Law firms must do more to improve how they provide services to clients as in-house legal teams say the quality of delivery they receive continues to fall short of expectations, according to Legal Week Intelligence's 2017-18 Best Legal Advisers Report.

This is just one of the key findings in the 2017-18 report, which asked 810 GCs and in-house lawyers across the globe to rate the importance of, and their satisfaction with, their chosen external counsel's performance on categories including billing practice, innovation, quality of service delivery, communication/responsiveness, level of teamwork and quality of legal advice.

The mismatch between how clients rank the importance of the quality of service delivery and their satisfaction with it widened to 0.7 points in 2018, from 0.5 points a year earlier – the largest gap in the survey. The satisfaction score dropped to 4.1 out of 5 from 4.3 in 2017, highlighting the need for law firms to think much harder and smarter about how they can better service their clients.

"There is a near linear relationship between the knowledge a law firm has about a client – its business, risk appetite and culture – and the quality of the service and advice the firm is able to provide," says Bjarne Tellmann, general counsel at Pearson (pictured right). "To give outstanding advice and service, firms must be extensions of the internal legal departments they support. That requires them to get as close as possible to their clients."

Minding their own businesses

Some firms are tackling this by thoroughly rummaging under the bonnet of a client's business and really understanding how those businesses are wired, so that the advice in-house teams receive is commercially astute.

"If you don't understand your client's business, you're not going to be able to advise them," says James Miller, managing partner at RPC (pictured right). "The days of just advising on black letter law absent the set of circumstances it fits in are long gone – it's got to be seen in a commercial context."

That is leading to a shift in how law firms are structured, with many taking a sectoral approach to their client matters rather than the traditional practice group set up. That means relationship teams are able to build up a broader overview of the markets their clients are operating in and align their services and advice accordingly.

"A client's experience is often deep and narrow in relation to their business, and what they get from us is a wider experience that can be layered on top to make sure they're guiding their business in accordance with the way things are going in the market, so that market context is vital," says David Pollitt, managing partner at DAC Beachcroft (pictured right).

While secondments are a popular method to gain insights into how in-house teams operate on a day-to-day basis, simply engaging and interacting with clients more frequently can be just as effective.

"We encourage our lawyers to spend as much time as possible with clients, to gain an understanding of how they operate and even to work as much as possible at clients' offices," says James Knight, managing director at Keystone Law. "In this way, our policy of freeing lawyers from traditional working practices helps them deliver advice that is more commercially relevant."

The gap between clients' satisfaction with their firms' commercial approach and the importance placed on it narrowed to 0.3 points this year, from 0.4 in 2016-17. Satisfaction, however, remained flat at 4.2 points, indicating that while it remains very important to clients (4.5 this year, down from 4.6), it is still not as important as the quality of service delivery and legal advice they receive (clocking in at 4.8 and 4.7 respectively).

Cost and communication

Another area where firms need to improve is with fee arrangements and billing practices, with satisfaction on both falling by 0.1 to 3.8 out of 5. Firms that are doing better here are the ones that attempt to be more transparent in what they do.

"If you approach it in a sensible manner, there shouldn't be any challenges around fees and billing," says Miller. "There's always the odd case where you agree a fee or give an estimate for work and then the scope of that work changes, but we're very alert to that and everybody understands that if it changes you don't just let it drift by – you have the conversation."

This is where good levels of communication are critical. Clients ranked their satisfaction with law firms' communication and responsiveness 4.2 out of 5, 0.1 points lower than in 2017 and 0.4 points lower than the importance they place on it – the third largest gap in the survey (along with quality of legal advice and value for money). Therefore, improving the speed and frequency of communication, making sure assumptions are mapped out at the start of a matter and that any changes are well telegraphed, are all ways of maintaining the golden rule around billing – that there are no surprises for the client when the invoice arrives.

"It comes back to what the is client trying to achieve," says Gaius Powell, business development director at Shoosmiths. "So it's the clarity of the instruction and the onus is on us as the provider and the client to get that clarified and challenge the client if necessary – 'Can you just explain what you mean by this?' – as well as confirming where the scope starts and ends, and understanding who is doing what and when."

Clients are also demanding more flexibility around fees as they seek to move away from hourly billing models. Gordon McCue, associate general counsel for strategy and coordination at Shell (pictured right), says his department has introduced an alternative fee arrangement programme that means Shell's panel firms must agree to do work on its terms.

"The hourly rate is just inherently inefficient – there's no incentive on the firm to deliver their services more efficiently," says McCue. "That completely flips on its head when the firm is on an AFA for a matter, their incentive then is to be as efficient as they possibly can because they can then make more money as a result of that, not necessarily more in terms of the total amount that is delivered to the firm but more money on an hourly basis."

Such arrangements can help clients feel more like they are getting value for money – another area in the survey with a 0.4 gap between satisfaction and importance, coming in at 3.9 and 4.3 points respectively. But while cost is important to a client's sense of value, it is not the only factor.

"I've always worked on the basis that value for money is the product of quality and price," says Pollitt. "It's not necessarily the cheapest option, but price is a key part of value for money, as is the quality of advice, and by quality I mean both the legal and commercial content."

The many definitions of value

For other firms, value for money is tied up with the value-added services they can offer clients. Value-added services – along with the amount of partner-level contact clients receive – were the only two areas in the survey where satisfaction exceeded expectations, with a positive 0.3 and 0.5 gap respectively. That is partly because clients ranked those areas the least important in the survey, with value-added services scoring 3.4 out of 5 and partner-level contact scoring 3.7, reflecting the cost pressures that general counsel face and the strain on some in-house teams to trim non-essential spending.

"Some don't want to pay for [partner time] and they don't think it's necessary, they just want to get the deal done and they're happy with senior associates handling the matter," says Jan Geert Meents, managing director for clients and sectors at DLA Piper (pictured right). "Other clients value it highly and want a partner on everything."

Those cost pressures have inevitably spurred some law firms to innovate so they can provide services more efficiently. But much more needs to be done. Clients ranked their satisfaction with innovation 3.4 out of 5 – the lowest level of satisfaction in the survey. Satisfaction also lagged expectations by 0.5 points, the second largest gap.

"Law firms are under pressure from disruptors in the sector and some firms have dealt with that really innovatively, and some not so much," says Rachael Davidson, general counsel at National Grid.

One such disruptor is Keystone Law, which harnesses technology to improve its efficiency and to cut costs.

"Our entire model is predicated on innovation and we are constantly looking to enhance our service delivery," says Knight (pictured right). "Our tech-driven platform enables Keystone lawyers to operate from any location, as easily and efficiently as when they are in the office. The absence of unnecessary dead time helps us deliver a more responsive service to clients."

Innovation, however, is not just about what latest tech products firms can offer.

"Innovation is becoming confused with artificial intelligence and technology, and the suggestion that there needs to be some whizzy thing behind the human in order for something to be innovative – wrong," says Pollitt. "More often than not, it's just people saying: 'Why don't we do this slightly differently?' or: 'Why don't we apply something we learnt here over there?'"

And for some market practitioners, firms that resist new ways of working or that are reluctant to embrace solutions that ultimately make it cheaper for clients to access legal services, will soon find themselves obsolete.

"If you don't like change you're going to like irrelevance even less, so it's all about staying relevant to the client, and the consequence of staying relevant to the client is that you must innovate," says Alastair Morrison, head of client strategy at Pinsent Masons. "Innovation comes in myriad different ways but it's more about the adjustments and changes you need to make in the context of the client relationship."

The Best Legal Advisers Report will be published in February 2018. For more information email [email protected] or call her on +44 (0) 203 868 7545.

Click here for more on the Best Legal Advisers 2017-18. The 25 law firms below have been awarded the accreditation of 'Best Legal Adviser' due to their high average scores across each category in the 2017-18 report, illustrating their high standards of client service.

• Addleshaw Goddard • Al Tamimi & Co • Allen & Gledhill • Allen & Overy • Baker McKenzie • BLM • Bond Dickinson • Clifford Chance • Clyde & Co • CMS Cameron McKenna Nabarro Olswang • DAC Beachcroft • Dentons • DLA Piper • DWF • Eversheds Sutherland • Freshfields Bruckhaus Deringer • Kennedys • Keystone Law • Linklaters • Mayer Brown • Mills & Reeve • Norton Rose Fulbright • Pinsent Masons • RPC • Shoosmiths