Consequently, many corporate law departments (CLDs) will remember these past 12 months as the great pricing reset in which law firms required significantly higher hourly rate increases over and above anything the legal marketplace has seen in at least a decade.

The new year finds both the buyers and sellers of legal services having to grapple with the economic reality of high inflation, increasing labor and infrastructure costs, attrition, labor arbitrage, and major shifts in market demand — all of which will in some way or another impact the cost of legal services into 2023 and beyond.

Using cost control counter-measures

With this reality, many CLDs are not looking forward to a repeat of last year’s rate hikes; however, that is not necessarily a fait accompli for corporate clients. Yet, there are counter-measures that can be deployed to help them mitigate, control, and even create cost savings in the face of such pricing uncertainty.

There are many familiar options that CLDs have at their disposal — such as tiering, RFPs, volume discounts, panel convergence, budget structuring, and in-sourcing — although these approaches, while important considerations for every CLD looking to control their costs, may take time to mitigate the impact of proposed rate increases.

Instead, let’s focus on a few things that might help CLDs achieve tactical and immediate results.

Rebates

Similar to, but distinct from, volume discounts, most rebates exist with those law firms that enjoy large volumes of billing. Rebates are typically negotiated at the start of a calendar year and are contingent on a firm achieving a certain dollar threshold or tier of billings in that year.

Rebates are a good tool for CLDs to utilize during any rate negotiations and especially on large matters or a portfolio of work where a CLD is looking to reduce its legal spend, offset the cost of future work, or simply to mitigate the impact of future rate increases.

Value-added services

Not all clients have sufficient scale with a law firm to entitle them to ancillary benefits with the firm. However, value-added services — such as free legal advice, secondments, market research, access to proprietary technology, education, and training sessions — can be separately negotiated.

If a CLD must accept higher rates, then perhaps trying to negotiate or tie some level of complimentary ancillary services to those rates may help offset the CLD’s legal costs in other areas.

Rate management policy

While many CLDs have billing guidelines in place with their law firms, far fewer have any language in their guidelines that talks specifically about rate management and prescriptive requirements related to how a law firm is to address any proposed rate increases. Consequently, the process becomes much more ad hoc.

A proper rate management policy should address criteria such as when a firm can make a rate increase request, the frequency of a request (e.g., one increase per year rather than two incremental increases), permissible rate increase caps for specific professional groups, and the permissible criteria or reasons that qualify for a rate increase (e.g., merit vs. market pressures). All of these criteria are fundamental to managing expectations up front for both the firm and the CLD and for providing predictability and transparency around rate management.

ALSPs

ALSPs offer CLDs an opportunity to leverage less expensive providers than traditional bricks-and-mortar law firms. Tiering transactional matters or components of a matter away from expensive firms to ALSPs provides CLDs with cost saving and convergence opportunities.

Contingent worker ALSPs are a good example of legal work that typically has been sourced to traditional (and more expensive) law firms. Now, however, CLDs have the option to utilize virtual and less expensive service providers for components of legal matters or other resource needs.

Staffing ratios

As part of rate negotiations, CLDs should consider imposing staffing ratios on firms requiring them to assign a greater percentage of their work to lower cost mid-level associates, rather than expensive partners, thereby offering up potential cost savings for the CLD.

Disbursements & cost recovery

Legal e-billing systems are great for implementing quantifiable rules around non-reimbursable expenses on invoices. However, there are many charges or billing practices that cannot be quantified and corelated to an automated e-billing rule that rejects the proposed expense. Further, there are also other expenses that may be subjective in nature and require more powerful tools to review.

Diving into law firm disbursement data offers a CLD an opportunity to: i) find patterns of billing that are non-compliant with a CLDs billing guidelines; and ii) use the exercise to close any compliance gaps and save money; .

Quick-pay discounts

The importance of timely payment is not lost on a law firm’s management team as tracking outstanding accounts receivable balances is instrumental in measuring productivity and effectiveness of lawyers or identifying servicing issues.

A CLD can utilize quick-pay discounts as a solution to a firm’s balance challenges by providing an incentive for the law firm to lower its rates or offer a discount in exchange for the CLD’s commitment to paying the law firms invoices within a specific time frame.

Alternative fee arrangements (AFAs)

AFAs (e.g., fixed fees, flat fees, contingency, volume discounts, risk collars, etc.) are often touted as the great pricing panacea to hourly rates; however, before accepting any AFA proposal, CLDs should consider asking the law firm to provide quantifiable proof as to the value of the AFA and what if any determination was made to validate that the AFA is a better pricing option for the client. Without any such empirical validation, CLDs risk making costly assumptions around cost savings, when in fact the opposite may be true.

Getting ready to negotiate

Before engaging any law firms in discussions of the above strategies, CLDs need to address two key components that must underlie any of their efforts — billing data and communications.

Billing data — When leveraged correctly, CLD billing data offers a plethora of opportunities to save money in a runaway market that has pivoted in favor of legal service providers. By mining timekeeper data (e.g., rates, year of call, geographic locations), disbursement charges, invoice line item detail, time allocation, staffing ratios, and more, CLDs may uncover opportunities for savings when comparing billing data between multiple firms and ALSPs.

Communications — Having an open and honest dialogue with their law firms on budget constraints or their companies’ cost saving targets may allow CLDs to obtain voluntary law firm rate freezes or even rate reductions in the interest of building stronger and lasting relationships.

Indeed, holding these candid discussions at an opportune time when a lot of companies are facing financial challenges, may remind law firms that many CLDs are committed to growing lasting partnerships with those firms that understand the client’s budgetary pressures and are willing to help clients meet their cost-saving targets for the greater good of the relationship.

While all of these reactions are normal, remember that critical feedback is not personal; it’s integral to business. It’s critical to our legal practices and the business of running a law firm that we are always learning, growing, and developing, especially if a particular behavior has a negative business impact. The key is to understand the situation objectively, try to resolve the issue, and then move forward. With shifts in the way we communicate, feedback can be a great gift to many senior-level attorneys.

Certainly, receiving difficult information can be a challenge. When you handle a negative situation graciously and calmly, however, your demeanor and professionalism will be noticed and appreciated. More importantly, you the gain the ability to pivot in the best direction possible for you and your organization.

Communications strategies

With that in mind, here four tips that may prove useful the next time you find yourself at the receiving end of constructive (and possibly uncomfortable) feedback.

1. Stay engaged in the conversation

It’s common to tune out feedback — and even mentally map out the counterargument before hearing someone out. That’s why many of us shut down or become closed off when presented with negative information. When this happens, we give off nonverbal cues through facial expressions and body language that show we’re not engaged in the conversation. Yet, this is a guaranteed way to rapidly escalate the conversation from constructive to destructive.

Because a conflict cannot be resolved until the situation is understood and addressed, it is important to stay open and actively listening. That way, you can be part of the solution and help everyone find a way to move forward. Keep your face neutral, your arms uncrossed, and your mind open.

2. Keep emotions out of it

Shock, anger, and embarrassment are all common reactions to bad news or criticism. In fact, many people may experience an entire range of emotions when presented with negative information at work. And while these reactions may be considered normal, unfortunately, they only serve to escalate an already negative situation.

By remaining calm and emotionally regulated, you can maintain a professional presence and offer solutions to help determine the next steps.

If you feel the conflict has arisen from misinformation, feel free to make that correction — but stick to the facts. Making excuses or placing blame will only cloud the issue and make it difficult to make headway. Further, it may seem like you aren’t taking responsibility but are instead throwing others “under the bus.”

3. Ask to reconvene

Not every conversation has to be resolved in a split second. Take a break and ask to reconvene once you’ve had a chance to review the details. Separating yourself from the situation will allow time to regulate your emotions, process the information, and start to come up with productive solutions or next steps. And if you have to share the bad news with others, taking time to review the situation can be even more important.

Your ability to remain emotionally regulated and handle feedback well will make it easier for your team or clients to model your behavior and provide a more straightforward path forward for everyone involved.

4. Look for the positive

As unpleasant as it may be, try to remember that constructive criticism, negative feedback, and difficult conversations are all key opportunities for growth. Each time you find yourself at the receiving end of bad news, try to see what you can gain from the situation.

For example, if the issue comes from a client, take time to listen and ask questions. The client may appreciate your openness to their feedback and your desire to improve. If you’ve hit a challenge within your firm’s partnership, having an open conversation will help you build trust and develop the relationship, as well as maintain a healthy work culture for others.

If your client is leaving you for a new firm, ask them why. If they’re committed to moving on, they still may be able to offer insight that will help improve your engagement with your other clients going forward. Being receptive to critical feedback will help establish you as a highly respected lawyer within your field, as well as one who is always trying to be responsive to their clients.

If the bad news comes internally, work together with your colleagues to see if they can share their suggestions on how they could have handled the situation differently. Use these scenarios to strengthen your relationships internally, possibly gaining information that may help you in the future.

Importantly, don’t be afraid to ask for constructive insights from both higher-ups and junior members of your team. Each perspective can contribute knowledge that helps create and refine best practices for your firm.

Responding with grace

When you respond to challenging feedback with grace and open communication, others will come to see you as a confident and emotionally intelligent person — one that they will be more likely to seek out in the future. You will also help create a psychologically safe work culture in which people aren’t afraid to give constructive feedback.

Remember that no one gets to the top without facing conflict multiple times throughout their career. What sets the best professionals and leaders apart is the way they handle these uncomfortable situations.

So, the next time you find yourself in a difficult position at work, remember to stay engaged and open to discussion, separate yourself and process your emotions, and accept feedback with grace and poise. These tips will help you navigate tricky situations confidently and allows you to continue growing and developing your key relationships internally and externally.

Receiving constructive feedback professionally and with grace is one step towards building communication and strengthening relationships among your colleagues and clients. For more on how internal collaboration can enhance your firm’s standing in clients’ eyes, check out our recent Thomson Reuters Institute Insights podcast.

Looking over the past year, three key themes — around client feedback, talent management, and law firm business development — strongly resonated in our columns and throughout the legal industry.

Leveraging client feedback

Learning what clients are thinking by way of formal client listening programs or feedback opportunities was an especially potent manner in which law firms sought to improve their client relationships and demonstrate their value to clients over the past year.

Whether gathering feedback at the client interview stage or in post-pitch discussions, receiving feedback from clients around what the firm and its lawyers did right or wrong, how the firm’s client service could improve, and even what competitors were doing it better may lead to some uncomfortable questions, but such client insight can prove extremely valuable to the firm’s performance going forward.

Further, a two-part series of columns on client listening programs showed how valuable those can be to a law firm’s own bottom line, detailing how clients spend twice as much with those law firms that ask them for formal feedback than with those that don’t. The series also discussed the typical barriers that exist to establishing client listening programs, most significantly, of course, trying to engage firm partners in the process.

Talent & retention

Not surprisingly, finding ways to keep key legal talent was quite possibly the top concern among law firms and other professional services firms throughout 2022 — and our Custom & Advisory columns certainly reflected that.

Indeed, it became clear as the year went on that legal talent had become extremely mobile, and many lawyers, especially younger associates, were switching law firms with increasing frequency in order to find a good fit that met their needs. Interestingly, while the legal industry initially thought throwing more money at these associates would solve their retention problems, it seemed there was much more at stake in the minds of these associates.

Numerous industry surveys showed that among associates, compensation ranked lower as a reason to stay at their current firm. Much more important in their minds was the firm’s culture and leadership, according to our research.

This meant that law firms needed to look for incentives beyond compensation to retain their top legal talent, such as improving how fairly associates are treated and how much they are shown respect by their current firms — both of which ranked very high on the list of reasons why an associate would choose to leave or stay at their current firm.

In our surveys, associates also noted that they are most likely to leave a firm if they perceive a lack of opportunities for career growth. This insight was extremely valuable to those law firms that were concerned about lawyer retention because it gave them one clear area to address by offering more career development, networking, mentoring, and training opportunities. In fact, all of these factors contributed greatly to an enhanced sense of well-being among lawyers, something too that law firms would be wise to promote in order to keep top talent from leaving the firm.

Business development strategy

As the legal industry (and the rest of the world) moved past the worst of the global pandemic throughout 2022, those law firms that embraced remote and hybrid working environments were now confronted with managing clients that had done the same, dramatically changing how lawyers and clients were interacting.

For example, during the pandemic and now going forward, it became clear that videoconferencing was far superior to phone calls with clients, allowing lawyers to better establish rapport more rapidly and greatly enhance the client relationship.

Another Custom & Advisory column picked up on the theme of improved client relationships by suggesting that a business development strategy that’s lodged in how the firm’s value is demonstrated to clients can be a way for firms to differentiate themselves from the competition. Clearly, all firms lay claim to having client-centric service, but only those that make that claim come to life by demonstrating at every touch point within the client experience will truly differentiate themselves, the column noted.

Like with many strong themes that emerged through our Custom & Advisory columns, embedding the demonstration of value within the client experience was not just a good-to-have mantra of today, but rather a necessary component for law firms if they were to continue forward successfully in the current environment.

Clearly, business development doesn’t just begin and end with finding additional ways to serve current clients. Law firms should be constantly on the look-out for new practice areas or service offerings that can help them add business from current clients and attract new ones. For example, the area of environmental, social & governance (ESG) has become a potentially lucrative vein of new business in compliance, corporate work, and risk management matters for those law firms that are early adopters.

As reflected in our Custom & Advisory columns published throughout 2022, the themes of client feedback, talent management, and business development greatly influence firm leaders’ focus over the past year. Moreover, these themes — and others that will be chronicles here — are likely to continue weighing on law firms leaders’ minds into the next year and beyond.

If you’re interested in learning more about some of the research used in our monthly Custom & Advisory column, and how this data can be applied to your firm, please visit here.

One of the most crucial questions around creating a formal client listening program is, simply; How do you convince partners that independent feedback is an important aspect of their regular client relationship meetings? (We often hear push back from partners, saying that “they already do this” and don’t want to bother the clients.)

Yet, effective tactics for driving partner engagement include communicating early and often about the program, involving a carefully selected steering committee, and using partners as champions for the program internally.

One of the best examples of partner engagement shared during our recent webinar series, came from a midsize US law firm that had assembled a steering committee by carefully choosing firm partners for their attributes: the trusted litigator that everyone respects to engender trust in the program; the critical thinking disputes partner who will find the kinks to be ironed out before anyone else; and the head of the firm’s newest practice to bring fresh perspective and signal this is an inclusive firm-wide program.

When the group faced some objections from partners blocking progress early on, we set up a town hall style meeting for partners to hear a brief, 15-minute overview of the program’s goals, plan, and rationale, leaving the rest of the time for a Q&A. This meeting gave partners the chance to see and hear about the program for themselves, ask their questions, and get more comfortable with it. Addressing engagement issues early on is key, of course, but there is a fine line to walk — program creators don’t want to ignore the naysayers, but they should be careful to strike balance between steaming ahead or pandering.

Growing a program

Most firms today say they have a client listening program in place. For some, this is more formal with a project manager, regular reporting, and a systematic approach to selecting clients with a clear plan for action. For others, it’s a handful of Chair-led top client visits held each year. Most firms are somewhere in between, usually clustering toward the “less is less” end of the spectrum.

Webinar attendees said they want to reach more than the average 20% of clients by scaling up their programs and adding more streams of feedback such as post-pitch and post-matter feedback into the overall program. This ramping up of the client listening program takes resource and skills as well as better engagement from partners than may actually exist in many law firms today.

As the graphic above demonstrates, law firms typically start out with a Moment in time periodic measurement of client experience which can provide a valuable baseline of satisfaction and useful insights about how to strengthen individual relationships and competitive advantage.

Once established, they can build on it with Big picture research to gain future-looking insight that will inform strategic growth. For example, one international law firm set out its strategic plan and identified four key areas of growth. We then used client research to test demand and appetite for these four areas within the firm’s existing client base, with our questions focused more on legal spend, assessing the need for certain work types, identifying decision-makers for those work types, and the perception of the firm compared to its competitors. This process, incidentally, hardly touched on client service metrics.

Increasingly, law firms want to learn more about their clients’ own ambitions and needs relating to new or emerging topics like environmental, social, and governance (ESG) initiatives or innovation. These are far-reaching topics that deserve a dedicated research exercise as opposed to one question in a client service review. For example, innovation itself is a great opportunity to design a program around a carefully selected set of clients to whom innovation is a high priority. The program can gather details about their innovation journey, goals and progress, and how well the firm is supporting them, and, conversely, what other firms are doing that is helpful.

Besides getting to understand the client’s perspective on this topic, these interviews deliver a huge amount of competitive intelligence that feeds directly into developing the firm’s innovation proposition and how it communicates that strategy.

Connecting client listening to firm strategy

There are countless ways in which client listening data and insight can be used across the firm — innovation and ESG are just two of them.

To derive the best value from a program requires doing more with the results. To do this, firm leaders first need to ensure they are asking the right questions. Sometimes these questions can be uncomfortable to ask a client, such as about legal spend or the competitors with whom they work; but the value of that information outweighs the awkwardness of asking. Also, this is where working with an independent third party is invaluable. I recall encouraging a nervous managing partner to trust us to ask their clients about their legal spend in order to collect the data that would be instrumental in gathering insight for use in formulating the firm’s five-year strategic plan, which also was a major program objective.

Fast forward to the results presentation, and this same managing partner now had at their fingertips a list of the firm’s Top 200 clients, clients’ typical budget, the proportion allocated to the firm, and whether the client intended to spend more with the firm next year. The data can help demonstrate the value of a listening program which is important in encouraging partner engagement and leadership support for client listening initiatives.

To be successful, client listening should be a strategic priority and managed as a strategic initiative with full and visible support from leadership. When firm leaders talk about the importance of client listening, yet none of their own clients are being invited to participate, is the program really going to be taken seriously throughout the firm?

Much more authentic and convincing is the leader who can admit to their own apprehensions before one of their clients was interviewed and how much they learned about that client after the interview — insights that they were able to use in growing the relationship.

You can learn how to help your firm better determine strategy and demonstrate its value through the use of client listening programs, here.

While there is no single formula for creating an effective hybrid legal team, there are four essential strategies that legal leaders should pursue to increase the performance and success of hybrid teaming:

1. 1. 1. Create psychological safety
      2. Build belonging and inclusion
      3. Make communication intentional
      4. Prioritize well-being

Create psychological safety

Psychological safety is trust at the team level and a foundational practice of effective hybrid teams. Psychological safety is the belief that employees can be themselves, ask “dumb” questions, share partially formed ideas and respectfully disagree with colleagues without the worry that they will be embarrassed, singled out or otherwise penalized.

Lawyers in a high-trust environment generally feel more comfortable sharing their knowledge and speaking up. Lawyers in psychologically safe environments are also more likely to identify or admit to errors and mistakes earlier. Trust also makes it more likely that lawyers will feel comfortable giving necessary feedback to others on the team. These are critical to a profession that doesn’t sell anything tangible — clients buy legal advice, which must represent the collection of the team’s expertise.

These behaviors will help legal leaders increase trust on their hybrid teams:

• • • Team members should be consistently reminded of the shared common goal and the outcome leaders are seeking to achieve for clients.
    • Legal leaders need to be both accessible and approachable. In a hybrid environment, team members need to feel both the digital and physical presence of leadership.
    • Leaders should offer encouragement — caring and kindness are the new leadership currency in law.
    • Leaders should also celebrate small wins by encouraging lawyers to share examples of small successes during the past week. Tracking small successes has been shown to be a powerful form of motivation.
    • Leaders should also acknowledge the limits of their knowledge. The legal matters that lawyers work on are complex and rarely have a simple answer. Saying, “I’ve not seen this issue before” or, “There isn’t an easy answer to this — let’s discuss it together” signals to team members that leaders will leverage the collective expertise of the team when needed.
    • Finally, leaders need to pay attention to how they listen. Legal leaders often listen to fix problems, and lawyers generally like to listen to win; however, leading effective hybrid teams requires empathy — “humble curiosity” that promotes listening to learn and understand. You can activate humble curiosity with communication cues like, “tell me more about that/say more about that” or “walk through that with me.”

Build belonging & inclusion

Belonging is the need to feel connected to others and to feel like a part of groups that are important and significant to you. One of the biggest challenges legal leaders mention about hybrid work is how to consistently mentor, give feedback and otherwise build the relationships that spontaneously happened when everyone was in the same office. Belonging is such an important psychological need for lawyers that it has been shown to be among the top three drivers of lawyer well-being and motivation. It’s also critical that new professionals feel a sense of belonging quickly.

A good first step is to think about your goal for the interaction and the type of information to be discussed so the best channel to facilitate the relationship can be used. Communications experts call these channels “rich media” versus “lean media.”

A good first step is to think about your goal for the interaction and the type of information to be discussed so the best channel to facilitate the relationship can be used. Communications experts call these channels rich media versus lean media. Rich media include social and collaborative tools, video and face-to-face interactions that are often used for discussions where back-and-forth dialogue is required or when team members must discuss and interpret information and come to an agreement. Lean media are documents, email and texts, and these are often effective methods of communication when new information needs to pass from one person to another (e.g., letting someone know the meeting time was changed to 10 a.m.). Phone calls fall in the middle of the rich versus lean media continuum.

A group of general counsel recently noted the following strategies helped recent hires build strong relationships quickly:

• • • Allow new lawyers to shadow senior colleagues in meetings.
    • Schedule meetings with key partners across the company, which also helps lawyers appreciate the broader company culture.
    • Schedule extra time in one-on-one meetings to discuss non-work-related topics.
    • Set up virtual coffee chats to celebrate personal and professional wins, ask questions and seek feedback about legal matters that lawyers are handling.

Other ways to build belonging include providing greater responsibility to more junior lawyers for tasks that are both visible and important to the organization, and structure unstructured time so that team members can talk about non-work-related topics as they continue to get to know each other.

Make communication intentional

Hybrid legal teams need to communicate in a very intentional way to make sure remote participants don’t feel excluded. The rich media versus lean media analysis from above also applies to team communication.

Team communication norms should be discussed and agreed upon at the beginning of the matter. Teams should discuss practices like how information learned during in-person conversations will be delivered to remote participants and by whom.

Hybrid teams also need to be aware of proximity bias — the tendency for partners or those distributing the work to reward the people with whom they interact in person. Leaders can combat this by coordinating days in the office — for example, requesting that everyone comes in on Tuesday, Wednesday, and Thursday. They can also make sure remote participants speak first on calls, so they aren’t forgotten or left out.

Leaders may also need to be more methodical in how they track distribution of work assignments so as not to inadvertently exclude remote lawyers.

Leaders may even want to have the entire team participate on a call remotely, even if some of them are in the office. This helps to limit the conference room “side conversations” that are common with hybrid teaming. Remote participants can inadvertently feel excluded when they join a call only to see several people huddled together in conversation.

And perhaps most importantly, leaders should clearly communicate expectations and timelines to thoughtfully manage people’s expectations.

Prioritize well-being

Our collective well-being has been significantly challenged since the start of the pandemic, and it’s an area in which lawyers have struggled for decades. Legal leaders have reported remote and hybrid work models have made it even more difficult to know when lawyers and legal professionals may be suffering from burnout and stress.

It can be difficult to recognize the signs and symptoms associated with burnout, but here are some early indicators: procrastination, a drop in productivity, getting sick more frequently with low-grade illnesses like colds and headaches, every curveball is a major crisis (having an outsized negative reaction to a small, basic request), mood changes, inability to concentrate and being detached from things they typically enjoy. Everyone on the team has a responsibility to watch for these warning signs and to invite a conversation (provided you have the right relationship with the person) if they are noticed.

The pandemic changed the way many lawyers and legal professionals want to work. Hybrid teaming is now the expectation of many talented professionals — a model (and a skill set) that legal leaders will need to continue to embrace and practice to retain their top legal talent.

These are among the key findings of the newly published 2022 Report on the State of US Small Law Firms from the Thomson Reuters Institute.

Even as the overall economy has turned sour for many, smaller law firms have maintained a bullish outlook on their future prospects, and likely with good reason. Evidence across the legal marketplace indicates that corporate clients are looking for ways to push work down to lower-cost legal service providers, creating new opportunities for smaller law firms to capitalize on their pricing advantages.

At the same time, however, those small law firms that serve primarily individual clients continue to face pressure from alternative providers like do-it-yourself (DIY) legal sites. Yet, small law firms report that they are not facing an increasing degree of pressure from those competitors, with whom they have learned to cope over many years of market maneuvering.

This most recent edition of the Report on the State of US Small Law Firms once again explores the current state of the legal market through the eyes of leaders of small legal practices, offering several insightful glimpses into their thinking. While leaders of small law firm continue to characterize their practices as generally successful, for example, some cracks potentially may be emerging. Increasing costs pressures for some small law firms and a heavier administrative burden continue to place ever greater pressure on firm leaders. Moreover, broader economic challenges could put further pressures on this group of firms.

Still, for those small law firm leaders who take a mindful and strategic approach to the problems many of them foresee in the future, as well as those they admit they’re already dealing with, the current upheaval in the broader economy and the legal market specifically could provide fertile ground to turn difficulties into opportunities.

Among the report’s key findings:

• • • The outlook for small law firms is increasingly positive;
    • Small firms by-and-large consider themselves to be successful;
    • The competitive landscape is shifting, and this provides both new opportunities and rising threats; and
    • Small firms are demonstrating the ability and wherewithal to make changes and potentially take advantage of those opportunities.

The report also highlights the positive outcomes that can result from a determined focus on addressing a key challenge, offering the example of how small law firms dealt with one recent problem. In 2020, getting paid by clients was one of the top concerns among small law firms with nearly two-thirds (64%) of firms reporting it as a significant or moderate challenge. However, more than 40% of small firms reported that they have a plan to address the problem and they had already implemented changes to address the issue through such strategies as increasing retainers, improving payment collections, and accepting electronic payments such as ACH payments and debit or credit cards. Fast forward two years and the percentage of firms that view getting paid by clients as a significant or moderate challenge has fallen to 54%. And those firms that rated it as a significant challenge has been cut by more than half to just 9% compared to 19% in 2020.

Small law firms that follow this example as they look to address the challenges reported in this year’s edition of the Report on the State of US Small Law Firms are certainly not guaranteed a similar result, but the evidence suggests that they are far more likely to enjoy a positive outcome and capitalize on their bullish vision for the future.

You can download a copy of the “2022 Report on the State of US Small Law Firms” by completing the form below:

Despite cost control being top of mind, however, executing on this goal is no mean feat.

In a new Thomson Reuters Institute Insights podcast, available on the Thomson Reuters Institute channel, we discuss what the LDO Index, an annual look at the state of affairs within corporate legal departments from those professionals tasked with managing the operations, says about department leaders’ thinking in the current environment. This year’s report compiled a wide range of responses from 107 different companies, from small businesses to those making in excess of $10 billion in annual revenue.

As the podcast looks into the key findings of the Index report, it sheds great light on where law department leaders are seeing their greatest challenges and opportunities. For example, the Index report showed that matter volumes are increasing for the vast majority of responding law departments, even as they cope with flat budgets.

You can access the latest Thomson Reuters Institute Insights podcast, featuring a discussion about the recent LDO Index report, here.

Indeed, few law departments report adding lawyer headcount. The end result is a situation where perhaps the only option to deal with the increasing workload is to send more work to outside legal counsel, even as those external law firms continue to raise rates.

Again, as discussed in the podcast, this is not an easy situation for corporate law departments to manage.

To help shed some light on some of the pain points as well as possible solutions, the Thomson Reuters Institute Insights podcast invited a panel of experts to join us from among the membership of the Legal Value Network (LVN), which partnered on the LDO Index. The Legal Value Network is a group of professionals with the mission to accelerate evolution in the legal industry, connecting business of law professionals from across the legal industry who are focused on designing, building, and implementing innovative models of legal service delivery.

In this week’s podcast, we speak to:

• Alexandra Guajardo, a pricing an analytics officer with Shell’s legal operations team. With her 20 years of experience in the legal industry, Guajardo functions as the right hand of the legal ops team at Shell.
• Justin Ergler, director of alternative fee intelligence and analytics at GlaxoSmithKline. An outspoken critic of the billable hour, Ergler has established himself as a thought leader and expert in the use of alternative fee arrangements for complex legal matters.
• Keith Maziarek, director of pricing and legal project management at Katten Muchin Rosenman. Bringing his 20 years’ experience focusing on strategic growth and profitability initiatives, Maziarek seeks to bring the voice of the client into his firm and helps guide firm strategy towards sustained profitability.

As the podcast illuminates, how corporate law departments control costs is an involved and complicated topic, with nearly innumerable necessary components. This podcast features a great discussion from both the in-house and law firm side of the equation and in doing so, reaches a key conclusion: No matter which steps a corporation or law firm may decide to take, three things are indispensable — transparency, communication, and trusting relationships.

Without those, controlling costs will become much more difficult, if not an impossible task.

For more from the Legal Value Network, you can follow their podcast, Off the Clock

Episode transcript.

The potential growth that law firms could see with existing clients is huge, yet it is still a minority of clients that are invited to take part in a formal feedback program.

In our recent webinar series, I wanted to tackle this issue head-on by breaking down some of the barriers that firms are facing as they try to build a successful client listening program. I also wanted to look at how firms were setting themselves up for success.

Our research shows that client listening initiatives provide a unique opportunity for law firms to develop deeper, broader relationships with their client base and stand out quickly from the competition in their clients’ minds. The webinars not only offered  attendees some new ideas and best practices, they potentially provided inspiration to those client-listening ambassadors within law firms who could use the insights to create or sharpen their own client listening plans.

Getting started

The webinars devoted some time to how law firms can begin to tackle the fundamentals of getting started, how to scale up a client listening program, and the importance of connecting client listening to firm strategy. Attendees also heard a lot about the ambitions that many law firms have for their client listening programs, as well as the challenges they face in bringing these aspirations to life. For example, we know the rationale and benefits for doing client listening far outweigh the trouble it takes to actually bring a program to life; so, why then are only 20% of clients being invited to share feedback formally with their outside law firms?

In fact, we put this question to the webinar audience to better understand the main challenges getting in the way of a firm’s client listening success. Not surprisingly, at the top of the list was the fact that leadership was not mandating the program.

Other factors cited at the top were partner-related obstacles: Partners won’t allow access to clients (second-most cited reason); and they aren’t supportive of the program (third-most cited). It’s clear that more work is needed to convince partners of the benefits client listening programs may have on growing their own practice. Of course, the success of initiatives like this begins with firm leadership — and they must own the responsibility for encouraging and supporting a program, too.

You can learn more about creating a top-level client feedback program here.

Client listening may be the single most important step in securing the long-term future of a law firm — without it firm leaders and partners can’t know for sure how their clients are experiencing the firm, their propensity to consider the firm for future work, or indeed, what their future legal needs may be.

Of course, client listening is a two-step process: Asking is just the first step; and acting on the information is the crucial second. In fact, one of our key messages on client listening is without the commitment to act on what you hear, you should not start asking.

Planning the program

This diagram below shows the four key stages that law firms should consider when planning a successful client listening program:

• • • First, the program should start with careful planning and thought as to what the right input, in terms of stakeholders and engagement, would be. Set clear goals to define the purpose of the research program, and choose the right clients to include.
    • Then, these inputs will determine your program design, which includes determining which methodology is most appropriate for your firm’s needs, based on which clients your firm is researching, what you aim to learn, what you should be asking, and how you will resource the program in terms of skills and capacity.
    • Our message is “Ask and Act”, so that makes the actions that are derived from the program’s results become as important (or more so) as asking for feedback in the first place. How will your firm be set up to work with the results? How will the results be shared around the firm? Who will be accountable for following up?
    • Finally, a review stage requires that you check back periodically with clients to see how firm performance has improved based on clients’ feedback. With this information, firm leaders can assess how successful the program was in line with its goals.

There is much talk within law firms today about collaboration, cross-practice activity, and institutionalizing relationships with clients across the firm. Until firms and their leaders truly walk the journey of clients by listening and taking steps to engrain client listening in the firm culture and make it a part of how the firm does business, however, all this will remain just that — talk.

In the second part of this series, we will look at how to gain support within the firm and with clients for client listening programs

The global changes experienced in 2016 saw many clients turn to the perceived safe harbor of larger firms — a trend that has held up for quite some time. Then, the global pandemic-related events of 2020 only sharpened the perception that clients needed safety and solidity, and that those would be found among larger firms.

Then came 2022 — global fears of recession, rising inflation, and clients rapidly seeking more cost-effective solutions to their legal questions without sacrificing quality. Law firms, too, have experienced these changes, and with them has come a sort of reversal of fortunes for many midsize law firms.

To be sure, the midsize law firm segment has not been immune to the volatility experienced broadly in the past several years. But the average midsize law firm seems to have staked a position going into the latter half of 2022 that finds them in a better position relative to the market.

You can access the 2022 Report on the State of the Midsize Legal Market here

Much like their position at the end of 2015, in which the average midsize law firm outperformed its Am Law 100 counterparts in terms of demand growth, the same is true through the mid-point of 2022. And while other trends such as dramatically increasing overhead expenses and associate compensation are placing a drag on the financial results for midsize law firms, many other fundamental markers are looking quite positive.

The latest edition of the Report on the State of the Midsize Legal Market, published by the Thomson Reuters Institute, offers an in-depth exploration of a number of factors contributing to a generally bullish picture for midsize law firms. It is also worth noting, however, that numerous challenges remain.

For example, midsize law firms have generally fared well in terms of attorney attrition. In fact, research from the Thomson Reuters Institute indicates that midsize law firms make up a disproportionate percentage of what has been dubbed “Stay” law firms, those firms with lower rates of attorney turnover that may be indicative of those firms being a desirable place for attorneys to work. For obvious reasons, this is a positive finding, particularly in light of the fact that midsize law firms tend to have lower associate compensation scales and generally offer smaller raises. The clear implication is that for at least some lawyers, a good working environment is about more than just money.

However, the competition for associate talent has unquestionably impacted the ability of midsize law firms to recruit and retain talent. Sparked by large salary increases by major international law firms, midsize law firms have similarly found themselves needing to raise salaries in order to stay competitive. The Thomson Reuters Institute’s 2022 Report on the State of the Legal Market, published in January, discussed the research of Frederick Herzberg, who in the 1950s posited that paying employees less than what they think they’re worth creates dissatisfaction, but paying them what they think they are worth is not sufficient to make them satisfied employees — a sort of “necessary versus sufficient” line of argument.

In this way, midsize law firms with lower pay scales must be careful to create firm cultures that provide satisfaction in ways other than cash compensation. There may be a plethora of necessary conditions to create a favorable working culture, which if present, can possibly overcome the allure of a higher salary. Absent these necessary conditions, however, it becomes increasingly likely that a higher salary will be sufficient to draw lawyers away. And particularly in today’s marketplace, every vacancy which must be filled represents a substantially more expensive endeavor than in years past.

Yet, even in the face of some factors which will give wise law firm leaders pause, midsize law firms are on a generally favorable footing upon which to continue their venture into whatever the future may bring.

Yet, for many firms, one key nugget of valuable information often seems out of reach: Post-pitch feedback is generally regarded by firm leaders as the hardest stream of feedback to obtain. This can be easy to understand. When a firm has been unsuccessful in its pitch on a certain matter, it may be quite uncomfortable asking the client why the firm was rejected. Conversely, when the firm has been successful in winning the mandate, the work often has to start right away, which leaves little time to ask why the firm won over the competition.

With careful planning, however, post-pitch feedback can be captured widely without straining relationships or feelings, and then can deliver incredibly valuable competitive insight to the firm and improve its chances on other matters going forward.

Tracking the pitch

Law firms often know which other firms they are up against when they pitch each time and with almost every client. After all, it’s a small world, and legal specialization, matter specificity, and geography make it all the smaller.

Firms should start with readily known insight and create a pitch-tracking database that includes information on clients, the firm’s pitch team, likely competitor firms, whether the pitch outcome was successful or not, pricing structure and price point, sector expertise, and presentation methods, among other factors.

With this information, a firm’s pitch team can be better prepared by studying what has happened in the past. That way, the next time the firm is pitching to a specific client or against a specific competitor, the firm will know their win rate and also their relative strengths and weaknesses. These insights can help focus the pitch team’s efforts on maximizing the firm’s strong points, getting an edge, and increasing its win rate much better than could a competing firm without such detail.

You can hear Thomson Reuters’ Lizzy Duffy discuss the benefits of a client feedback program on the latest Thomson Reuters Institute podcast, here

This kind of information — easily gathered and invaluable if used — may be a good first step in improving pitch success, but it is not the last. In fact, this initial round of internal data-gathering should be seen as the jumping-off point for gathering more insightful data that will ultimately allow a firm to build a post-pitch engagement process that yields big benefits.

Turbo charge your pitch data and your win rate

While most firms are tracking the detail of what they did to try and win a pitch, few are successfully capturing what clients thought of these efforts and how they came to their decisions.

For those firms that are asking clients directly for feedback on their proposals and presentations, this insight captured offers a turbo-charge to their pitch intelligence database by placing clients’ perspective alongside the tangibles.

Post-pitch feedback takes many forms — phone, web survey, email, etc. — and it is good to offer clients the choice of how they prefer to provide their feedback. It may be best to keep feedback requests short and stick to core metrics, such as asking clients to rate firm performance vis a vis other firms, and limit the number of open questions to the most crucial ones, such as why clients came to the decisions they did. This way, a firm can capture a little data from a lot of clients and quickly build a dataset that can enable their pitch teams and partners to identify what is working best and where the firm’s weak spots might be.

How to build engagement with post-pitch feedback

Gathering post-pitch feedback from clients is among the most difficult tasks in law firm data collection, simply because it may bring law firms and their lawyers into difficult conversations with their clients around issues of performance, pricing, and satisfaction.

As with all types of client feedback — periodic relationship reviews, post-matter debriefs, client service surveys, etc. — the individual partners who manage those client relationships may feel either good or bad about asking for and receiving feedback that relates directly to their performance. Let’s call it a feeling of vulnerability.

Yet, post-pitch feedback, like all kinds of feedback, is about collecting insight to improve the firm’s performance and especially the firm’s business development team’s efforts to support the pitch and proposal process. That team works night and day to meet the exacting demands of partners and gather the meticulous detail required by the client’s procurement team against crushing deadlines. To receive news that efforts have been successful is always welcome, but how does it truly help the team replicate the win without knowing what exactly led them to it? And hearing that a pitch was unsuccessful is disappointing for all involved, and an even harder pill to swallow if the team does not know where the firm missed the mark or how to avoid that miscue next time.

While most firms are tracking the detail of what they did to try and win a pitch, few are successfully capturing what clients thought of these efforts and how they came to their decisions.

By collecting and sharing more detailed information — about such critical factors as how the firm stood out or fell short; what specific factor of pricing or staffing was a winner or a problem with clients; or even direct, frank reasons on why the firm won the mandate or lost out — firms will be able to arm their support teams with better information to play their crucial role.

One added bonus? Strategic use of this information also goes a long way to motivate and retain the best people within the organization. Indeed, by softening the blow of a loss by being able to identify the factors that resulted in it, and being able to recognize and reward the strengths of individuals or a team will demonstrate to lawyers and staff members throughout the firm that management is actually looking for ways to improve the firm’s chances of success, and not necessarily point fingers or assign blame.

Indeed, this type of post-pitch feedback serves a far greater purpose to the support team than the lawyers out front — and it would be wise for firms to position it as such. For example, firms could seek feedback on all aspects of the pitch process, such as quality of the documentation provided or clarity of communications. In this way, there is no need for individual partners to feel so scrutinized nor for team members to have to guess why a client’s selection went their way or didn’t.

Moving past the potential barriers to a successful post-pitch program requires a firm to create a commitment and accountability to capturing this feedback from the off. The request for post-pitch feedback should be built into a firm’s pitch service-level agreement from the start, and it should become a de facto part of that firm’s relationship management process with clients. Simply put, law firms should let the client know in their initial intent to pitch that they will be asking for feedback — and firms should then let their partners know that a pitch can’t be closed out without completion of that feedback step.

This may seem unlikely or impossible for some law firms, but those that are serious about gaining competitive advantage must think creatively and challenge the status quo — the benefits are too great to ignore.

Learn how to build a client feedback program within your law firm, here.