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Legal Sales & Service: The Most Important Trend in Legal Business Development
Recently, I spoke with the general counsel at a Fortune 500 firm about some of his best, and worst, experiences with law firms. His central message was that 'Social events and personal relationships just don't matter like they used to. These days, if a firm wants a steady flow of new business, [it] must deliver value.'
In a transparent world where every GC is held accountable for results, and you're only as good as what you accomplished last week, golf outings and tickets to sports events just don't have the power that they used to. This GC's best relationships were with firms that delivered value, that were open and honest about anticipating cost, and that sought his advice on tactics, so that he could choose the best course based not just on legal strategy but also on financial implications.
For each new matter, his company selects a law firm based on its expertise, their history working together, the amount at risk, and its billing rates. Several times, he returned to the idea that there are a number of firms that do excellent work, but their prices are too high for routine work. So he relies on the high-priced firms strictly for cases with a great deal at risk, and 'bet the company' matters.
I was not surprised that his stories kept coming back to money, and discussions of the potential return on investment. But I was surprised at how many firms he had worked with who did not seem to understand this very fundamental point. They just wanted to maximize revenue in the short term or win the case at all costs. They did not seem to consider how much better they could do in the long term if they paid more attention to giving clients what they want and need.
Part of a Larger Trend
Law firms are not the only ones that are feeling the pressures of an increasingly competitive global economy. In fact, in the last 20 years, most other businesses have already felt it far more.
Last summer, Jack and Suzy Welch (of GE fame) discussed this trend when a reader of their Business Week column (Aug 13, 2007, p. 92) asked, 'Is customer loyalty dead?' Their answer: 'Not dead, but different. Time was you could 'earn' a customer's loyalty with tickets to a big game… [and] a few nice dinners.' Those days are over, according to the Welches. In 'today's fierce economy' there is a greater emphasis on price and on a 'two-way approach' in which sellers are 'fervently committed… to making your customers win big in the long haul, rather than just meeting their immediate demands.'
Sales gurus have been preaching the benefits of this approach for more than 20 years.
Are the harsh trends have been transforming other businesses for the last 20 years really coming to law firms? Consider the evidence regarding five overlapping issues: loyalty, relationships, process, price, and value.
Loyalty
For lawyers, the reduced importance of client loyalty first became apparent with the rise of the DuPont legal model. In 1992, DuPont established a 'convergence process' to increase efficiency, reduce the number of law firms it used, and to work only with firms that treated DuPont as a strategic partner. Within a few years, DuPont had reduced the number of law firms it used from 350 to 42. To put it another way, DuPont stopped working with 308 firms. For each firm where loyalty might have been a factor (the 42), there were more than seven firms (the 308) where prior relationships were not enough to hold on to business.
By 2006, Business Week (9/18/06, p. 42) estimated that this approach had saved DuPont '$100 million ' through automation, outsourcing, and reducing the number of outside law firms it uses.'
DuPont has publicized its success, and even set up a Web page with everything a company needs to get started on this process, including a five-page downloadable RFP template (at www.dupontlegalmodel. com). Variations on the DuPont model have spread widely, and RFPs and competitive bids have become standard operating procedure at large law firms. Some competitions have been even tougher than DuPont's. A few years ago, when Tyco applied the DuPont model, they started out with 167 law firms handling product liability cases. By the time they were done, they were using just one firm: Shook Hardy Bacon. And we know loyalty was not a factor in the decision, because they had never worked with the winner before. They won by proposing an approach that Tyco judged as the best price and the best value.
Relationships
Even in an age of convergence and RFPs, some rainmakers swear by the personal relationships they have been cultivating for many years with sports tickets and steakhouse dinners. There is no doubt that in the past social relationships have made a big difference in keeping clients happy and in getting new business. But there is also no doubt that in the future, the importance of social relationships will continue to decline.
One of the most interesting trends in the legal marketplace is the growing influence of procurement professionals. Over the last ten years, procurement professionals have substantially increased their influence at large corporations, by becoming extraordinarily skilled at reducing costs throughout the supply chain. The good news for lawyers is that they were among the last to get squeezed. The bad news is that the squeezing has just begun.
Procurement managers tend to look at legal service purchases as commodities, and to force suppliers to compete more directly by issuing RFPs. Anyone who has worked in legal marketing for the last few years will attest to the radical growth in the number of RFPs, and in their importance.
Are social relationships still relevant to new business? Of course. They always will be. It's human nature to want to work with people you know and trust, especially in a sensitive and critical profession like the law. But every time a large client professionalizes the buying process, the value of social relationships goes down a bit more.
Process
Very simply, general counsel are being held accountable by their management, and their management is being held accountable by shareholders. As a result, clients demand to be much more involved in decision making. There is greater emphasis on responsibility, accountability and transparency and corporate counsel's decisions and budgets are being scrutinized like never before.
Price
Sooner or later, this discussion must turn to price, since that is so often at the heart of the matter.
What should law firms do to control costs and meet client needs? The key is to manage budgets to assure that there are no surprises. Of course, there are still the matters of rates, and of hourly billing. Consider this quote from the RFP template on the DuPont legal model Web page: 'DuPont is interested in results, not effort. Our long-range goal is to move away from hourly billing where feasible. We believe hourly billing is a disincentive to efficient service, and we welcome opportunities to structure fee agreements that provide for incentives and that reward results rather than time devoted to a matter.' While progress on this has been slower than some predicted, there is no question that more firms are using project pricing, fixed fees, blended rates and/or flat rates than ever before. The billable hour isn't going away any time soon, but any firm that can offer alternatives is likely to benefit in the long run.
Value
At one level, everything comes back to price. But at a more fundamental level, the price that clients think is fair is based on their perception of value. Lawyers typically believe that the quality of their legal work is a competitive differentiator. But surveys have repeatedly shown that clients do not share this view. Client perceptions of value are related to meeting business needs. To protect and expand their business with current clients, law firms must consistently deliver excellent client service. They also must be willing to pay for unbilled products and services that will lead to stronger relationships.
Predicting the Future
These are hard pills for law firms to swallow, since what is free for the client comes straight out of the partners' profits. Why give away something for free, if you don't have to?
As Nobel prize winner Nils Bohr famously put it, 'It is very hard to predict, especially the future.' It is human nature to deny that there is a need to change. The experts may be wrong about the future payoff from free services, but you can be 100% certain that you can increase profits per partner in the present by avoiding free giveaways.
Over the next few years, we'll see who's right. I side with the many observers who think that these critical trends will continue to transform the legal profession:
What about the present? Where do law firms stand today on these issues? There is no simple answer, because we are living in a time of transition. The emphasis varies from client to client, from firm to firm, and from one practice group to another. Some lawyers will refuse to accept this argument until it is too late. Who wants to believe that firms should spend much more on client satisfaction? And maybe spend less on season tickets, expensive dinners, and golf junkets?
So some lawyers will continue to operate as they always have, until the day that they lose the large clients who have been paying the rent. Then there will be weeping, gnashing of teeth, and calls to the marketing and business development departments. But it will be too late. Because once you lose a client, it can take a very long time to win back his or her business.
| Past | Future |
| Clients are loyal | Clients look for the best deal |
| Social relationships are critical | Value relationships are critical |
| Process can be hidden | Process must be transparent |
| Price is a given | Price is constantly re-negotiated |
| Value is assumed | Value must be proven |
LSSO Announces New President
On Jan. 11, The Legal Sales and Service Organization, Inc. (LSSO) announced that Catherine Alman MacDonagh has been selected as the President, succeeding Silvia Coulter, who will remain on the Board of Advisors.
Catherine, a co-founder of LSSO, is a well-known author, speaker, and thought leader on legal marketing, sales, and service. Catherine is a former corporate counsel, former law firm executive, certified six sigma green belt, and a member of the New Jersey and New York bars and the American Bar Association (Law Practice Management Section, Women Rainmakers, Strategic Marketing Group).
'I am excited at the prospect of delivering new and high-impact opportunities to lawyers, law firms and legal departments, globally,' remarked Catherine.
For more information on LSSO, please visit www.legalsales.org or e-mail [email protected]
Jim Hassett, Ph.D., is the president of LegalBizDev, and the author of Legal Business Development: A Step by Step Guide. 'Copyright LegalBizDev 2008 for use by LegalBizDev and LSSO.
Recently, I spoke with the general counsel at a Fortune 500 firm about some of his best, and worst, experiences with law firms. His central message was that 'Social events and personal relationships just don't matter like they used to. These days, if a firm wants a steady flow of new business, [it] must deliver value.'
In a transparent world where every GC is held accountable for results, and you're only as good as what you accomplished last week, golf outings and tickets to sports events just don't have the power that they used to. This GC's best relationships were with firms that delivered value, that were open and honest about anticipating cost, and that sought his advice on tactics, so that he could choose the best course based not just on legal strategy but also on financial implications.
For each new matter, his company selects a law firm based on its expertise, their history working together, the amount at risk, and its billing rates. Several times, he returned to the idea that there are a number of firms that do excellent work, but their prices are too high for routine work. So he relies on the high-priced firms strictly for cases with a great deal at risk, and 'bet the company' matters.
I was not surprised that his stories kept coming back to money, and discussions of the potential return on investment. But I was surprised at how many firms he had worked with who did not seem to understand this very fundamental point. They just wanted to maximize revenue in the short term or win the case at all costs. They did not seem to consider how much better they could do in the long term if they paid more attention to giving clients what they want and need.
Part of a Larger Trend
Law firms are not the only ones that are feeling the pressures of an increasingly competitive global economy. In fact, in the last 20 years, most other businesses have already felt it far more.
Last summer, Jack and Suzy Welch (of GE fame) discussed this trend when a reader of their Business Week column (Aug 13, 2007, p. 92) asked, 'Is customer loyalty dead?' Their answer: 'Not dead, but different. Time was you could 'earn' a customer's loyalty with tickets to a big game… [and] a few nice dinners.' Those days are over, according to the Welches. In 'today's fierce economy' there is a greater emphasis on price and on a 'two-way approach' in which sellers are 'fervently committed… to making your customers win big in the long haul, rather than just meeting their immediate demands.'
Sales gurus have been preaching the benefits of this approach for more than 20 years.
Are the harsh trends have been transforming other businesses for the last 20 years really coming to law firms? Consider the evidence regarding five overlapping issues: loyalty, relationships, process, price, and value.
Loyalty
For lawyers, the reduced importance of client loyalty first became apparent with the rise of the DuPont legal model. In 1992, DuPont established a 'convergence process' to increase efficiency, reduce the number of law firms it used, and to work only with firms that treated DuPont as a strategic partner. Within a few years, DuPont had reduced the number of law firms it used from 350 to 42. To put it another way, DuPont stopped working with 308 firms. For each firm where loyalty might have been a factor (the 42), there were more than seven firms (the 308) where prior relationships were not enough to hold on to business.
By 2006, Business Week (9/18/06, p. 42) estimated that this approach had saved DuPont '$100 million ' through automation, outsourcing, and reducing the number of outside law firms it uses.'
DuPont has publicized its success, and even set up a Web page with everything a company needs to get started on this process, including a five-page downloadable RFP template (at www.dupontlegalmodel. com). Variations on the DuPont model have spread widely, and RFPs and competitive bids have become standard operating procedure at large law firms. Some competitions have been even tougher than DuPont's. A few years ago, when Tyco applied the DuPont model, they started out with 167 law firms handling product liability cases. By the time they were done, they were using just one firm:
Relationships
Even in an age of convergence and RFPs, some rainmakers swear by the personal relationships they have been cultivating for many years with sports tickets and steakhouse dinners. There is no doubt that in the past social relationships have made a big difference in keeping clients happy and in getting new business. But there is also no doubt that in the future, the importance of social relationships will continue to decline.
One of the most interesting trends in the legal marketplace is the growing influence of procurement professionals. Over the last ten years, procurement professionals have substantially increased their influence at large corporations, by becoming extraordinarily skilled at reducing costs throughout the supply chain. The good news for lawyers is that they were among the last to get squeezed. The bad news is that the squeezing has just begun.
Procurement managers tend to look at legal service purchases as commodities, and to force suppliers to compete more directly by issuing RFPs. Anyone who has worked in legal marketing for the last few years will attest to the radical growth in the number of RFPs, and in their importance.
Are social relationships still relevant to new business? Of course. They always will be. It's human nature to want to work with people you know and trust, especially in a sensitive and critical profession like the law. But every time a large client professionalizes the buying process, the value of social relationships goes down a bit more.
Process
Very simply, general counsel are being held accountable by their management, and their management is being held accountable by shareholders. As a result, clients demand to be much more involved in decision making. There is greater emphasis on responsibility, accountability and transparency and corporate counsel's decisions and budgets are being scrutinized like never before.
Price
Sooner or later, this discussion must turn to price, since that is so often at the heart of the matter.
What should law firms do to control costs and meet client needs? The key is to manage budgets to assure that there are no surprises. Of course, there are still the matters of rates, and of hourly billing. Consider this quote from the RFP template on the DuPont legal model Web page: 'DuPont is interested in results, not effort. Our long-range goal is to move away from hourly billing where feasible. We believe hourly billing is a disincentive to efficient service, and we welcome opportunities to structure fee agreements that provide for incentives and that reward results rather than time devoted to a matter.' While progress on this has been slower than some predicted, there is no question that more firms are using project pricing, fixed fees, blended rates and/or flat rates than ever before. The billable hour isn't going away any time soon, but any firm that can offer alternatives is likely to benefit in the long run.
Value
At one level, everything comes back to price. But at a more fundamental level, the price that clients think is fair is based on their perception of value. Lawyers typically believe that the quality of their legal work is a competitive differentiator. But surveys have repeatedly shown that clients do not share this view. Client perceptions of value are related to meeting business needs. To protect and expand their business with current clients, law firms must consistently deliver excellent client service. They also must be willing to pay for unbilled products and services that will lead to stronger relationships.
Predicting the Future
These are hard pills for law firms to swallow, since what is free for the client comes straight out of the partners' profits. Why give away something for free, if you don't have to?
As Nobel prize winner Nils Bohr famously put it, 'It is very hard to predict, especially the future.' It is human nature to deny that there is a need to change. The experts may be wrong about the future payoff from free services, but you can be 100% certain that you can increase profits per partner in the present by avoiding free giveaways.
Over the next few years, we'll see who's right. I side with the many observers who think that these critical trends will continue to transform the legal profession:
What about the present? Where do law firms stand today on these issues? There is no simple answer, because we are living in a time of transition. The emphasis varies from client to client, from firm to firm, and from one practice group to another. Some lawyers will refuse to accept this argument until it is too late. Who wants to believe that firms should spend much more on client satisfaction? And maybe spend less on season tickets, expensive dinners, and golf junkets?
So some lawyers will continue to operate as they always have, until the day that they lose the large clients who have been paying the rent. Then there will be weeping, gnashing of teeth, and calls to the marketing and business development departments. But it will be too late. Because once you lose a client, it can take a very long time to win back his or her business.
| Past | Future |
| Clients are loyal | Clients look for the best deal |
| Social relationships are critical | Value relationships are critical |
| Process can be hidden | Process must be transparent |
| Price is a given | Price is constantly re-negotiated |
| Value is assumed | Value must be proven |
LSSO Announces New President
On Jan. 11, The Legal Sales and Service Organization, Inc. (LSSO) announced that Catherine Alman MacDonagh has been selected as the President, succeeding Silvia Coulter, who will remain on the Board of Advisors.
Catherine, a co-founder of LSSO, is a well-known author, speaker, and thought leader on legal marketing, sales, and service. Catherine is a former corporate counsel, former law firm executive, certified six sigma green belt, and a member of the New Jersey and
'I am excited at the prospect of delivering new and high-impact opportunities to lawyers, law firms and legal departments, globally,' remarked Catherine.
For more information on LSSO, please visit www.legalsales.org or e-mail [email protected]
Jim Hassett, Ph.D., is the president of LegalBizDev, and the author of Legal Business Development: A Step by Step Guide. 'Copyright LegalBizDev 2008 for use by LegalBizDev and LSSO.
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