I recently read the 2016 Report On The State Of The Legal Market by Georgetown Law and Peer Monitor. I was struck by the clarity of the message being sent by clients, and equally struck by how law firms seem not to hear it. Consider these messages.
- More work is going places other than law firms.
It is not as if the amount of work inside law departments is less or even the same. The amount of work is greater than ever and increasing every year. Where is that work going? Certainly not to law firms.
2. Law Firms keep raising rates. Clients refuse to keep paying.
Notice how the gap between standard rates, billed rates and collected rates is increasing. That is a reflection on client pressure to reduce spend and their refusal to “go along” with regular rate increases. This message is made crystal clear here:
Law firms are collecting a decreasing percentage of their standard rates every year. What message to they believe is being delivered? The fact that the percentage of billed v. standard is declining so precipitously means law firms know that clients won’t tolerate being billed higher amounts, but the continual rate of decline means firms are not addressing the fundamental problem or are doing so ineffectually.
At the same time, client satisfaction with law firms’ client service is declining. From a recent post on the Mad Clientist (BTI Consulting):
56% of corporate counsel issued RFPs for law firms in 2015, up from 45% in 2014. We now face a majority of clients using RFPs to hire new law firms. The increase is due directly to the rock-like drop in client service performance clients are experiencing.
What does it all mean?
It means the greatest revenue opportunity for law firms is not raising rates. The greatest opportunity is increasing realization rates. Perhaps the road to doing so is by improving client service. The combined data certainly suggest that clients are delivering a clear message.
I wonder if law firms need to have their institutional hearing checked.
I am sure Simon and Garfunkel never thought their lyrics would find their way into the law (this line has been used by judges in their opinions, so I am not breaking new ground) but when a line fits so perfectly, it is hard not to use it. In August, I wrote a New Normal Column for the ABA Journal, How Lawyers Can Embrace Mistakes. It was premised on a simple logical syllogism. Lawyers are humans. Humans make mistakes. Therefore, lawyers make mistakes. The column suggested that lawyers learn from their mistakes so they can avoid making them again, and therefore be better at what they do.
You would have thought I had tugged on Superman’s cape. How dare I raise the mere possibility of lawyers making mistakes. The first comment addressed an issue I did not:
If you learn a lesson, you are unlikely to repeat the mistake you made. Consider this like turning on a flashlight while walking around in the dark. It helps you avoid running into a piece of furniture.
If you learn a lesson and share that lesson with others, your colleagues, your outside law firms and more can learn and avoid the mistake you made. This is akin to turning on bright overhead lights so everyone avoids running into a piece of furniture.
While this is really an obvious insight into the obvious, there are roadblocks that get in the way of making it so. I’ve written about some of these before (in my New Normal column)–I encourage you to read the comments because they illustrate the problem as well as anything. My next column is going to talk about the value of lessons learned from the client’s perspective.
I wrote a series on Signal and Noise here, here and here. The problem clients confront is that most law firms look and sound alike. When we started Valorem in 2008, no one was talking about alternative fees, no one was offering alternative fees and the world, by and large, thought we were crazy. Now, of course, everybody claims they offer non-hourly billing. The only problem, really a minor one, is that few of the firms making such claim can explain how their proposed fee differs from an estimate of what they would charge on an hourly basis. The challenge for clients, which is specifically address in the second and third post, is about how to differentiate between true signal and mere noise.
I recently received the January/February issue of Law Practice. The cover featured two stories on client service, including the aptly-titled Let Client Service Be Our Watchword. It appears that more is being said and written about the importance of client service than every before, which means that every law firm will start talking about how important
[fill in blank] client service is to them. They won’t actually change anything, they will simply talk about the importance of [fill in blank] client service so they cannot be immediately identified as not making [fill in blank] client service a priority for the firm.
The hard truth is that client service is not a policy you adopt, or a marketing department gimmick. It is part of a person’s DNA, a product of extensive training and an institutional commitment that few firms know how to, let alone are willing, to make. Clients deserve more than noise. What and how you do it should be something that can be shown. What are the design elements that show that client needs and desires were the drivers of the design?
There are a number of questions like this a client should ask to separate signal from the noise, and I’ll address those questions in a future post.
Here’s just a flavor for the reasons the author provides in this must-read article:
- Disrespectful: Being on time is about respect. It signals that you value and appreciate the other person. If you don’t respect the meeting’s participants, why are you meeting with them in the first place?
- Inconsiderate: Unintentionally being late demonstrates an overall lack of consideration for the lives of others. You just don’t care.
- Big-Timing: Intentionally being late is about power. It’s showing the other person, or people that you’re a “big deal” and have the upper-hand in the relationship. It’s also called being a dick.
Have you ever had asked about the status of a project you had assigned to someone only to be told it had been completed “some time ago?” Those who have had such conversations know the level of irritation you feel when you hear that response.
A project is not completed until it is reported completed. Full stop, no exceptions.
Why is this important? People act in reliance on information they receive. If they don’t receive information, they cannot act on it.
Think about this from the customer’s perspective, whether you are the customer and someone else in your perform is the “supplier,” or whether your client is the customer.
If you want to learn how a prevention program can help a law department add value to its company (with metrics), join us in Houston on October 28 at 5:30. Jeff Carr will present his experience with prevention and the value it creates for law departments and their companies. Details can be found at www.valoremlaw.com. Remember to RSVP–seats are limited and going fast!
If you can’t join us in Houston, we will be discussing prevention programs in Chicago (November 12) and Palo Alto (November 17). Details at the Valorem web site (above).
UPDATE: Because of the storms that battered the Houston area over the weekend and the resulting flooding, we are postponing this event. A new date and time will be posted shortly.
50% of Americans do not get second opinions for important medical diagnoses.
30% of the time the second opinion causes changes in the diagnosis or treatment.
Do the math.
I don’t know the data on what percentage of in-house lawyers get second opinions about a strategy. But I bet it’s pretty darn small. I have only rarely heard of it being done.
Fresh eyes are often the best eyes. People trying to solve a problem often lock-in on a strategy and play favorites with it. Fresh eyes can provide needed perspective.
Want an example? When a company tries a product liability case, the first of many cases to be addressed, who evaluates the trial? People involved or from the trial firm are not going to cast a critical eye on things if that is the deserved outcome. And why incur the cost? Because it is critical to get better in future cases. Trial performances should be shredded and rebuilt constantly, but they rarely are.
Sad. A real missed opportunity.
Most people spend their lives trying not to be the Greater Fool. We toss him the hot potato. We dive for his seat when the music stops. The greater fool is someone with the perfect blend of self-delusion and ego to think that he can succeed where others have failed.
This whole country was made by Greater Fools.
Sloan Sabbith, a character on HBO’s Newsroom series
Here’s to the Greater Fools among us. They make us better.
I have internal demons. To ease the burden of these demons, I imagine that everybody has their share. Even if not true, believing it to be makes it easier to accept that I have demons. But deep down, I know I must fight mine every day.
Every. Single. Day.
My number one demon is complacency. It is a trap for my ego, to believe that I am doing my best, that there is no room for improvement.
When I am candid with myself, I know I can do better than I have before. I know that I have let myself be held back, whether by laziness, fear of change, a desire to appreciate the distance I have traveled or to avoid the hard work that lies ahead. But when I give into complacency, I stop trying to be better.
Not everyone battles complacency. Those that do not are trying, every day, to get better. I know that if I give into complacency, they will pass me by or increase the distance by which they lead me. I hate that.
Each day is a choice. Do I let complacency win? Or can I be just a little bit better today than I was yesterday. Improvement is a choice. My choice.