Stop navel gazing and focus on your clients' changing needs

In late 2008, the legal market turned upside down. Clients started to more closely scrutinise lawyers and legal bills and, in doing so, found that pressure applied in the right way at the right time can create change.

The disappearance and consolidation of clients, combined with recessionary fears, has reduced legal work in virtually every market. The remaining clients have recognised their position of strength and created a new order for lawyers.

Firm selection has become more competitive. Delinquencies have risen. Requests for proposals have become the norm. Client loyalty has waned as fee negotiations have increased.

Alternative fee arrangements (AFAs), talked about for so many years, have become a reality. Unfortunately, most AFAs have not led to creative billing arrangements, but rather to discounts on frozen rates.

What about law firms? How have they responded to new client demands? Unfortunately, firms have been less nimble than their clients. Faced with declining revenues, firms have generally turned to cost reductions.
While clients have called for different ways of doing business, law firms have responded by reducing staff and laying off associates. As a result, many firms have exacerbated their problems by looking internally instead of understanding their changing clients’ needs. Some firms continue to blame their woes on the economy and thereby fail to acknowledge the changes in the client world.

Well-managed firms embrace change: they adapt and do what they must to be successful. Here are four suggestions to help firms to better understand the new legal market.?

1. Talk to your clients. Spend time on client interviews. Find out what you are doing well and what other firms are doing better. Understand the work that clients need and how you can attain that work.?

2. Re-evaluate your fee structure. Understand each client’s willingness to pay and apply it to your fee structure. Which areas can be profitable even on a reduced fee basis? Make an effort to understand AFAs so that your firm can be competitive. Keep in mind that clients are businesspeople and are willing to negotiate, so counter, change and talk until you reach an acceptable fee structure. ?

3. Reset to the new norm. Not the firm’s new norm, but the clients’ new norm. Staffing, delivery of services and pricing have changed. Understand the changes and respond accordingly.?

4. Focus efforts outward. Ensure your lawyers understand that their clients reside outside of their four walls. The road to prosperity passes through the client’s office.

?This year, the economy will improve. Make sure you position your firm to take advantage of it.