The lack of communication between law firms and their clients

Last week, I wrote about the lack of trust between in-house law departments and large law firms.  This week’s post is also from our national survey of alternative fees, and also reflects larger problems that have implications for both hourly and non-hourly work.

Many participants described how communication is vital to success, and how often it is lacking:

Everybody on both sides of the table must understand where the risks and rewards are in this type of relationship.

Some clients are really focused on, “Let’s all be open, let’s discuss things, and let’s find something that works for us and works for you.”  [But other] clients want us to almost bid in a black box world, and are very reluctant to share information.  It’s a little bit of a heads they win, tails we lose. 

[Some of our] clients have shared extensively with us their historic legal expenses. They’ve done it very openly. [But] other clients treat such information as if it’s an absolute trade secret.

Some felt that the entire RFP process works against the type of communication that is needed:

Getting down to the nitty gritty of what an alternative fee is going to look like requires an open and honest relationship and a frank discussion.  I just don’t know how you do that through an RFP. Maybe you can narrow the list of firms you want to talk to, and then have an open dialogue to design a really great alternative fee arrangement. But trying to do it through these formal or distant mechanisms is very difficult.

You inevitably have to get down to a much more detailed discussion, which requires some give and take, and which is hard to do in the RFP process.

The whole concept behind the current movement towards non-conventional billing is designed to create better relationships between clients and law firms, with law firms probably bearing more of the risk than they do now.  There also needs to be alignment of the firm and client interests.  Clients should understand that the law firms also want to make a profit, and [they should both] work together to come up with good arrangements.  This doesn’t call for a formula RFP; it calls for discussion. Just agreeing to whatever is in an RFP or bidding on a lowest cost basis doesn’t further that. If anything, it makes it worse.

Perhaps clients can get by with limited communication with hourly billing, but that is not the case here:

[Alternative fees] require more discussion between the client and the firm about what the billing is going to be, and more frequent checking in with each other. [Then], once you get into that dialogue, if something radically changes in the terms, you have a basis for a reasonable agreement rather than somebody getting stuck with holding the bag or getting a windfall of some kind.

There needs to be a built-in review process, [where client and firm say,] “Let’s meet in six months. Let’s sit down and see how we’re doing.” There needs to be good management at both ends. That’s the trick. The communication piece is critical.

One participant mentioned the importance of building meetings into the formal RFP process:

There should be a bidders’ meeting to sit down and talk, and [there] should be a more open dialogue than just, “I’m going to send this to the top 50 law firms and pick from the five who were the most creative at responding on this RFP.”

There needs to be a lot of up-front involvement.  Some [clients] have an RFP, then they come back [for discussion], and then you evolve your proposal as a result. And that works.

Another talked about a client that was doing things the right way:

The client, to their credit, has been very flexible throughout the course of this process. They’ve been willing to come back to the table and talk about exactly what’s working and what’s not working.  [They ask], “How do we adjust on the fly?  What needs to be done?”  It’s a benefit for the client too, to have stability in that relationship.

But some said that communication is not getting better, it’s getting worse:

One of the interesting phenomena in many of our practices is the changing role of inside counsel in the client/firm relationship. We have had big clients where we have gone from working directly with various business people in various units, to hearing everything through the inside counsel and never, ever once speaking to the business people. I’m sure that someone decided that this would be a better use of the business people’s time. In some fields it’s quite inefficient, because the inside lawyer probably doesn’t have expertise in whatever the subject matter is, so you have to keep asking the question six different ways to get the right answer.

 

This post was reproduced from The LegalBizDev Survey of Alternative Fees.  See our web page for a free executive summary, an order form, or to purchase the $395 complete report online.

Comments

[Steven B. Levy, Author of Legal Project Management: Control Costs, Meet Schedules, Manage Risks, and Maintain Sanity]

There is no law that says you must respond to an RFP only in the approved format. I suppose the fact that few suppliers step outside the RFP format is itself a comment on poor communication.

In supplying professional services -- whether legal, consulting, financial, or otherwise -- you're building a relationship of trust as well as "vending stuff." After all, that's the whole concept behind shrugging off the vendor:customer terminology in favor of professional:client. Most consumers of professional services recognize that the traditional RFP isn't the ideal format, but they have to start somewhere -- and often have to satisfy the procurement-group folks and their processes. Rather than railing against this, use it as an opportunity to be creative and demonstrate the true value to the corporation of having a relationship rather than LPO-ing the work to India at $20/hour.

If you allow the relationship to be circumscribed within a formula-based RFP, you're admitting you're selling a commodity -- and the overwhelming decision factor in purchasing a commodity is price.

(That said, occasionally law departments put out RFPs that are truly designed for law firm responses; I'm talking about the more common form.)