Today I want to discuss what, I imagine, many readers will thing is a hare-brained idea; and then I want to explain why, if you adopted this idea, your own behavior would change such that it might not end up being hare-brained in the least. Both dimensions of this discussion, I believe, have value, although the second can of course be transposed to an almost infinite variety of contexts. So if the first part (the proposal itself) leaves you cold, focus on the second.
First: The Proposal
The idea is a “Client Value Guarantee,” meaning simply that you would offer some clients a guarantee from your firm that if they feel they haven’t received value from you over the course of a representation, they don’t need to pay your bill as submitted.
Take a breath while I unpack this a bit.
- “Some clients:” Yes, close readers will have detected a bit of calculated fuzziness in this formulation. Not, by any means, all clients. Not, probably and for example, new clients or episodic clients or clients who have otherwise demonstrated a tangential familiarity with scrupulously fair business practices.Which clients, then? Pretty simply, the opposite of those above: Steady clients of long standing, who have shown appreciation, above and beyond, for what your firm does for them. Clients in your firm’s inner circle, as it were. You know who they are, and who they aren’t.And for extra credit, you could further distill the opportunity set into those clients you plausibly believe might give your firm more work.
- “A guarantee:” This means one thing but does not mean another thing. It does mean that the judgment whether “value” was received is the client’s and the client’s alone. Don’t argue. (This is an opportunity to invoke the timeless wisdom of Henry Ford 2d, who when arrested for drunk driving, said, “Never complain, never explain;” this even made his NY Times obit.) “Value” is solely in the eyes of the client because that’s what a guarantee means.What the guarantee does not mean is that the client gets their money back in full; here’s your opportunity to have a candid conversation
with the client about what “value” would have been, why they were disappointed, what you could have done differently: And your opportunity, critically, to ask them how much they are willing to pay given the actual work performed.In other words: If your bill over-stated the “value” of the work in the client’s eyes, what would have been a reasonable and fair bill. $0.00 cannot be the answer (or you know what to do with that client; see bullet #1 above.)
The Chicago firm of Ungaretti & Harris (merged earlier this year into Nixon Peabody) actually offered just such a thing. Here’s how their guarantee read, in haec verba:
We guarantee that as a client of Ungaretti & Harris you will receive cost-effective legal services delivered in a timely manner. We promise to involve you and communicate with you regularly. We cannot guarantee outcomes, but we do guarantee your satisfaction with our service. If Ungaretti & Harris does not perform to your satisfaction, inform us promptly. We will resolve the issue to your satisfaction, even if it means reducing your legal fees.
This has a lot going for it: Plain-spoken, direct, the opposite of legalistic. And also realistic (“we cannot guarantee outcomes”).
Let’s pause at this point, before we proceed to the dynamic implications this has, to consider the bidding among proponents and detractors.
Bruce–as Jeff noted, Valorem has been doing this since we opened our doors in 2008. Every single invoice we have ever sent has allowed the clients to mark the amount due up or down so they were comfortable that the amount they chose to pay reflected the value we had delivered. I’ve written about this for years trying to get other firms to consider it, especially since clients already effectively have this power, at least if you want to keep representing them. Few firms have put their toe in the water. But you have to be either in or out–there is no way to explain to one client why you are not offering this to them but are to another client.
I agree with Patrick above. You either offer it to everyone, or not at all. There other inducements you can (and do) selectively offer the “inner circle” clients. A guarantee does not need to be in the toolbox with that type of client anyway. Those clients should already be getting the best service you have to offer. Or they don’t remain that type of client very long in a low-growth environment.
As someone who has seen this type of thing in action, not sure it is much of a competitive advantage with sophisticated clients to be honest. I don’t think I ever heard a client bring it up once.
I can’t speak more highly of written service guarantees.
I wrote the first one, for Coffield Ungaretti & Harris, back in 1994, when I was the firm’s Marketing Partner. Admittedly, in part it’s turning lemons into lemonade. That is, if clients don’t think they only received 80 cents of value out of the dollar you billed them, they’re not paying you the full dollar anyway — that’s basically just your Realization Rate.
But if you take the high road, encourage them to tell you when they’re dissatisfied, you have the opportunity to fix the problem to their satisfaction. If you didn’t, they have ample opportunity to choose a different firm the next time.
We found very clearly that clients sincerely appreciate the offer and take the guarantee seriously. Sophisticated clients aren’t looking to screw their trusted professionals for a few bucks. You wouldn’t seek to screw your doctor who offered a sincerely relationship guarantee. You just want (great work, and) great service.
We’ve helped a number of other firms offer various types of guarantees in the past couple decades, and if they’re serious offers to improve a firm’s client relationships, clients take them seriously too.
I agree that it is an all or nothing approach, which I think is what terrifies most firms. The prospect of taking a large hit is one they are uncomfortable addressing up front. Despite the reality that after the fact write offs are common place.
What this approach does is move the conversation to a pre invoice stage (where it is collaborative) and away from the post invoice stage (where it is confrontational). If a client called after the bill was received and said he wanted 10% off I don’t know many lawyers who would say no.
The worst case scenario is you find out who your bad clients are and can exit those relationships. And you find out who your sub standard lawyers are and can address that issue also.
While it may not be designed as such I think it is an outstanding business development tool.