We recently received a most welcome testimonial for beaton's pioneering research into cost conscious, but it's not only law firms that will benefit from being more cost conscious.
In a March 24, 2014 interview with Australasian Lawyer, Herbert Smith Freehills’ Australian managing partner Jason Ricketts is quoted as saying “We just haven’t stopped on cost consciousness, and our rating has improve again this year”.
Here's yet more evidence why cost consciousness is valued by clients and profitable for law and all other professional services firms.
beatonbenchmark's 2014 analysis of what's most important to clients in their assessment of a law firm's Client Service Performance shows nine statistically significant drivers for the 'top-end of town' firms. In no particular order these include no surprises like 'technical expertise', 'reliability', 'understanding the client's business and industry', and 'ease of doing business' with the firm. And for the first time in many years 'innovation' appears in this list, putatively emphasising the importance large clients are starting to place on LPO, LPM, alternative business models, and the like.
And then – ranking in third position of importance – is 'cost consciousness'. The origins and nature of cost consciousness and cost conscious behaviour have been described in this post on Research. Reveal. A couple of years ago the then Freehills generously allowed beaton to publish a case study showing the early pay-back on the firm's investment in cost consciousness.
More evidence why cost consciousness is valued by clients
Evidence is accumulating that shows how clients value cost consciousness. This should be no surprise because the answers to the question "How responsibly are you (the law firm) spending the business owners', the shareholders' or the tax payers' money is at the heart of behaving in a cost conscious manner.
You are spending clients’ money as if it were your own
“You need to be in a position where you are spending clients’ money as if it were your own," said Jason Ricketts in the Australasian Lawyer interview with journalist Ben Abbott. "We need to be a alive to the fact that the right cost outcome is just as important as the right legal outcomes; clients can’t be surprised at the end of the process, because that can have a profoundly bad effect on client relationships. It’s not a black box any more, it’s a journey you go on with the client, where you are talking at all key stages about what the cost outcome might be.”
Law firms perform poorly on cost consciousness
In spite of the evidence of the importance of cost consciousness to clients and the role cost consciousness plays in enhancing clients' perception of value (and hence firms' ability to minimise price-down pressures), the strange truth is that law firms continue to perform badly on cost consciousness. Examination of the radar chart shows the low performance on cost consciousness – and the narrow band from highest to lowest performer in this analysis of 10 top-end-of-town firms.
Of the nine drivers to which I have referred above, clients rate performance on cost consciousness by far the poorest. In the each of the last four years, cost
consciousness has been scored mid-way between 6 and 7 on a scale from'0' for 'extremely poor' to '10' for 'extremely strong'. Whereas in 2014 the other attributes scored over '8', save for 'innovation' which scored 7.3.
So, what's the problem? Why aren't firms lifting their game on cost consciousness? The answer it seems lies in the fact that clients' perceptions of cost consciousness stem largely from the behaviour of the practitioners. We all know that changing lawyers' behaviour is extraordinarily difficult. Witness the famous 'herding cats' metaphor – watch this YouTube clip (again!) for a good laugh and reminder of the challenges.
For more information on what lies behind this chart and the annotations, please contact me or any other member of the Beaton team.
It's not only law firms that will benefit from being more cost conscious
Lest members of other professions are feeling smug about the poor performance of lawyers on cost consciousness, stop and think again. Beaton's evidence is just as telling in accountancy, consulting engineering and management consulting. It's not only law firms that will benefit from being more cost conscious, all professional practitioners and their firms will.
If you found this post on 'More evidence why cost consciousness is valued by clients' of interest, then you should also read these on the Beaton blogs:
+ Cost consciousness is a missing link for professional services firms
+ Selling professional services: Damned if you do – Damned if you don’t