Why New Work Goes to Other Law Firms and Not to You

BTI Average Number of Law Firms Used 2017.png

CLOs, and their in-house teams, now work with 37 law firms in total—down from 42 in 2015*. This is the 3rd smallest law firm roster clients have used in 16 years. Not only have clients cut 5 firms entirely, they have also replaced another 3.

This is a stark reminder of how competitive life is at large clients. You face at least 26 potential competitors—if not more—at virtually every single client. In the middle market with smaller clients, BTI research shows these decision makers using 9 law firms on their roster—down from 12 firms a short 2 years ago.

Every time you interact with your client—whether you deliver a document, answer a question, return a call—your client compares what you do to one of these other firms. Competition—and the client service separating one law firm from another—does not hit harder than this.

Clients Auditioning New Law Firms

This pattern where clients are replacing firms can only mean one thing: clients are auditioning new law firms for substantive work. This alone is a warning to all law firms—your client has someone in the wings who may just be your understudy.

Clients are making these changes because they are not getting what they want from their current law firms. In some cases clients’ needs change. For example—bet-the-company work has quadrupled over the last 3 years, clients are experiencing bigger class actions, and labor and employment keep growing—not to mention the surge in cybersecurity. Any firm who fails to educate clients about how they can help with these new matters is not considered for the new work—as the most aggressive firms are educating clients before a need arises.

Law firms are often blindsided by client changes in their law firm rosters. Most firms neither conduct client feedback nor track the billing trends. In addition, the “one and done” attitude among lawyers is so pervasive they think it is normal for work to tail off—despite client’s annual budgets ranging from $10 million to hundreds of millions of dollars.

You have 2 strategic options: give up or make this a business development opportunity. Ask clients their goals in reducing their law firm ranks (hint: the most likely answer is the search for more value and the cumbersome nature of managing many law firms), which needs they are trying to meet, and what the underlying factors are making your clients go through all this work.

You can suggest strategies for parceling out the work, organizing client dockets in key practice areas, and offer new ways to group together services. Using clients’ cuts in outside counsel management to develop more business plays right into your client’s hand—they want value, you want their business. 

MBR

*Based on in-depth BTI research conducted on a rolling basis between February 2016 and August 2016. BTI conducted more than 330 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations, as well as 200 interviews with law firm leaders.