Disruption to the traditional law firm model continues to cause flux for the top-50 UK law firms: client-led pricing pressure, new market entrants to technology and new business models that move away from traditional service delivery are all contributing to an unprecedented period of uncertainty.
Despite many initiatives being driven by client demand, research suggests that the voice of the client is not always being heard and that there is a significant disconnect between law firms and their clients.
LexisNexis report Amplifying the Voice of the Client, produced in conjunction with Dr Kishore Sengupta at Cambridge’s Judge Business School, suggests that this disconnect means many clients are making moves away from larger law firms.
This report makes clear that if law firms are to retain their clients, changes are needed across the board; including reassessing working practices, pricing, firm structures and client relationship management. As Alastair Morrison, Partner and Head of Client Strategy at Pinsent Masons observed, “If you don’t like change, you’ll like irrelevancy even less”.
It is not all doom and gloom though – suggested solutions are all doable and achievable and are standard practice across other industries and being implemented already by more progressive law firms.
LexisNexis held two breakfast seminars to explore this issue and to help provide some answers.
The panel was asked to consider whether or not they agree a disconnect exists, what the causes might be and – most importantly – to explore potential solutions.
Using the right lenses – viewing key client relationships
As a starting point, the panel suggested that firms need to assess key client accounts across the entire firm. These key clients need to be viewed as holistic relationships, rather than through a purely transactional lens.
This is particularly the case where firms have hundreds of clients. Taking a sector focused approach can assist in understanding which clients are strategically more important. Not all client relationships will need to be treated in the same way but identifying the ones that are key to driving the firm’s strategy and vision will pay dividends.
The panel discussed the need to make more strategic client choices and to be clear about the type of work offered and for which clients. It’s also important to not be afraid to turn down work.
Horses for courses – getting the right people
Law firms need to do more to ensure expert skills within the firm are fully utilized. This may seem obvious but it is crucial to get lawyers at the right level completing work. It’s important to allow junior staff to contribute, but also to make valuable use of other staff expertise including project management experts, head of operations and head of innovation.
Lawyers do not have to be good at everything; teams with varied skills from diverse backgrounds are essential. It was suggested by Alastair Morrison that law firms should go so far as to get rid of term ‘non-lawyer’; other experts are not just there to support the lawyer, they are an equal part of the offering.
Taking the relationship to the next level
Law firms and clients need to stop entering into relationships with mutual suspicion but with mutual honesty. However, honesty without clarity is a waste of time. Rob Booth, General Counsel and Company Secretary at The Crown Estate, cited “transparency, clarity and consistency” as his suggestions for the three key elements to improving the relationship.
Any meetings with clients should include key members, including client beneficiaries. Progress needs to be reviewed regularly and objectively, with a more structured view on how the relationship works, including considering what the client’s customer (or wider business) needs are.
Law firms need to prepare in a structured and strategic way. It is not enough to just ask the right questions or what problems need solving; firms need a deep understanding of their clients’ businesses and industry sectors.
Undertaking more structured practices such as analysis of their customer (client) journeys and consider 3rd party perspectives on how it is working even just by engaging in something as simple as mystery shopping to test the entire journey from start to finish can show great results.
The price is right?
Law firms need to consider billing and pricing strategies which could include being willing to balance out fixed price work on the basis that it evens out over the course of the year. The clients are looking for solutions not just legal advice but are also weary of clocking up unnecessary bills on issues outside the specific area which has been quoted.
The clear message from the panel during the discussion was that law firms need to see clients less as an extractional resource (ie. one from which more and more money can be squeezed) which leads to short term decisions and more as a key part of a longer term strategy. Finance teams and boards need to support long term sustainability.
Where firms do offer fixed price work though, clients must resist questioning ‘what is in the box’ which muddies the waters, says Stephen Allen, Director of Service Delivery at Hogan Lovells. Clients are generally in favour of more transparent and clear pricing.
Maurus Schreyvogel, Head of Operational Excellence at Novartis Group Legal, suggested that by allowing clients to stop having to think “will this cause me problems with boss/CFO who watches my budget?” every time the conversation moves away from the precise matter in hand, will allow firms to give the solution focused service which all the clients on the panels made clear that they were seeking. Read more on pricing on page 5 of the report
Not listening to clients? There may be serious consequences…
More frequent retendering is an obvious consequence particularly as the network for clients is strong. There are many opportunities now for In-house counsel to discuss best practice and what law firms are offering and to whom. Arguably they know a law firm’s competitors better than the firms do.
Clients are disaggregating work as a matter of course; big ticket jobs do not now automatically go to big ticket law firms. For law firms however there is an increasing competitive nature exacerbated by the fact that the volume of work has not really increased due to the macroeconomic environment. The market as a whole is stratifying. The faster firms are better positioned; the ones that are still watching and retaining margins, thinking they are alright for the moment, are going to struggle to keep work on a long term basis.
It seems the issue has become a pressing one; it is now a market trend now and clients want action. As Stéphanie Hamon, Managing Director and Head of Commercial Management at Barclays Legal said, clients are getting serious about the way they select law firms to work with. Firms are not realising the seriousness of panel reviews. These reviews are not something to be tolerated before reverting back to old ways of working, but rather a wakeup call to the firm to either change or lose out on the work. The best firms are embracing the opportunity. Read more on page 9 of our report
Other factors which are widening the disconnect
Part of this disconnect issue can be attributable to the regulators who are creating an uneven playing field. Even when clients want ‘gut feel’ advice, the insurers and regulators mean that legal advice has to be comprehensive, definitive, and clients have to pay for the cost of law firms providing this gold plated advice, which in many cases is never read or referred to, simply filed.
Young lawyers entering the profession are still being taught a more traditional set of skill. The panels were all in agreement that until a new mindset was fully embedded it is going to be hard for law firms to change. Read more on the other factor on page 8 of the report
Building bridges, not walls
The message from the panel and the audience was that, as with personal problems and relationships, often the first step to solving the problem is realising that there is one. Law firms need to be prepared to discuss the problem and unpick the idea that every party needs something different, but that doesn’t mean being resigned to a dysfunctional relationship.
It was encouraging that to hear from both ‘sides’ of the discussion that the issues were not just ideas but starting to become market trends. All the panellists emphasised the problem was not just with law firms but also with in-house teams not being clear enough as to their expectations. It is therefore not the responsibility of one side to bridge the gap; it requires investment from both sides
To find out more about this, we encourage you to read the report: Amplifying the voice of the client in law firms
The discussions, which took place on 4 April and 6 April 2016, were chaired by Nigel Rea, Director of Precedents and Drafting at LexisNexis. The panellists were Mark Smith, Market Development Director at LexisNexis, Kishore Sengupta, Professor at Cambridge Judge Business School, Alastair Morrison, Partner and Head of Client Strategy at Pinsent Masons, Rob Booth, General Counsel and Company Secretary at The Crown Estate, Stephen Allen, Director of Service Delivery at Hogan Lovells, Maurus Schreyvogel, Head of Operational Excellence at Novartis Group Legal, and Stéphanie Hamon, Managing Director and Head of Commercial Management at Barclays Legal.