Our final installment in this week’s series of blogs will be looking at the practical steps lawyers can take to improve their relationship with their clients. The stakes are high. In The House recently conducted a survey of over 26,000 in-house lawyers. It revealed that 45% of respondents had cut ties with a law firm within the past two years as a result of their performance. General Counsel are more willing to abandon long standing relationships with firms that are unwilling to work on their terms. But firms cannot innovate with abandon in the hope that something will hit the mark with their clients. As such, we have identified the three key areas in which Counsel are demanding their lawyers improve, or face relegation.
Step One – Transparency and flexibility in billing
Much has been written about the call for increased transparency and risk sharing in billing from in-house lawyers. Firm realisation rates have dropped every year since the 2008 financial crisis. In 2015 they hit an all time low of 83%. This has arisen largely out of the call for cost-cutting measures from general counsel. Acritas’ yearly survey of in-house counsel showed that over a quarter had dropped a firm for cost reasons. As Thomas Sager, DuPont’s general counsel puts it:
“We had to communicate that this is a new day, and you need to be as committed to our financial success as you are to yours.” The Economist
So what is it that clients are demanding of their lawyers? The answer is twofold. Primarily, clients are asking their lawyers to share risk on the basis of the value of the work itself. Secondly, clients are asking for contextual information about the work performed to justify that cost.
The first of the two options requires lawyers to re-think the hourly billing method. As we have explored in previous blogs, this is not necessarily a negative move. Proactively offering Alternative Fee Arrangements (AFAs) is as lucrative, if not more so, as hourly billing. Firms are well aware of various forms of AFA available, but the key here is to be able to offer them in advance of a client’s request. In doing so you can be sure the offer is one which will work for your firm financially. Using software like Clocktimizer ensures that the quotes you generate are not only historically accurate, but also based on more than just experience (or simply gut-feeling). Too often, firms risk making poor financial choices by building an AFA on opinion rather than data, as we discovered in our recent whitepaper.
More information now, fewer questions later
But how can increasing the contextual billing information available to clients satisfy their increasing calls for transparency? Well, because often clients are not aware of how much hard work their lawyers are doing for them. It often leads to unfair comparisons between different sized firms or different levels of complexity between cases.
“[General Counsel] tend to compare the billing practices adopted and value delivered by smaller, cheaper firms alongside those of much larger, premium global firms doing more complex work.” Acritas
In short, where invoices sent to clients do not include detailed breakdowns of the work done, clients are likely to think it is because this work isn’t done at all. It can often be a leap to open up time tracking oversight to your clients. However, in doing so your firm is likely to increase its realisation rates dramatically.
Step Two – Client surveys should be an industry standard
In our last blog, clients are calling for a deepening of the relationship between themselves and their lawyer. For their lawyers to understand their needs and deliver what is important to them in a more streamlined manner. The best way for lawyers to achieve this? By knowing intimately what their client wants through surveys. Data shows:
“Law firm clients who are invited to take part in client feedback exercises are more satisfied, more likely to recommend their firm and, crucially, less at risk of switching to an alternative provider.” Acritas
Clearly the benefits for firms in conducting these surveys is significant. However, shockingly, 94% of global law firm clients were not asked for any formal feedback from their primary law firm. Are lawyers concerned what clients will say? Will the results be too negative or cause disruptions within the company? Furthermore, how should firms even go about implementing such a system? Well, client surveys will always have to suit the firm for which they are designed.