We have another problem with client management in a market-share-battle environment, and this problem stems from our own culture and psychology. Namely, it’s more glorious to win a new client than it is to patiently nurture and grow the relationship with an existing client. Yet the data is utterly consistent that existing clients are more profitable than new clients, and that a stable roster of clients can lead to greater continuity internally in the firm in terms of professional development, “handoffs” from one generation to the next, and control over your own destiny.
Now, it may simply be intrinsic to human nature that laurels go to those involved in new client “wins”—it’s exciting and newsworthy and the adrenalin and angst that surround any big pitch can ripple far and wide within the firm. Many people probably participate in the pitch, and far more are aware it’s going on. Maintaining strong relations with an established client is, simply, less interesting, and certainly not worthy of tallying on a scorecard. Indeed, beyond those working directly with the client, few are probably even aware that anything’s going on with the old client at all.
But do we have to encourage new client “origination” so feverishly? With little comparative recognition for building solid, profitable, long-term relationships? (Yes, we’re talking about compensation here; I don’t mean to be oblique.) In other words, do we need to structurally and affirmatively reinforce what are already—I would argue—shortsighted habits of mind?
We know at least one other thing about client “stickiness.” A few years ago Redwood Analytics conducted a study of client attrition across four AmLaw 50 firms over time. The measure of “attrition” could not have been simpler. XYZ was deemed a client during the year if the firm billed them any amount whatsoever; XYZ was not a client if they were not billed at all.
Using that unsubtle approach, Redwood determined that the average client attrition rate (in terms of revenue lost) was about 1%/month. Now 1%/month may not sound like so much until you realize it’s one-quarter of your revenue every two years.
How to stem that attrition?
Here’s the interesting finding:
- The more partners the client interacted with; and
- The more practice groups the client called upon
the less likely they were to fall off the radar.
Stated differently, partners (or practice groups) that “hoard” clients for fear of exposing them to other lawyers in the firm are increasing the odds the client will be out the door. Now do you understand why the dreaded “cross-selling” is every marketer’s recommendation?
If you want to get serious about an ongoing, structured, consistent approach to enhanced client management, there are some simple, nonthreatening, “Business Development 101” programs out there. We won’t get into the weeds on them here and now, but just to take the mystery out of it, the fundamental pieces are:
- Know your client’s business
- Know your own firm’s capabilities
- Create formal client teams (not ad hoc assemblages for pitches, etc.)
- Have the teams create annual plans, with strategies, action items, quantifiable goals, and evaluative criteria
- They don’t need to be long or elaborate—in fact they should be short and concise—but they need to exist, they need to be clear, and there needs to be accountability for realizing their objectives
- Formalize and institutionalize client feedback
- Deliver “added value” (see above) that clients actually care about. And finally:
- Give meaningful recognition to smart and effective client management at compensation time.
And a final reminder: Why do you want (“need” isn’t an exaggeration) to do this?
To avoid becoming an endangered species. Recall the answer to Peter Drucker’s question.
If that’s not motivation enough, good luck.