As Clients' Budgets Shrink, Firms Aim to Prove Their Worth

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Editor's note: This article is the second part of a series on getting business in a difficult legal market.

As in-house legal budgets continue to tighten, legal departments are taking a hard look at the value they're receiving from outside counsel. As a result, even firms with longstanding relationships are finding themselves under the microscope. In the face of intense competition, firms can make themselves indispensable to their existing clients by demonstrating a deep understanding of the clients' business and a commitment to fostering a long-lasting relationship, firm leaders and business development professionals said.

"The general guiding cultural principle we follow is to understand the client's business, to add value and to do the work very well and cost-effectively," said Timothy P. Ryan, CEO of Pittsburgh-based Eckert Seamans Cherin & Mellott.

According to Ryan, more and more clients are issuing requests for proposal as a means of whittling down their lists of outside counsel, forcing firms to prove their worth.

While a history of quality service is obviously a must for any firm hoping to make the cut, clients in a post-recession economic climate are looking beyond mere competency for firms with a strong business acumen and practice depth, attorneys said.

Mark P. Messing, chief marketing officer of Philadelphia-based Duane Morris, said in an email that "client intimacy is the sine qua non to maintaining and gaining client share; know the client's business better than anyone else; maintain strategic perspective on client business (not just the legal department)."

"Ramping up client intimacy takes many forms, but it's not entertainment," Messing said. "It's focused on building knowledge which allows our lawyers to anticipate client issues and start developing solutions ... even ahead of a fully articulated problem."

According to Ryan, when his firm responds to an RFP by an existing client, the number-one thing it strives to emphasize is a deep knowledge of the client's industry and how the client operates within that industry.

Ryan said his firm spends "a lot of time on our own nickel, understanding, reading and staying up-to-date on our clients' businesses."

Providing a mix of legal and business counsel that goes beyond just a single matter has become just as important a strategy for a Central Pennsylvania regional firm like 18-lawyer Hartman Underhill & Brubaker in Lancaster as it is for a 700-plus-lawyer global firm like Duane Morris.

Hartman Underhill managing partner Kim R. Smith said that, at a time when smaller firms are losing some of the more commodity-type work they used to do to online legal services companies, her firm is looking at ways to provide clients with "the real value, which is legal advice; the things you can't really find on the Internet or shortcut your way through."

"One thing we're working on, though we're not quite there yet, is helping [clients] with their own business planning and projecting by helping them see what their business needs are," Smith said. "We're trying to be a little proactive because we feel that creates value."

Ryan said Eckert Seamans has also been successful in demonstrating its business knowledge by cross-selling services across various offices and practice areas to clients that are looking to give more work to fewer outside counsel.

While many firms tout their practice depth, utilizing that depth first requires buy-in from the firm's attorneys, Ryan said, explaining that cross-selling won't work if lawyers in different offices don't know and trust each other with their clients' business.

"We view internal referrals as outside referrals," Ryan said, noting that the firm holds monthly practice group meetings via teleconference to build familiarity.

Ryan said his firm's cross-selling efforts have also been aided by its low attrition rate, which gives attorneys confidence that they can refer a client to a colleague without fear of that colleague taking his practice elsewhere a few months or years down the line.

"It's a mess when it happens and clients don't want to get caught in the middle of it," Ryan said.

Smith said Hartman Underhill also aims to demonstrate its practice depth to clients as a means of capturing a larger chunk of business.

"We try to make sure we educate them that we have the staff and attorneys to handle [a wide range of matters] by telling them, 'You really could probably save on costs by having our firm do as much as we do, rather than paying premiums to four or five different firms,'" Smith said.

But in an environment where in-house budgets are shrinking, even the most knowledgeable firm runs the risk of receiving a pink slip from a client if it's unwilling to work efficiently and be flexible in terms of rates.

Ryan said his firm strives to give clients predictability in their legal spend by being open to alternative billing arrangements such as cap fees, success fees and blended rates.

While Ryan said clients have not altogether abandoned the standard hourly billing model in favor of alternative fee arrangements, he noted that his firm is seeing many more of them than it had prior to the recession.

A willingness to be flexible with rate structures is about more than just giving a client a discount, however.

Ryan said one of the most important steps a firm can take to gain a client's trust is to demonstrate a commitment to building a long-lasting relationship, rather than trying to squeeze every last dollar out of whatever matter is currently in progress.

"If you watch the price, if you're creative, if you always look toward getting the next one and extending the relationship, you'll be successful," Ryan said.

According to Ryan, his firm tries to provide its clients with added services at low or no cost, an approach that has been a major selling point in its business proposals.

For example, according to Ryan, his firm often offers to provide clients with free in-house seminars or to make attorneys available to answer quick legal questions at no charge.

Ryan said clients shouldn't be reluctant to call an attorney to ask a simple question for fear of being charged for the time.

Similarly, Ryan said his firm has recently begun employing, to great success, what it refers to as "office neutrality."

Often, according to Ryan, the best attorney to handle a client's matter is in an Eckert Seamans office somewhere other than where the client or the matter is located.

Rather than simply using a less suitable but more local attorney, the firm foots the bill for the appropriate attorney to travel wherever he or she needs to go to handle the matter.

That way, the client pays the same as it would if it had used a local Eckert Seamans attorney.

"That's been really popular," Ryan said.

Smith said that, even with increased competition in the market and more in-house counsel reevaluating their legal spend, the firms that have worked with a client for years have an advantage over newcomers.

"We have so many longstanding relationships with our clients that go back years," Smith said. "We have worked with these people through our own succession plans and through their succession plans. We understand each other and there's a trust there."

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI.

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