The Value Gap

Much of the current discourse and activity in our industry seems to be focused on evolving approaches to fees and pricing, budgeting, project management, better leverage of technology, and insourcing/near-shoring/outsourcing. While these are critically important aspects of modernizing law firm service delivery models, is our focus on value – discretely defined as the monetary worth of something – distracting us from thinking about value in a more holistic or integrated way?

I offer some data points based on my own recent experiences. Earlier this month, I attended a client panel discussion featuring four senior-level in-house lawyers representing different segments of the Canadian economy and having varied constitutions of internal legal expertise and requirements. They were, however, consistent on the following four points:

• Their roles within their organizations have changed profoundly. They consider themselves business people first, and lawyers second, and they are perceived as business people within their organizations. They are sought out for their business and strategic counsel, not strictly their legal counsel.
• Strong relationships and trust remain vital factors in the selection of external counsel.
• Legal advice should provide value to the business; value doesn’t always equate to providing service at the lowest price.
• Know my business.

I also recently attended a panel discussion featuring partners who shared their views on building strong client relationships. The partners agreed that the ingredients for a successful practice involved:

• Understanding, and adapting to, the changing business environment and client demand for commercially-relevant legal advice.
• A keen interest in people and their motivations. This remains a relationship business.
• Knowing what value means to your clients, and delivering value during and between matters.
• Knowing your client’s business.

I was struck by the mirror-image messages of these two panels. While fees, pricing and budgeting resulted in some animated conversation during the client panel, it was clear that hiring decisions are not being made on price alone. It suggests to me that there remains a gap between what clients need, value and expect (which varies by client and by matter) and what law firms are delivering. Buyers and sellers of legal services may be on the same page in their thinking, but we have yet to narrow the gap in reality.

Jumping back to pricing and alternative fee arrangements, I gleaned another data point from a recent LMA Toronto Chapter seminar, which included the following observations on a small sampling of client and law firm perceptions of pricing proposals:

• Clients’ perceptions of pricing proposals submitted by law firms range from mild to strong mistrust.
• Law firms’ perceptions of requests for pricing proposals by clients are often characterized by mistrust.

Admittedly, these are all small-scale data points, but for me they reinforce that the current discourse may be too heavily weighted in one direction. A narrow, generic or unbalanced view of value has the potential to distract us from, and chip away at, strong and trusting relationships.

The following paragraph, drawn from a recent article entitled “How GCs Decide Who Gets the Work,” articulates a more holistic view of value for clients and lawyers:

“[L]aw at its best is still personal. When choosing firms, inside counsel must seek to marry direction of matters and control of money through a reciprocal value relationship with specific firm leaders – a relationship of real trust between real people. The inside counsel must believe that the outside lawyer, whom he looks in the eye, will deliver great service at the right margins with high quality. The outside lawyer must believe that the inside lawyer will fairly value the work and treat the law firm team with courtesy and respect.”

It also suggests that the non-monetary aspects of the relationship between clients and external counsel – trust, communication, collaboration – may be the keys to narrowing the gap.