Clients And Law Firms Rate "Value" Differently
Growing evidence reveals that firms define ‘giving value’ very differently from the way clients assess whether they receive it. There are three simple things a firm can do to get – and stay – on the same page as the executives paying their bills.
A recent review of nearly [100 law firm websites](http://www.linkedin.com/pulse/bloomberg-criticizes-law-marketings-boring-sameness-james-bliwas?trk=mp-author-card&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target="blank) from BigLaw whales to SmallLaw guppies reveals that “delivers value” is the fourth most-overused cliché in legal marketing, following only “experienced,” “client-focused” and “high quality.”
Of course all firms are going to say they deliver value to their clients; if they weren’t doing so, chances are the client would be moving on to new lawyers in short order. The problem is that value is being defined by the law firm, not the client. This is likely why, when I do client interviews and ask [executives](http://www.linkedin.com/pulse/law-firm-leaders-still-arent-listening-james-bliwas?trk=mp-author-card&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank) and [general counsel](http://www.linkedin.com/pulse/general-counsel-losing-patience-law-firms-james-bliwas?trk=mp-author-card&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank) to rate the value they receive from their law firm on a one-to-10 scale, a frequent answer is merely a six. And because I ask separately about pricing and the quality of the work product, the replies are specific to how they are perceiving value untainted by other possible problems.
Clients may not be completely unhappy but they aren’t turning joyous cartwheels, either.
For a law firm, scoring only six out of 10 is like its attorneys all getting a ‘C+’ in law school. They probably won’t get unceremoniously booted out the door but it’s no cause for celebration – unless they expected something much worse. In effect, many clients are saying that the value they receive from their outside law firm is OK but not all that terrific. In practical terms what this really means is the relationship is vulnerable to a competing firm roaring in and scooping up the business’ files – and fees.
Clients aren’t unhappy but they aren’t turning cartwheels, either.
When the score isn’t at least eight, I probe to find out why. Absent specific quality, service or delivery issues, a typical reply often goes something like this: “I’ve never been asked how I defined value so how can they deliver it?”
As [Frederick F. Reichheld](http://www.bain.com/about/people-and-values/our-team/profiles/fred-reichheld.aspx?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank), who wrote [The Loyalty Effect](http://www.amazon.ca/Loyalty-Effect-Hidden-Profits-Lasting/dp/1578516870?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target="Blank) and [Loyalty Rules!](http://www.amazon.ca/Loyalty-Rules-Leaders-Lasting-Relationships/dp/1591393248/ref=sr_1_1?s=books&ie=UTF8&qid=1479735178&sr=1-1&keywords=loyalty+rules!&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank), put it, a merely satisfied client is ripe picking for other law firms.
And when a client cannot easily perceive the value they receive, or are indifferent about the firm they use, not only are they a plum target for other firms, they default to price – where many law firms can’t build a solid rebuttal argument in their favor, either.
“In the past 10 years, costs to U.S. companies went up 20-percent … except legal costs, which went up 75-percent,” observes Mike Roster, a former chair of the American Corporate Counsel Assn. “They represent a bubble within a bubble.”
This isn’t to say fees are not a vital factor when a client assesses value; they are, and clients are increasingly sensitive to – and vocal about – the fees they are being charged and the size of their bills. But [value perception is a more complex issue](http://www.lawpracticetoday.org/article/identify-communicate-value-client/?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank) and goes well beyond hourly rates. Moreover, competing on price alone is a risky, often losing, proposition. Given the over-abundance of business law firms in the U.S., Canada and many other jurisdictions, there’ll always be a firm willing to charge less per hour just to get the work in a race to the bottom.
When clients cannot easily perceive value, they default to price.
And in any event, I don’t think many managing partners of traditional firms want to be known as the Costco of corporate law.
When [Alternative Fee Arrangements (AFA)](http://legaltrek.com/blog/2015/09/alternative-fee-arrangements-a-comprehensive-law-firm-guide/?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target="Blank) began taking hold during the Great Recession, they were viewed by some in the profession with dismay and even scorn. But many lawyers and firms believed that implementing an AFA approach was a critical way to address and resolve client concerns about value. As a result, the business saw the rise of discounted fees on some types of matters, flat or flexible fees, bonus-based fees, negotiated rates and other, sometimes very creative and clever, options to straight hourly billing.
Yet while larger firms are hiring “pricing directors” and creating a client service function in the marketing department as well as keeping closer track of actual costs to more precisely offer profitable AFA bids, for the most part the [billable hour remains a zombie](http://www.linkedin.com/pulse/zombie-billable-hour-james-bliwas?trk=mp-author-card&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BWyLe3A0WSWGhRtDwLTZO2Q%3D%3D" Target=" Blank) that just cannot be killed off.
In any event, AFA only deals with issues concerning fees and the size of a bill, not whether clients feel they are receiving genuine value beyond the size of the check they write to pay an invoice.
To climb up the perceived value ladder, firms must do more than modify their pricing strategy. Every time a complex new file is opened, the firm needs to ask how the client defines value – and pay attention to the response. The era is long past when an attorney can simply assume – or believe – that producing quality documents on time for a fee proportionate to the importance of a file will address the mounting frustration.
So how are clients defining value? If they’re not satisfied with what they are getting, what do they want?
In fairness, it is something of a moving target. What was considered adding value to the client relationship only a few years ago is now taken as a given: Useful and readable blog posts updated frequently, informative on-demand webinars, business-themed conferences and the like. These have become the price of admission firms must pay to gain or keep a client.
Complicating finding an answer is that each client is likely to define the word “value” somewhat differently, making it nearly impossible for any firm to establish an absolute value standard. But there are ways to pin down what a client believes is receiving value that go well beyond what many law firms assume.
Defining value is a moving target.
Still, in general there are three things every firm – regardless of its size or business model – can do to increase the likelihood that a client will feel they are receiving genuine value from their outside counsel.
1 – Just ask. A good place to start is obvious: Ask the client – especially a new one – what is important to them.
“Whenever we get a new file, even from a client we’ve worked with before, we always ask what do they want at the end,” the managing partner of a 25-attorney litigation boutique in California once told me. “If they answer ‘Nail the bastards,’ we handle the matter one way. But if it’s ‘I don’t want to end up in court,’ we take a very different approach.”
A corporate partner in a large Chicago firm does something similar.
“Whenever a client sends me a non-routine file,” she explains, “I spend anywhere from 10 minutes to an hour on the phone drilling down to find out what their objective is beyond closing a deal or getting the financing.
“I’m more valuable to clients if I understand how a file fits into their business goals, and its overall importance to them,” the attorney observes astutely.
2 – Host an annual business update session with each key client. Invite them to bring all of their key people to lunch to talk about their business and growth plans for the coming 12-to-18 months. Explain that the meter isn’t running because it’s the client’s meeting and they can discuss anything they want – and maybe get a bit of free legal advice along the way.
Make sure that there are one or two fewer lawyers than client representatives at the lunch so they don’t feel overwhelmed. The lead lawyer should prepare questions to ask the client – but remember that this isn’t the time or place to cross-sell or tout the firm in any way. The most productive sessions are those that are subtly directed but open ended so that the conversation unfolds organically.
Two things are likely to happen, based on my experience organizing and facilitating this kind of get-together.
First, the client will see that the attorneys working on their files are trying to learn more about the business so that their work is done in a broader context. This all-but automatically raises the firm’s value in the client’s eyes.
Second, done properly this meeting inevitably leads directly to new files, if not at the lunch then within a week or two.
3 – Conduct client interviews and satisfaction surveys regularly. I am always astounded at how comparatively few firms do either one of these every year. Every firm needs to do both annually with every ongoing client; it’s the only way to benchmark and track the relationship before there is a major problem or an opportunity is lost.
Whether conducting an on-line survey or sitting across the desk from an executive or owner, three questions are vital – and asked in this order: How do they rate the firm’s fees, the quality of the work, and the overall value they’re receiving, all on a 1-to-10 scale, If any reply falls below an eight, follow-up questions should be asked to learn why the score was given – especially with the value question.
This is critical: No lawyer who worked on a file should do interviews; it’s not a good idea for the head of a firm or practice group to conduct it, either. Few people enjoy breaking bad news and a client may say what they think the lawyer wants to hear. It’s better for interviews to be handled by the marketing, client service or executive director, or an outside advisor.
The on-line survey and in-person interview should occur about six months apart.
Law’s DEW Line
Clients are firing warning shots across the bow of the law firms them use.
According to The Age of the Client from Lexis-Nexus (registration required) found that eight-in-10 lawyers think they deliver above-average service and value but only 40% of clients say that’s what they get.
As a result, an amazingly high 60% of clients using more than a single firm fired one of them during the previous year. The key reason is unnerving: The firm provided the client with mediocre service and value. Not horrid or bad, just ordinary.
It like the Distant Early Warning line that used to stretch across Northern Canada to warn of incoming Soviet bombers duing the cold war. With the business of law is increasingly competitive, only a willfully short-sighted or foolish firm believes that its relationships are immune from poaching.
Why do you think the law business has been so slow to understand that client’s don’t feel they receive sufficient value? How is your firm trying to move up the value ladder? Or are you racing to catch up with your clients?