This article looks at ways firms regularly manage to lose clients. All of the examples below are real. They are based on actual examples of bad practice perpetrated on companies which that the author is involved by reputable legal firms, ALL of whom think they give good client service and most of whom have the evidence (Lexcel etc) they think backs that up.
Clients are expensive things to find. Many firms dedicate chargeable time of £20,000 or more per annum per partner to “marketing” – which is mainly finding new clients. Indeed, if this time is costed separately as a “below the line” cost, marketing is one of the four biggest expenses of most law firms.
A firm’s client bank is a considerable asset and, like any other asset, it needs to be looked after well, protected from loss or damage and made to pay. Like the other big asset of professional firms (the people), the client bank makes demands on the firm. Clients tend to think that since they are actually paying for everything, they deserve the level of service they expect, which is often a higher level of service than the firm is able or perhaps willing to give. This is a crucial weakness in many law firms. The inability to meet service levels expected by clients is the surest possible way to lose them. It is normally worse than being seen as expensive. It is normally worse than doing mediocre work.
We regularly do research on the differences between expressed client desires and actual client behaviour. There is no doubt whatsoever that these are different, with referrals and loyalty being based on very different factors to those stated to be important in the crude 'client care' questionnaire. (1). This is critical, since it means firms are regularly measuring factors that are frankly not very important and ignoring those that are , making business decisions on the wrong information is almost as silly as making business decisions based on no information. Good client care is a good long-term strategic marketing risk minimisation strategy: bad client care increases systematic risk and makes the marketing mountain steeper to climb.
Clearly, no one ever sets out to alienate clients (other than perhaps some firms’ receptionists!), but many do. The following are our list of things professional firms do that can alienate their clients – do they ring any bells?
Who is in the Loop?
The biggest single mistake many firms make is to fail to keep their clients “in the loop”. When a matter is progressing, all the client normally knows is what he or she is told by their contact. To the firm, it is a matter. To the client it is their life, their business, their future…. and their wallet. Clients who do not know what is going on will be more stressed-out and less happy. The senior partner of a very successful private client firm says: “In our firm, if a matter is ongoing, we talk to the client to bring them up to date at least every month and normally far more often."
Billing
These days, most clients will ask for an estimate. Most will get one. All will get a “Rule 15” letter, outlining the basis of the firm’s charges – which are normally based on a rate per hour. When this basis is accepted by the client, it does not signal that you have carte blanche to run up any level of fees. It means they are expecting to pay a price similar to the estimate. If the bill is in line with the original estimate, all other things being equal, the client will almost always be happy. Time and again, firms alienate clients by presenting bills far higher than their estimates. This is often compounded by sloppy back office and procedures that make matters worse.
Pay Attention!
An actual example will illustrate the problem. A commercial client needed three documents prepared and instructed a firm who had been courting them for some time. The normal procedures were followed and a rule 15 letter was received and returned, signed. The estimated cost of the work was £1,200 - £1,800. Matters were initially delayed owing to the fact that the (recommended by the solicitors) accountants approached failed to provide the requested advice by the specified date agreed. While the client, sensibly, blamed the accounting firm for their failings, they also blamed the law firm for their recommendation. They instructed new accountants. Tellingly, the law firm failed to read the signals! They eventually delivered draft documents (late) with a bill for £2,000: more than the estimate and for an incomplete job. Knowing that there was more work to be done to finalise the documents, the client wrote back paying the bill on the basis that there would be no further charge without any further agreement. The final documents were returned to the client with a further bill for £800. The firm lost the client. This type of mishandling of relationships is all too commonplace and is avoidable. If the firm cannot perform in time, or costs will be above estimates, clients must be told in advance, as soon as this is known and the matter resolved before the bill is sent.
Think Before You Bill
Another common problem with fee-based billing comes when the bill is not looked at critically before being sent. In an endeavour to resolve a fee dispute, a firm sent a copy of its file time records to the client. The client carried out the examination that they felt was the firm’s responsibility. Firstly, they noted that they had been charged £150 per hour to (as they saw it) correct errors made by the law firm, who carried out work which was not in accordance with the instructions given. Secondly, they noted that there were time entries on the matter by fee-earners not connected with the matter. These turned out to be mis-postings. Thirdly, they noted that up to five separate entries were made on individual days relating to the same work. To them, this meant that the file had been picked up and put down several times: an inefficient way of working and, they felt, responsible for both high costs and numerous errors. In this case, the client offered the law firm to continue the relationship only on the basis of fixed fees and a reduction in the bill for the client’s time spent correcting the law firm’s errors. Lack of critical review before bills are sent is a major source of client dissatisfaction.
When a bill is queried, never send a letter to the client whinging that you have already lost money or charged under scale fees: this means to the client that you are expecting them to be grateful you haven't (over)charged them even more! When you fly, do you ask yourself how much the airline costs to run? No. You want to know the price of the ticket. Clients don't care what your costs are: they care what their fees are. Trying to get them onside with the "we've under-recovered" argument is a counter productive unless the reason for the time can be laid firmly at the client's door and they will accept the reasoning: this is not frequent, in my experience.
Service No-Nos
Clients expect good service. If you cannot take a call, and use voicemail (and everyone hates voicemail!) make sure their calls are returned promptly. If they cannot be returned promptly (i.e. same day at least) make sure your message tells them when they can expect a call. With e-mail, the pressure for a fast acknowledgement, even if not a full response, is even more critical. If you promise to return a call (or indeed do anything) – do it. To fail to keep a promise (even one that is very casually expressed) is a potential destroyer of a relationship. Acknowledge receipt of letters or any other information received from your client. They sent it so it could be in your capable hands. They'll be happier if they know it is.
Always do the job asked. Clients want advice, but instructions are instructions. Another client was highly aggrieved at spending hours talking their solicitors out of inserting clauses in a document they flatly did not want. This was compounded by the draft document being sent to the other side with some of the clauses intact. The results were a considerable heightening of tension during the negotiations and nearly a lost deal: another result was a lost client for the law firm. Pay attention to clients and follow their instructions, but do this in a thinking way! A couple who said they want 'identical wills' did not mean that the (brotherless) wife wants a will which mentions dividing the residue between her brother and sister. This was made worse by the fact that the solicitor who prepared the will was a close family friend and now no longer the family solicitor.
Dealing With Errors
Years ago I found I had made a mistake in dealing with a client matter. The mistake was going to cost the client money – not a huge amount, but some. Knowing that US business school research suggests that how firms deal with errors is a very important predictor of long term success, I immediately picked up the phone and told the client, offering full compensation. Their reaction? Amazingly, they refused the offer, since they were 'so impressed with our honesty'. Within two years, they had referred sixteen other people to the firm because 'you can trust them'.
Deal with an error brilliantly and the client becomes powerfully glued to the firm: I have seen this on the other side with a client of mine who sold film rights to a US studio. They produced all the necessary tax documents with amazing speed – and many errors. Once these were reported, they took full control, rectifying everything; dealing with all resulting issues at light speed and keeping us informed step by step. The clincher was the conversation (a call from them at 6 am California time - very impressive), in which I was asked if there was anything AT ALL we would like them to do after all the problems were solved. My reply - that I just wanted to tell my contact's boss what a brilliant job he had done to solve the problems - brought the following reply. "There is no real need for that: this is company policy". My next call was to the client was to tell him to make sure that studio picked up all future rights!
The most successful firms I know are those with the best client care. This is a systems issue: get this area right and the future is yours.
Suggested reading
'God is a Two Faced Client -' AXIOM, April 2000.
'Effective Marketing for Lawyers, A Systematic Approach' – Managing Partner, September 1999
'Marketing Without Spending Megabucks' – Law Practice Management , September 2000
For copies of these articles contact the author on 01392 423607
Joe Reevy MSc FCA AIIT is a director of www.bestpracticeonline.com, a UK based consultancy which helps law firms and companies market better and run better businesses.