I have recently written about the new report published by CounselLink regarding the buying habits of large legal service consumers. While this report is full of interesting information about rates, volume and markets, a more subtle point made by the CounselLink staff in their result interpretations caught my attention. Specifically, the advice given was that firms should not become so focused on a particular billing rate for a particular timekeeper type so as to ignore the overall mix of staff on a client's account or matter. It seems that they get to this conclusion by examining the median billing rates by practice area and compare them among practice areas. While the specific comparison among practice areas is interesting on a level, I believe the larger point they are inferring is that clients evaluate the value they receive from a firm by using similar comparisons among competing firms.
For example, one firm may offer lower rates than another but chooses to staff the account with more partners than associates thereby driving up the overall cost to the client. A firm caught in this situation may actually be less cost effective from a client's viewpoint than a firm that actually charges more per hour. Law firms would do well to consider this concept when staffing cases. Case staffing in most law firms is impacted by a number of internal factors that may ignore the reality of what a client prefers or even needs. Some of the more common internally focused factors that impact case staffing include:
- Compensation systems that overly reward individual partner production;
- Billable hours minimums at the partner level;
- Lack of available or qualified associates;
- Inadequate training and development programs;
- Fear on the part of the partners to expose younger attorneys to client relationships;
- The philosophy that partners should be given priority for billable work in slower periods;
- Lack of business development skills or motivation that makes partners adopt a scarcity mentality; and
- Rate cutting that allows partners to work at associate rates.
It should be pretty easy to see how the client does not factor into these staffing decisions. Law firms too often believe that as long as a client is paying the bill and not complaining they must be happy. Client inertia allows relationships to proceed over longer periods of time, but that is changing in my experience. Companies like CounselLink are abundant and the resulting analytical data that clients are now empowered with allows them to compare the value offered by law firms on levels that previously were unattainable.
My recommendation to law firms, especially in the small and mid-group where staffing issues are more common due to lack of headcount, is to critically examine the mix of staff on major client accounts and cases. As an exercise, imagine for a moment that you are the general counsel at major company and your job is to determine which firms are providing the best value. How would you honestly rate your firm? Firms that get this right generally fall into the upper range of the rate and volume spectrum in a particular market and category. Firms that don't, wander aimlessly wondering why other firms are more successful even though their rates are higher.