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5 posts from August 2006

August 30, 2006

How to turn legal clients into raving fans – Part 3 of 5

To me, the most interesting thing about client satisfaction is how bad lawyers are at estimating it.

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I was reminded of this by Patrick Lamb’s recent posts about the Lake Wobegon effect, named after Garrison Keilor’s fictional community where “all the women are strong, all the men are good-looking, and all the children are above average. In my former life as a psychology professor, I had a lot of fun lecturing about the research behind this phenomenon, including these examples (from David Myers textbook Social Psychology, Fifth edition, p. 54):

Most people report that they are smarter and better looking than average.

In one study, 90% of business managers rated their performance as above average.

In another, 86% percent of workers said they were above average, and only 1% thought they were below average.

Most drivers say they are safer and more highly skilled than average, even if they have been involved in accidents that led to hospitalization.

Most college students think they will live about 10 years longer than actuarial tables predict.

When the College Entrance Examination Board asked 829,000 high school seniors to rate themselves on the desirable characteristic of “ability to get along with others.” 0% said they were below average, 60% thought they were in the top 10%, and 25% ranked themselves in the top 1%.

Another Patrick Lamb post called my attention to Inside Counsel’s annual survey of General Counsel, which compared lawyers’ ratings of client satisfaction with ratings by the clients themselves.

In this survey, 52% of lawyers rated their client relationships as an A, but only 21% of their clients agreed. Similarly, 68% of lawyers said that the general level of legal service has improved over the last five years, but only 32% of clients agreed.

Do you want more evidence that many lawyers overrate client satisfaction? See the Inside Counsel online reports for more numbers and numerous quotes, like this one from John Gronda, counsel at the Harris Corp, “Law firms don’t do what they’re told. If I ask you for a quick opinion, don’t send me a 10 page memo that I don’t have time to read.”

In general, the In House Counsel survey concluded that “Most of the friction between law firms and their in-house clients can be traced back to costs. Just 7% of lawyers think law firms make too much money, but 43% of clients do. 74% of lawyers say that law firms are actively seeking out ways to reduce legal costs. They’d better tell clients how they do this, because only 11% of their clients agree. Even worse, 42% of clients (vs. just 6% of lawyers) agree with the statement “most law firms pad their bills.”

The survey report ends with this quote from Douglas Nelson, general counsel at Croplife America: “Some outside lawyers have tremendous reputations and knowledge, but they forget that you’re hiring and paying them, and that they need to keep you happy.”

More about how to do that in the next few posts in this series.

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Or see my new book Legal Business Development: A Step by Step Guide, which will be published September 25, and can be ordered now on my web page.

August 23, 2006

Should managing partners spend more time with clients?

We now interrupt my five part series on “raving fans” to discuss a new online book by Patrick McKenna, a cofounding partner of Edge International, who has worked with top ten professional service firms in over a dozen different countries.

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The reason I got distracted is that a who's who of top legal bloggers – including David Maister, Adam Smith, Patrick Lamb, Bruce Marcus, and Gerry Riskin -- recently praised McKenna’s new free e-book in their blogs. When I heard that it was just 23 pages long, I decided to read it right away. The book is called First 100 Days: Transitioning a New Managing Partner, and it includes nine pages of insightful quotes from leaders at some of the largest law firms in the country, including Ropes & Gray, Crowell & Moring, Dickstein Shapiro, and Patten Boggs. While I have no plans to become a managing partner, I thought it would help me understand my customers’ mindset and priorities.

Which it did, with a vengeance. My conclusion: in their first 100 days on the job, managing partners don’t care about sales or about new business.

The book is an excellent summary of real world advice which will be useful to every manager. But when I typed the word marketing in the e-book's online search tool, I was surprised to find that it did not appear in the book. I thought it might just be the terminology, so I went for the more subtle approach and searched for the most important word in business development: listen. The good news was I found eight references to listening. The bad news was that when I looked more closely, all eight were about listening to the firm’s lawyers, not to its clients. So then I searched for the words clients and partners. The score was clients 3, partners 21.

I would like to draw a sweeping conclusion from this data. (After all, that’s what blogs are for.) New managing partners seem so consumed with dealing with other lawyers, that they don’t have time to think about new clients. In fact, they don’t even have enough time for the current clients who are paying everyone’s salaries.

Now I understand that managing a group of attorneys is very very hard. In one of my favorite articles -- “Are Law Firms Manageable?” (American Lawyer, April 2006) -- David Maister describes most law firms as “bands of warlords, each with his or her followers, ruling over a group of cowed citizens and acting in temporary alliance—until a better opportunity comes along.” What’s more, he argues that “Management challenges occur not in spite of lawyers’ intelligence and training, but because of them.”

So it is easy to see why managing partners would get pulled into spending almost all their time looking inside the organization. But, as the legal environment becomes more competitive, shouldn't they be looking outside?

When new CEOs take over multi-billion dollar firms that are many times the size of the largest law firms, you often read about whirlwind tours to visit the biggest customers, to strengthen relationships and get a better understanding of what customers need and what they want. Are managing partners doing enough of this?

It all comes back to one central question: If competition continues to increase in the future, should managing partners spend more time with clients?

August 16, 2006

How to turn legal clients into raving fans – Part 2 of 5

Based on a series of surveys on the satisfaction of law firm clients, BTI Consulting reports that client satisfaction is declining, and these are the most important reasons why:
Not keeping up with changing client needs
Doing a poor job or articulating and delivering value
Poor communication between law firms and clients.

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BTI’s Marcie Borgal has a great piece online which goes beyond these basic findings to describe five ways that law firms can deliver more value, without reducing their fees:

1. Increase efficiency. This includes assigning the most appropriate lawyers to each matter, paying more attention to the budget, and avoiding duplication of effort.

2. Increase responsiveness. You can’t give clients what they want unless you know what they want, so responsiveness starts with understanding client preferences, whether it’s the nature of a weekly report or the format of a monthly bill. As Paul Newman put it in the movie Cool Hand Luke: “What we have here is a failure to communicate.” Some lawyers think that responsiveness means returning phone calls promptly. That is certainly one element, but there is a whole lot more. As Client Services Advisor Iris Jones at Akin Gump told me in an interview for an article coming soon in Law Firm Inc: “One thing that’s different these days is that clients demand to be much more involved in decision making. There was a time when clients expected lawyers to handle matters for them, and were not as involved in the details. The client’s role was simply to pay the bills. Now clients are looking for efficiency, cost savings, and value added.”

3. Offer more resources - As internal departments find their head count squeezed, there are times when they just need more heads. Some firms have developed “loaner programs” in which associates and junior partners may work onsite with the client for months at a time. The benefits to the law firm are also huge, since this encourages relationships and a level of knowledge which is only possible when people work side by side, day after day.

4. Offer “one stop shopping” – I’ve written in the past about how the Dupont model has encouraged many clients to reduce the number of law firms they use, and to rely on a smaller number of firms for a wider array of services. This works to the advantage of large firms that offer high quality service in a variety of areas. For smaller firms, this may mean creating partnerships with complementary groups, as long as they can be offered in a way that is simple and easy for clients (e.g. a single bill.)

5. Client-centered billing - This means providing bills in the form that each client wants, whether that means e-bills, or special formatting. Bills must come often enough to allow clients to manage costs. They should also include enough detail that clients feel that they know what they are paying for. In some cases, clients may want to review a draft invoice before a bill is formally submitted.

This material was adapted from my new book Legal Business Development: A Step by Step Guide, which will be published in September, and can be ordered now on my web page. For additional details, see Marcie Borgal’s article “How Clients Hire, Fire And Spend” in The Complete Lawyer.

August 09, 2006

How to turn legal clients into raving fans – Part 1 of 5

Whenever I give a speech to a group of lawyers, I ask how many think their top clients are satisfied. Almost everyone thinks they are.

But for the last few years, BTI Consulting has been conducting surveys that show most legal clients are not satisfied. In fact, this year’s data reported “An unprecedented drop in client satisfaction with law firms… Just 30.7% of large and Fortune 1000 companies recommend their primary law firms….an astonishing 53.7% of clients ousted their primary law firms in the past 18 months. More than 50% of clients also reported they plan to try at least one new law firm for substantive matters in 2006.”

Why the gap?

The truth is, most lawyers overestimate satisfaction. So do other service providers. The reason is simple: clients generally keep complaints to themselves. In 1995, Thomas Jones and W. Earl Sasser wrote an article for the Harvard Business Review on “Why customers defect” and noted (p. 95) that “Regardless of how they feel, customers of companies with reasonably good product or service quality find it difficult to respond negatively.”

In any case, the critical question is not whether your clients are satisfied. It is whether they are raving fans.

According to Harry Mills in The Rainmaker’s Toolkit “between 60% and 80% of all lost customers report that they are satisfied prior to defection.” Some other lawyer comes along who is new and exciting, or maybe just different, and your client is gone. So if you want to protect your revenue, your goal must be to turn your clients into raving fans who rate satisfaction as 10 out of 10, or maybe even 11.

Then after you start scoring 11 out of 10, you must dig deeper, because, as Jones and Sasser note (p. 91) while “customer satisfaction surveys are an important indicator of the health of the business, relying solely on them can be fatal.” You need to track client complaints, the questions clients ask, feedback from frontline personnel, and much more, because clients need “numerous opportunities to express their dissatisfaction.” (p. 96).

When a client complains, it is human nature to try to resolve the situation before anyone else hears about it. In other industries, quality measurement systems have therefore been designed to insure that they can not be biased by interest groups within the company, and that everyone has easy access to information on individual customers.

This may be especially difficult at law firms, given the independence that lawyers are accustomed to. That simply makes it even more urgent that law firm management constantly strives to create a transparent, open atmosphere, where complaints cannot be hidden.

I recently exchanged emails with several consultants about the complaints they hear most often about lawyers. According to Bob Denney “not returning phone calls is usually the number one complaint.” Other frequent complaints center around not being kept informed on the status of the case or matter, who to call when the responsible attorney is away, what to expect in invoices, and discussing litigation strategies and recommendations.

Unreturned calls are also at the top of John Remsen Jr.’s list of common complaints. “In this age of Blackberries and cell phones, clients simply will not excuse inaccessibility.” His list also includes missed deadlines, surprise bills, and “‘over-lawyering’ - too many lawyers working on files or running up an outrageous bill over a relatively small matter.”

Over the next few weeks, I’ll talk about what to do about it and how to turn clients into raving fans.

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This material was adapted from the book Legal Business Development: A Step by Step Guide.

August 02, 2006

Creating client loyalty

These days, just about everyone participates in programs to increase customer loyalty, including frequent flier clubs and discounts for frequent purchases. In the last few years, have you noticed that they are becoming more common? And have you seen how companies like Ritz Carlton and Southwest Airlines have experienced enormous success by increasing customer perceptions of quality?

These business tactics can be traced to a series of studies published in the Harvard Business Review which showed that exceptional service creates loyalty and that “Increased customer loyalty is the single most important driver of long-term financial performance” (Jones, Thomas O. & Sasser, W. Earl. “Why satisfied customers defect.” Harvard Business Review, November-December 1995, p. 91)

There are many reasons why long-term customers are more profitable than short-term ones. The most obvious is that it is expensive to find new customers. But research has also shown that it costs more to service new customers. For example, one consulting company found that “costs drop by two thirds from the first year to the second because customers know what to expect… and have fewer questions or problems.” (Reichheld, Frederick F & Sasser, W. Earl. “Zero defections: Quality comes to services.” Harvard Business Review, September-October 1990, p. 4.)

When companies serve clients more efficiently, costs go down and profits go up. Customers also spend more as the relationship develops and confidence increases. Finally, the supplier can often charge more for the same services. Add it all up, and it’s easy to see why so many businesses focus on increasing loyalty.

Law firms can be fooled by what researchers call “false loyalty”: when it is difficult to switch, clients may act loyal even when they are just waiting for a chance to jump ship. When they believe the moment is right to find another firm, they will leave so fast it will make your head spin.

Creating true loyalty requires more than just satisfaction. True loyalty grows only out of the total and extreme satisfaction that creates raving fans. More about that in a few weeks.

This material was adapted from my new book Legal Business Development: A Step by Step Guide, which will be available on Amazon in September.