This past Thursday morning at the offices of White & Case, I had the opportunity to participate in presenting the results of a survey of how professional service firms (primarily law firms) set strategy. Held under the auspices of the Managing Partners’ Forum, of which I am now the New York regional director, the 8:00 am — 10:00 am meeting addressed such issues as:
- Attitudes towards strategic planning
- Responsibility for formulating strategy
- Assessment of opportunities and threats facing firms
- Frequency, duration and time horizons when formulating strategy, and
- Overall satisfaction with the outcome
Which brings us to our topic for today: Cognitive dissonance, or, to be more specific, our profession’s truly impressive talent at suppressing same even when the internally inconsistent positions are being enunciated by the same people in the course of the same survey.
But let’s back up and start with some of the survey results.
Over 100 individuals responded to the survey, 40% of whom were the managing partner of their firm and another 47% of whom were a senior partner or the business-side Executive Director, COO, or CFO. Nearly 60% were from firms with more than 250 fee-earning professionals, and another 31% were from firms of between 51 and 250 fee-earners.
Asked what their most pressing strategic challenge was, nearly 80% cited "increasing client demands and downward pressure on fees." Another 70+% said essentially the same thing, with a different spin: "Increasing levels of competition within the profession." So I take that as the most salient description of the environment these firms are trying to address through their strategic planning process.
Next, we asked how much of strategy is actually executed: Here, about 40% of North America-based firms happily replied "most of it." But 20% also replied somewhat cryptically "as much as we required," and nearly another 40% candidly reported "less than we would have liked." A follow-up asked how satisfied they were with achieving pre-determined strategic goals: roughly 2/3rd’s reported "satisfied" or "very satisfied," but 1/3rd chose "dissatisfied."
Bear with me through a couple of more data-points and then we get to the good stuff.
Asked about strategy’s effectiveness in "creating meaningful differentiation from competitors," well over 50% said they were "dissatisfied," and less than 10% reported they were "very satisfied."
On the seemingly positive side, however, over 75% reported they were "satisfied" or "very satisfied" with getting the firm’s employees to "buy into" the plan, and essentially the same figures held true when asked about partners’ buy-in (vs. employees).
But strategy should not exist in a vacuum, right? So we also asked about people’s satisfaction levels with its impact on two key financial metrics:
- "dissatisfied" or "very dissatisfied" with its impact on top-line revenues: Almost exactly 50%
- the same, with respect to profits: About 40%.
Finally, the bottom line question: How satisfied were people with their strategy’s impact on "improving client satisfaction with the firm?" Over 75% reported "satisfied" and another 10% "very satisfied." No one chose "very dissatisfied."
Where, then, does this leave us?
With, I submit, a severe disconnect between our optimistic (delusional?) belief that our strategic process is "improving client satisfaction" and the overwhelming number of us who report that "increasing client demands" is primary among the pressures on our firms.
For another perspective on this same disconnect, I commend to you the 18th Annual General Counsel Survey from Inside Counsel magazine (July 2007), which opens with the observation that there is a "collision" at hand in form of "law firms under pressure to make more money butt[ing] up against general counsel locked into budgets that won’t bend." Here’s the table that sums it up, to my mind, which is the "overall" law firm report card as viewed by the 862 in-house counsel and 135 firm attorneys responding:
| In-House Counsel | Law Firm | |
|---|---|---|
| A |
19%
|
62%
|
| B |
70.5%
|
35%
|
| C |
10%
|
3%
|
| D/F |
0.5%
|
—
|
Disconnects are also apparent on specific components of client service. For example, on the question whether service levels have improved over the past five years:
- 68% of law firms say yes, but only 29% of in-house counsel
- 15% of law firms say no improvement, but 35% of in-house counsel.
"Most law firms pad their bills:"
- 39% of in-house counsel agree, 24% are unsure
- 72% of law firm respondents disagree, 18% unsure.
"Law firms are actively seeking out ways to reduce the costs of their services:"
- 70% of in-house counsel disagree, 19% unsure
- 56% of law firm respondents agree, 20% unsure.
"Law firms make too much money:"
- 38% of in-house counsel agree, 40% unsure
- 76% of law firm respondents disagree, 15% unsure.
Finally, 77% of inhouse counsel say they’re under strong pressure to reduce spending on outside counsel, but only a third of them believe that law firms understand this constraint.
Is there hope for bridging this divide?
I think so, and I’m going to suggest it comes from as old-fashioned a source as there is in our profession, from a value that must, or should, date to the first days when it ever began dawning on people that this thing called lawyering might be tantamount to a profession.
To approach that conclusion, here’s the last data I’ll present from the Inside Counsel survey, namely hiring criteria for selecting outside counsel, ranked in order:
- Quality of work/Responsiveness (tie)
- Creative solutions
- Billing rates
- Providing preventive counseling
- Multiple practice areas
- Alternative fee arrangements
- Diversity/National reach (tie)
Setting aside rates and alternative fee arrangements, which speak to pure economics and not service levels, and also setting aside practice area and national reach, which are typically irrelevant from the perspective of an inhouse lawyer hiring a firm to help with Matter X today—by hypothesis they handle the practice area in question and have the geographic reach required—the list reduces to: Quality, Responsiveness, Creativity, and Preventive (read: holistic) counseling.
What do those boil down to?
Supreme levels of client service and consummate professionalism. Sound familiar? Wasn’t this what you signed up for when you first became enamored of the profession? Isn’t this what you find most fulfilling today? Don’t your most admired colleagues aspire to precisely the same?
Wherein, then, lies the problem? Why do we think we’re doing so well promoting client service and clients think we’re doing so poorly?
Communications, of course, is the answer; we’re not communicating very well at all, which is a rather appalling failing considering how verbal and articulate we all presume ourselves to be. It may be that we’re not communicating on the frequency or wavelength clients are listening in on or want to pick up on. If so, the answer may be that our firms need to invest more in client relationship development. (This is different than traditional marketing.)
Does your firm have a Client Relationship Director? Should you?
