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When you hear that a Fortune 500 corporation is consolidating its law firm roster, you might not expect it to affect your practice, or your bread-and-butter local clients. You might be wrong. Consider the fate of all the firms that are being eliminated from rosters of approved firms. What happens to them? They look for business elsewhere, of course, and that means that they go fishing in smaller ponds than before. What happens to the firms that they displace? In turn, they move on to even smaller ponds. So, sooner or later, you will feel the presence of others fishing off your favorite pier.
To help put the trend in perspective, since 2000 when it began its consolidation process, Union Pacific Railroad Company has eliminated more than two-thirds of its outside law firms—55 firms. Likewise, NEC has trimmed its outside counsel roster from 130 to five. That’s a cut of just under 96 percent, leaving only 4 percent of outside law firms remaining to share the NEC work. Good news for the surviving firms. Not so great for the firms that bit the dust.
What can you do now to actively protect your client base? Let’s look at Duane Morris and Patton Boggs—two firms that get it about delivering value to clients. Patton Boggs survived the cut at UP, and has managed to forge a successful relationship with their client. Duane Morris’s ability to demonstrate that the firm could deliver value—as defined by the client—resulted in its walking away with a huge piece of NEC’s business. Both firms were able to identify the unique value “sweet spot” of their clients. So, what are some of the differentiators for the big winners?
▪ A breadth of capability that enables clients to consolidate as much work with one firm as possible.
▪ An understanding of the economic realities of corporate counsel and their need to control outside counsel costs. This must be coupled with a willingness to work on a fixed fee or other basis besides hourly billing.
▪ A high level of trust and communication.
▪ An ability to demonstrate an intimate familiarity with and responsiveness to the client’s businesspeople at all levels of the organization-—not just those at the top.
▪ A demonstrated knowledge of factors -impacting the client’s business, coupled with an ability to help the client succeed.
▪ The ability to function as a team with other firms when the client feels that a highly complex matter requires the capabilities of several firms.
▪ A relationship partner who resists the urge to micro-manage, and who ensures that all lawyers are properly educated about the best ways to communicate with the client.
▪ Presenting information the way the clients like to have information presented to them.
▪ A constant eye toward active representation and additional quality-added services. What can your firm do to take more routine matters off clients’ hands so they can concentrate on their core business?
▪ A willingness to take the heat so that the client can maintain good working relationships with federal, state and local regulators, or other key vendors or employees.
▪ Effective internal quality management practices to ensure that the firm can deliver good value.
Don’t be lulled into complacency. Keep in mind that those big or bigger out-of-town firms are already reaching out into communities large and small by aggressively acquiring solo and small practices. They will be able to provide a combination brand-name one-stop-shop presence with a friendly familiar “local” face. To compete with them, be prepared to define and communicate your value proposition to all your clients. You can wait to be asked, but you will be better off communicating it regularly to your clients before the competition arrives.
Most firms strive to do good work at a reasonable price. But most haven’t figured out what their differentiating factors are, and they haven’t actively looked for ways to innovate or improve value. Most of the time, they have not sought out the client’s feedback to help them define value from the client’s perspective. You have a chance to do it better. Just don’t procrastinate too long, or you’ll find Big Law has already started fishing off your favorite pier.
A version of this article previously appeared in the Pennsylvania Bar News.
Ellen Freedman, CLM , is the Law Practice Management Coordinator of the Pennsylvania Bar Association and President of Freedman Consulting.