In legal firms, providing a service of low value can severely harm customer relationships. This idea is typically recognized based on intuition rather than formal assessment.
The most recent Legal Department Operations Index report, carried out by Thomson Reuters and published in 2020, substantiated through data what is observed anecdotally during the delivery of legal services.
A survey of over 750 interviews revealed that a client’s views on the value provided by their law firm directly impact the amount spent on legal services.
Would you like to learn more about it? Keep reading this article.
The impact of service value on expenditures at law firms.
On average, when a client rates a law firm 9 or 10 for value delivery, 28% of the external budget is spent on legal services, as per Thomson Reuters research.
This figure represents a 14% increase compared to a company rated as a 7 or 8 in value. It is also 35% higher than a company rated 6 or lower. Despite the seemingly small percentage change, this presents a chance for the law firm to generate an extra income ranging from $585,000 to $1.2 million annually per client.
The potential impact on attracting new businesses due to a negative perception of the value of legal services is a significant concern. Additionally, 40% of customers who do not recommend the bank cite unsatisfactory value delivery as the reason.
Law firms need to change their approach now.
Law firms can enhance their transparency and value delivery to customers by utilizing and monitoring the same metrics they use. This is crucial as customers now rely more on financial metrics to assess the value provided by their department to other business units.
Law firms have a significant chance to establish themselves as reliable partners and assist clients in achieving their financial objectives, a level of trust not typically found in the relationship between clients and law firms, as indicated by research.
Providing cost savings is valued by all, but it can pose a risk to the law firm’s profitability. This is where the broader concept of value becomes important.
The key is to always be ready to recognize additional value propositions that the office can provide to the customer, even if the opportunity is limited.
- Consider the accuracy of your company’s actual spending within the customer’s budget and identify tasks that could be shifted to a fixed-rate agreement to align better with the customer’s needs.
- How can your business enhance cost and time effectiveness by optimizing processes or utilizing technology to boost productivity? Is there a way to rearrange staff to save money for your customers? Alternatively, how can the duration between opening and closing a case be minimized?
- Consider whether the legal advice provided by your company has positively influenced the customer’s business by increasing revenue, mitigating risks, preventing operational disruptions, obtaining funding for growth, or safeguarding the company’s reputation.
These financial and value metrics are utilized by clients internally and can also be beneficial for your legal department.
Legal One Firm Meeting
It is crucial for an advocacy office to manage expenses and the worth of legal services in a way that highlights the office’s performance and value proposition to customers. Demonstrating value through these metrics is key to positioning the office as the most valuable option over time.
Thomson Reuters Legal One Firm is a system designed to assist law firms in automating tasks, making it easier for them to be more strategic in serving their clients.
The tool can assess the value of work done by individual lawyers across various tasks, which is particularly useful for firms facing obstacles in billing for legal services.
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