The researchers

Law firms often have difficulty with their decision-making process. The difficulty is in establishing real clarity about how they should be operating, where they should be focusing – and, in particular, how they should be handling the client base. And yet it is relatively rare for a law firm to make a dedicated effort to understand that client base: what clients, and prospective clients, think of the firm; what they like about the firm (and don’t like); or what they prefer about the firm’s competitors. This is market research, which is one of the most misunderstood and underrated of business tools at your disposal. Practically irrespective of your firm’s size, if you want to know, and know with certainty, how you should be operating in your local market, you must understand your client base.

If you honestly believe that your firm has all the client insights at its disposal, and is therefore able to make its strategic decisions with clarity and confidence, take a moment to consider the following scenario, which is all too typical.

A circular debate goes on among the partners – whether on resourcing issues, business focus, areas for expansion, necessary improvement to service levels or back-office functions, and even on the biggest issues: what the firm stands for, where to take the firm in the next five years, and what will be necessary for a sustainable future? Very substantial amounts of partner time are being absorbed, but without a proper resolution being reached, and with a dreary recurrence of oft-aired and still unpersuasive views.

No place for gut feel

This type of decision-making will have several effects within the firm. There will be obvious difficulty in establishing a definitive and consistent view on key business issues; and frustration will be increasing, both among the protagonists and those forced to participate in the ongoing debate. But it will also impact on the firm’s ability to operate profitably. The ability – and the desire – to run the firm on more rigorous business grounds is becoming a key differentiator between the mid-tier firm struggling for scale, and the more focused firms who are tightening up their operations.

These are characteristics that prevail in many types of firm, but particularly in the collegiate/ consensual culture of professional service partnerships – most specifically in the law sector. Law firms too often resort to making strategic and investment decisions on grounds of personal and unsubstantiated opinion. But you simply cannot afford, in the current market, to continue to make key business decisions on the basis of gut feel and established practice.

It’s a question of establishing facts. From the facts will come clarity about the bigger and more intractable issues. Of course, many senior partners will swear that they have been in the business long enough to know exactly what their clients think and want. After all, they are frequently exposed to opinionated customers, and they meet their counterparts regularly at business events and socially. The problem is that what they see and hear is not representative. They will hear the good news nearly all the time, but the bad news only some of the time. It’s also very unstructured: what opportunity have you to identify changing patterns of behaviour from a two-minute discussion in the reception area? And, crucially, you won’t be getting the whole truth: not from your clients, not from the staff – and certainly not your competitors. After all, would you tell them?

Prepare for surprises

You don’t need to install a rolling programme of research. You aren’t IBM. But you do need to know, every few years, whether what you think is happening around you is the true story. This applies in each of the following areas, in which it is dangerous to have only anecdotal understanding of your clients.

First, you need to ensure that you have a robust mechanism in place to allow you to keep tabs on your main competitors. Customers generally have a much better idea of how a firm stacks up against its competitors than the firm itself does. And don’t forget that their perception of how you stack up is much more important to your bottom line than your own. Finding out who the competition really is, and how you perform on the elements that customers are really interested in, is vital. Firms are invariably surprised to hear what the marketplace really thinks of their own capability and reputation in comparison to their competitors’ – and yet it is this perception that is the key driver of their ability to grow revenues.

Secondly, you need to establish a proper understanding of your own customers’ satisfaction levels. This is one of the most misunderstood concepts in modern business. The concept of research is very simple. It tells you what is really happening in your customers’ world – seeing yourself as others see you. Then it steers your activity: it tells you what you need to improve on, how vital these changes are, and (crucially) what is the commercial value of your doing so. And this is at the heart of good research: it tells you how to operate more profitably, by handling your customers in a way that encourages them to buy more and stay longer, and protects you from the usual demand of the dissatisfied client: cut your fees.

Getting the full story

The concepts themselves are very simple: once you know what customers like about your firm – and what annoys them – this will reveal the things you need to focus on, either because they are real strengths that you can make more of in your marketing, or because they are weaknesses that are obviously doing more harm than you imagined. You also need to know about the customers you don’t have: those who have recently stopped using you, or those who you tried to win, but lost to a competitor. What are the real reasons for their decisions? This will tell you where your competitors are operating more effectively, and help you refine your own firm’s positioning. Most importantly of all, it will lead you to those improvements that may be practicable (and cost-effective) if you are to choose to compete more strongly.

Face-to-face interviews are revealing, because of the opportunity to build a better rapport with customers and probe more effectively for their real views and motivations; but these are expensive. Questionnaires are cheap, but in research you demonstrably get what you pay for: respondents will be a small proportion of the whole, but more importantly they will not be representative of the customer groups you need to hear from. They are a quick fix, but to be used with considerable caution. A much more cost-effective form of research is usually telephone interviews. Whichever method you choose, don’t do the research yourselves: clients will rarely tell you the full story (especially if your firm is part of the problem), and a skilled interviewer will uncover vital insights. It may appear a simple process, but it’s a professional skill.

Once a law firm has uncovered its actual positioning vis-à-vis its competitors, and understood how customers feel about the firm, it is positioned to make informed decisions on both a strategic and tactical level. And these are not minor decisions either: the purpose of commercially valuable research is to inform the future investment decisions of the firm. The research will tell you, with a significant degree of detail, where the critical activities of the firm should be focused. This must not become an unwieldy wish list: I worked recently with a firm whose  research uncovered 21 areas of strength and 33 weaknesses – and whose inclination was to establish 33 action plans accordingly. It is vital that the necessary changes – and the lessons learned – are prioritised with real rigour. It is generally impracticable for any business to take on more than three major improvement initiatives, and this should steer you towards activity plans that are high-profile, manageable and trackable.

Grasping the nettle

In parallel, the process by which the findings are absorbed, debated, and then used to set up specific and delegated action plans is central to a firm’s ability to extract value from its research. The best research produces uncomfortable findings, and your firm needs to have the stomach for this. The most common failing of research exercises does not lie in the research itself: it lies with the firm’s failure to act on the findings.

A focused customer research exercise will provide you with hard facts about how your firm is perceived by your current and prospective customers. The feedback from a representative, professionally handled sample of customers will cut through potentially endless management argument and indicate clearly what needs to be done to improve the practice’s fortunes. It will reveal insights that are commercially valuable: good research, properly acted on, invariably pays for itself. But the whole exercise requires a new type of business rigour: first, to realise that a law firm, just like any other type of business, cannot afford to plan its activities and its investments on the basis of unsubstantiated opinion, and that it’s time to stop the circular debate. Secondly, to undertake the research in the knowledge that the findings will produce some hard facts that will crystallise thought, but will also challenge and contradict some past thinking. And thirdly, to lock horns with the results, accept the findings as being a commercial gift, and act on this with a degree of common purpose and confidence that has been lacking.

Mungo Dunnett has worked in numerous business sectors, and now runs Mungo Dunnett Associates, a specialist consultancy for professional service firms. e: mungo@md-as.com