With the down economy, law firms are facing additional pressures from all directions. External forces, namely clients, are forcing firms to do things differently, while internal forces, namely firm management, are driving lawyers to challenge themselves and consider doing business differently. There has been a recent emphasis on value pricing through up-skilling of lawyers (and others involved in selling) to enhance their ability to negotiate and present value.
While law firms focused on operational efficiency and cost reduction in 2010, 2011 is seeing a greater emphasis on growth, customers and innovation. Firms are taking client satisfaction more seriously, as they should. According to BTI Consulting Group’s Premium Practices Forecast, “53.0% of clients will replace their primary law firm with a competitor who delivers better value, superior client service, greater flexibility or a more innovative approach.” While this statistic might sound ominous for some, this is actually good news for law firms that are ready to step up their game. And there are several different paths law firms can take to ensure they are the firms that don’t get replaced.
Culture of Experimentation
Twenty years ago law firm marketing departments were typically comprised of a single individual who managed a client database and coordinated client events. Today, as the business of law grows more competitive, the industry is starting to see full-service Marketing departments, Practice Development professionals aligned at the practice or industry group level (to assist with the development of client teams and new business) and Business Development professionals (sales people that close business for the firm) beginning to drive firm strategy.
While consulting firms have always made significant investments in training their professionals on how to effectively communicate and go to market as a team, this concept is new for law firms. “Law firms are still behind in terms of creating a business model that rewards anyone other than the big rainmakers,” says Christie Hind, Innovation Strategist at Cypress LLP in Los Angeles. “Cypress is unique in that we reward anyone that brings work in to the firm regardless of their role. As a result, everyone is really out there and engaged in client development.”
One national firm that is introducing industry best practices when it comes to trying new approaches is Faegre & Benson LLP. Faegre & Benson recently launched an “Alternative Fee Toolkit” that provides information, case studies, and worksheets on a variety of alternative fee options. “Each lawyer is empowered to partner with their clients in establishing a mutually beneficial fee arrangement” says Adam Severson, Director of Business Development at Faegre & Benson. “Our clients value our commitment to this area and our ability to demonstrate a track record in client pitches and proposals.”
Rebranding Yourself in a Global Marketplace
For the past decade the legal profession has grown, both nationally and internationally. Some clients are expanding operations overseas, and this shift has provided even mid-sized, regional firms with an opportunity to enter the global market. “It’s exciting when we work on global and international issues for clients,” says Frank DiGiovanni, Co-Chair of the Intellectual Property Litigation Section of Connolly Bove Lodge & Hutz in Wilmington, Del. “Intellectual property law has always been played on an international playing field, so our lawyers know the landscape. The guidance that we can give clients in this regard helps them expand more successfully. It’s also important to know when to consult with foreign counsel, and we are not shy to do that.”
Until recently, law firm reputation was based primarily on existing relationships, favorable results and general brand awareness. Now with the client asking “What have you done for me lately, and what can you do for me now?” there is a perception that lawyers are shifting away from the “trusted advisor” role and into in a “team member” role. Clients still understand that they get what they pay for, but they also realize that, if they don’t ask for more value, they likely won’t get it. While the legal profession still carries a privileged and somewhat charmed reputation, situations such as the worldwide economic recession are forcing law firms to steer their proverbial ship into unchartered territory.
But these firms aren’t completely alone. Guidance from the Association of Corporate Counsel’s Value Challenge provides direction regarding what law firms need to consider in order to maintain valued client relationships. Paul Bonner, Director of Business Development for Haynes Boone in Virginia, states “Our Business Development team focuses on strategic sales support; this makes our lawyer efforts more efficient and meaningful to our clients.” Bonner has a unique perspective. He practiced law, marketed in the product arena for American Mobile Satellite and now pulls from his experience to lead a successful professional service team.
In the past, lawyers have been criticized for failing to keep clients’ needs and best interests front and center. Trying to be everything to every client has left law firms coming up short on return business. Legal project management, alternative fee arrangements and client service operations are some of the new messages law firms are now marketing to clients. It looks like law firms understand that trying to be all things to the client often leaves them off Preferred Provider lists. Specializing and being willing to share a piece of the pie are positioning firms to remain competitive.
The Internal Competition
As the legal industry is forced by client demand to shift its mode of operation away from the billable hour to more creative arrangements, law firms are embracing creative means to not only service the client but provide innovative solutions to their problems. “Lawyers at big firms, in particular, tend to live on islands and don’t necessarily see the bigger picture on the business side; it turns out that the business side is really important and drives much of what we can do and offer our clients,” states Hind. “Lawyers are judged and rewarded based on the size of their books, not their billable hour.” Creating an atmosphere of teamwork, rather than competition, helps alleviate the age-old problem of aligning origination credit to compensation. While the ultimate goal is to bring in revenue, it’s vital to align with clients’ interests and needs.
This reality has caused some lawyers to leave big firms and create practices that afford maneuverability. Karen Katz, Executive Account Manager with Thomson Reuters and former practicing attorney, has seen a lot of proactive movement in the industry. “Lawyers are keeping lower overhead, employing better technology and delegating legal processing to outsourced non-lawyers because clients simply do not want to pay big firm prices anymore, except for the ‘bet the company’ work.” Inside law firms, management is considering how to incentivize without tying compensation to origination and/or the billable hour requirement which ultimately creates a disincentive.
Focus On the Details but Still See the Big Picture
In a recent article, Silvia Coulter, Managing Director with Hildebrandt Baker & Robbins, highlighted several key trends when it comes to sales professionals in the law firm. They include:
• the separation of Sales and Marketing;
• law firms replacing strong business development people with individuals who have a successful track record of driving revenue; and
• skilled sales professionals earning what an average equity partner earns. (The sales executive typically receives salaried compensation with a bonus tied to revenue generation.)
While these trends may seem provocative to some law firms they are the new reality that is creating the law firm of tomorrow. Sitting back to wait for the return of normalcy may leave firms waiting alone with no new clients for a very long time.
Jennifer Smuts is the director of marketing and business development at Connolly Bove Lodge & Hutz. Smuts develops and implements strategic and coordinated branding and cross-selling initiatives. Smuts is a member and past president of the Legal Marketing Association-Metro Philadelphia Chapter and member and communication chair of the Association of Legal Administrators-First State Chapter. She can be reached at Jsmuts@cblh.com or 302-888-6214.
This article is reprinted with permission from the April 4, 2011 issue of The Recorder. Copyright The Recorder, Incisive Media. Further duplication without permission is prohibited. All rights reserved.