Law Firm Articles

What Do Most Law Firms Misunderstand About Clients?

“The short answer is many important things.”
–Thomas S. Clay

What do most law firms misunderstand about their clients?  The short answer is many important things.

For example, at a recent law firm retreat, I asked partners what their clients want most with respect to legal fees. The overwhelming response was the “lowest possible prices.”  In fact, survey data shows that General Counsel are looking for fees that reflect efficiency, a greater understanding of the objectives of the matter and collaborative transparency. Only 10% of clients say they want the lowest possible price. Lawyers proposing legal fees to their clients must have a more nuanced understanding of this issue.

In another example, in a meeting with a firm’s practice group leaders, I asked each lawyer to think about their best client and indicate if they knew what that client’s legal budget for the year was. Not one answered in the affirmative, and not one had even thought to ask. How can lawyers effectively serve their clients if they do not understand the challenges those clients face?

In the 2017 Chief Legal Officer Survey, CLO’s were asked to rate three key groups of stakeholders on their knowledge and understanding of the challenges of leading a law department. Among the three groups – non-law firm vendors, their own organization’s executives and their outside counsel – law firms were rated highest at 6.1 on a scale of zero to ten.  However, although law firms came out on top, a score of 6.1 out of 10 is hardly a glowing endorsement.  Law firms still have significant work to do to develop a truly sophisticated understanding of their clients.

Why are law firms underperforming in this area? Two things are at play. One is an unwillingness in many lawyers to have robust conversations with clients that go beyond billing rates and specific legal services to other broader, more intangible needs. The other is the tendency among most lawyers to commoditize their clients’ wants and needs rather than analyzing each individually.

“Law firm leaders that recognize the magnitude and variety of client preferences can achieve competitive advantage.”
— Alan R. Olson

Today’s clients are not monolithic in what they want and expect from their outside counsel — and this presents a widespread challenge for law firms in structuring and planning their legal services.  This reality makes it more difficult to take what is learned from one client, or successive clients, and apply it to the next.

Even within the same industry and market segment, there will be client businesses that are aggressively internalizing their legal services and relying primarily on inside counsel, while very similar businesses are just as aggressively seeking to outsource their legal services.  Some clients want to simplify their legal management by relying on a limited number of outside law firms, and even designating an outside coordinating counsel to ‘quarterback’ their legal services and supervise other law firms.  In the same market segment, another competitor chooses to spread their work around to numerous outside counsel based on specialty, bench strength and other factors.

Law firm leaders that recognize the magnitude and variety of client preferences can achieve competitive advantage by tailoring their services and structures to be effective with a range of client philosophies and priorities.

“Law department leaders are looking for true partners in delivering legal services to the client.”
James S. Wilber

Law firms too often believe that clients who want to better manage the cost of outside counsel automatically are out to ‘get’ them, or otherwise trick them into agreeing to something that strongly favors the client to the significant detriment of the firm. Certainly, if a law firm is talking to a client that only is interested in cost and appears to be seeking a one-sided financial relationship, the firm would be wise to let another firm have that work (unless the practice area is so commoditized that the firm is willing to compete on price alone).

However, our experience is that most General Counsel want a win-win financial relationship that is likely to last for many years. More than anything, these law department leaders are looking for true partners in delivering legal services to the client. True partners seek to understand the other’s needs and circumstances. True partners find a way to maintain a working partnership, and to price services in ways that are compatible with both partners’ needs and circumstances. Good General Counsel are looking for so much more than merely the lowest price. They want predictability. They want efficiency. They want value-added services. They want a partnership.

“Absent change, clients will chart their own path to the detriment of law firms that ignore the call.”
James D. Cotterman

Clients want faster and more efficient processes, better value, more cost certainty and transparency, enhanced leveraging of technology tools and the like. They expect law firms to take the lead in these change efforts. Absent change, clients will chart their own path to the detriment of law firms that ignore the call. The problem is that many law firms are either missing this point or are just tone deaf to the issue.

Clearly it is difficult to persuade partners who are in the top 1% of wage earners (often taking home millions of dollars per year), that their way of doing things may not make the grade going forward. Possibly senior partners who have less time left in their careers may be immune to the fallout. But, as elders, they are also leaders who have a responsibility to their law firms and to their partners to build support for change, to drive necessary conversations with individual clients about their expectations and to encourage the exploration of alternatives.

Yes, this requires time, time that is not billable, and therefore time that carries less value. But law firms must consider the business landscape — littered with storied brands that failed because they either missed the signals of market change or thought they did not need to heed them. The lesson is clear. The solutions are largely here. The will to act… Well, that is up to you.