Rod Wittenberg, VP of Financial Productivity
By Legal Futures Associate BigHand
Legal professionals are feeling pressure from the economic headwinds over the past 12 months. Law firm clients want more financial transparency with 76% of firms confirming this in The Annual Law Firm Finance Report. This isn’t the only pressure firms are facing from clients. Nearly half of firms are being ask by their clients to demonstrate the value of their investment and to use technology to drive efficiencies.
This means increased visibility into financial insights and granular data on what happens on a matter. They want to know they are getting their value and outcomes. If not provided, they are ready to look elsewhere for legal services. Disaggregation or unbundling is a tactic that corporate counsel must use in order to adhere to budgetary constraints.
To improve client engagement, some firms have already started taking their first steps. Client retention and engagement are proving to be key profitability metrics as demand for legal services continues to decline. The data from BigHand shows 40% of firms have now started measuring client retention, engagement, and cross-practice referrals.
Changing market dynamics
The firms that I work with agree that although they are aware of client demands for more financial transparency, there is a varied response into what the actual demands are.
Some of the common demands that I’ve heard include:
- Matter budgets
- Real-time financial updates
- Faster turnaround times
- Resourcing transparency
Without the right processes in place, surfacing the data needed to meet these demands in a challenging market is an uphill battle. Luckily, there are innovative practices and technologies firms can put in place to improve client engagement and retention by meeting the above demands.
The response
Law firms are moving towards using a more holistic approach to performance measurement and profitability with better client engagement at the forefront. To meet the client demands we discussed, 64% of firms are planning on collecting and billing more frequently in the next 12 months with over a third looking to increase the frequency of communication throughout the matter.
Along with clearer communication, firms are also investing in greater commercial awareness and responsibility for lawyers. The lack of education and understanding is part of why I think there’s a lack of matter budgeting. It doesn’t help that a quarter of firms have admitted to poor scoping of work up front with the client or even not agreeing to scope at all.
With support from a business intelligence tool, lawyers can scope matters more accurately. This is critical as accurate scoping of work from day one is key to achieving better, profitable client engagement. Access to a tool that provides visibility into client information is a key factor in being able to respond to client pressure. This includes data on project scope, collections, write-offs and variances to make evidence-based decisions regarding pricing, managing, and delivering legal services.
The firms I’ve supported in onboarding a business intelligence tool have gained visibility enabling them to optimise rates, resource matters more cost-effectively, and provide real-time financial updates all of which can then be communicated to the client. Through business intelligence, firms can identify potential financial concerns as a matter is ongoing. Partners who are supported by this data can confidently communicate with clients and have the right tools to take on responsibility for profitability, expanding commercial awareness firm-wide.
Today’s legal clients have more options than ever when selecting their representation, putting firms under pressure to demonstrate their value. To stay competitive, improved transparency, collaboration and client dialogue will support firms in maintaining better client engagement and retention.
Though recent years have brought financial turbulence, the Annual Law Firm Finance Report shows there is a silver lining for firms placing client engagement at the core of their practices.
