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Why Are Law Firms Falling Behind?

This news ought to be deeply disturbing to managing partners and lawyers everywhere, regardless of the size of their firm: Attorneys are losing their once-revered position as a business’ most-trusted advisor. Other professionals are edging them out, especially accountants and consultants.

How did this happen? More precisely, why did lawyers let it happen?

Something of a parallel might be found in what happened to the American auto industry in the 1970s when Japanese and European manufacturers made their first serious inroads into Detroit’s dominant market position. Several years later, Lee Iacocca—who saved Chrysler from near collapse and liquidation—was asked by the CBS News show Sunday Morning how the Big Three could have allowed this to happen. His answer was blunt and accurate: “Nothing is more vulnerable than entrenched success.”

A similar earthquake is shaking up the business of law. As recently as 10 years ago, often a lawyer was the most-reliable and easily available source of advice to executives, managers and business owners. So, the entrenched success of traditional law firms created a window for new competitors to make inroads into the dominant market position of the profession. Business people discovered other sources of advice that often charged less to give it:

  • Accounting firms launched law firm divisions to go after the high-premium, high-value files of corporate clients;
  • A growing number of foreign-based firms began opening offices in the U.S., Canada and the U.K., often staffed with “business authorities” to help companies from their home country make the transition to doing business in America and other Western nations;
  • Consulting firms began hiring lawyers, not to practice law per se but to provide advice when business issues had a legal component;
  • Virtual “NewLaw” firms operating under a low-cost economic model started attracting day-to-day commodity work from businesses that always paid the light bill for regular law firms; and
  • Clients are keeping more work in-house, both as a cost-saving measure and because lawyers in the general counsel’s office are more likely to know more about the business and thus offer better, more focused advice.

So along with competition for actual work, lawyers are suddenly playing a game of tug-of-war with the other sources of advice open to clients that didn’t exist a decade ago.

Value v. Price

Contributing to firms losing their “trusted advisor” status: Clients don’t feel they are getting sufficient value for what they are paying.

A new study from Nisus Consulting finds “clients feel they are paying through the nose and that the (law firm’s) profits are excessive,” and as a result they are not getting value for money. According to LegalFutures, the survey shows that the top three factors driving client views of the law firms they use haven’t changed—strategic thinking, personal chemistry and problem solving—yet responsiveness, which lawyers believe is the most important factor, came eighth.

Price also is driving clients away from seeing their attorneys as an advisor. Indeed, there is a growing reluctance on the part of executives to call outside counsel on simple, routine matters or to run something by them that isn’t a big deal.

“Unless it’s really vital, I avoid calling our lawyers because it’s gotten too costly,” the general counsel of a midsized, fast-growing, high-tech company told me not long ago. “A few months ago, I phoned him with a quick question. We spoke for maybe 10 minutes and at the end of the month a $150 charge appeared on my invoice. “Our CFO tells me that the CPA firm he uses never charges for that kind of a call,” he added. “Why do law firms start running the meter every time the phone rings?”

Attorneys have fallen a long way in their client’s eyes. In early October, The Global Legal Post reported that along with pricing issues, the client-attorney relationship is undergoing a fundamental shift thanks to the rise of artificial intelligence, which is changing the how firms must package and price services. As law futurist Chrissy Lightfoot has been writing for several years, “The incremental change everybody talks about I actually believe has begun to be exponential … Now is the time to actually do the deep research and the deep thinking on how it’s going to impact all of us, our livelihoods, our career, but in a positive way.”

Law firms have done a lousy job of differentiating what they do by quantifying their value. Instead, they have fallen a long way in their client’s eyes in a relatively short period of time.

Recovering

Lawyers can still recapture their role as the client’s trusted advisor. But it will take a different mindset and a sustained marketing effort to convince clients that the firms are sincere. Attorneys can begin the process by thinking about these six ideas:

  1. Start listening to your clients, they’re trying to say what they want to do. I’ve lost track of how many business people told me in focus groups and client satisfaction interviews, “They don’t hear what I’m saying. I tell them I just need a dining room chair and they come back with six chairs, a table and a sideboard. They were at the meeting so why is this so difficult?”
  2. Stop over-lawyering files. Don’t put three partners on a file when two can do the job. If I were a client, I’d explode hearing, “I asked Joe to help on the file because he needs the hours” – which I’ve overheard in hallways too many times over the years. Unless the client is the Lawyer’s Relief Charity Fund, let Joe find his own hours.
  3. Don’t charge for bringing young associates to meetings. Yes, they need the experience and observing a deal being structured is a valuable learning exercise. But don’t bill for every minute of the associate’s time; training young lawyers is a cost of doing business for the law firm, not the client, and charging for the time is unprofessional.
  4. Turn off the meter. Billing for a 10-minute phone call where you answer a quick question may be ethical but it’s bad business. The executive will believe that you see them as a paycheck, not as a colleague, and it only deepens the crack in the “trusted advisor” relationship.
  5. Invite clients to a free “What are your plans?” meeting annually. Invite the key executives in for a lunch where they can explain how they plan to grow their business over the next few years. Tell them the meter is off, and have some of your partners attend. Just ask questions, don’t use it to tout the expertise of a tax partner the client has never met. It will absolutely generate new files.
  6. Learn to get by giving. A well-written, readable blog is the best way to establish an attorney’s thought leadership and provides clients, potential clients and referral sources with things they should think about in running their company. If you give away good ideas, you’ll get files that help an executive implement them.

I hope you’ll find my outlined reasons why I think lawyers may be losing their valued status as a “trusted advisor” to clients and suggestions for turning things around helpful toward increasing your overall level of success in this new year!

Jim Bliwas

Law marketing veteran Jim Bliwas has spent most of his career working in and with law firms in the U.S. and Canada. He is senior marketing and communications strategist for Professional Services Marketing LLP, and managing director of Leaner Law Marketing Strategies. Reach him at Jim@PSM-Marketing.com.

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Filed Under: Featured StoriesPractice Management

About the Author: Law marketing veteran Jim Bliwas has spent most of his career working in and with law firms in the U.S. and Canada. He is senior marketing and communications strategist for Professional Services Marketing LLP, and managing director of Leaner Law Marketing Strategies. Reach him at Jim@PSM-Marketing.com.

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