One third of the world’s largest companies have dropped a law firm in the last year, representing an increase on the rate seen in 2012.
The research, conducted by legal market research specialist Acritas for its latest report on winning and losing business, highlights the critical importance of prudent pricing in the current economic climate:
- 26% of the in-house lawyers interviewed said that price and budget reduction had driven their decision to seek alternative outside counsel.
“There is better value elsewhere. We want to consolidate from 60 firms down to 20 firms.” Chief legal respondent, Energy, Canada.
- 19% said they had parted company with their lawyers because they were simply too expensive.
“Well we just felt we did not have that good bang for the buck. We thought that they were too expensive, I have nothing to say on the service levels, we just got better value from X and we get the same efficiency level.” Chief practice counsel, Retail/Wholesale, Canada.
The results also show how highly clients value service excellence:
- 17% said they had fired their law firm because they were slow or provided poor service.
“The trust has broken down and the bills haven’t been timely. I get the impression that I am paying for the lawyer constantly without him telling me anything.” Chief legal role, Government/Public Sector, UK.
When it came to hiring law firms, clients gave a range of reasons which reflected their need for specialist expertise as well as their propensity to spend their budget with the firms they like and which represent good value:
- 37% of clients were influenced by subject matter expertise
“They had the special expertise [we] were seeking. One was US securities, the other was data privacy and information securities.” Deputy GC, Technology/Media/ Telecoms, US.
- 17% hired on the basis of geographic presence
“We started getting institutional investment interest from the US. That justified going to a US firm.” Chief legal role, Real Estate, Australia.
- 15% quoted a previous positive experience
“We have long-term co-operation with them. We have been working together for a long time.” Chief practice counsel, Technology/Media/Telecoms, China.
- 11% mentioned cost.
Interestingly, prestige does not appear to provide immunity from dismissal with three of the top four most fired firms being market-leading, premium global practices.
This shift away from elite providers is a trend that has been developing since 2010. Under pressure to control external spending, clients are becoming more selective in their use of the top-priced firms, reserving their use for bet-the-company or highly specialised matters alone.
Instead, it is the international challenger brand firms (i.e. those with a wide geographic spread, high levels of customer service and competitive rates) which are gaining favour most rapidly and winning the most work.
Commenting on the new research, Lisa Hart Shepherd, CEO of Acritas, said: “Our data reveals that law firms can take simple, effective action to prevent unnecessary client loss. By conducting regular, formal client feedback interviews and maintaining good client communication from the start of the relationship, law firms can effectively put in place an early warning system to highlight problem areas before they become critical.
“This is a powerful way to build trust and loyalty as well as encouraging client referrals. In turn, being hired becomes part of a more natural process reducing law firm reliance on costly new business initiatives.”
The research was conducted in 2013 among 968 senior in-house lawyers in $50m+ revenue organisations operating in all industry sectors across the world. The telephone interviews formed part of Acritas’ wider annual Sharplegal study of legal market trends, now in its seventh year.
For further information or to request your copy of Acritas’ ‘Winning and Losing Business: Clients’ Candid Views on Why They Hire and Fire Their Law Firms’, please contact:
Michelle Nesbitt-Burrell, Marketing Manager, Acritas, email@example.com
on +44 (0) 808 178 3020