In a recent post on his fantastic blog directed to corporate counsel, Rees Morrison describes the opening statement in a communication from a corporate General Counsel to his outside law firms:
On the first page of the JDS Uniphase guidelines for outside counsel gleams the distinctly un-lawyerly sentence “We hate surprises.” That dramatic and clear statement leads off two paragraphs about the utter importance of prompt and full communication between law firms and the law department.
This lesson cannot possibly be repeated enough.
I’ve had the good fortune to lead businesses. It’s hard to forecast revenues and expenses well in advance, it’s hard to make progress when talented employees come and go, it’s hard to make profits when those confounded competitors keep catching up or overtaking us! Each of these presents uncertainty. Uncertainty is a fact of business. Some have even found a way to quantify uncertainty so it can be incorporated into the business planning process (see here, but have Advil and a very good calculus textbook on hand).
With the market presenting uncertainty all day every day, the last thing business owners want is another surprise, particularly those that are self-generated, particularly from vendors and suppliers.
Most law firms add up revenues and expenses at the end of the year, and then decide whether to raise rates in the coming year. Problem is, the coming year has long since arrived when the rate increase notice is distributed in January or February. When’s the best time to issue notices of rate increases? Late December? By Thanksgiving? In the corporate world, most managers have to submit all revenue and expenses for the coming year by the end of August, and several revisions will take place until we lock it down by early October. Anything past that date constitutes a surprise.
The same goes for budgets for ongoing matters. Predictability is often more important than absolute cost. But sometimes costs exceed expectations. As a service provider, you shouldn’t necessarily bear the brunt of overruns if your actions are in keeping with the assignment. But don’t ever ever rely on the invoice to communicate the delta between actual and expected costs. Make a phone call. Make it long before the invoice is generated. Give the client as much runway to adjust accordingly. It may even impact their business decisions concerning how to proceed.
But it’s not just about fees. We all know litigation is by nature unpredictable. That said, there is a finite set of potential outcomes. Each outcome has a financial and public relations cost. The savvy law firm helps its client identify and quantify the potential outcomes, within reasonable ranges. It’s not just good client service, it also helps the client make better business decisions. As I’ve written elsewhere, most business owners don’t consider legal issues in the same way that a law professor might, as an opportunity to explore fascinating areas of the law. It’s merely risk management. What path gets me to my goal most expediently? Given my appetite for risk, what legal tactics further my business objectives? I may not even care about being “wrong” as long as the cost and PR impact are manageable. I don’t want to be surprised if the legal tactics you advocate present unforeseen challenges.
By the way, if you’re a lawyer and you don’t explicitly know your client’s appetite for risk, and how this shades his business decisions, and instead you provide advice based on what you feel is the “right” response to a legal issue, then you might very well be the next to receive a surprise.
A version of this post previously appeared on my personal blog.
4 responses so far ↓
Navigating the Acorn Minefield « Corcoran’s Business of Law Blog // June 15, 2009 at 4:51 pm |
[...] responsive rather than merely prompt when reacting to client demands, setting and then exceeding expectations, are all ways to use a service posture as a differentiator. Educating timekeepers to speak in [...]
Area Man Drowns in Deluge of Law Firm Pitches « Corcoran’s Business of Law Blog // June 18, 2009 at 6:49 am |
[...] “winning” in the legal sense. We respect the client’s significant aversion to surprise, so we will conduct the engagement openly and negotiate a fee arrangement which optimizes cost and [...]
The ACC Value Index – We’re Not Worthy! « Corcoran’s Business of Law Blog // October 28, 2009 at 4:48 pm |
[...] have the same understanding of the desired outcome and the path to get there. In business, surprise can be a fatal mistake, so setting proper expectations is critical. In-house counsel share [...]
Legal Budgets and Corporate Budgets – Why Predictability Matters « Corcoran's Business of Law Blog // March 7, 2010 at 11:54 pm |
[...] Many lawyers operate under the delusion that law as a process or as a business function is inherently and infinitely variable, meaning that one cannot predict costs with any certainty. This opinion is often held by outside counsel and in-house counsel alike. Imagine the plight of the General Counsel: she doesn’t know how many deals the business executives may initiate in advance when even they don’t know. She has no insight into what products liability suits the company may face, or what type of employment actions will be raised. For litigation already underway, she can’t possibly predict the next move the adversary may make, so by definition she can’t budget for how she’ll react. And even pending acquisitions may reveal complications in due diligence that are impossible to predict in advance. These are reasonable concerns, but they fly in the face of the number one rule in business: no surprises. [...]