Price, service among key reasons why clients fire law firms

A new study by Acritas helps explain why one third of the world’s largest companies dropped a law firm in the past year, and what firms can do to prevent getting fired in the future

It appears that choosing a law firm is a lot like choosing any type of provider, from telephony to catering: price and customer service really matter. This perspective is supported by the results of a survey conducted by legal market research specialist Acritas.

The study, which surveyed 968 senior in-house lawyers in companies across all industries that generated more than $50 million in revenue, found that 33 percent of companies globally stopped using a firm in the past year. Two of the top drivers, according to Elizabeth Duffy, Vice President, US, Acritas, are price and service.

Duffy emphasized that price concerns include value propositions, billing models and overall expense. Businesses are facing price pressures, trying to find ways to trim budgets in many different departments, and general counsel are starting to feel this pressure more than ever. As the role of general counsel becomes more important, there is more scrutiny on budgets, and GC have to justify spending internally. Consequently, they are looking for value and gauging each outside firm based on metrics.

But the firms themselves, Duffy explained, are not aligned with this practice yet. While a telephony provider, for example, might be keenly aware of the pricing structures of its competitors and use this information in dealing with potential and existing clients, most law firms have not implemented a similar practice (and could be completely unware of their competitors’ costs). In addition, general counsel are scrutinizing the billing practices of law firms, noting smaller items on bills that, in the past, may have been disregarded.

The second key factor that leads companies to drop law firms, according to Duffy, is service. She cites a number of relationship failings that the survey uncovered from respondents. Duffy explained that law firms are falling short of GC expectations in regards to service level. Firms are not keeping clients up to date or staying in touch with them. This harms long-term relationships, which are beneficial for both parties.

One trend that Duffy has seen over the past several years is that general counsel are becoming more strategic as their companies become more risk adverse. Firms that use good customer service to develop long-term relationships can demonstrate value by building familiarity and efficiency, delivering more volume. Duffy emphasized that communication is key. Many survey respondents expressed frustration that firms did not use preferred communication channels, giving the impression of disinterest. Duffy recommended that both parties engage in constant feedback, highlighting what works and what does not and adjusting accordingly.

In many cases, companies that drop law firms are moving away from so-called “elite providers.” Duffy stated that Acritas has seen this shift develop over the past several years. She said that clients have greater choice in the market and the price pressures of the financial crisis put a lot of scrutiny on budgets. Companies realized they did not have to pay a premium price for certain work, and were able to get great value and good quality from other providers. Plus, many of the “value firms” put a greater emphasis on service.

The survey is in its seventh year, and is ongoing. According to Duffy, it benefits in-house counsel to have a channel to give feedback to frustration, and to learn what other GC in the U.S. are thinking in relation to industry topics. For more information on the study, or to take part, interested parties can contact Elizabeth Duffy.

Managing Editor

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Rich Steeves

Richard P. Steeves is Managing Editor of InsideCounsel magazine, where he covers the intellectual property and compliance arenas. Rich earned a B.A. in English Literature...

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