3/31/10

"Clients Have Gotten Smarter."


At TECHSHOW last week, I kept hearing the phrase, "Clients have gotten smarter." This was typically in relation to the law firm fees clients are paying and how things are changing. The presumption is that clients figured out law firms weren't treating them well on price (a.k.a rates and hours) and are now holding them accountable. On the face of it, this 'smarter' statement sounds right. Everything we see and hear seems to confirm this assumption.
But have they become smarter?
A colleague recently attended an in-house counsel conference on getting more for less. With few exceptions, the attendees commented on how their CXO (replace "X" with appropriate letter) directed them to cut internal and outside legal spend and that they would now be treated like every other department in the company. The bottom line: legal departments no longer get a pass when it comes to cost management.
So what has really happened is that instead of getting smarter - clients have gotten accountable. They are now in reaction mode trying to figure out how to pass that accountability on to their law firms. And in this process the great majority of them are asking for discounts and then managing to the hours, since this is what they know.
I've previously used this Einstein quote: "Insanity: doing the same thing over and over again and expecting a different result." Clients tinkering with rates, hours and expenses are only pushing on the edges. Working within the traditional hourly billing model will not result in the big changes everyone wants. In other words - it's not smart.
When I see clients moving the fee discussion (versus rates and hours) to the beginning of the engagement to establish a price-to-value proposition up front, then I'll believe the whole smarter thing.

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