Last week I was in Denver at a technology conference attended by many of the market movers and shakers. It was during one of the sessions that I met the author of “Why Johnny can’t sell”. The book looked at the changing needs of sales people over the last 50 years. In the history of modern day sales there are 3 main eras, each with its own characteristics: Era I (1940-1975), Era II (1975-1995), and Era III (1995 to present). You are probably wondering what this has to do with a blog on AR management; believe it or not, it is very relevant.
To gain a true grasp of the relevancy of the book one must look at what our legal counsel does, aside from the practice of law; they undertake business development. For all intents and purposes our firms' attorneys are salespeople! They get new clients and new work into the firm. They sell the legal prowess of the firm. However, it is this sales process that leads to WIP and specifically AR related issues.
Without belaboring the discussion on selling, era II was the age of ‘qualities’. Basically, I as the salesperson spend time presenting to you, my prospect, all of my qualities. I, as the prospect, purchase based on the distinguishing characteristics between the vendors, in my example - the law firms. This was all well and good before the explosion of technology and rapid global dissemination of knowledge through the internet and other electronic means. It is the increasing momentum of more knowledge being disseminated more rapidly that takes us to Era III; the age of consultative selling and the value proposition.
Success in the selling process in Era III requires the salesperson, our attorneys, to demonstrate the added value to the client, not simply by expounding on theirs or the firm’s “qualities”. The attorney must clearly demonstrate their unique value and how the engagement will provide the client with tremendous value. Now, consider how many lawyers are out trying to get the same clients. What we see is a sea of “qualities’ and very few distinguishing characteristics. The one characteristic identified most often; price. Clients rationalize all of the qualities of the lawyer/firm, and the only one that tends to stick out – is price!
Today’s legal salesperson, our lawyer, using the skills of ERA II (qualities based) in an ERA III world, has created a dilution of the value of legal work and has caused many of the problems we see associated with today’s law firm collections. They have essentially reduced the value of their services to a commodity. This commoditizing of legal services pits firms against each other bidding for services – bidding wars. Sometimes these bidding wars results in firms taking on work below their ROI thresholds or even worse, below break-even points.
Now with the client on board, commoditizing of the legal services goes a step further. In the effort to differentiate the firm from others, clients are offered special terms; such as N60. Since the billing for services is considerably protracted from the collections effort, the client’s motivation for payment is gone. This concept has been clearly documented by Edward Poll in his book “Collecting Your Fee”, in the protracted amount of time taken to collect the bills and worst – fee discounting, all the result of commoditizing legal services. Almost all of the problems associated with delinquent legal bills can be traced back to the inception of the relationship! It was Stan Godbehere, chief credit officer of Robert Half International who said “It is the 1% that is not done right at the onset of the relationship that can cause 99% of the collections problems”. In today’s market, that one thing is not clearly demonstrating the unique value the lawyer brings to the engagement.
To be successful in today’s highly competitive market, firms must educate their lawyers on becoming legal advisors, demonstrating their unique value to the client, and not commoditizing legal services. Today’s lawyers must see themselves as the one of a kind service provider, without whom there can be no value. Then and only then will they achieve true competitive advantage, in an increasingly more competitive market