Corporate clients no longer pay with an open checkbook. The economy has forced them to scrutinize their money, and as a result, they are putting great pressure on their outside firms to control costs.
Along with that, they are demanding more services for the money they pay. And they are bringing a lot of work in-house.
To maintain corporate clients, firms have had to improve their efficiency and client service, says Wayne, PA, law firm consultant Robert Denney. “They have to show value.”
But the problem is that firms don’t always see value the same way corporates see it. Here are four ways to get off track with your corporate clients.
1. Focus on the hourly fee
One of the most serious failings is that firms don’t realize the importance of giving cost estimates to the client before work begins.
Corporate clients don’t want “an endless continuation of billable hours.” They want to know what they will be charged and what they won’t be charged. And they want to see the light at the end of the tunnel. They want to know the ultimate cost.
Yet many firms stay with old habits and quote hourly rates and say, “We’ll discount these rates 20%,” thinking that will keep a client happy.
To corporates, the hourly rate is far less important than the final fee. “They would rather pay $500 an hour and know the total cost than have an attorney charge $300 an hour but stumble on and run the fee up.”
2. Ask your client to pay for associate training
Another area where viewpoints clash is associate work.
Most firms tout associate participation as a money saver because the rate is lower.
But clients don’t necessarily agree with that. They know new associates work slower and require extra time to get work done. They also see associate billings as a way for a firm to run up the clock. In addition, they feel they are paying for associate training, and who wants to foot the bill for that?
Firms have to address the associate issue if they expect to retain their clients, Denney says.
An approach some are taking is to hire fewer associates reasoning that if there’s not enough work to support a new hire, the hire isn’t necessary. They are hiring only to the extent necessary to get the work done as opposed to hiring for the future and scrambling to find work to cover the salaries.
Other firms are finding success in outsourcing work that would otherwise be given to the associates, reasoning that work such as document research can be done quickly, efficiently and cheaper by a non-legal company.
Others are handing much of the associate work over to the paralegals.
Still others are holding back on the associate billing. They bill only for a portion of the work until the new attorneys have enough experience to work at full speed. At the same time, they are telling their clients, “We understand you don’t want to pay for our associates to get trained on the job, so we are not going to charge you for that.”
And to get past the learning curve as quickly as possible, those same firms are expanding their mentoring programs, evaluating the work immediately after it’s done instead of quarterly or annually, and providing more training and ongoing legal education for their associates.
How associate work is billed has to be settled with the client before work begins, Denney says.
Explain who will work on the matter, how the associates will participate, and how their time will be billed. Say, perhaps, that a percentage of their hours will not be counted or that work will be done at a reduced rate.
Unless that’s understood at the start, corporates are affronted when they see associate time on the bill and the firm risks having those charges denied or worse, watching the client move on to another firm.
3. Don’t provide progress updates
Ongoing work updates are also a demand firms tend to ignore.
Clients want to know what’s happening with their matters, what changes might occur, and how these changes will affect the fees.
Denney’s advice is to “shower the client with emails and phone calls” throughout the life of the matter so there’s never a question of what’s going on. Give regular reports on the progress and how long the work will continue, and explain any changes that could alter the direction of the matter and thereby increase or decrease the fee.
The worst of all turnoffs, he says, is for a firm to charge ahead with a change and then try to explain a huge bill after the fact.
4. Don’t seek feedback
Finally, Denney says, firms don’t realize that corporate clients want to be surveyed on how well they are being served and where improvements can be made. And they expect to be asked how the firm’s work is better than, or doesn’t measure up to, the competition.
They also want their firm to inquire about their business objectives and recommend services to help reach those objectives.
When the client/firm relationship is well established and encountering no rough spots, an annual review or at the end of the matter is usually sufficient, he says. But when the work is ongoing—or when there’s a danger signal such as an unpaid bill or an unreturned phone call—Denney recommends you talk to your client quarterly or even monthly.
Find out if there’s a lack of communication or if the attorney on the matter doesn’t work well with the corporate staff.
It’s a sensitive conversation, he cautions. And for that reason, the interviews are best conducted by the managing partner or by an outside consultant. The client will be far more candid with either of them than with the billing attorney.
And he adds that if the firm opts to use a consultant for the evaluations, it needs to be someone who works with attorneys and understands the practice area rather than someone who “does consumer interviews for tomato juice or beer.”
