In legal firms, providing a service of low value can severely harm customer relationships, although this is usually recognized instinctively rather than quantified.
The 2020 Legal Department Operations Index report, produced by Thomson Reuters, provided data to support observations made 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, clients who rate their law firm highly for value delivery spend 28% of their external budget on legal services, based on research from Thomson Reuters.
This figure represents a 14% increase compared to when a company is rated as 7 or 8 in value, and 35% higher than when a company is rated with a 6 or lower grade. Despite the seemingly small percentage change, this presents an opportunity for the law firm to generate extra revenue ranging from $585,000 to $1.2 million annually per client.
The potential loss of new businesses due to a negative perception of legal services’ value is a significant concern, with 40% of customers citing unsatisfactory value delivery as a reason for not recommending the bank.
Law firms should now change their approach.
Law firms can improve transparency and value delivery to customers by utilizing and monitoring financial metrics, which are essential as customers rely more on such metrics to assess internal value.
Law firms have a valuable chance to establish themselves as reliable partners and assist clients in achieving their financial objectives, a level of trust usually lacking in client-law firm relationships.
Providing cost savings is valued by all, but it can pose a threat to the law firm’s profitability. This is where the broader concept of value becomes important.
Even when the chance is diminished, it doesn’t vanish entirely. The key is to stay ready to recognize and present other beneficial services the office can provide to the customer.
- Consider the reliability of cost estimates: Evaluate how closely your company’s actual expenses align with the customer’s allocated budget. Identify tasks that could be shifted to a fixed-rate arrangement to enhance customer satisfaction.
- How can your business enhance productivity by optimizing processes or using technology tools efficiently to save costs and time? Can using a different staff mix help save money for customers? Alternatively, how can the time taken to resolve a case be shortened?
- Consider how your business’s legal guidance has contributed to the customer’s revenue generation, risk mitigation, reduction of operational downtime, securing of funding for growth, or protection of reputation.
These financial and value metrics are utilized internally by clients, and your legal department can also effectively benefit from them.
Legal One Firm Meeting
An advocacy office must effectively manage costs and demonstrate the value of its legal services in order to be perceived as the most valuable option by customers in the long term.
Thomson Reuters Legal One Firm is a platform designed to assist law firms in automating tasks, making it simpler for them to enhance their strategic focus on client service.
The tool can assess the value of the work done by individual lawyers across a variety of tasks, which is particularly beneficial for firms facing obstacles in billing for legal services internally.
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