This post is one of four that discusses the findings of a survey conducted jointly by the Financial Times (FT), the Managing Partners’ Forum’ (MPF) and Meridian West. The survey results were pre-viewed at a one day conference hosted by PM Forum in London on September 27. The posts reflect findings from the survey, sessions and discussions at the conference and of course, views of the blog’s author.
Depending upon their practice specialty, many lawyers believe they understand their clients’ businesses. This is especially true in corporate and related areas in which lawyers counsel clients on business growth, operational and management issues, e.g., real estate, tax, employment, environmental, compliance, intellectual property, etc. Lawyers that have had more of a challenge in “commerciality” are litigators and trial lawyers, who traditionally have stayed focused on cases and trial strategy (and often lose site of the business objective, searching for a needle in a haystack and generating excessive depositions, hours of discovery, and more billable hours that relationship partners often have to write off.) In the past ten years, litigators have been encouraged to better understand litigation in the context of a client’s business objectives and financial constraints and adjust strategy to meet client’s risk tolerance and objectives.
But is there more to “commerciality” than understanding a client’s business?
Yes, much more according to the FT/MPF/Meridian West 2012 survey. And in this area, there is a significant gap between client and managing partner perception of CEO priorities.
The question “What three issues do you prioritise for the agenda in your conversations with management at advisory firms” illustrates the gap:
- Sector-specific issues 50% CEOs to 40% MPs
- Project/matter specific developments or concerns 50% CEOs to 35% MPs
- Risk and regulatory issues 44% CEOs to 21% MPs
- Operational changes 32% CEOs to 9% MPs
As reflected in these numbers, clients want their lawyers to really understand their industries and the challenges posed. Commerciality means understanding legal issues and approaches in the context of the business’s goals, risk profile, risk tolerance and budget. Clients want their lawyers to do more than read their financial statements. Seventy-five percent of clients want their adviser’s to know about their business’s strategy and business plan and 65% expect them to have a good understanding of their sector and trends. Doing so helps lawyers consider the context of the legal matters they are helping with.
Less obvious but equally important is for lawyers to understand the individual client: personal agendas, preferences and what keeps them up at night. General Counsel often bemoan the fact that their outside lawyers seem oblivious to the pressures they are facing in their legal departments and in the companies themselves. Most General Counsel now serve a critical role in the business as a part of the executive group, counseling CEOs on risk and compliance and strategic issues. Additionally, General Counsel’s annual compensation is often tied to how well the legal department does, especially in terms of achieving cost-cutting and efficiency goals. It is critical that lawyers really understand the pressures they face. As reinforced by Liz Kelly, Group General Counsel of the Nationwide Building Society at the PM Forum Conference in London, “I really want my lawyers to put themselves in my shoes, understand what I am dealing with, the role I play, the challenges I face.” Liz says one of the most valuable things a law firm can do is come spend a day at her office facility to meet others, walk the floors, see how the business operates.
Given that 55% of clients are facing a riskier business environment, they want advisers who assess current risk but also who counsel them proactively on risk triggers and solutions, as well as peer benchmarks. Clients at the PM Forum Conference noted that only a certain amount of commercial knowledge can be gained from business plans, financial statements, sector web sites and other on-line sources. The best way to truly be commercial on behalf of a clients is to regularly talk to clients about their issues, industries, priorities and personal agendas.
Eighty-seven percent of the professional advisers surveyed acknowledged the need to develop commercial skills to supplement their technical expertise, but sadly, only 36% receive training or knowledge from their firms in this area. This is clearly an area that law firms will have to focus on if they want their lawyers to deliver client value.
Our next post will address what clients mean by wanting added-value from their law firms.