Guarantee your effort Options

[Editor]

Most clients realize that law firms and lawyers cannot guarantee a result. To do so comes under Rule of Professional Conduct 7.1’ prohibition of false or misleading communication. The American Association’s commentary says this includes “lead[ing] a reasonable person to form an unjustified expectation” about results. However, lawyers and law firms can guarantee a level of effort, which does violate the code because it deals with factors within the lawyer’s control.

That kind of effort goes to the heart of what even sophisticated clients want, as symbolized by the Association of Corporate Counsel’s (ACC) Value Challenge. Its goal, in the ACC’s words, is to align law firms with what corporate clients want and need: value-driven, high-quality legal services that deliver solutions reasonable cost and develop lawyers as counselors and professional partners. A service guarantee reinforces that a firm is committed such performance and reduces clients’ feelings of risk, so that feel comfortable moving ahead with an engagement.

The legal administrator can play a key role in three important strategies through which a firm can guarantee the kind of professional effort that all clients want and expect: developing budgets, proposing alternative billing approaches and setting service standards.

BUDGETS AS A GUARANTEE

Establishing a budget at the start of an engagement is only an estimate of what’s going to happen. However, creating a budget shows that the firm is sensitive to the client’s needs and reveals what to expect. Administrators can contribute the necessary data and perspective so that budgets use common sense and realism to define what it will take to complete any work. Always err on the side of caution to spare the client any negative surprises.

Budgeting begins by getting as much information as possible from the client about goals and expectations. Information should cover parties, issues, anticipated strategies and desired outcomes. Understanding the client’s objectives will define the two crucial budget parameters:

• Time. Use common sense, be realistic and communicate accurately the amount of time it will take to complete any work. Be sure to build in more than adequate time; except when you are dealing with statutory or dealmaking deadlines, the client is less concerned with exact time and more concerned about being surprised.

• Money. A client should have in mind how much money it wants to spend to resolve a problem, just as it knows what it wants to spend on a piece of equipment. In either case, a higher initial cost may be acceptable if the long-term return on investment justifies it. Sometimes a legal problem is large enough that spending big sums on it is justified.

Most issues, however, involve everyday costs of doing business. It makes no sense to budget spending $2 million to try a case if a $100,000 settlement will meet the client’s objectives.

This entire process is about communication – to secure as much information as possible from the client about goals and expectations. The key here is not just preparing the budget, but also involving the client in its preparation, approval and implementation, the last part through constant communication about developments to keep the budget on track. The budget document should be periodically reviewed, with the client being told how much it has already spent and asked to approve any necessary changes. No budget can be guaranteed, but communication about budget progress will reassure the client.


ALTERNATIVE FEE ARRANGEMENTS AS A GUARANTEE

Alternative fee arrangements often represent anotherform of “guarantee” when they are tied to a specific result. Contingency fees, in which the lawyer gets a stated percentage of the value recovered for the client, represent only the most prominent example. Others include a flat or fixed fee (which is determined and stipulated in the engagement letter, before the assignment even begins, and will not vary no matter how much time the lawyer expends, or what the result) and premium pricing (in which the lawyer secures the right to add an additional amount beyond a stated fee if the result exceeds client expectations as defined in the agreement). Such billing alternatives again require the kind of solid knowledge of a firm’s cost structure that administrators should be positioned to provide. Knowledge of costs supports taking a direct financial stake in achieving the desired results. Both the firm and the client benefit from the assurance and risk avoidance.

There is nothing magical about hourly rate alternatives – they all seek to focus on actions taken to benefit the client, beyond the time of how that benefit is achieved. Choosing the right alternative is ultimately a business matter for the firm and the
client; there is no universal “best” billing alternative. Clients’ preferences and firms’ operations differ, and each project or case has multiple factors that could accommodate billing options. The administrator’s data provide the assurance for lawyers to take a direct financial stake in achieving the desired results. No lawyer wants to lose control and direction of an assignment, but absorbing a degree of risk on the basis of sound financial knowledge can be a win-win foundation of effort.

SERVICE STANDARDS AS A GUARANTEE

It’s only a short step from this level to “satisfaction guaranteed,” and several firms have embraced such an approach. Chicago, Illinois-based Ungaretti &Harris has for well over a decade offered clients this assurance: “We cannot guarantee outcomes; we do guarantee your satisfaction with our service. If we do not perform to your satisfaction, inform us promptly. We will resolve the issue to your satisfaction, even if it means reducing your legal fees.” The Summit Law Group – based in Seattle, Washington – offers a variation on guaranteeing satisfaction by providing clients with its “value adjustment line” on invoices: “We empower each of our customers with the right to adjust our billing, upward or downward, based on our customer’s perception of the value received, not ours.”

“Good service,” “value” and “solutions” shouldn’t be vague buzzwords; they reflect actions that are often directly in the control of legal administrators. At firms of any size, administrators can play lead roles in creating the kind of performance that encourages a high degree of client assurance and perception of value. Basic elements of that can include:

• Establish a return-phone-call policy that aims for returns of clients’ calls within two to four hours.
• Create a client-friendly office environment. Have informative pieces of literature in the waiting room, and make sure they reflect your clients’ primary languages.
• Have a comprehensive job description for every position in the law office to create a shared perception of work objectives and to ensure that everyone in a staff position understands client service responsibilities.
• Look for educational programs that give everyone in the office – including staff and lawyers alike – opportunities to learn skills that facilitate better service and enhanced performance to clients.
• Include staff listings on a website to give clients additional contacts to help them, particularly because these are people who wouldn’t expect to issue a bill for the service. The client who knows how to contact an effectively trained staff member and who receives an appropriate answer to a question, even if not from the attorney, will be a satisfied client.

CULTIVATING LONG-TERM RELATIONSHIPS

Ultimately, there is no ethical problem when a firm guarantees that people will be satisfied working with its people and receiving its services. Of course, don’t make this guarantee if you aren’t prepared to stand behind (and in front of) your effort. A better way to look at guaranteed performance is that it can maintain long-term client relationships in a spirit of collaboration.
Firm and client work together to assess needs and develop a proactive, interactive law approach, making recommendations to each other about actions and decisions that are mutually beneficial.

Collaboration is maintained by performance. By contributing to the firm’s performance through their areas of expertise, administrators can make themselves valuable partners in this collaborative effort. And when the result is the kind of guaranteed effort that increases revenue from satisfied clients, there will also be increased respect for administrators whose multidisciplinary skills support this level of performance.


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