"Let not the marriage of true minds admit impediment" wrote Shakespeare in his Sonnet #116. His tribulations in life were far different from those of lawyers and firms today. But at least he did not have to struggle with the trials of client relationships and their effect on profitability.

There is a stingingly direct connection between client loss and financial health: Key clients who defect can wreak enormous financial and reputational damage. For every client that defects, three new ones will be needed to replace the lost revenue and profit stream, and the replacement cost is six times the cost of servicing a remaining client. Even more to the point, the last recession taught clients how to use their leverage in the negotiation over fees, services and all the extras, "value-adds," that take the form of seminars, access to information, contacts and special billing arrangements. These items all count in the continuing pressure on profit margins in the profession.

It is time to de-leverage this financial proposition so that firms can harness the profit dollars that client retention brings Ñ a 5 percent increase in retention from repeat matters, cross-selling and referrals boost the net present value (read, client profitability) from 50 percent to 80 percent Ñ chiefly because there is no marketing expense attached to these revenues. Taking advantage of this equation requires new methods of communication and feedback between client and lawyer Ñ the client review Ñ that provides a forum for evaluation and the consensual chartering of future objectives.

While discussions with clients ordinarily touch on some form of evaluation, the greatest retention and profit benefits accrue when the review is institutionalized as a standard practice. The more critical the relationship, the more time should be set aside for giving and getting advice, evaluation and information on the relationship itself. This type of "meta talk" Ñ talking about the relationship, not the work of the relationship Ñ is as important to the lawyer-client venue as it is in one's personal relationships.
Using the client review is particularly timely in light of commercial management practices such as vendor qualification, partnering programs and strategic alliances. Whether the client is an individual or a corporate executive, most working people have been exposed to these practices. And, most often, these practices include giving a report card to selected vendors or partners Ñ a unilateral device that puts negotiation leverage on the side of the issuer.

The client review process encompasses three phases:

• a review of past work;
• the evaluation of the relationship itself; and
• a look forward that includes the joint creation of new opportunities and a specific menu of value-added services that allows the firm to stand out.

Each phase, and the order of them, serves a unique function, but experience has shown that the net effect is substantially increased retention rates and profitability.

Before summoning the common objections to using this process Ñ too much time involved, too many clients (heaven forbid), too fluffy Ñ remember why clients defect. In a majority (68 percent) of cases, clients disappear because of feeling undervalued, not because of fees. That undervalued experience is usually a four-incident composite of recurring questions, issues, misperceptions or impolite treatment by any person in the firm Ñ not big issues, but repetitive, niggling ones that are concrete in the client's mind and may escape the firm's attention and remediation.

Here are some examples of comments made by defecting clients:

• They were a good firm, but did nothing special.
• I liked the partner I worked with, but I had no idea what else his firm did.
• I had trouble getting through or getting answers quickly.
• One of my colleagues knew of a another firm that took time to understand his business and they suggested preventative measures.
• The administrative staff was less than helpful.

Now, some of these former clients were small. But some took with them a substantial revenue bite. Consider the 24-member commercial firm whose largest litigation client was hinting at defecting. That one client accounted for nearly 10 percent of the firm's revenues. Or consider the 30-member full-service firm that lost an institutional client of similar revenue clout, and suffered the additional ignominy of being thought of as a failing firm. Although the firm was financially viable, the resumes of a few attorneys hit the streets, and the firm did then fail.


The Review in Depth

The client review is an occasion separate from the working meetings one has with a client. Not every client needs to be reviewed; choose the top 10 percent (in terms of fees) of clients, and hold two reviews a year, more if necessary.
To set up the meeting, try saying words to this effect: "You're an important client to us, and I'd like to meet with you for the sole purpose of asking your advice about how we can serve you better in the future." If the client, rather than the firm, calls an evaluative review, chances are the firm is in trouble.

Prepare for the review as for any critical appearance. In addition to the usual sources such as client files and notes, go on-line and learn about the client's world and life. Industry and company profiles are easily available (Hoover's Business Resources) that include five-year financials, company history, names of executive management, product lists and competitors. The attorney can pull filings from Edgar and Disclosure, search for commentary and analysis from a plethora of periodicals and other media sources, and visit the company's Web page for a wealth of information. The attorney should also visit the Web pages of the trade and professional associations in the client's field; they publish surveys, industry information, meeting schedules, and forecasts and trends.

If the client is an individual, visit the demographic data published through the American Demographics Web site. In conjunction with census data on-line and information about the client's workplace, attorneys can pull together a rich view of issues, opportunities and trends that will allow them to be both suggestive and creative in shaping future opportunities.
Why bother? Simply put, the most prepared competitor wins. In any persuasive process, preparation and information-gathering are the only reliable factors affecting outcome. Knowledge of the client's universe honors the relationship per se, but beyond that, it can bring new people and issues to the table. When that happens, the pie is larger for both sides.


The Look Back

Attorneys should put in writing their review of matters handled, results, problems and, specifically, any value-adds they performed Ñ training, news notes, briefings, contacts, etc. Ñ but may not have billed, and most of which the client may have (conveniently) forgotten. Refreshing memories about these extras is critical. Alternatively, this list can include dollar equivalents. This tactic can provide leverage during discussions about ongoing and future services and, particularly, fees.
Having laid the groundwork, ask for evaluation: good, bad and advice for the future. How does the firm compare to other firms? Listen actively and make notes. This part provides competitive information, remediation options and concrete suggestions for moving forward. The client will also talk about the bumps in the road, those small instances of perceived undervaluation that accumulate and provoke defection. Listen very carefully and fix them quickly.
It is important to note that without the look back, the future is unavailable. Clients will not look ahead without establishing this plateau or common vantage point. Certainly, without adequate time spent on history and evaluation, the client will sequester lingering objections and use them to shoot holes in planning for the future.

Query the client's business and personal objectives: What specifically are their goals? Ask about trends, company and industry information, and two critical pieces: (1) Who else should be part of future reviews? (for cross-selling and referrals); and (2) What associations, networks, groups do they attend? Attorneys should ask to go to the next meeting. This is a room full of prospects, a potential long-term involvement, and even a possible stage for a speaking engagement, or a forum for the publication of an article.


The Look Forward

"How do you see us working together in the future?" Ever been afraid to ask this? Now it can be done with a measure of impunity because the look back is completed. Ask how else, and what else, the firm can do to be of service, and start to suggest opportunities proactively.

For instance, "I've noticed that your CEO has been quoted in the press about the aggressive expansion of your international distributor network. Have you given any thought to talking with my colleagues about our experience in shaping these relationships?" Or closer to home: "You mentioned your charter to drive down litigation (transaction, legal) costs. We run an executive briefing series specifically to address those strategies." Or, "You said you were happy with our work in collections, and I realized in doing this work, that your sales compensation plan should be reviewed so that your sales force has a continuing interest in collecting on major invoices before commissions are paid. Can we set up a meeting with your sales VP and human resources department?"

All of the above discovery leads to expansion, which is now more likely to happen because of the evaluation, look back and preparation.

As a capstone to the review, put this final question on the table: "We would like to create a menu of unique value-added services. What would you suggest?" This question positions the firm as a provider of specifically tailored services. The menu items are endless: seminars, briefings, newsletters tailored to the client's needs, industry conferences, joint sponsorship opportunities, a venue to trade beneficial contacts and introductions, unique billing, reporting, and on and on.

As long as the client values them, and the firm can do them, these value-adds demonstrate concrete points of difference between the firm and its competitors. They get recounted in the next review, of course, and they are negotiation points to increase the firm's share of the client's potential business. Listing (perhaps with dollar equivalents) those extras performed for the client now can be used to mediate what is fair to the firm and the client in regard to fees and service levels.


Finishing Touches

No client wants to be the subject of a one-shot marketing extravaganza, and that is exactly what they will think if the firm does one review alone. At the end of the review, schedule the next one so that the client understands that this forum is an ongoing conversation. Pay particular attention to bringing in unknown parties to the review who may be important sources of information, and who also may be quiet decision-makers.

© Copyright 2001, The Success Group

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