Demand Management Techniques for Law Firms

Techniques

Application

Narrow the scope of work the firm will accept

An excellent tool for a firm that has the capacity in some areas but not others. Common ways to implement this include limiting the types of cases taken or restricting roles within assignments. 

Purge unprofitable clients

First; firms must have the ability to calculate client profitability. Unprofitable clients zap resources and keep the firm from working for better clients. If a client is unprofitable after implementing profitability improvement measures, the relationship should end.  

Purge unreasonable clients

Clients who don’t respect or appreciate that the firm has other commitments don’t fit any firm. Unreasonable clients typically go from firm to firm. Don’t let them take your law firm over the cliff. 

Dynamic pricing and rate discipline 

Dynamic pricing is an excellent tool to slow demand. Discounting rates when a firm is in a period of high demand is counterproductive but often happens.

Accepting assignments when a firm is at capacity will cause inefficiencies and cost the firm money. You have to charge a higher rate to overcome these inefficiencies.

In periods of high demand, push up rates or at least quit discounting. This technique may not work for firms with existing retention agreements but can apply to new clients. Use the extra income to build capacity and reward people for their extra work.

Budget and price in surge staffing

When creating the firm’s budget, allocate money for surge staffing. When firms redline, they make money in the short run but often cause harm in the long run. Turnover is a significant unintended consequence of overproduction. Take a longer view on profit, and you will have a better firm.

Here is a link to a capacity analysis to help with budgeting. 

Associate specialist law firms 

Most firms struggle to associate with other law firms. Introducing potential competitors into a client account has risks in terms of loss of future business and reputational risk if a firm recommends another firm that underperforms.

Measure those risks against the consequences of poor performance from overworking people or providing weak advice because of limited expertise.

Sometimes clients will dictate co-counsel relationships, but knowing when to ask for help can save a client relationship.   

Negotiate deadlines 

When applicable, negotiate deadlines in periods of high demand. Resist the urge to over-promise. Missing the aggressive deadline or hurting the progress of other matters all lead to poor client satisfaction and attorney morale. 

Negotiate staffing mix

Too often, firms and lawyers overcommit specific lawyers to a case. Clients often try to dictate case staffing, but many lawyers also have delegation issues. In periods of high demand, negotiating the staffing mix and encouraging delegation are practical tools.

Control who can accept new work

At the firm level, controlling who can take new work and under what terms is effective for controlling demand. Intake policies can sometimes conflict with compensation systems, so this is not as easy as it sounds. Still, controlling the flow of new work into the firm is a solid risk management technique and worth the time and energy to manage the conflicts with compensation.

Client rating system

Using critical success factors to rate clients before demand surges occur can help decision-making in busy periods where time is limited for analysis. Considering billing rates, payment history, ability to do the work, reasonableness, responsiveness, quality, and loyalty can help prioritize production allocations. It is important to remember that the required service levels apply regardless of the client rating once a matter is accepted.  

For example, law firms can never do less than necessary because clients are slow to pay or unprofitable. Law firms can have their reputation harmed by poor clients in several ways.  Client rating can help prioritize demand and manage risk.