‘Ancillary support services’ can no longer be sustainably performed by law firms, says Fernando Garcia
In early January I participated in the Legal Executive Institute’s 27th Annual Marketing Partner Forum in beautiful Miami, Florida; the theme of this year’s conference was “Vision Quest: Aligning Strategic Focus Across the Firm.”
The conference presented an opportunity for law firm managers and business development professionals to share best practices and to hear from general counsel on what we look for in selecting lawyers and law firms, how we determine what work is done inhouse, and what work is sent to external counsel.
Panelists also discussed how law firms might position themselves to take advantage of the changes taking place in the legal profession, mainly the introduction of legal technology, alternative legal service providers and increasing competition among law firms.
An analysis of the legal market suggests that competition is increasing, and more and more work is being brought in-house or performed by specialized alternative legal service providers. At the same time, there is increased demand for certain legal services wherein lawyers are able to command higher hourly rates.
Much of this can be explained by the dynamic market model, a roadmap for lawyers and law firms in deciding where they should direct the focus of their marketing efforts. According to the Legal Executive Institute’s 2019 Report on the State of the Legal Market, 20 to 25 per cent of a law firm’s revenues come from “unique legal expertise,” or specialized legal skills and experience, which commands higher rates and faces less competition.
The work in the middle, representing 60 to 70 per cent of the revenue, comes from “comprehensive legal services,” or work that is more routine and not highly specialized. These services are performed by other large law firms, regional boutique firms and even inhouse legal departments, and therefore are more price sensitive. Larger, more expensive law firms are seeing this work diminish as they are unable to effectively compete on price.
Finally, the bottom third of revenue comes from “ancillary support services” such as translations and some paralegal work, now performed by alternate service providers more efficiently and cheaply than law firms can provide these services. This represents 10 to 15 per cent of revenues and can no longer be sustainably performed by law firms.
The strategies undertaken to ensure long-term success as a lawyer or a law firm will differ, but here are some points I was able to take away from the conference sessions:
- Law firms must better understand why their clients provide them with business and ensure they are meeting their needs. For example, if diversity is important to a client, failing to provide a diverse slate with regard to a proposed legal team will reduce the likelihood of success. Moreover, it was noted how infrequently, in the face of an unsuccessful RFP submission, does the unsuccessful law firm ever seek feedback from the prospective client as to why it was not selected. This is low-hanging fruit that is rarely sought. Finally, panelists noted that if a law firm was told why a bid was not successful, it was expected that, for the next time, insufficiencies would be rectified. Here again, this often does not happen. The takeaway was that law firms need to listen better, act, and continuously react to the changing needs and requests of the clients.
- Panelists spoke about customer relationship management (CRM) and the need to ensure that critical insights into clients, their needs, and other areas where services may be provided is not lost, which can of course result in missed opportunities for the firm.
- Another panel looked at the key role of the relationship manager. While it is common for a client to be provided with an account rep, that person is usually a lawyer that works for the client. Instead, the panelists recommended implementing a key strategic account approach. This means providing the client with a strategic account manager who is not a lawyer, who has some independence from the counsels providing day-to-day services and is able to action concerns, feedback and requests from the client while being unaffected by the internal politics and self-interests of the lawyers involved. This is a model that has been increasingly used in the United States and is one that I believe will become increasingly popular in Canada in the near future.
- Law firms practising in the upper echelon of the dynamic marketing model are increasingly moving away from organizing around areas of practice and moving toward establishing sector practice groups. This allows for one-stop shopping for clients in specific industries, and allows for better cooperation and a more holistic treatment of the client by the firm. Moreover, by separating the relationship manager from those providing services, there can be more frank and valuable discussions about what is working and what is not.
- Last but not least, there was discussion about the importance of law firms implementing legal technology and then allowing their clients, who often have less tools and resources at their disposal, to use these tools. Other value-added practices discussed included the importance of sharing templates, making billing and legal opinions searchable and available to clients, and finally, providing timely training sessions and/or access to conferences for the legal and business team clients.
These conferences are valuable in allowing for an exchange of ideas and best practices, and they provide an opportunity for law firms and their teams to hear what the client is looking for directly from clients themselves. This insight is critical for the ongoing success of law firms and their lawyers.
