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4.3.20: COVID-19 Crisis Series LAW FIRM

Updated: Apr 24, 2020

As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at their firms, and within their teams, and to explore potential solutions and make predictions on where things go from here. Key takeaways from each meeting will be published for the public following each discussion.

The below meeting was conducted primarily with the law firm leaders group.

This Week’s Temperatures

Each week we ask the Luminaries to answer these three questions, on a scale of 1-10 with 5 being what would have been their pre-COVID response. We asked these questions for the first time at the April 3 meeting.

1. How frequently have you been approached by clients, or partners who need to respond to clients, looking to reduce costs in light of the pandemic?


2. How frequently have you been approached to help partners proactively approach clients looking to reduce costs in light of the pandemic?


3. How interested is firm leadership in identifying new pricing models or lower cost methods of serving clients as a means of dealing with client fee pressures (other than discounted rates)?


What Are You Hearing from Clients (And Others) About Their Concerns and Expectations?

Overall, our Council of Luminaries reported that they have not yet heard much from either partners or clients looking for discounts or other adjustments; but it’s still early. All claimed that there’s been less demand thus far than they would have thought, but unanimously believe it will certainly increase.

Some wondered whether partners were just offering discounts and making other moves without bringing in the pricing team as we believe it is critical for them to reach out to their pricing teams help. The consensus, however, was that it’s early and most clients are still trying to get used to the new environment, triaging urgent issues, and perhaps just starting to look at cash flow. They are still putting out fires. One Luminary pointed out that requests will accelerate when clients get their March invoices.

Proactive Outreach to Clients?

There was further discussion on whether to take a proactive or reactive approach with clients. A proactive approach may be best, though as one Luminary described it, “I think our partners are not being proactive because they won’t like what they hear. The concern is that the call made to ask how the client is doing and if they are having issues that firms can help solve, the conversation will immediately turn to discounts.” Most importantly, any proactive offer should be in line with the market, as offering a small discount when other firms are offering much bigger ones can actually be counterproductive.

Tips for Working with Partners and Clients

1. Get partners to take a breath. Law firm partners are likely to have reactionary responses, especially when favorite clients reach out to them. Getting them to pause and look for solutions that works for both the client and the firm can be critical.

  • Try to understand where clients actually need help; don’t just assume that it’s pricing; it might be technology, a process change or consulting that they need. Immediately offering discounts will just cause revenue leakage.

2. Focus on easing short-term pain. Many clients will face severe cash-flow issues, but then are likely to rebound. It’s good to help them now, but better not to commit to anything for the long term. A defined timeline for crisis period accommodations, and defined parameters surrounding what will be done, is likely the most fair and practical approach to these situations.

3. Take a granular and appropriately-customized approach to identifying options, collaboratively with clients. Some industries will be impacted much more than others. And some practice areas will struggle, while others are actually likely to thrive. This is not a time for a one-size-fits-all approach.

4. Some clients are “not letting a crisis go to waste” and will ask for discounts or other savings options despite not being very negatively impacted by the crisis and having strong cash reserves. These conversations must be held delicately, and by the individual with the strongest relationship with the client.

5. Also make sure to factor each characteristic of the situation into the solution development exercise. Specifically, all the following elements should be considered when savings options are being formulated:

  • Average annual volume of work

  • Existing level of savings/price reductions already provided to the client

  • Which specific solutions address the client’s issue: short-term cash flow, transparency of work being done, reprioritization of budget to align biggest needs with the budget now required, budgetary certainty, etc.

  • Collection of types of work that comprise the portfolio, perhaps providing reductions where needed and leaving un-impacted practice areas/matters alone

  • Utilization levels of teams doing work for the client

  • Any considerations for the long-term viability of the client’s business, including any government aid that may reduce some stressors

  • Consideration of new ways to serve the client that can be provided in the short-term to increase the value of the budget being spent

6. The fundamental strategy and approach shouldn’t change. It’s still pricing strategy meets market conditions.

7. Communicate that the firm’s pricing is fair, either in a bear or a bull market. The firm’s willingness to be a team player and take a haircut now does not indicate it was overcharging when times were better.

8. Think about utilization, realization and resource management. Some practice areas (e.g. employment) may be busier than ever and offering discounts in those areas may be counterproductive from a pure economic perspective. Of course, taking care of struggling clients may make more sense for the long run. Regardless, try to think carefully about where to discount and how to shift prioritize resources where possible.

Can We Raise Prices in Some Instances?

The free-market economists on the call pointed out that huge increases in demand in certain areas could allow for price increases, though that might not be a wise long-term strategy as the message that sends to clients does not nurture a partnership-based relationships. Another question was about how to handle clients in industries at severe risk, that may be likely to disappear. Does it make sense to cut rates to the bone for a client that is not likely to be around through a rebound? And what impact will that decision today have on the opportunity for lucrative bankruptcy or insolvency work if that becomes necessary? Other than treading carefully because ‘clients have long memories,” the group did not reach much consensus on absolutes related to these issues, defaulting to the position that the unique circumstances should dictate the actions taken.

Fixed Fees, LPM and Alternative Delivery Models

Most Luminaries agreed that it makes sense for both firms and clients to look for novel approaches rather than just discounting—such as flat fees, moving work to a captive ALSP/services center within the firm or applying legal project management to reduce costs—although most partners (and clients) immediately jump right to discounts because they don’t know what else is in their toolbox. The general consensus was that these discussions are not taking place with much frequency--at least not yet, but that times of disruption often provide the platform for achieving progress in innovating how services are delivered and priced. Many of the Luminaries agreed that we are likely to see a big increase in demand for LPM services.

One big factor here is the extent to which partners have been trained to have these conversations, which is impacted by both the maturity of the pricing, LPM and innovation functions at the firms. Also relevant is the fact that some, especially in the U.S., more often “deputize” heads of pricing, LPM and related titles to have these discussions with their clients, while others are more likely to reserve those conversations to be led by partners, which is more common in the UK. Which of these approaches is used will impact the importance of ensuring that partners have a more sophisticated understanding of the options and levers at their disposal. Not surprisingly, the level of sophistication on the receiving end of these discussions—in the client legal department—will also impact the outcomes achieved.

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