Previously, we identified two fundamental problems with the business model prevalent in many of our big law firms today, though it is by no means limited to big law firms.
This is where the "start over" of the new business model really begins. In some ways, it is the rediscovery of what made your firm successful in the first instance. The price/value proposition for customers is not the problem; it is merely a symptom. Many struggling law firms were successful in the past precisely because they did deliver a price/value proposition that was perceived by clients as outstanding. What happened?
Is the problem bloated overhead and uncontrollable or unmanageable costs? Is it the “billable hour” versus fixed-price or other alternative billing arrangements? Of course not. The problem has been a lack of courage and discipline to create and deliver what clients in every industry ask for: a better-quality product and service for a better price—to provide increased value. Firms stopped investing in people and the future of the enterprise as an institution, and they did it long before the onset of the Great Recession. We would still be facing this problem in the future, but the Great Recession accelerated and compressed it into a shorter period of time. Clients were clear in expressing what they wanted. Instead of giving it to them, the all-too-frequent leadership response was to raise rates, flog people to bill more, and internally reallocate profits. The free fall in realization rates shows everyone the pragmatic client response.
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