A blog by Joel Barolsky of Barolsky Advisors

Time to ditch your ‘Batman’ clients

In Articles, Commentary on 12 December 2021 at 9:16 pm

The full text of my opinion piece first published in the Australian Financial Review on 12 December 2021.

“Hello Batman!”

That’s how a top three client of a particular firm insisted that his calls be answered on his dedicated phone line and handset. Unlike the mild-mannered caped crusader, his tone in the conversation that followed was usually aggressive and demeaning.

Little was done to address Batman’s behaviour for several years because he was a very important client. When a new managing partner was appointed, the firm finally plucked up the courage to stop doing his work.

While this is an extreme example, most law firms continue to serve clients who are “wrong” for them.

There has never been a better time to deal with the wrong clients in your firm.

The latest Australian Financial Review Law Partnership Survey points to a year ahead where demand will outstrip supply. The risks of not replacing any lost revenue are much lower than usual, and the opportunity costs of continuing to deal with these clients are much higher.

Wrong clients

There are four broad categories of wrong clients, or sometimes referred to as the four ‘uns’:

  1. Unfair pricing and commercial terms. In some instances, the accumulative impact of deep discounts, scope creep, special favours and free value-adds is such that the firm would be much better off walking away and giving their exhausted lawyers a rest and finding other clients willing to pay a fair price.
  2. Unreasonable service requests. While most clients will have the occasional emergency and request very fast turnarounds, some classify everything as super urgent and demand rapid responses day and night, weekdays and weekends. A subset of this group are clients are those that consistently provide briefs that are incomplete, inaccurate or misleading. 
  3. Unconscionable behaviour. The third category includes the Batman clients of the world who disrespect their service providers. In some instances, it’s not the individual buyers who behave poorly but rather a major misalignment in core values between the firm and the client organisation. For example, firms that are deeply committed to diversity and sustainability are finding it harder to service clients that just pay lip service to these things.
  4. Unprofitable. Some legal practices with a high-cost client acquisition and delivery model would be better off financially without a long tail of very small clients. As practice teams reach full capacity there’s folly in a relentless drive to grow revenue from any type of work from any type of client.  

The task of classifying clients into one or more of the four categories can be a difficult exercise within a law firm partnership. There is often a lot of defensiveness and protection when it comes to labelling a client as ‘wrong’.

In some cases, the source of this resistance is emotional – the classification risks disrupting personal friendships and/or the legacy of long-term relationships.

In other cases, partners see a major risk to their personal practice. Any intervention to make a wrong client right risks a drop in earnings, progression or status if things don’t go to plan.

Taking action

Assuming one can get over the resistance, the next step is to decide on the preferred outcome of the relationship reset for each client. These outcomes usually range from terminal at the one end of a continuum to tweak at the other. 

Tweaking outcomes may include negotiating new commercial terms or seeking a substantive shift in behaviour, or simply taking away Batphones.

In some instances, the firm may elect to take unilateral action like notifying a change in pricing levels or changing the service team or refining scope and terms. In the case of a terminal outcome, the firm may suggest alternative firms the client could consider with an offer to transfer old files and other records.

For more important strategic clients, a 360-degree relationship review might be a gentler way to address the issues. These reviews involve asking all the stakeholders to provide comments on the relationship as a whole, as well as their views on others’ performance and their own. Feedback can be sought on a range of factors like communication, value, trust and quality. This feedback is then shared between the parties and collective action agreed upon. 

The power shift from buyers to sellers in 2022 offers a unique opportunity to reset some poor relationships.

Notwithstanding any financial or other strategic benefits, the impact on staff morale from dealing with fewer Batman clients will be significant.

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