The hard core bulls-eye of our practice is helping firms assess, refine, or discard and re conceive their strategic plans. We approach and proceed through the course of these engagements–as we do in all our work–without preconceived templates, 2 x 2 matrices or idealized models. What’s right for one firm will be wrong for another, what’s aspirational for one will be delusional for other, slimming down to fighting trim will be right for one and building capacity will be right for another, and so forth.
Yet despite the tremendous variety across the content of all the law firm strategic plans we’ve seen or worked on, what’s almost invariably featured front and center in the final document is “Clients.” This is obvious and hard to take exception to, and I’m sure it surprises no one reading this.
But we always worry, as with any element of a strategic plan, how deeply partners have internalized the message as the plan moves from design and formulation to the work of “head and heart,” day to day living-out embodiment of execution.
I said a moment ago that we worry about firms’ perseverance and diligence in executing every material element of a plan, but I wasn’t quite leveling with you. If other priorities are expressed–greater collaboration, disinvestment in particular practice areas, more authority and accountability given to business professionals (for example)–then yes, we hope the firm will be conscientious, thorough, and determined in pursuing them, but the “clients first” bothers us in a way we’ve struggled to articulate for some time. Now we think we have a hypothesis that might clarify this. Here’s Part 1 of the hypothesis:
Many lawyers do not understand that they’re in a client service business.
They may, and usually do, pay it lip service, but in their core they don’t act it out.
Our first intimation of this hypothesis came a few years ago when we were talking to a senior business executive at a global law firm who had joined a month or two earlier from an even larger global organization in a different professional services business. He said, “At [my old firm], if the client’s office flooded, we would be organizing emergency work space, finding disaster recovery services, and doing everything else we could to help them get past the flood. Here, that would be unimaginable; ‘it’s not what lawyers do.'”
Now, if his example (a real life one) strikes you as preposterous, think about it again. Why couldn’t a law firm do things like that for a key client? Isn’t that what “client service” boils down to? What is the client’s pressing business problem and how can you help solve it?
More prosaically, is what your clients really need always the most profound, beautifully crafted, Supreme Court-clerk worthy, analysis of their legal issue? The most brilliantly creative trial strategy, damn the expense? Because if you ask many lawyers what they think excellent client service means, that is essentially what you’ll hear.
Let’s take this a step farther: What if our hypothesis that lawyers do not see themselves in a client service business has some truth to it? What then do they think their relationship to their law firm is? After all, in professional life there is no such thing as having no goal, no desired outcome, no preferred state of affairs. If their relationship to their firm is not first and foremost about “client service,” what is it about? What, in other words, is Part 2 of our hypothesis?
Bluntly, we think many lawyers believe their firm exists to serve up to them interesting legal questions on which they can demonstrate their impressive legal prowess. The overriding purpose of their firm, in other words, is not client service; it’s to present an endlessly fascinating buffet of thorny legal issues for the partners to enjoy chewing on before moving on to something else tasty.
We thought it might be as well, but last week we heard a story that prompted us to publish this column. The managing partner of an extremely well-known global firm was discussing client service with a group of partners, pressing the case that it was all about solving the clients’ business problems, when a dissenting voice contradicted him: “No, it’s about delivering the most finely honed legal analysis, and then doing that again for another client, and again.”
There you have it.
Whatever else this fellow thought his firm primarily existed to do, it was evidently not to put its clients real-world, practical business problems (flooded offices) first; it was to serve this fellow’s interest in pursuing his own preferred intellectual activity.
Now, we have no quantitative data to support this, and it would be impossible to gather any, but it seems to have a ring of truth to it, as well as repeated and widespread anecdotal evidence. Even if it’s only sometimes or partially true, might it help explain or at least clarify some things? Such as?
How about chronically low, and still declining, realization? We don’t know about you, but it strikes us that there’s an impressive shortage of self-reflection about this in our industry. It seems to be accepted, like the weather, or rationalized with glib dismissals about what-do-you-expect if you keep raising rates and it all comes out in the wash. By contrast, we think it cries out for a solid, powerful explanatory theory of how this is either a tolerable or a good thing, because if it’s neither we need collectively to do something about it. For the record, here’s the trend from the latest Thomson Reuters State of the Legal Market (2019). Although they break it down by AmLaw First and Second Hundred and “midsize,” the message is essentially the same for all three segments:
Over the past 12 years (since the Great Meltdown), the average among the firms they track (meaning half do worse) shows realization dropping from about 91% of “standard” rates to about 83%, or almost a 10% drop. Looked at slightly differently:
- The discount, willing or otherwise, that firms are giving their clients has doubled from 9% to nearly 18%; and
- Assuming firms have not otherwise enhanced their efficiency or cut costs, the haircut to the firms’ profits has also doubled. (Cost accounting 101: If your fixed costs, mostly people, rent, insurance and other nondiscretionary overhead items don’t drop, any decrease in revenue comes 100% out of your profits.)
Why is this not a cause for concerted analysis, diagnosis, and corrective prescription? (Were this the case in our own business, we would find it a cause for real soul-searching.)
Alas, the answer to that last question may fall more into the realm of psychology than economics, so I will not venture an explanation, but if looked at solely from the clients’ perspective, the most likely reason may be self-evident: They don’t value what their law firms are doing as highly as the firms themselves seem to.
Could it be that the clients are expecting “service”–that their business problems will be addressed and solved–and the lawyers are fixated instead on the magnificence of the practice of law?
What does your strategic plan have to say about this? What do you have to say about it? Does your firm exist first and foremost to serve
clients its partners?