More law firms are learning that offering great legal service is less of a differentiator and more just a standard expectation of clients today
Law is a quintessential relationship business, with law firms long centering their business development and marketing strategies around providing high-quality client service. The unchallenged expectation has always been that tight connections will bring repeat business, particularly from corporate clients.
However, according to new figures from Thomson Reuters Market Insights, client service today may be less of a differentiator among firms and more table stakes to even get in the door. Additionally, with a probable recession on the horizon and an increasing portion of buyers anticipating a decrease in their external legal spend (17% through the first half of 2022, compared to 22% in Q3 2022), delivering value and efficiency will likely move up clients’ agendas. And that means law firms may need to automate some of their lower-value processes in order to deliver more of what clients really want.
When asked about why they would favor one firm over another, the percentage of corporate clients that pointed to overall service as the reason fell to 31.9% over the past year (October 2021 to September 2022), compared to 38.8% the year prior. Specifically, there were major drops in how many of the 5,000-plus in-house counsel surveyed actually viewed client service (from 16% to 6%) and speed (from 7% to 5%) as major law firm differentiators.
In the place of service, more clients pointed towards viewing expertise and business savvy as key differentiators among law firms. And while this doesn’t necessarily mean that service is less important, it shows rather that firms’ emphasis on service has led customers to expect it on every engagement, says Rachel Heathcote of Thomson Reuters Market Insights.
Service as an expectation
“What it shows to me is that everybody is doing service really well, so nobody is standing out for their service. It’s not a differentiator; it’s just table stakes,” Heathcote explains. “So what we have to be careful about if you’re a law firm is that if you are delivering poor service, then there’s a danger of losing out to competitors that are delivering high service.”
Heathcote also noted that one particular sub-category of service did see an increase in the percentage of clients citing it as a reason to choose a particular law firm: responsiveness rose to 15% from 12% over the same time frame. Coupled with expertise and business-savvy increasing as firm differentiators, this may indicate a client base that is increasingly asking for more active business value out of their engagements rather than simply a good client service relationship.
At the Thomson Reuters Institute’s Emerging Legal Technology Forum in Toronto in October, Fernando Garcia, general counsel at multiple small to midsize corporate law departments over his career, noted that just as law departments are clients of law firms, so too are internal business stakeholders the clients of these departments. And internally, a law department’s objectives are increasingly aligning with the larger business and chiefly focused on providing financial value.
When evaluating outside counsel, Garcia pointed to nine key points of value he wants to see in any relationship with a law firm, including:
- Make my life easier;
- Make us look good as a law department;
- Give me the tools to achieve our goals;
- Don’t force me to chase you;
- Don’t work just to cover yourself, be part of the solution;
- Make it such that it’s practical, simple to understand, and we can deal with it;
- Quality support on a timely basis;
- Reduce a risk but never say no; and
- Help me never get caught off-guard.
While there are certainly service elements in play, it’s perhaps no surprise that each of those value points largely deals with business objectives rather than building relationships. “Whatever it is, you’re adding value by letting me add value to my stakeholders and our board,” Garcia adds.
Law firms, no matter the size, are beginning to hear this call loud and clear. The Thomson Reuters Institute’s 2022 Report on the State of US Small Law Firms released in November found that even among law firms with 30 attorneys or fewer, the largest challenge remained spending too much time on administrative tasks and not enough time practicing law. Indeed, 80% percent of small law firms surveyed pointed to time spent doing administrative work as a challenge, even more than acquiring new client business or any other challenge identified. Yet even so, 82% of those small firms said they did not feel they were addressing the time it takes for administrative tasks as well as they should.
This is where technology can play a role. By automating some parts of the administrative process, law firms can free up their most important asset — their people — to do what they do best: use their skills, expertise, and experience to add value to the client’s business. It’s no surprise then that while the report found most small law firm technology budgets are staying the same overall, the technologies seeing the largest increase in investment dollars mostly have to do with back office automation, such as billing & invoice software, timekeeping software, and customer relationship management software.
Now as we move into a post-pandemic yet economically unstable environment, it may be a good time for law firms to re-visit conversations with their clients about preferred methods of communication, where new technologies can fit into the process, and what the client ultimately values in their law firm engagement, adds Heathcote.
“People were working in a different way during the pandemic. It was crisis time, and everybody was working remotely,” she says. “But now, some people are in the office, some people are at home, and people’s situations have changed. So it’s a good conversation to re-visit, especially now that things have settled down.
“In fact, it’s a good conversation to re-visit at the outset of any matter, because those preferences could differ depending on what the matter is or what stage it’s in.”
You can learn how to stay on top of clients’ changing priorities by leveraging market trends and practical advice, here.