Monday Morning Wakeup Call: A Note No Law Firm Has Ever Sent To An Insurance Company Client (Until Now…)

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The following is a true account — only names have been withheld to protect the identities of the parties.  My identity is left in, because — well, because I’m the guy who writes this blog, and because I’m trying to sneak a pat in on my own back, maybe.  Indulge me for three minutes.

There is a demand in the client marketplace for law firms to get beyond the billable hour.  But there is also fear and  trepidation of the unknown, on both sides.  Cutting edge law firms must, therefore offer not only  innovative pricing alternatives, but also metrics and data with those alternatives, to show the client that it is benefitting from the new arrangement.  Even beyond that, the law firm must show the client how much it is benefitting compared with the old way of doing things.

So without further adieu, here is an actual email which left my office last Friday afternoon.  On the surface, it is a routine update to an insurer I represent about the metrics of an alternative fee program we developed and implemented to align with their business goals.   But read on nevertheless, there is news here :

Hello All,

The most recent metrics on our flat fee program with you are showing us you are currently realizing about an 8-10% savings on all open matters, compared to the traditional hourly arrangement. We’d actually like to see you do a little better than that, and get you closer to 15% and higher.

So please get ready to read something no law firm has ever written to you before….Beginning next month we are cutting the flat monthly fee payment on all open matters by $125 to make sure the flat monthly fee program delivers better value to you, and moves us closer to  hitting that benchmark of at least 15% in reduced outside  legal expense.

You do not have to do anything on your end. You will simply see the reduced payment on your next round of invoices. And remember, the more you utilize the arrangement, the more cost control you are going to have over your outside legal expense. We will continually monitor and feed back the data and make sure you are receiving value in the alternative monthly flat fee program.

Thank you, as always, for your business.

CJ

This actually happened last Friday, and as it did, three things occurred to me about delivering value and better pricing models to corporate clients in an increasingly competitive business environment:

  1. Lawyers must make a leap.  Nothing is fatal.  Nothing is irreversible.  Everything is adjustable.  You will never remove 100% of the variables, and if you wait for that point to get started, you will simply never start, and  clients will be working with law firms which have started.
  2. Measure What You Are Doing.  This does not require floors and floors of mainframes and data analytics personnel.  Track a few items:  what your client is paying under an alternative fee deal, and what your client would have paid had the engagement been hourly,  for example.  Compare those two numbers, and… Presto!  You are now in the analytics business.
  3. Share What You Measure With Your Client.  If your alternative fee arrangements are helping your clients improve their bottom  line and helping them meet their goals, you would be foolish not to give yourself the free advertising you get by sharing that data.  And if the numbers aren’t working out, the only way you are going to adjust it and keep a happy client is to show them the data to discuss making an adjustment about which both sides feel good.

Let me close by asking the question I am certain you would like to ask me right now:   are you some kind of idiot?  Losing money on a client as it is, and making a decision to lose it faster? That’s very, very, bad business.

I am NOT a philanthropist, and despite what my kids might tell you, I do not believe myself to be stupid.  So what am I really doing here?  Think big picture for a minute  and let’s  revisit the most important win-win sentence of the note I sent:

“And remember, the more you utilize the arrangement, the more cost control you are going to have over your outside legal expense.”

Clients will not do business with you unless you are helping them with their bottom line.  It is written nowhere, however,  that this exercise  has to be is a zero sum game with one winner, and one loser.  In today’s business environment, lawyers and law firms have to find ways to create two winners, starting always with the client, and working outward from there.

It can be done.

 

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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