The Debate: Sales Functions in Law Firms

by JD Supra Perspectives
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My concerns rely mostly on how such sales professionals are appropriately compensated and how certain accepted practices within the industry can be adapted or modified in a beneficial manner...

Lately, I've noticed that there has been a lot of talk about the creation of true sales functions within law firms. Articles have been written, legal consultants have offered their views, and law firms have shared case studies as examples. The dialogue essentially consists of the recent trend of certain law firms using sales professionals in place of lawyers for the identification of target companies, for the development of sales leads, and for assistance in closing the deal. The majority of the commentary seems to be focused on the position that law firms are just the latest batch of professional services firms to go down this path, following the well-trodden lead of financial services, accounting, and so on.

My personal views on the matter, however, run a bit counter to this argument. I do not wish to suggest that, collectively speaking, law firms will never go this route, nor do I wish to suggest that certain firms, in certain markets, have not been successful in their efforts to implement a sales function. Rather, I would simply like to caution the legal industry about possibly having a knee-jerk reaction to the latest business development trend du jour, perhaps in response to the serious and ongoing challenges of a global market that has produced flat or lower demand for legal services in recent years. Accordingly, I would like to present some general thoughts about the development of a sales function within a law firm, which include some concerns I have considered and confronted over the years in my role as the head of marketing and business development for a large, globally integrated law firm.

1. Incentives and Rewards

In order to develop a sales function within an organization, you must be able to properly incentivize and reward salespeople. This holds true for the field of law just as it would for companies in other industries. Herein lies the first, and perhaps most challenging, hurdle to overcome. If law firms find it difficult to measure the exact contributions of individual lawyers who work on client compensable matters, one can imagine it could be exponentially more challenging to measure the contributions of a salesperson assigned to grow the top line. For instance, some firms, K&L Gates included, reward lawyers for cross-selling practice areas and offices throughout the firm, essentially creating a natural incentive for collaborative behavior. As such, it isn't a simple equation of looking at what a particular lawyer billed or collected; rather, it is an attempt to capture the cumulative work that the lawyer added to the global platform. Not always easy to calculate, but significant in many ways.

If law firms find it difficult to measure the exact contributions of individual lawyers who work on client compensable matters, one can imagine it could be exponentially more challenging to measure the contributions of a salesperson assigned to grow the top line...

Shifting gears, let's take a look for a moment at the business development sales cycle. Client opportunities can frequently take months, even years, to develop before bearing fruit. It starts with an initial contact, staying top-of-mind with a client or prospect, perhaps losing a pitch along the way, then suddenly there may be a “win” 18 months later.  The question then becomes, who gets the credit for that work? Certainly the lawyers involved in the pitch and who ultimately perform the work should share in the credit, but consider the salesperson that identified the target many months ago. Do they get a piece of the cut? If so, what percentage is fair? Let's take this a step further. Imagine a scenario where the salesperson was the sole individual responsible for winning the work (i.e. no lawyer involvement whatsoever). Seems somewhat hard to imagine from my perspective, but this is simply a conceptual exercise. Do you reward that salesperson for the total amount billed for that matter, total amount collected, total revenues collected over the life of the client relationship? Are you creating a system where the billing rate is pushed down because the incentive from the sales perspective is to get as much work in the door, no matter the cost? All of these issues must be addressed before firms make a foray into creating a true sales function.

2. The Perils of Creating an Intermediary

Our lawyers are ... the salespeople in our system.

At K&L Gates we have more than 2,100 lawyers located across five continents. One of my primary goals is to make sure that each and every one of our lawyers is empowered, willing and able to communicate our firm's value proposition to clients and prospects. Our lawyers are therefore the salespeople in our system. By comparison, a major objective of my business development team is to support the client development activities of our lawyers in a strategic and focused fashion - they are typically involved in the targeting of clients, the creation of proposal materials, the development of a pitch strategy, and with coaching our lawyers prior to the meeting. They also, from time to time, make direct introductions between prospects and our lawyers, as well as accompany our lawyers in pitch meetings. We track and measure each and every pitch with a pursuit tracking tool. And we do all of this without having a “sales function.” I believe our firm works best when our lawyers are accountable for selling the firm, and I think some unintended behaviors can occur if you have an intermediary in place to identify leads and make introductions between clients and lawyers. In some law firms, there is an expectation that these salespeople will do all of the business development work, and all the lawyers need to do is close the deal. This kind of thinking can create a sense of entitlement and could also lead to a classist system where the lawyers are not expected to conduct business development. I can also say with some certainty that some clients would find it odd and off-putting to be contacted by a salesperson, or to have such a person in a meeting with a law firm under consideration. Will that perception change in the future? Perhaps, but I do know that at the moment it isn’t a generally accepted practice by clients or by law firm lawyers.

3. The Shift Away from Marketing/Branding

...it is important to maintain an appropriate balance between the support of both marketing and business development activities. One is not more important than the other.

Several years ago, at the height of the global economic downturn, I observed an interesting trend within law firms. There was a steady move away from traditional marketing/branding efforts toward business development activities. At some level, this made sense, as business development activities usually are able to demonstrate a clearer return on investment (ROI) for the money spent. That being said, it became clear to me that some law firms were swinging the pendulum really far in the other direction - they were moving completely away from the marketing efforts that help drive brand awareness and perception, and were putting all their eggs in the business development basket. From my perspective, it is important to maintain an appropriate balance between the support of both marketing and business development activities. One is not more important than the other - you need marketing to help feed business development. To shift away from all or most marketing activities seems to be a myopic decision on the part of law firms, and I believe that this scenario played itself out in the years that followed, as some firms lost a great deal with respect to their brand standing. Although we’re hopefully beyond the worst of the global economic downturn, our industry is no less competitive. Will we see history repeat itself as some firms move toward creating a sales function, as we saw a few years ago with the move away from marketing toward business development? Time will tell.

4. Changing the Culture

Legal industry experts often talk about how it is both important and beneficial to actively change the culture of law firms - organizations that are typically associated with being overly traditional, rigid and antiquated. I don't argue with the fact that some level of cultural change can be good for law firms; indeed, I have personally been involved in helping to shape the culture of K&L Gates toward its current client service focused environment, which I believe has had a positive impact upon the growth and evolution of the firm. However, I think some forms of radical change can consist of such a shock to the system that the organization cannot thrive or ultimately be successful. It's the proverbial shot in the arm that leads to an overdose. Law firms are innately unique entities - they may possess some of the same characteristics of professional services companies, but to make the assumption that all services firms are created equal is overly simplistic and faulty. After all, law firms have, in many cases successfully, relied on their lawyers to attract and develop work with clients for hundreds of years. To remove lawyers from the act of promoting their services to current or prospective clients is not a cultural shift that will come easily to most law firms, nor should we expect that it will happen without a great deal of stress caused within certain organizations. And in some cases, such extreme cultural shifts in approach may ultimately be likened to committing a fatal error for law firms that were not really ready for such change.

...to make the assumption that all services firms are created equal is overly simplistic and faulty.

In closing, my argument here is neither for nor against the development of sales functions in law firms. I believe that it is entirely possible that we may be experiencing the first wave of change within our industry, as clients become more accustomed to seeing sales professionals within the pitch process and law firms get more sophisticated in their approach. My concerns rely mostly on how such sales professionals are appropriately compensated and how certain accepted practices within the industry can be adapted or modified in a beneficial manner, without creating some unintended (and potentially negative) consequences. I will be interested to see how this all shapes out in the years to come, and intend to keep my ear to the ground as the dialogue continues. My main question remains, are law firms seeking a silver bullet that will address the broader issue of flat or decreased demand for legal services? If so, I think the majority of firms will ultimately be disappointed in the results.

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[Jeff Berardi is the Chief Marketing Officer for the global law firm K&L Gates. As CMO, Jeff leads an international team of marketing and business development professionals to support the firm’s offices located throughout the U.S., Europe, Asia, South America, Australia and the Middle East. Jeff can be reached at jeffrey.berardi@klgates.com.]

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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