Kevin Wheeler examines how best law firms can grab work off their competitors in a lacklustre legal market
Writing recently in The Times, Alex Spence noted that this year’s law firm reporting season will see another year of unimpressive results. He reported also that this current financial year is likely to see a
flat legal market.So, how do law firms achieve any sort of growth in such a
market? Well, short of merging with another firm or taking on lots of lateral hires, they will have to take market share from their competitors. Some will be lucky enough to be able to tap into growing overseas legal markets but for most firms dependent for all, or a large share of their work, on the UK market, their success will have to come at the expense of others’ misfortune.
So, how do law firms take market share from their competitors? I have a number of suggestions:
● Take a larger share of your key clients’ legal spend. ● Focus your business development efforts. ● Invest in your lawyers’ business development skills. ● Show clients that you really understand the issues facing their
business.
Take a larger share of your key clients’ legal spendThe easiest way to grow the firm’s revenue is to take a larger share of the legal spend of the firm’s key clients. Rather than rushing out to win new clients, partners need to work together to understand the needs of their existing clients, build stronger relationships
with the key decision-makers in these businesses, and exploit these relationships to win additional work by displacing other incumbent law firms instructed by these clients.
Historically, most large clients have used a number of different law firms on a “horses for courses” basis, picking individual firms for their legal specialisms, sector expertise, jurisdictional coverage or proximity to the company’s operations. In many of the largest corporates and institutions there has been a realisation that having such a large number of instructed law firms is not efficient, and the formation of formal panels of much smaller numbers of firms has been a process that has accelerated over the last few years. So, the clients already see the rationale for working with a smaller number of firms: they can form closer relationships with these firms by giving them a larger share of their legal work, and in return the firms have to reduce their costs and provide better value for money.
If the clients are receptive to giving fewer firms a larger share of their legal spend, why do law firms find it so difficult to take advantage of this? In my experience, one of the keys to cracking this problem is to overcome the internal barriers to partners working together to develop clients and cross-sell services. Often this is linked to the firm’s remuneration structure, which in many firms places an emphasis on individual or group billing targets rather than on client-specific objectives. The former creates a “silo” mentality with partners reluctant to introduce other departments to their clients because they generate no work from this activity and hence are not rewarded for it.
The other main problem is that law firms often only have a vague idea of the needs of their key clients. If you do not understand the issues that clients are facing or their views on the legal services that they are receiving, you will not be able to link these to the advice that your firm can provide, and hence you will not make much progress in increasing your share of the client’s
of the pie
8 LawBusinessReview.co.uk August 2011
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August 2011 LawBusinessReview.co.uk 9
Business school
Business development
“The ambitious firms will grasp the opportunity and make it happen; the rest, I suspect, will wait for the economic storm to blow over and see where they end up. Many may find their pie has been eaten by others”
legal spend. Having objective client feedback on which to base your client service plans is crucial and it still amazes me that fewer than 10% of all law firm/client relationships are audited by the law firms to provide this invaluable business intelligence. It amazes the clients that I talk to even more!
Putting together an effective key client programme in a firm is not rocket science, but few seem to have managed to do so. Getting buy-in at the top is crucial, as are the reward structures which motivate partners to work together on accounts. Next comes the task of identifying the firm’s “key clients” – usually a combination of the largest ones by billing as well as those with potential to be grown into bigger accounts – and the allocation of client partners to each of these.
Most clients see the value in the client partner role – a “point person” for managing the relationship between the firm and that client – but it is often difficult to get partners to take on such roles or relinquish control over “their” clients. This impasse is best resolved by showing that the changes are necessary to meet the client’s needs more effectively. In fact, objective client feedback – preferably obtained by an independent third party – is the best way to change partners’ behaviours and get them more focused on delivering what the client actually wants rather than what the firm thinks they want.
Business development
A client service plan writes itself once client feedback has been obtained. A quick check with the client that they are happy with this, and off you go. Regular monitoring of the plan’s implementation by the firm’s management team and the client ensures that actions happen. Simple.
Focus your business development effortsToo many law firms are still spreading themselves too thinly. Few firms can claim to be genuinely full-service firms and even fewer global, full-service firms. By the way, the key to success in these latter firms is to ensure that the great expense that you have gone to in setting up a global network is recouped by offering a seamless global service to key clients, who then instruct the firm around the world. Many such firms still seem to have failed to grasp this point or just struggle to make it happen.
When I see a law firm at the bottom end of The Lawyer 100 claiming to be a full-service commercial law firm, I know they are in trouble. Most such firms, including those higher up the table, need to recognise that success comes though focusing on fewer rather than more services or sectors. Concentrating the firm’s resources on a limited number of markets means that you can build greater expertise in those markets, which leads to a higher profile/reputation than your competitors, and hence more new business opportunities.
“Putting together an effective key client programme in a firm is not rocket science, but few seem to have managed to do so”
“The future belongs to a handful of firms that will be truly global…and strong niche players”
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Business developmentIn my opinion, the future belongs to a
handful of fi rms that will be truly global – mirroring what has already occurred in other professional services markets like accountancy, property consultancy and actuarial services – and strong niche players. The full-service fi rms that sit in the “middle” will struggle to fi nd a point of differentiation and will come under intense pressure on fees as they fail to justify why they should charge a “premium”. As a result, they will make less profi t, which will impact on their ability to attract the best talent. This then becomes a vicious downward spiral from which it is diffi cult to escape.
Successful niche fi rms will focus on sectors such as energy, or legal specialisms, for example, intellectual property. These could be based on global markets or regional/jurisdictional niches. The depth of experience that they possess will enable them to charge a “premium” for the advice they provide. This will lead to above average profi tability which will enable them to attract the best talent as well as providing for investment in “thought leadership” to further consolidate that fi rm’s understanding of the market and position it as the market leader in its fi eld.
Invest in your lawyers’ business development skillsThe success of any law fi rm is dependent on the business development (BD) skills of its lawyers. This is more crucial now than ever.
In the pre-recession market, when work was plentiful, fi rms could carry a large proportion of their partners who didn’t have such skills. These fi rms relied instead on the work coming to them or through the endeavours of a few “rainmakers”.
Now that work is scarce, fi rms should be investing in BD skills training for their lawyers, but instead most fi rms have cut their training budgets to save money! This is very short-sighted. Many fi rms seem to have taken the view that the market is depressed, all fi rms are affected equally and that they should “hunker down” and wait for the market to recover. However, some commentators are suggesting that the market will not recover for a decade, in which case those fi rms with ambition should start thinking about up-skilling their lawyers now to take market share from their competitors.
One of the problems that law fi rms face is that many have had their fi ngers burnt in the past by using poor quality BD trainers who knew little about the peculiarities of selling legal services. However, this is no excuse to stop all such training now.
Lawyers should focus fi rst on bringing their client development skills up to scratch. Then they should gain an appreciation of the “sales” process for legal services:
TARGET CONTACT PROSPECT CLIENT
They need to understand how they move along this continuum from target to client; how they use marketing to facilitate this; and, why the best strategy entails building a relationship of trust with a decision-maker, understanding their needs, explaining your capabilities, and waiting for them to buy from you. Now is not the
time for aggressive sales tactics, which in the legal market are doomed to failure.
Show clients that you really understand the issues facing their businessIn my long experience of working in the professional services sector, what impresses businesses most about their business
advisers is the extent to which they take the time to understand the issues facing the business and then come forward proactively to suggest possible solutions to these issues. Too many lawyers wait for clients to come to them with an instruction before doing anything.
Being proactive and showing an interest in, and knowledge of, issues facing clients will put your fi rm at the front of the queue to advise on such issues. Such a “thought leadership” based approach has been used very successfully over the years by other advisers like accountants and management consultants. These fi rms have not stopped investing in this approach just because there has been a recession.
In my opinion, the most impressive piece of thought leadership undertaken in the professional services fi rm (PSF) sector is PwC’s annual Global CEO Survey, which is now in its 14th year. This year’s survey involved more than 1,200 CEOs from 69 countries. The sheer logistical challenge of this research reinforces the impression that here is a fi rm which can galvanise its resources to undertake any global assignment. The insights on CEO thinking and experience analysed by sector, country and issue are truly impressive. The use of a dedicated micro-site on the web allows the fi rm to present a dazzling array of stats along with video clips of some of the CEOs who took part and PwC partners commenting on the fi ndings. This represents the “gold standard” for PSF thought leadership. Law fi rms looking to get ahead of the game and win market share from their competitors need to start thinking about how they can emulate the likes of PwC when it comes to thought leadership. At the moment, they are a long way behind.
These are just a couple of ideas for how your fi rm could start to take a bigger slice of the legal pie in this diffi cult market. The ambitious fi rms will grasp the opportunity and make it happen; the rest, I suspect, will wait for the economic storm to blow over and see where they end up. Many may fi nd that their pie has been eaten by others.
Kevin Wheeler has been advising law fi rms on all aspects of marketing and business development for 16 years. He can be contacted at [email protected]
Kevin Wheeler
“Those fi rms with ambition should start thinking about up-skilling their lawyers now to take market share from their competitors”
