Walker Clark Worldview

A partner from a law firm in a small legal market (under 500,000 people) in the United States asked me this question a few days ago.

The answer is really one of definition. While the term  “general practice” is relatively benign, claiming to be “full service” can be toxic for a small law firm.

Business clients, even in smaller communities, are rightfully skeptical of small firms (which, for purposes of this discussion, includes firms of up to 20 lawyers) that advertise  expertise or significant experience in dozens of practice specialties.  When probed, many of these claims are based on one case or one transaction that might have happened years ago.

Our firm works with smaller law firms, both in the United States and worldwide, to develop and execute marketing strategies that work in smaller legal markets.  Our experience and observations suggest three points that a small law firm should consider:

• Avoid the temptation to tout yourselves as a “full service law firm.” Not only does such a claim lack credibility among sophisticated business clients and high net-worth personal clients; it can also unnecessarily raise their skepticism among the things that you really do well. And no news travels faster in a small market than the experience of a client who has been disappointed by mediocre performance or poor client service.
• Focus on the client sectors in which you are already strong.  If some of your best clients are, for example, in the construction industry, be sure that you understand their businesses better than any of your competitors.
• Don’t be afraid to refer a client to a competitor for work that is outside your area of expertise. Of course, there is a risk that the competitor might “steal” you client. If that happens, it probably was likely to happen even without the referral. The much higher probability is that sending a client to another firm, when you cannot give the client the best possible service, will actually increase the loyalty of that client to your firm, as well as make the client more likely to refer you to others.

The risk to small law firms that try to do it all is that you usually end up doing nothing particularly well. This is a sure formula for invisibility in the competition for the types of potential clients that your firm needs the most.

Norman Clark

Why don’t more law firms conduct client surveys?

Our firm has been researching that issue continuously for the past five years, through surveys (of course!) and also hundreds of informal discussions with law firm managers and marketing directors.

Some law firms are simply afraid to ask for feedback.  They are not relevant to this issue because, refusing to solicit feedback in a systematic way, they are doomed to crisis-to-crisis improvisation and, ultimately, the deterioration of their client base and market position.

However, when we ask people from healthier firms why they have not conducted a formal client survey within the past five years (or, in a shocking percentage of instances, never!), we usually hear three excuses.  Each one of these reasons seems to make good business sense, but has been disproven by the experiences of successful law firms throughout the world.

“Clients already have to fill out too many surveys.  The won’t participate in ours.”

Most clients see a significant difference in a survey conducted by a hotel chain and a serious survey conducted by a law firm.  When clients fail to participate in a survey conducted by their law firms, it is frequently because:

• The survey questions are trivial; or
• They are not confident that their answers will make a difference.

Law firms that send out generic surveys usually learn this lesson the hard way.  Surveys that might work well in ordinary consumer businesses can completely miss the key points with respect to quality in legal services.  This is why we recommend that your survey be designed for a law firm — not a hotel chain — and  be tailored to the specific characteristics, practice specialties, and client base of your firm.

The truth is that even the busiest clients like to be asked for their opinions.  If at all possible, even busy clients will try to find time to answer serious questions.  However, questions such as “Do you like our website?” and “Are our fees fair?” (I am not making these up.) usually drive clients away.

A good law firm client survey should be as sophisticated and thoughtful as the clients to whom it is sent.

“Client surveys are too expensive and too much work.”

Like all myths, this one has a kernel of truth.  Client surveys used to be expensive and time-consuming.  With on-line survey administration and tabulation, a custom-designed survey, including an in-depth analytical report and benchmarking to other law firms, can be conducted at a cost that most law firms can recover, several times over, with one new client or one new matter. Whether you design and conduct the survey yourselves or outsource it to a firm like Walker Clark, your firm cannot afford not to conduct a client survey.

“Surveys don’t produce results.”

This myth also can be true if you merely read the survey and do nothing about it. The most important part of a client survey is the follow-up, both with the clients and internally. Even a dissatisfied client can become one of your firm’s biggest fans if you follow up specifically and systematically concerning the points of dissatisfaction.

Specific follow-up means responding promptly to the client about the client’s concerns. Systematic follow-up means making improvements in your firm’s internal operations and client relations practices to ensure that similar problems do not arise in the future.

What to expect from a survey service provider

Every Walker Clark survey, from our low-cost high-yield Snapshot survey (which we offer to any firm for a fixed fee of US$ 800) to our most sophisticated survey service, the Strategic Business Development Survey, offers these basic components:

• A predictable fixed fee
• Multilingual capabilities
• Customized, firm-specific questions
• Comparison of your results to benchmarks
• A written analytical report with specific recommendations for follow-up
• Post-survey advice and assistance with implementation

These features can turn a client survey from a marginal marketing exercise to a low-cost investment that pays for itself with one or two new instructions and can produce a higher return on investment than almost any other marketing activity.  They can also help your firm to identify opportunities to improve the cost-effectiveness and profitability of your internal operations, by responding to and meeting the clients’ needs and expectations better.

Visit the Walker Clark website for more information and examples.

Norman Clark

It only takes one hole to sink a ship, not a hole in every compartment.  If one practice group — or even one lawyer — has a vulnerability, the same or similar weaknesses probably exist elsewhere in the firm. A firm-wide approach to quality assurance therefore usually produces the best return on the investment of time, resources, and attention.

To carry the maritime analogy forward, we observe two principal types of “leaks” in law firms with poor quality assurance. Like many leaks, each one can go unnoticed for months or years while it does major damage to a law firm’s financial seaworthiness.

Reduced productivity

“We can always find time to fix our mistakes, but we can never find time to prevent them.”

Most law firms rely primarily on after-the-fact inspection to catch and correct mistakes, particularly in documents. Such rework can consume as much as 40% of the time of fee earners and staff. Since most clients are unwilling to pay the law firm to correct its own mistakes, every hour spent in rework represents a revenue-producing opportunity that is lost forever.

Law firms that have introduced serious, systematic quality assurance systems and procedures have found that the resulting improvements in productivity can produce substantially increased fee revenue without proportional increases in staff. This results in dramatic improvements in profitability.

Loss of clients

“We get only once chance to get it right.”

This comment by one of our firm’s clients, a practice group head in a mid-size firm in the United Kingdom, summarizes what law firms everywhere are experiencing.  Clients today have decreased tolerance for poor quality. By the time the client actually complains, it might be too late to save the firm’s credibility with the client.

This leak is more subtle than the client who fires the law firm midway through a case or matter. One of the most important diagnostic indicators of a systemic quality assurance problem is the relatively low percentage of clients who return to the firm for subsequent legal services.

Interestingly, there also appears to be a correlation between poor quality assurance and poor recovery. Firms that lack a quality assurance system also tend to be inept at responding promptly to client complaints. At best they tend to placate the unhappy client for the moment, but do little if anything to prevent the problem from arising again.

Norman Clark

In its Knowledge@Wharton site yesterday, the Wharton Business School, University of Pennsylvania, posted an interesting abstract about motivating employees: “Putting a Face to a Name: The Art of Motivating Employees.” This should be a quick, but worthwhile, entry on your personal “to read” list.

University of Pennsylvania professor Adam Grant draws several interesting conclusions from his research.  I believe that, although not drawn from observations in the legal profession, they have direct applicability to law firms.

People are motivated by an understanding of the positive impact that their activities have on others.  Here are summaries to two of their studies:

Grant and a team of researchers — Elizabeth Campbell, Grace Chen, David Lapedis and Keenan Cottone from the University of Michigan — arranged for one group of call center workers to interact with scholarship students who were the recipients of the school’s fundraising largess. It wasn’t a long meeting — just a five-minute session where the workers were able to ask the student about his or her studies. But over the next month, that little chat made a big difference. The call center was able to monitor both the amount of time its employees spent on the phone and the amount of donation dollars they brought in. A month later, callers who had interacted with the scholarship student spent more than two times as many minutes on the phone, and brought in vastly more money: a weekly average of $503.22, up from $185.94.

Even reading about the benefits that one’s work produces for other people can produce apparent increases in motivation .

In a follow up study to the one he published in 2007, he focused on lifeguards at a community recreation center. Some of them were given stories to read about cases in which lifeguards had saved lives. A second group was given a different kind of reading material: testimonies from lifeguards about how they had personally benefitted from their work. The results: Those who had been reading about their ability to avert fatalities saw their measure of hours worked shoot up by more than 40%, whereas those who had merely learned that a lifeguard gig could be personally enriching kept working at the same clip.

The Knowledge@Wharton post has links to the papers that Grant and his teams produced.

Some law firms try to minimize face-to-face contact with clients by junior associates and support staff.  Grant’s research suggests that this is a mistake.

Everyone in the firm needs to see the face of the client. In some cases this can be a simple face-to-face encounter, such as a partner taking time to introduce a client to associates and support staff who work on the client’s matter. Even when employees cannot literally see the face of the client, partners should make sure that each member of the team — from senior associates to the crew in the mail room — understands how their efforts ultimately benefit the client.

Norman Clark

How do you and your partners typically refer to clients:  ”my client” or “our clients?”

The difference is very important. There are variations among individual law firms, of course; but there are also patterns that my colleagues and I have observed in law firms worldwide.

For example, “my client” firms typically:

• Rely disproportionately on a small number “rainmakers” to generate most of the new clients and new business.
• Prefer “eat what you kill” compensation systems.
• Have high levels of internal competitiveness among partners.
• Rely more on individual performance than group collaboration for the overall business success of the firm.
• Measure lawyer performance primarily in financial terms, such as billings and value of originated work.
• Do not make cross-marketing a priority.
• Must overcome internal resistance in making major shifts in the firm’s business priorities and marketing strategy.

“Our client” firms usually:

• Expect all partners, as well as experienced associates, to participate in marketing and business development.
• Have a more collegial partnership culture.
• Prefer compensation systems that reward professional development and mentoring of junior lawyers, as well as financial contributions.
• Emphasize teamwork and group effort as being of equal importance to individual performance.
• Make cross-marketing an important priority and are usually successful at it.
• Adapt to changing market conditions with agility.

The next time you are discussing clients with one of your partners — or even more importantly with one of your associates — listen closely to the pronouns. They will tell you a lot about your own firm,

Norman Clark

Once upon a time, only 15 years ago, law firms could learn many valuable lessons from all aspects of the Toyota management model. Toyota showed us how to identify and focus on our core business, understand how internal business systems operated, and — above all — the importance of quality management. Law firms that adapted principles of total quality management from Toyota and other leading Japanese companies saw remarkable improvements in client satisfaction and long-term profitability.

Now Toyota has another important lesson for law firms everywhere — the importance of not sacrificing quality to profitability and growth. To do so is a fool’s choice, as the recent Toyota debacles demonstrate. For every thousand dollars saved by cutting corners on quality assurance, a business can ultimately lose millions of dollars in customer goodwill and market reputation.

An article in this morning’s Washington Post provides interesting insights about what happened inside Toyota to produce the recent quality fiascos. As Blaine Harden points out in his article “‘Toyota Way’ was lost on road to phenomenal worldwide growth,” the blunders were not isolated mistakes, but the natural result of a long-term deterioration in the quality mind-set that accounts for much of Toyota’s success in the 1980s and 1990s.

But now, as the company recalls millions of flawed cars around the world, there is an expert consensus that growth itself derailed the Toyota Way, blurring its focus on quality, thinning its stable of expert mentors and undermining its capacity to respond to consumer complaints.

This one paragraph presents an excellent checklist for law firms of any size:

• As your law firm has grown, have you blurred your focus on consistently delivering “best-in-market” levels of professional quality and client service? Quality assurance is not “nice to have” or a sideline. It should be at the core of your operations.
• Are you making a serious resource commitment to quality assurance? Quality assurance is more than having “spell check” on your computers. It requires probing into the operations of your firm to identify and prevent the causes of errors, rather than trying to catch them and fix them after they happen.
• How do you respond to client complaints? The real test of a law firm’s commitment to quality is not their slogans, but how they respond to client complaints. Unfortunately, most law firms do not have any systematic procedure to address client complaints, but instead rely on crisis-to-crisis damage control, which is much more expensive and usually much less effective.

Harden’s article also reminds me of something that a senior partner in a large, international law firm in London told me about 12 years ago, as his firm was embarking on a campaign of dramatic international expansion:

No matter how big we get, we still get only one chance to get it right with our client.

Norman Clark

Notwithstanding economic uncertainty in many countries (as well as certainty that things are really bad in some economies), there appears to be a remarkable number of new law firms entering the market. Many of these are formed by partners or groups of partners who concluded that they had no prospects of a professionally and financially rewarding future in their old firms.

As the old proverb states:  When times are risky, it is also the best time to take risks.

Leadership is an imperative during the start-up phase of even the smallest firms. Without it, even the most talented lawyers cannot realistically expect to achieve more than mediocre financial performance long term.

Moreover, a substantial investment by the owners of the new law firm in leadership skills will produce measurable business results. The new firm needs quickly to become a law firm of leaders, not just a law firm with a leader. My experience advising new law firms suggests that law firms of leaders, even new ones, demonstrate at least these three advantages:

• First, they appear to anticipate better the stress that rapid growth can place on the firm’s capital, staff resources, and service delivery capabilities. They also appear to respond to unexpected growth – either faster or slower than originally planned –more cost effectively.

• Second, they deal more easily and effectively with the many minor, but highly stressful, problems that seem to arise almost every day during the start-up phase. Morale appears to be higher. People work hard, but seem to be less exhausted at the end of the day.

• Third, communications, both within the firm and to the legal market, are more accurate and timely.  Most importantly, they are consistent and aligned to the business goals of the firm.  Good leadership ensures that everyone in the firm understands short term business priorities and longer range visions, and that they communicate them in a clear, consistent manner both internally and externally. This allows the new firm to establish its presence in the market, and especially among its desired client base quickly, and to achieve a better alignment of the firm’s service delivery functions to the needs of specific clients.

Greater agility, less burn-out, and better communications with the market — all three of these observations seem almost counter-intuitive to the experience of many lawyers, who start new law firms and sweat their way through those challenging first six months to two years.  Yet I are convinced that any new firm, regardless of size, location, or practice specialty, can enjoy these benefits.

For more about the challenges and strategies of start-up leadership in law firms, click on this link: Start-up Leadership to download an article from the Walker Clark Resource Library.

Norman Clark

I had two interesting conversations at the International Bar Association conference in Madrid several months ago. They occurred within ten minutes of each other.

The first conversation was with a partner from a midsize law firm in the United Kingdom.  We were discussing the issue of client satisfaction, based on some comments that I had made as a panelist at one of the conference sessions that day.

“I don’t really see a need for client surveys and interviews and all that,” he said.  I have a pretty good idea of what my clients expect from me.  If there’s a problem, they will tell me.”

The second discussion was an in-house lawyer from a European bank.

“You would not believe it,”  she said.  ”Most of the law firms that work for us do not have the first idea of what is important to us; and they do not bother to find out.”

“If you are unhappy with them,” I responded, “why don’t you sack them?”

“That is what we are considering,” she said. “There are some firms that are going to be receiving an unpleasant shock at the end of the year.”

Neither of these comments are offered as being representative of the prevailing opinions in law firms and in-house law departments.  But they are typical of a substantial risk that many law firm partners overlook.

In today’s legal markets, what you don’t know can hurt you.  When someone boasts — and it usually is a boast — that they know what their clients need and expect, I always ask, “How do you know?” In most instances, my question is met with silence.

If you don’t know what is on your client’s mind today — as well as what is likely to be on the client’s mind tomorrow — there is one reliable way to find out:  Ask.

Some law firm partners will tell me, “We did a survey and it turns out that we already knew 80% or 90% of what the clients told us.”

This is usually true.  But it is that unknown 10% or 20% that can strike your firm like a cobra.  It is usually the unknown problem or the unspoken dissatisfaction that costs law firms even their oldest and best clients.  You may also discover that somewhere in that unknown 10% or 20% lies an untapped competitive advantage for your firm.

So, how do you know?

Norman Clark

Yesterday’s post discussed an interesting but disappointing year-end list. Today I want to invite your attention to a more instructive one.

Allan Dinkoff, who is a senior litigation counsel at Weil, Gotshal & Manges, has posted, in the Corporate Counsel section of Law.com, a valuable and entertaining list of  the top ten things that law firm clients want.

Here is his list, but be sure to read his post for his commentary:

1. They want a lawyer who is commercial and who understands their business.
2. They want a lawyer who thinks about them and their problems … all the time, not just when they get called.
3. They want a lawyer who can talk to them in a straightforward way, without jargon and without talking down to them.
4. They want a lawyer who is empathetic.
5. They want a lawyer who has a point of view, but also is interactive.
6. They want a lawyer who likes clients.
7. They want a lawyer who thinks about issues and the relationship from their point of view, not the attorneys’.
8. They want a lawyer who is always hungry for their business, not accepting it as a given.
9. They want a lawyer who charges a fair price.
10. They want a lawyer who wins.

Do you and you partners deliver each of these ten things? Do you do it consistently? How would your clients rate you on each of Allan Dinkoff’s ten points?

Do you even know for sure?

The absence of a complaint is not the same thing as client satisfaction.

Walker Clark, LLC, provides a low-cost service, the Client Service Monitor, that will give your firm up-to-date, reliable information about how well you are meeting the needs and service expectations of your clients. It is critical that every partner in your firm understand how your clients perceive your firm’s performance. This understanding must be based on reliable data — not impressions, “experience,” or hopeful thinking.

It is worthwhile to note that the title of Allan Dinkoff’s post is “Avoid Getting Dumped by Your Client.” The Client Service Monitor can be the core of your firm’s “anti-dumping policy.”

Norman Clark

We are now in the last two weeks of 2009, which, for many law firms, means the last two weeks of the fiscal year.

It is not too late to make significant improvements in your firm’s profitability for 2009, even at this last minute.

Focus on collections.  This money is already yours.  Other than the cost of a telephone call, the added fee revenue is pure profit.

Here are four tips:

1. Pay close attention to unpaid expense reimbursements. Even if the client is unable or unwilling to pay the fee, you can appeal to the client’s sense of fairness by asking the client at least to pay the expenses that you or your partners have already spent on the client’s behalf.
2. Offer to settle accounts receivable that are more than 180 days old at a deep discount, provided that you receive payment by 31 December. Your probability of ever collecting these balances without compromise has already fallen below 50%. Moreover, a substantial percentage of your long-overdue balances are probably from relatively small accounts.  You can possibly write off as much as 50% without a significant negative impact on overall profitability.  Why not take what you can get this year, rather than carry forward an account that will probably never be paid in full?
3. Offer an end-of-the-year rebate for all accounts receivable.  For example, if the current fee balance is received by 31 December, you will apply a rebate equal to payment of 5% or 10% against the next invoice in 2010. Although this will reduce your revenue a little in 2010, it could make a significant difference by the end of this year.
4. Pay special attention to clients that are having cash-flow problems or other financial difficulty.  Ask them to make a significant partial payment by the end of the year and a commitment to a payment plan in 2010.  In return, agree to write off a significant portion of the total balance — perhaps as high as 30% or 40% — if they complete the payment plan as agreed. You know (or, if you are doing your job properly, should know) which clients are in financial trouble. Most of them will respond positively and will also become more loyal to your firm.

These techniques work. Most clients see these as favors from you, not just last-minute bill collecting. They also can put a significant amount of additional profits into each partner’s pocket.

Norm Clark