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At-risk programs for law firms: Applying data analytics to strengthen client relationships and increase retention

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In a fragile economic environment, law firms are focused on retaining their client base by ensuring that their client relationships remain strong and diversified across the firm. When key indicators show signs of decline — decreased revenues, slower new matter velocity, or fewer practice areas engaged — forward-thinking firms are using at-risk programs to identify the root causes of business erosion and implement remediation measures. These programs combine a data-driven methodology for identifying at-risk clients and a high-touch approach to outreach, engagement, and retention.

Gauging the health of client relationships

Business erosion can occur at both a macro level, where market conditions can impact entire industries or practice groups, and a micro level, where at-risk clients disengage. Managing and mitigating these risks requires a multipronged approach to marketing and business development analysis.

At-risk programs provide an objective framework for firms to get ahead of erosion by identifying early indicators of client risk and offering guideposts to needed remediation. That’s critical, because if your firm is focused instead on lagging (historical) indicators like revenues, you won’t have visibility into problems while there’s still an opportunity to course-correct. Gaining that visibility can be especially important when revenues are dependent on practices with long-running but intermittent matters — such as disputes — when high revenues from a single project may mask underlying issues.

For more timely insights, your firm can examine the factors that drive revenue, supplementing revenue data with new matter volume and velocity, or time since last engagement. For example, if your billings number is growing but the number of practice groups engaged is lower, you probably have fewer revenue streams and are thus less diversified.

A decrease in average revenues per matter may mean your client is using a different firm for their higher-value work. New inquiry rates from conflicts data and win/loss analyses will enable you to better understand the nature of the business you’re winning and losing, revealing trends around the wins and losses associated with specific practice groups, industries, and geographies.

Client listening is an additional key component of every sound at-risk client program. To build the necessary trust for your clients to share honest, complete, and actionable feedback, client listening should be a collaborative effort between firm and client representatives. To that end, firms often bring in either an independent consultant or a member of senior management to help surface these insights.

Since current client satisfaction is usually strongly tied to the team they work with, firms should also conduct relationship mapping to understand coverage of key decision-makers — who may have changed over the course of the client relationship — as well as the breadth and depth of the lawyers known to the client. This helps reduce the likelihood of clients becoming at-risk if your firm’s key contact were to retire or otherwise move on.

Taken together, revenue metrics, client feedback insights, and additional data like Net Promoter Scores will give you a better sense of your clients’ existing satisfaction with your firm — and all these indicators merit consideration for proactive intervention.

Initiating difficult conversations about at-risk clients

Once you’ve identified at-risk clients who are showing early signs of decline, a range of micro and macro factors will inform remediation. For example, if you can attribute a decline to a leadership change for a specific client, you don’t need to worry about the implications for other clients. But if you’ve detected a troubling pattern across a population of at-risk clients that’s tied to a certain practice group, the problem is likely systemic.

In either case, the first step is to begin honest internal conversations about why that client is deemed at-risk. Take care when planning the sequence of those conversations and who should be involved in them. Participants should include relevant practice group leaders able to sponsor changes required to make improvements, lawyers who are still positively engaged with the client and have a vested interest in addressing problems, and individuals who can bring ideas to the table for creating growth opportunities — industry leaders willing to share successes with peer clients, for example.

Formalized at-risk programs provide a data-driven framework that brings the necessary objectivity to navigate the sensitivities these types of conversations surface — although when client feedback or data suggests an individual or team is at the heart of an issue, addressing those concerns privately will likely be the smart first step.

Making decisions on remediation measures

Sometimes, the problems underlying a client departure aren’t easily fixed, or even resolvable at the firm level, so your at-risk program should incorporate data-driven analysis on whether it’s more advantageous to try to save an at-risk client relationship or let it run its course. For example, if your firm has backed away from types of work that are critical to that client’s business due to profitability issues; if a client’s industry position has created conflicts challenges with another, more strategically important client; or if a client no longer aligns with your firm’s strategic objectives, your firm may decide not to remediate.

As part of this analysis, you’ll need to build the case for intervention or status quo. Your at-risk program should include studying the data on general work profitability, whether the client operates in a high-growth market, where the client fits in the competitive landscape, and how these factors collectively inform the decision to actively intervene.

Building client remediation plans

If your firm decides to intervene, having an open conversation with the client about their recent experiences with your firm and discussing their priorities over the next 3 to 5 years can help ensure that the plan you develop is aligned to their needs and has the support of their senior management.

To reinvigorate the relationship, identify two or three areas where your firm can align with your client’s priorities. Success with remediation initiatives hinges on bringing in the right players in terms of expertise, compatibility, and relationships. Consider the following as you build your plan:

  • Achieve alignment: Aligning with areas in which the client doesn’t have a strong service provider in place will likely be more successful than attempting to displace an incumbent.
  • Solidify support: Selecting areas of focus that reflect strategic priorities and your firm’s market leadership ensures continued management support and investment.
  • Refine positioning: Considering the ancillary areas related to the specializations you wish to enter — for example, M&A for a life sciences company — ensures that you’ve thought through whether you have strengths in related areas — like commercial and IP — to ensure success.
  • Involve clients: Involving clients in the evolution of your teams and introducing them to a new generation of talent ensures a smooth transition, which is especially important if succession planning is the focus.
  • Expand knowledge: Growing your knowledge of the client ensures that your plan is focused on their needs; you might also consider secondments to build institutional knowledge.
  • Address feedback: Engaging your client when feedback suggests your offering doesn’t align with their needs provides the opportunity to build a better offering and gain a sense of the general market sentiment to help you stay relevant.

Make sure you have the right team to then plan and execute your planned realignment, agree the details of the plan in conjunction with your client, and communicate on progress regularly.

Finally, plan for sustainable succession. By including a mix of seniority levels on the team, you can balance the necessary management weight and support to get things done, while also seasoning more junior team members to take the reins when the time is right. Finally, regular check-ins with the client — and your client data — will help you adapt in the right ways as circumstances change.

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