Although Australia and New Zealand have been relatively successful in containing COVID-19 compared with other regions, the worsening outbreak during 2020 has had a significant and growing influence on domestic and international economic activity.
According to an IBISWorld COVID-19 Special Report, “COVID-19 has negatively affected the Australian and New Zealand economies by disrupting consumer demand and business supply. Consumer sentiment has deteriorated significantly, weakening demand across most industries. Households have scaled back discretionary spending due to fears relating to rising unemployment and economic uncertainty. Many businesses have abandoned or postponed investment in new productive capacity to retain cash and provide a liquidity buffer to survive the COVID-19 pandemic.”
Although the Australian legal sector has thus far fared reasonably well, the changes occurring in buyer behaviour have infiltrated practically every industry, including law firms. Lawyers, like sales professionals and marketers, are having a similar experience: their prospects and clients want to work with professionals that understand their business and the issues they face. Attracting, engaging, and retaining clients is becoming increasingly difficult, with clients seeking a more personalised, consultative approach.
The realisation that standing out from the crowd in a difficult market requires a strong, strategic approach to client relationships has undoubtedly been accelerated by the wider economic downturn, with COVID-19 driving the message home for many mid-sized law firms.
In fact, PracticeEvolve’s recent State of the Nation Outlook report revealed that for over 46% of Australian mid-sized law firms surveyed, investment priorities for FY21 have changed in the aftermath of COVID-19.
Over 70% reported that improving internal systems and workflows is now the number one priority for FY21, closely followed by increased business development and marketing efforts (61%) and a greater focus on client service and experience (42%). The change in priorities does not come as a surprise, as those surveyed also cited current lack of business development and marketing efforts, keeping pace with the changes to client expectations and difficulty attracting new clients among the common challenges facing their legal practice.
COVID-19 has effectively focussed legal firms on the need to explore new and better collaborative technologies that are fully integrated into their Practice Management System (PMS), have the best people drive these technologies to enhance the client experience and free up resources for higher-value work.
More than ever, firms are feeling the pressure to deliver value not, bill time , with 45% of survey respondents reporting they will increase focus on retaining and strengthening client relationships as part of their FY21 strategic direction.
Client Relationship Management: Traditional vs Modern Approach
Under traditional models, lawyers were pressured to meet the billable hour requirements set out by the firm, with strategies in place to measure and reward those lawyers who bill the most. However, time-based billing can deter innovation, discourage lawyers from building meaningful value-based relationships and deter investment in finding new, more productive ways to work.
The traditional client lifecycle management workflow, is a straightforward one:
Although criticism of billable hours is not new, the problems manifest themselves more notably in a rapidly changing market where buyer behaviour and growing competition is shifting demand.
Today’s law firms have realised the importance of building strong client relationships, starting from a business development phase. In fact, one of the more evident differences between the traditional and modern approaches to client relationship management, is a law firms’ attitude to business development which is one of the most important factors in determining whether it will be successful.
Law firms in today’s environment are required to be more client focused and are run more like a traditional business, following a three-phase approach.
Phase 1: Business Development
Phase 2: Client/Matter Management
Phase 3: Ongoing Relationship Management
As a result, the modern relationship management process workflow is more complex.
To ensure continued success, there are three action items that law firms need to address.
1. Manage Talent
With 38% of PracticeEvolve survey respondents expressing a concern around attracting and retaining experienced lawyers, it is now more important than ever that law firms take the time to understand what motivates their staff, and do their best to deliver. Going beyond monetary incentives and perks, good lawyers often leave because firms start to feel ‘antiquated’ in their systems and are not keeping up to date with legal technologies, which creates inefficiencies and detracts lawyers from building a client-centric, value-based client relationship.
Although nearly 40% of surveyed firms do not plan to increase staff numbers any time soon, without exception all want to retain their best and brightest for what is perceived as value-added work by clients while using technology to automate the mundane, repetitive tasks.
2. Focus on Clients
Arguably, clients are a law firm’s number one asset. Client relationships are what drive revenue, so monitoring, managing, and protecting these relationships is key. Strengthening client relationships during an economic downturn where demand is lower, competition is rampant and buyers more selective, becomes even more critical.
Economic shifts, such as those currently impacting the Australian and New Zealand legal sector, force firms to focus on the need to explore better collaborative technologies that are integrated into or can work hand-in-hand with their legal practice management systems. By aligning all technologies to create one centralised system, firms can develop a more seamless data-driven approach to identifying and managing client relationships.
For instance, a data-driven client retention and business development solution provider like Client Sense connects seamlessly to PracticeEvolve, to automatically collect the data legal professionals need to identify the relationships held by the firm, along with potential opportunities and risks, providing the visibility firms need to effectively manage their prospective and existing client relationships.
3. Integrate existing and new technologies
PracticeEvolve’s industry report revealed that the impact of COVID 19 will see firms innovate and adopt new forms of technology (71%) and more firms will expand the use of existing technology to improve legal work processes (50%).
The most compelling reason for firms to take an interest in technology is because the right tools, when optimised to the requirements of an individual practice, ultimately help create more effective and efficient workflows that can be quickly adapted to reflect the changing market needs. As a result, firms can adopt a lean thinking approach which is key to reducing costs, eliminating waste from legal and business processes, and maximising value not only by understanding what clients want but making sure they can deliver.
The three recommendations above provide a great framework to start, following through is how maintaining market share is achieved.
How PracticeEvolve helps manage various stages of the client lifecycle.
- Customer due diligence lifecycle: Our AML feature helps law firms to perform (document and report on) due diligence checks on clients and associated parties of clients to ensure they comply with their obligations under anti-money laundering and anti-fraud legislation.
- New business lifecycle: Our prospective clients feature helps law firms to capture data about prospective clients including their name and contact details, as well as the expected revenue and area of law of their prospective matters and how they were referred to the firm. All of this data can be reported on to help law firms understand where their leads are coming from so they can refine their business development efforts to attract new clients. Capturing name and contact details of prospective clients also helps make any conflict checks more robust.
- Client lifecycle: Our custom reporting functionality enables firms to report on any fields that are in the client card properties, meaning clients relationships with other entities are easily identified as they are created through associated parties. Safe custody can be managed and accessed easily via client cards regardless of whether firms add it to the matter card or to a client card. As the client card and matters are separate from each other, client relationship management can be maintained long after a matter is closed. Law firms are able to keep the client open in the system and manage the marketing and client relationship aspects directly from the client card.
- Matter lifecycle: All data added to a client card will flow through to all matters when updated. This creates one source of truth for an individual person, so that every time an update is made it will automatically flow through to all the matters they are connected to.
- Financial management lifecycle: We provide quick access to client financial data in one central place which means law firms can easily identify the total outstanding amounts for each client across the multiple matters they are involved in, and view a total trust balance. Overview of total debtors also make it much easier to manage the financial aspects of the client relationship.
Are you looking to evolve your client relationship management approach? Request a no-obligation online demo and find out how PracticeEvolve can be tailored to suit your firm’s unique requirements.
Note: All statistics referenced in this article are outlined in State of the Nation Outlook for Mid-Sized Australian Law Firms – 2020/2021
Written by: Iryna Uvyaz, ANZ Marketing Manager at PracticeEvolve