Corporate clients continue to ramp up their legal spending on “alternative providers” while cutting back on budgets for work farmed out to law firms. That is the conclusion drawn from recent studies by BTI Consulting Group and the Association of Corporate Counsel by Wall Street Journal writer Jennifer Smith in WSJ’s September 15 edition.
The Journal cites a BTI study determining that nearly 60 percent of larger companies are keeping more legal work in-house this year while budgeting $40.9 billion on in-house lawyers, a 22 percent increase since 2011.
Corporate clients are also hiring more experienced contract lawyers do crunch work, as needed, rather than paying lofty rates for junior lawyer work done at firms, and they are looking to alternative service companies for discrete tasks such as document review and due diligence, once performed by armies of young top-dollar associates at law firms.
This trend shows no signs of abating, and demonstrates that law firms must show how they are better than their contract provider competition. Of course, that means they must also figure out how to be better and how to measure their superiority.
While firms have long avoided the cumbersome task of mastering process improvement, project management and service measurement, failure to tackle those tasks now will prove to be suicidal in years to come.
Among the many metrics that a forward-looking and competitive law firm should be utilizing are the following:
- How fast does the firm close transactions of different varieties (average closing times in mergers/acquisitions is down to 60 days now)
- How often does the firm come in “under budget” on deals
- What is the frequency of post-closing problems that result in material dollar expenditures (a firm that has close to zero percent can argue that their experienced foresight and proper initial handling of a deal means lower costs on the back-end)
- What percentage of clients rank their satisfaction for the dollars spent at 9 or 10 on a scale of 1 to 10
- What percentage of clients say they would recommend this firm to others (and actually do)
- What percentage of clients say the law firm renders better “value” than alternative providers
- What percentage of clients say the law firm renders better “value” than other firms
In the corporate world, there is an old saying that “What gets measured, gets done.” If you are not measuring value delivered or satisfaction produced, it is not getting done. If you want to manage it, you better measure it.
Then, you can benefit greatly from communicating the positive results using authentic numbers, instead of guesses and puffing. This has worked well for at least one highly successful and growing Massachusetts accounting firm, which displays on its website the fact that 97 percent of clients surveyed “strongly recommend” the firm to friends and acquaintances. See, for example, the website of Alexander, Aronson & Finning.