What Every Client Wants, and Why Law Firms Refuse to Deliver
In the past month, I have moderated multiple in-house counsel panels (both in public forums and at private law firm retreats), interviewed more than a dozen in-house counsel and led client service workshops at law firms.
In every instance, I was struck by the widening gap between what clients want from their outside counsel and what the law firms are willing to invest in delivering.
An obvious starting point is fees. Too often, law firms expect to make more money every year regardless of what happens to their clients’ businesses. During a panel discussion at the College of Law Practice Management Futures Conference, the chief of staff for the legal department of a Fortune 500 company said that she expects less work to go to outside counsel every year, and the goal is for 80% of the work to fall in that category. Not only will a majority of the work be done by in-house counsel, technology providers and other non-law firm solution providers, but the cost of delivering those services will continue to decrease.
In another setting, I asked a law firm managing partner what the firm is doing in the face of this future reality. The response? The firm is looking at cutting overhead.
I was struck by the widening gap between what clients want from their outside counsel and what the law firms are willing to invest in delivering.
While the client side is using new tools to be more efficient, the law firm is using the same blunt tool of cost-cutting to drive profits. Change doesn’t have to be painful. Every industry evolves, but few law firms are doing anything that could be defined as innovative.
In a recent client interview, the general counsel of an energy company shared with me that because the market is soft, the legal department lawyers all took 15% pay cuts. For a public company, compensation often moves with the market. If a firm reinvests or acknowledges market dynamics that reduce profits (and income), the media deems it a failure.
A second area where law firms lag is communication. I still hear from outside counsel, both publically and in private, that outside counsel cling to legalese, long memos and equivocation in written communication. None of that helps in-house counsel serve their business clients.
When asked where law firms should invest in communication skills, one twenty-year corporate head of litigation answered, “PowerPoint.” It is the language of her business and how her team communicates. She says too often she spends hours translating long memos into client-friendly work product. Another in-house counsel spent 10 minutes ranting about the absurdity that law firms won’t e-sign documents. When I ask law firms how they are investing in better communication skills, I hear crickets.
The third area is value. I was recently asked by a law firm leader if clients would value and appreciate a fixed-fee service charge (3%-5% of the fees) for overhead on every bill to cover all of the expenses they typically charge for such as faxing, phone and messenger services. I had to stifle my own surprise.
On the recent in-house panel I moderated, I asked what the participants value from outside counsel that shows up on the bill and if any of them still paid for “overhead.” None of them could stifle their responses. They ranged from abject disbelief to laughter to anger. The value a law firm provides is experience, expertise and service. Overhead is just a cost of doing business.
Let me put this another way. If law firms really believe that clients should pay for overhead, clients would dictate every aspect of law firm investment. It wouldn’t yield nicer office space, but it would definitely result in more investment to drive down the cost of delivering legal work product.
Since that is not going to happen, clients will just seek out the rare firms that demonstrate they understand client needs and are willing to invest in the future.
Well, we see what GCs say they want. Outside lawyers hear what they say, but then see what they (the GCs) do – continue to reward Firms for persisting in prior behaviors. If GCs start to change suppliers, then supplier behavior would change. Can you imagine the head of another dept in an industrial customer complaining for years that key suppliers won’t meet specifications? No, they’d find someone else. GCs continue to enable behavior they say they dislike. Not everyone everywhere, of course, but enough so that things don’t change.