A Value-based Client-firm Relationship: Part VII
Industrial, Artisanal, or Both?
Week 7. Each week via the In-House ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. ACC Value Challenge steering committee member Ken Grady, General Counsel and Secretary of Wolverine World Wide, offered to profile his selection and start-up process of launching a trademark portfolio management engagement with law firm Seyfarth Shaw. Ken's co-blogger is Lisa Damon, a member of Seyfarth's Executive Committee and leader of the firm's efforts to incorporate Lean Six Sigma into its business. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.
The client side
From Ken:
Let’s forget the math and look at the concept of my last post. As Lisa has noted, we aren’t just talking about trademark portfolio values. The concepts here can (and in my opinion, should) be applied to many interactions between clients and law firms. If law firms mostly aim for good quality service at an acceptable price they will work towards the Wal-mart model. I think those firms want to thrive over the long-term need to define what value they add to the relationship. Doing good legal work is the threshold not the value. Value in a transaction isn’t simply documenting the terms of the deal – it could be identifying with the client the key risks and presenting creative ways to minimize those risks (see Bob Profusek’s thoughts on the role of lawyers in a transaction). Value in a lawsuit isn’t simply being an effective litigator, it is finding a creative way to resolve the litigation quickly and for low cost (defendant) or high return (plaintiff).
Looking at the model from the last post, Seyfarth’s value is helping us handle the day-to-day needs of portfolio expansion efficiently while finding creative ways to help us increase the value of the portfolio. The efficiencies reduce the time the firm (and Wolverine) spends on the routine but necessary portfolio management steps. Gainsharing with Seyfarth gives the firm an equal incentive to continue looking for and rooting out inefficiencies. We incent the firm to drive value by adding the topper fee. The key here is not whether the example has the right percentages assigned to each part of the equation. Rather, the key is that we are linking the client and the firm so they share incentives to improve and share in the value created through that improvement.
The purchasing specialists may tell us to get three bids and choose the best cost-to-service relationship. I think that model works for pencils, but not for high value-added services. Legal services do combine industrial and artisanal components. A firm should be competitive on the industrial component and earn its keep on the artisanal component – the part where the knowledge and abilities of the firm’s attorneys really shine. Purchasing services involves selecting the firm that you believe is best positioned to add value in your client’s situation.
I know comparisons are fraught with risk from my litigation days when my opponent would turn my well-crafted metaphor on its head in closing. But, one comparison that might help here is the high-end consulting model – for example, Boston Consulting Group (“We partner with our clients to deliver customized solutions that resolve their most significant issues and create lasting competitive advantage.”). The analytical work BCG provides is the industrial component. Many firms have the financial competence to do the data gathering and calculations. The value-add is in the transformation of that data into solutions that give a company a “lasting competitive advantage.” That value-add, the artisanal component, is why Boston Consulting Group charges what it does for its services.
Next: The fee discussions progress
The firm view
From Lisa:
To us, Ken’s last post is really important. Although our recent discussion has been in the context of fees, in some ways, it’s getting to an even more fundamental question. Namely, what do clients in the post sub-prime world truly want from their law firms, investment banks and other professional service providers and what role do we wish to fill? Ken’s post makes our choices pretty clear.
Ken’s framework asks us to choose whether we wish to be a quality services provider that is a necessary part of our client’s infrastructure or do we wish to seek a job as a member of the client’s strategic team.
We could decide to set our goal as being one of the best providers of commodity services in the profession — provide “good quality service” at an acceptable price across our entire portfolio. It’s a fine goal and in some respects could represent a more conscious acceptance of the role that many law firms, investment banks, accounting firms and consultancies moved closer to over the last twenty years or so. It’s the industrial role in Ken’s post.
On the other hand, we can choose to try and increase our relevancy to the client. As Ken points out, that aspiration means that first and foremost we need to understand that the deliverables we produce are far less important than the counsel we provide and the strategic contribution we offer. The deliverables are simply a tangible result of a much deeper relationship with clients. It’s the artisanal role, the transformational service that Ken describes in his reference to BCG’s work.
In that role, the clients want us at the table to contribute meaningfully to the conversation. Our documents, spreadsheets, financial statements, SWOT analysis, all of that, are just tools we provide to the client as a by-product. That by-product output does not get us hired in the artisanal role nor does it keep us hired. It’s our capacity to provide a contribution further down the value chain that matters in that context.
As a profession, lawyers used to serve the strategic role as a traditional part of their client relationships. We worked hard to help the client think deeply about their business and contributed to their effort to set direction. In serving that role, we earned the right to be perceived as “Counselor” and slept better at night for it. It was a privilege of the profession.
The press of business, the continued push from a model that increased revenue as a function of time spent, business atmospherics and perhaps the expectations of the clients themselves moved many in our profession and in other professions ever closer to the role of infrastructure providers. At the same time, we moved further away from our role as a valued counselor and our relevancy to the client decreased by the same measure.
All of that is exactly why this conversation is so important to our firm and why we perceive our relationship with Wolverine as a defining moment, as one of those once in a blue moon inflection points calling for us to chart consciously our future course. Although much of the discussion surrounding value in our profession is expressed in terms of fees and their newest compelling models, Ken makes it clear that all of us involved are actually trying to get to an even more important question. What does value really mean and what is necessary to get there?
In some senses, Ken’s answer is simple--we choose our seat the table.
Next week: Approaching these discussions in our relationship with Wolverine
