Strategic thinking reduces risk

1 December, 2015
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Business strategy in a changing legal market affects risk of claims.

The Australasian Legal Practice Management Association’s (ALPMA) 2015 summit looked at the changing legal services environment and how firms need to adapt. The message is that the most successful firms will be those best at convincing clients of the value of their services. Showing value is also important for risk management as many claims stem from a client’s dissatisfaction with perceived value.

Claims can arise from acting outside areas of expertise or experience. In a competitive market, many firms feel pressure to find new clients. Being prepared to act for anyone walking in your door increases the likelihood of mistakes.

Generalist firms are finding it harder to satisfy the value expectations of ever-more demanding clients. In the internet age clients are well informed and often go to more than one firm for their legal needs. The geographic location of the service provider is often irrelevant.

At the ALPMA summit, US business strategist Tim Williams of Ignition Consulting Group and Canadian legal industry analyst Jordan Furlong of Edge International urged every firm to have a strategy to differentiate themselves. Mr Williams said firms need to have clarity of purpose and know their unique offering. Firms happy to take on a broad range of matters and clients can be said not to have a strategy. They compete with other similar firms and often their only differentiating factor is price.

Limiting your range of potential clients might seem counterintuitive. However, Mr Williams pointed to companies such as Apple and argued a focused strategy is more likely to lead to business success than diversification. We can be good at some things but not everything. Firms that target particular types of work and clients are more likely to be firms of choice in those areas. They are also more likely to have high degrees of expertise in their areas and attract motivated staff with particular interest and aptitude in those areas. They usually have effective, streamlined systems and processes.

Consequently, those firms are positioned to be selective, rather than hoping clients choose them, and deliver high quality services that are valued by those clients.

Client service and explaining value

Another message from the summit is the importance of a meaningful client service strategy. Competency and accuracy are taken as a given by clients. Price may be the overriding consideration for some but service is often crucial to perceptions of value.

Carl White of CXINLAW, a consultancy specialising in law firm client experience, and Mr Furlong said client service is given lip service in many firms. Service is seldom discussed in partners’ meetings.

Practitioners should reflect on their own experiences as users of legal services and think critically about the customer experience of their firm’s clients. Is your firm responsive and user-friendly or are your clients put to considerable effort and frustration?

Scoping matters and cost estimates are key aspect of both client service and risk management. These tasks should not be treated as mere formalities, as the seeds of dissatisfaction are often sown when they are not done well. You should always:

  • take the time at the start of each matter to discuss your client’s needs and what they see as an acceptable outcome, and scope the work properly
  • give only considered cost estimates and avoid off-the-cuff estimates that anchor clients to an unrealistic figure
  • avoid giving low-ball estimates that can appeal to cost-driven clients but invariably leave them frustrated when the estimate is exceeded.

Think about the client’s perception of value and explain your services in a way that enables the client to see the benefit personally. Be clear about what the client will gain or potentially avoid in a monetary or emotional sense. Every instruction is an investment. Clients who understand the return on their investment are usually willing to pay and less likely to complain. Being proactive in showing value is better use of your time than chasing unpaid bills or even suing a client, which frequently results in a counterclaim for negligence.