The question of how best to deal with clients is utmost on the minds of most law firm leaders, partners and lawyers. Now, in today’s more highly competitive and quickly evolving legal marketplace, the question may be even more vital, if that’s even possible.
Rob Reedy, Managing Partner of Porter Hedges, a 110-lawyer firm based in Texas that focuses primarily on the energy industry, recently spoke to the Legal Executive Institute about handling client matters as a managing partner, including how much to compromise and what to focus on.
Legal Executive Institute: As a managing partner, how do you decide on what activities to spend your time while leading the firm?
Rob Reedy: I think that if you have a good team, you can find a way at the outset to focus on what matters — and that’s clients and revenue. Try to delegate the rest, or you’ll get caught up the weeds. I try to stay out of the weeds the best I can.
I know that I’m not any good at IT, for example, so I don’t spend a whole lot of time on that. There are really good people who know all that, and I talk to them and I trust them. I know there are some leaders who are going to micromanage stuff. If you do that, you’re going to miss the boat. Because the boat is your client relationships and your revenue stream.
LEI: What do you think is the most important part of the client relationship?
Reedy: I’m a big proponent of going to clients just to say thanks for being a client. It’s very well-received, in my experience. Most lawyers are afraid of it, because managing partners are going to hear things that, for example, are not positive about the partner in some cases. That’s actually never happened to me.
I think that if you have a good team, you can find a way at the outset to focus on what matters — and that’s clients and revenue.
But I’ve had experiences when I go to managing partner forums where a managing partner told me it was a good thing he went and met with the client to thank them, because there was a huge problem and he fixed it in the nick of time. As a managing partner, that’s something you need to make part of your agenda, year-to-year.
LEI: You hear a lot about clients ratcheting up the pressure on pricing, on getting more legal services for less cost. What advice can you give about dealing with that kind of pressure directly on the firm’s bottom line?
Reedy: Well, that’s a tough topic. There are people that have seminars that last for days on these topics. I don’t know that I’ve got any brilliant ideas that haven’t already been addressed.
We tend to work these on a client-by-client basis, and we don’t have a one-size-fits-all mentality. Certainly there are situations where certain clients in certain industries need a break for various reasons, such as market conditions or whatever. So our view is that if the relationship merits it, we’ll work with them.
I’m a big proponent of going to clients just to say thanks for being a client. It’s very well-received, in my experience.
However, I’m always very careful about clients who have a large revenue stream, but their profit margin on their revenue stream is quite low. And I am careful to talk about this to lateral candidate that we are looking to hire, for example. The kind of safety net that I put on those discussions is: We are not going to commit our firm in any kind of broad context to a profit margin that’s lower than what we need to execute our business plan.
To be honest, at some point a client can take themselves out of the mix. That doesn’t happen very often, and it’s a bad thing when it happens. And it’s very relevant when you’re talking to new lawyers that want to join your firm. We just don’t bring in people whose clients insist on billing rates or fee structures that don’t generate appropriate profit margins. We just don’t do it.
LEI: Is it about staying true to the firm’s internal metrics?
Reedy: I’m all about revenue-per-lawyer and about profit margin. Those are the two things that matter to me.
We’re probably lucky in the sense that we don’t have a ton of that pressure — although lately with the energy business being in such bad shape, we are getting pressure from some clients, especially in litigation. Overall, it’s not a material part of our market, fortunately.
But I think it varies from firm to firm. And I’ve got to be honest with you, there are some firms that are really in the middle of it. We’re not.