There are good clients and better clients. This is a situation most law firms will recognise – the better ones are profitable. Yet how do you work out which clients are valuable to the firm? And how true is the accepted premise that you should nurture small clients because they grow into substantial fee generators and pay back the initial investment you make in them?

For City firm Wedlake Bell, these questions came to the forefront after several months of working with a business coaching organisation. With the legal profession becoming an increasingly crowded sector, particularly with the Legal Services Bill encouraging greater competition in the market, Wedlake Bell sought the assistance of Shirlaws Business Coaching to develop its business and maximise profitability and efficiency.

Initially, coaches worked with the practice's senior partners, reorganising the roles and responsibilities of the executive team. This balancing of the 'functionality' of roles ensured that the right people, with the right skills, were doing the right jobs and that senior partners were focused on strategic activities rather than occupied with day-to-day administrative and operational functions.

Following this part of the project, Wedlake Bell and Shirlaws developed a strategy to strengthen the firm's position in the marketplace and then analysed the most effective distribution channels for generating new business, together with a capacity planning project to assess efficient use of employee time and plan a future recruitment programme in line with business objectives. It logically followed that the executive team should then tackle the issue of client management – a difficult area when personal relationships between lawyers and clients had to be analysed and assessed.

Partner Peter Day admits that client profitability was an item that appeared regularly on the agenda at partner meetings, but was never properly addressed. He says: "Like most firms we have been discussing the matter for some time, but it has always been difficult to agree and drive a positive strategy through the firm. In hindsight it was because we were not prepared to invest the time in working out how to approach the subject and there always seemed to be more pressing topics."

However, after having put in place strategies which addressed the fundamental structure of the business and having looked at the firm's positioning in the marketplace, Day and his fellow partners recognised that it was an area that had to be tackled. "We also realised that there was a model we could work through which would enable us to assess clients and quantify the effects of a structured client management programme."

Client management is the structure of systems and methods used to profitably manage and service an organisation's client base. The key lies in developing a planned approach. The initial task is to analyse the client list to identify those clients that produce the most ongoing business revenue and then agree and design a profitable client rating and categorisation system – probably consisting of two or three categories.

This is followed by determining the levels of servicing and the fee structure that is to be provided for each category, and then setting up a programme of monitoring and scheduling client service activities.

The final element in establishing a client management strategy is to develop programmes to achieve long-term relationships that will build and maintain client loyalty.

Wedlake Bell systematically worked through the various teams in its business, looking at each client in their portfolio, the revenue it produced and the client service cost expended. To achieve this the firm investigated the data for the last three years in each department, which yielded a valuable profile of each client. Also, as Day explains, it dispelled a long-held myth. "Like many other professional practices, we held the view that it is worth nurturing smaller clients as they will grow into large fee-revenue generating clients," he says.

"But our analysis highlighted some interesting information – it demonstrated that in the vast majority of cases this was just not the case. Once we looked at the actual cost of servicing we found that typically smaller corporate clients rarely grow sufficiently in income terms to pay back the amount of time that may be spent on attempting to grow them. Of course, the real trick is to spot which clients to invest that time in."

With this information at hand and a clear understanding by the senior partners about where they wanted to position and develop the practice, it was possible to define the profile of the clients they wanted to attract which would enable them to achieve a profitable growth programme. Understanding the profile of prospective clients and their required level of service also assisted in the development of a long-term recruitment strategy.

Getting buy-in to dispense with a number of low-grade or low-profitability accounts is not always easy when it involves personal relationships between solicitors and their clients. Because Wedlake Bell was working to a clearly defined framework it was able to explain the long-term strategy to its fee earners and support it with comprehensive data. The firm also worked with each team to define the categories of clients that would be most profitable for each department. With the whole organisation understanding the rationale behind the client management strategy and with clarity of vision about client profitability, the executive team was able to progress with implementation.

The process took about 15 months to complete. The starting point was for a partner to be given responsibility for the client management task and this was, as Day explains, the breakthrough point which took the issue from a long-standing agenda item to an action.

"Working with our business coaching team, the partners acknowledged that if they were going to move forward, someone would have to take on the task and they would need to devote around 20% of their time, or one day a week, to the project," Day says.

"Given the fee earning value of their time, we had to be convinced that we would see a return on the investment. The structure and thinking behind the client management framework was sound and it built on all the previous work we had carried out with Shirlaws."

Undertaking the project involved not only a member of the executive team, it also required an allocation of time from each department, together with support from the finance team to collate and analyse the historical data and agree individual department's category profiles. The coaches helped keep the process on track and worked with each team to clarify what needed to be achieved and methods of implementation.

So, 15 months down the track, was the process worthwhile? In addition to having a clear focus for new business, Day calculates that the implementation of the new client management strategy will free up significant capacity within the firm – sufficient to handle an additional £2m-worth of business without bringing in any additional resources.

"This project required a level of commitment from people throughout the business and at times we needed to be kept on track as other issues demanded our time," Day says.

"However, we had a clear structure to work to, without which we would never have achieved a comprehensive review. The return so far has been significant and we expect that to be maintained as we learn to manage future client relationships to develop their full potential."