to incentivise the behaviours and results that will help a business attain its strategic and financial goals. Law firms should be no different.

Certainly, there are pitfalls or barriers to formal CR programmes. Our research and others often identify the following obstacles to be overcome:

  • lack of time;
  • silo-ing or gatekeeping on the part of some partners; and
  • belief among some that a formal CR programme does not apply to them or their particular client situation.

Lack of time is often a valid argument. It is, therefore, important to ensure the process, while effective, is not onerous. Further, teams may use junior partners, associates or professional staff to facilitate the administrative aspects. Silo-ing is an age-old issue at firms; many lawyers are hesitant to share their clients with others. This can be dealt with in a number of ways, including training which familiarises lawyers with the benefits that can accrue from a CR programme as well as providing tools to enable easier adoption.

For those who believe a CR programme does not apply to them, I fall back on what our former US President Ronald Reagan often espoused, 'trust but verify'.

Client service and client teams are nothing new to the practice of law no matter where in the world it is practiced; what is new is the institutionalisation of these programmes, employing the same rigor other industries have for decades. This falls squarely within the larger trend of overall increased business professionalism in the legal industry.

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Published on:
  • Latin Lawyer [26/Nov/2010]

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