The results are in from the Inside Counsel survey of in-house counsel. Once again, the survey reveals that in-house counsel see lots of room for improvement from the lawyers they hire. And a third of them say they're going to fire one or more outside firms in the next year.
While the survey raises a number of different issues, one that I'm interested in is the disparity between how law firms grade themselves vs. how they're graded by their clients. That disconnect is one that is important for firms to address if they want to keep their clients - and keep them happy.
In the 2007 survey, 70.5% of in-house counsel gave their outside counsel a 'B' grade for performance overall, 19% graded outside counsel an 'A', and 10% gave them a 'C.' By contrast, 62% of law firms gave themselves an 'A,' 35% a 'B' and only 3% graded themselves with a 'C.'
To me, this raises a red flag - firms are not only not providing what I call an excellent client experience, but they're not in touch with their clients' perceptions. Assuming that they're an A when the client is grading them a B or a C spells trouble. Those firms aren't finding out what their clients really want and need, and they clearly aren't meeting those clients' expectations.
The survey also indicates that firms believe the path to better service is paved with understanding clients' needs and pressures. While the report indicates that this is incorrect, since in-house survey respondents answered that firms needed to improve efficiency and reduce costs, I disagree. If firms were well-versed in their clients' businesses, their needs and pressures, those firms would know that cost and efficiency were priorities. I don't think the survey reveals that firms don't know the areas that would increase service - what it shows is that those firms aren't following through on what they say they know to be true - that knowing the client's priorities and needs makes all the difference. This is supported by the survey finding that one third of in-house counsel don't believe their outside lawyers understand their budgetary constraints.
I still believe that providing an excellent client experience, along with results will reduce the price sensitivity of most clients. But it takes work, and part of that work is establishing expectations and costs up front. Delivering on those promises is also essential. Notably, the survey also indicates that 74% of attorneys say that they adhere to client budgets, while 46% of the clients say the law firms adhere to the budgets.
That indicates two things: first, that the attorneys aren't properly setting the budgets or properly setting expectations with the client at the outset of the engagement. And second, the deviation from the budget makes a much bigger impression on the client than it makes on the lawyer. Perhaps part of the reason for that is the failure of the lawyer or law firm to examine with the client the circumstances under which the cost/budget might change, so that the client isn't blindsided when those contingencies arise and additional costs become necessary.
If budgets are such a big issue for clients, lawyers are going to have to learn how to budget better and discuss expectations in detail with clients. And once again, setting fixed or staged fees may well be the best way to do that, as it will allow clients better control over their budgets. While clients may not ask for alternative billing arrangements up front, and they may not cite alternative billing arrangements as an important factor in selecting outside counsel, that doesn't mean that they won't make a difference. If clients see that those billing arrangements help to meet their needs, they'll start asking for them, and they'll become a larger factor in selecting outside counsel.
In fact, the three biggest factors that in-house counsel cited for choosing outside counsel were: quality of work, responsiveness, creative solutions, and billing rates.
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