Streamlined services: How US law firms are falling behind in client management

For most leading professional services firms, a key relationship programme (KRP) or key account programme is the bedrock of their business development (BD) activity. Such a programme helps firms to systematically grow and sustain clients and referral sources that really impact the bottom line. Relationships that have the potential to be important future clients – either by virtue of their business growth or the firm’s capacity to increase instructions from them – may also be included.

The differences between the traditional partnership model for dealing with clients and a formal programme are provided in Figure 1.

 

The original drive to establish KRPs was from the sell side, to exploit the opportunity. It is generally recognised to be easier to sell to people with whom you already have relationships.

Some clients represent a marketplace in their own right, with the largest companies spending several hundred million dollars a year on professional services, demanding an organised approach to their clients. Now clients increasingly take the same approach to their professional advisers.

For law firms, there is a real urgency to manage relationships as general counsel reduce the size of their panels through ‘convergence’. This trend was neatly summarised recently by Rankin Gasaway, general counsel of 7-Eleven, when explaining his reasons for trimming his organisation’s legal advisory roster.

“The sheer number of providers meant that too few providers were invested enough in us to understand our values and how we operate... we believed 7-Eleven was missing opportunities to negotiate fees and build partnerships,” he said.¹

Shrinking panel sizes should mean bigger prizes for successful law firms. But, 60 per cent of large corporate clients have replaced one of their two primary legal advisers – the highest turnover rate in seven years, according to recent research.² Mediocre client service was cited as the overwhelming reason. The research also found that only a third of corporate counsel would recommend their primary law firm to a peer, down from 40 per cent last year, constituting the second biggest drop in 15 years. The primary reason given was ‘the client expectation gap’.

Michael Rynowecer, principal of BTI Consulting, thinks that lack of effective management of the relationship is a root cause.

“Just over two thirds of clients tell us the best new ideas they see coming from law firms happen during an RFP process. Somewhere among the sea of bland boilerplate submissions lies one scintillating idea, suggestion or nugget. One firm invested the time and energy to simply blow their potential client away,” he says.

“This begs the question as to why law firms wait until an RFP before making suggestions to innovate. Why aren’t client partners engaging in an ongoing dialog with their clients who are often spending millions of dollars with them?

“It seems to me that many firms are unaware that they have client relationships at risk and are failing to grow their business by taking a passive approach to managing their relationships. Doing a good job is not enough.”

Rynowecer’s observations chime with many US law firm BD managers, who complain that they spend the majority of their time churning out new business proposals with little partner engagement or likelihood of success. Some of that time and energy could be diverted to mobilising partners to engage more effectively with their clients.

Successful approaches

Formal account management and independent client feedback are the two techniques most valued by clients, according to a 2012 study of a range of professions.³

For Laurie Robertson, global director of BD, marketing and communications at Baker & McKenzie, account management is a serious discipline.

“Managing and developing global relationships was my job at global ad agency JWT. Unilever was my client and we worked with them in over 100 countries and competed with other global agencies for their brand portfolios,” he said, reflecting on his previous role.

“When I first came into the legal sector, it was clear that there were enormous untapped opportunities for the international law firms in simply joining up the work they were doing for clients in different jurisdictions, better understanding their commercial needs and finding ways to help them in more areas of geography and areas of law.

“When you can deliver on that elusive promise of top-quality local service, coordinated centrally and globally available to your clients, the rewards flow rapidly in more loyal, stable, profitable relationships that can grow 10 per cent or 15 per cent faster than other clients of the firm.”

But, of course, it is not easy to deliver consistent service across multiple jurisdictions and practices or to control what goes on through a single point of contact for the client. A systematic approach is required (see box: Five success factors of a key relationship programme).

 

---

FIVE SUCCESS FACTORS OF A KEY RELATIONSHIP PROGRAMME

Increasingly, law firm executive teams understand the importance of having a key client programme of some kind because their clients tell them explicitly that they expect professional relationship and service management.

Andrew Donnelly, a senior client relationship manager at Linklaters, describes his global firm’s approach as follows.

“The firm is very serious about a ‘one firm’ culture and a professional approach to managing client relationships is essential to drive a culture of client-centric service for complex clients.”

Donnelly is himself a former banker; several of his colleagues are also drawn from industries in which the firm is active.

“Clients are receptive to a relationship manager who can take a wider view of their business,” he reflects.

“Busy clients, especially GCs, have so much responsibility and are time poor; they value knowing what we are seeing with other clients, insights on hot topics or developments in specific markets. The dialog often generates a pipeline and often reduces the amount of formal pitching and helps us to plan resources.”

He continues: “Our programme comprises around 25 relationships and has been running for over a decade and is well embedded in how we do things. There is a high awareness of who is in the programme, so people know that a small matter for a major (platinum) client is important, even though it might be low margin for a particular practice.

“Regular formal reviews are also critical, normally led by the client relationship manager and lead partner, but sometimes conducted by a third party. A major transaction or a service issue may trigger a review; we have created a culture where it is safe to flag a problem, so swift corrective action can mitigate relationship risk.”

Weak approaches

The fact that almost every major professional services firm has a KRP is a powerful recommendation for its efficacy.

However, a 2014 global survey of KRPs across the professional services sector revealed some surprising findings on uptake levels across the board.⁴ Asked whether their firm had a formal KRP in place – ‘formal’ was described as a documented programme with responsibilities, deliverables and timescales – 59 per cent said that they did.

Meanwhile, 41 per cent of respondents said their firm did not have a relationship programme in place. This figure rose to 67 per cent among the smaller (<US$100m) firms. US law firms account for the majority of this lag and are in general less likely to have a KRP.

“There is a tendency for marketing personnel to over-report their business development activities, and definitions of what constitutes a relationship programme are elastic,” comments Kevin Wheeler, a former law firm chief marketing officer (CMO) and a long-time consultant.

“I suspect that that the research understates the gap, but it is clear that US law firms are behind in key account management, which is a major business generating activity. For many firms, it the major focus of their BD efforts.”

The elasticity of the definition of a KRP for US law firms is underlined by Doug Johnson, a consultant and currently interim chief strategy and growth officer at top-100 US law firm Drinker Biddle.

“When you kick the tires on most law firm KRPs, you find little more than a list of client names with a team of people who do work. There is often no written account plan, no team meeting; the analysis on the strength of the client relationship or their needs is not known and there are no plans to investigate them.”

However, he notes that there are some signs of change.

“I sense that management teams are also increasingly aware of the fact that marketing can be more than marketing communications, provided that they have added the right leadership for their business development functions.”

When asked about law firms’ BD personnel, Johnson is forthright.

“Many law firms have copied the nomenclature of the accounting and consulting firms without changing what their people do or the nature of their talent. In a major accounting or consulting firm, a business development manager will either be an outright salesman with client contact and sales targets or will be someone who is credible enough to mobilise and manage client teams. In most law firms, the BD manager/director generally has a marketing background and is often found in a sales support role.”

Laura Breslaw, who was formerly CMO at AlixPartners and Proskauer and has held marketing leadership roles at Boston Consulting Group, Deloitte and several law firms, is well placed to compare the professions.

“A big difference between large law firms and leading consulting firms is the deep client-centric culture that the Big Four and consulting firms nurture and sustain,” she says.

“Collaboration is part of theses firms’ DNA; it begins with client delivery, but extends into industry positioning and business development as well as support of large account teams. Cross-practice teaming is celebrated and rewarded.”

Clarifying the concept of client centricity, she continues: “The partners actively engage with clients beyond their engagements. They understand that taking the time to do pitch reviews, end-of-engagement debriefs and annual client reviews enriches and helps grow client relationships. Lawyers, by comparison, still closely guard their individual clients and are reluctant to conduct relationship-focused discussions.”

She believes that law firms can learn a lot from financial and management consultancies.

“Marketing and business development professionals in accounting and management consulting firms really understand how to differentiate their brands through thought leadership, actively engage through segmented communication and how to play this out an individual relationship level. Law firms have been particularly slow to develop meaningful relationship programmes,” she says.

Pressure on CMOs

One of the features of the US market is the comparative lack of mobility of marketers between the law and other professions or industries. Many US law firm CMOs have spent much of their careers in law firms, moving frequently between them.

US law firms have traditionally favoured those with law firm experience for senior marketing hires. Some law firm CMOs were actually lawyers; indeed, the request for a JD qualification may still be cited as ‘preferred qualification’ in a CMO job description.

As a result, the US legal sector has remained relatively isolated from the trend towards key relationship management that has migrated from business to the professions over the past 30 years, resulting in a dearth of expertise. Some US law firms wanting legal experience have sought talent outside the US; several top-20 US origin law firms have British, Canadian or Australian CMOs.

This trend is confirmed by Tim Skipper, founder of UK-based legal recruiter Totum Partners.

“We have had several instances where firms headquartered in the US have initiated a search for candidates who are based ex-US. In particular, they want key account management and industry sector focused business development expertise, where the UK and Asia-Pacific firms have advanced more rapidly.”

John Abele, head of the marketing practice at global executive search firm Heidrick Struggles, and himself the product of a professional services environment (McKinsey & Co), agrees there is a trend afoot.

“Increasingly, we speak to law firms who come to us because they want real business development skills and understand that they need to fish beyond the legal industry, in other professions and perhaps from the industries where they are active,” he says.

“A law firm managing partner described to me what he called the ‘legal merry-go-round’ where law firm CMOs are recycled in an inflationary salary spiral that has been good for recruiters but is of questionable value to the firms, who need people who can really drive revenue. Many are pleasantly surprised that the type of salaries they are currently paying to CMOs will buy them truly outstanding talent from beyond the legal sector.”

Abele outlines the desired skills of CMOs and the current skills gap in candidates who appear to fit the job description.

“What firms mainly get from law firm marketers, despite job titles including the words ‘client’ or ‘business development’, is communications experience. What they want are people who have the business smarts and EQ to be taken seriously by client partners on advising how to grow the relationship,” he says.

“The professionalisation of law firm marketing and business development is likely to proceed as it is in other support functions, with hard functional expertise trumping law firm experience or having once been a lawyer.”

Asked about future trends, he says: “I predict law firms will opt for MBAs rather than JDs as CMOs because they will want to drive revenue.”

Robert Pay has led the BD and marketing functions of Clifford Chance, Taylor Wessing, BSI Management Systems and the London Stock Exchange, and is currently an interim BD leader and coach. Pay is the author of Designing a Key Relationship Programme: Building Strong Client Relationships (April 2015). Save 20% and order it today for only $308 (£196) (+p&p) – email publishing@ark-group.com or call +44(0) 207 566 5792 quoting code ‘KF-MP4’.

References

1. See ‘Breaking Habits, Optimizing Relationships: ACC goes inside 7-Eleven's firm convergence program’, Rankin Gasaway et al, Metropolitan Corporate Counsel, April 2015

2. Unpublished data from a 2014 BTI Consulting survey comprising 317 interviews with in-house counsel (47.1 per cent were general counsel/chief legal officer and 52.8 per cent directly reported to the general counsel)

3. See Effective Client-Adviser Relationships 2012, Meridian West and Financial Times, 2012

4. See KAM in the PSF Sector, Wheeler Associates, September 2014