By Learon J. Bird, CFA, J.D.
Affiliate Financial and Damages Expert with Financial Evidence Group
As I discussed in my last article, setting expectations and clearly communicating with clients is a key strategy in avoiding client write-down requests. But using these best practices won’t eliminate all your clients’ write-down requests.
There are some instances when a write-down is entirely appropriate. In these instances, your credibility and/or reputation can be damaged if you refuse to consider the client’s presumably reasonable request or summarily reject the client’s position. Typically, a request for a write-down deserves careful consideration when there is an inadvertent inclusion of unreasonable time entries on the client bill or if circumstances, upon careful review, support the conclusion that the deliverable fell below expectations. However, if neither of these issues arose, but the client tries to reduce their bill anyway, you aren’t without options.
Unreasonable Time Entries or Insufficient Deliverable
Take a long look at the bill yourself and determine if everything is reasonable. If the client has spotted a legitimate issue that was missed when you reviewed the bill prior to submission, then you’ll need to make concessions. When that occurs, you can expect this client to closely analyze future bills. A quality bill-review process can help these issues from ever arising, and I strongly encourage all professionals supervising an hourly engagement to thoroughly review all outgoing bills from their client’s perspective. Are the descriptions in the time entries clear? Do the entries provide enough detail to allow a client to understand what client-goals the time entry advanced? Do the entries relate to work and deliverables that the client received?
Alternatively, the request for a write-down could be due to the client receiving an insufficient deliverable. I have seen instances when a member of a team failed to meet expectations, including when experts ignored attorney directions in their prep and then crumbled during deposition, or when partners fumbled a project and needed to bring in a colleague to fix the problem. In these cases, the players/staff members involved should be informed of the client’s concerns and be part of the discussions about how much of a write-down is appropriate. It is often unnecessary to write off all the staff members’ billed time, so long as they added value to the matter. In these cases, the discussions should be aimed at determining the value that the staff members created for the case and writing their time down to this value.
I note that while it is important for the relevant staff member(s) to be part of the process, so they understand the reason their compensation is taking a hit, it is advisable to steer them clear of any direct communication with the client about the write-down. Whether lingering guilt causes them to undervalue their contribution, or their disposition leads them to be overly defensive, client relationships can be easily damaged in this situation. Thus, it falls to a managing partner or a firm executive to act as an intermediary and navigate the reductions with the client and any affected staff members.
Penny Pinching
But what do you do if the request for a write-down is not due to a firm-side mistake, but is a client’s attempt to simply lower their cost, despite having no legitimate complaints about the services they received? This is when you consider three modern negotiation strategies: (a) know your BATNA (best alternative to a negotiated agreement), (b) focus on interests, and (c) trade items of unequal value.
a. Know Your BATNA (best alternative to a negotiated agreement)
The first step in deciding how to proceed with this type of write-down request is to determine what will happen if you do not agree to a price reduction. If you don’t reach an agreeable solution, will you say “yes” or “no?” A “no” may risk losing the client. The alternative option of simply saying “yes,” however, may signal to the client that your rates are inflated and not a reflection of the actual value your firm provides. It can imply a lack of respect for your own work or a desperation for business. Whatever the case may be, agreeing to a write-down after the services have been provided sets a precedent that it may be better to avoid. Before beginning a negotiation concerning the write-down request, do your best to determine the impact of the yes/no decision.
b. Focus on Each Party’s Interests
It is axiomatic that a business seeks to maximize its revenues and minimize its expenses. That said, there are usually differences in what each party wants, and those differences can help you obtain full value for your services. For example, if the client is in the middle of a budget freeze, an installment payment plan may satisfy a client’s pressing need to minimize expenses during the current billing cycle and still allow you to collect the entire amount due (eventually). Alternatively, if the client requested the write-down because they need to report a ‘win’ to their superiors, it may be possible for your firm to provide a different type of ‘win’ to keep the client contact happy and still receive full payment. This might be an introduction to a firm contact or an invitation to join firm members in their box-seat at a sporting event. Determining your client’s interests requires a conversation, and I invite you to embrace these opportunities rather than fearing them.
c. Trade Items of Unequal Value
As you consider whether to provide the requested discount, figure out what you may be able to get in return. Possible options include executing a longer contract or being retained for another case, providing client testimonials or reviews, or collaborating on a marketing push (including presenting a CLE or co-authoring an article). When considering what might be exchanged, do some brainstorming – don’t limit yourself to the possibilities listed here. So long as the discount is worth the agreed-upon consideration, the request for a write-down can transform from a win/lose dispute into a win/win agreement.
Conclusion
When write-down requests come, you have more options than just (a) holding firm or (b) capitulating. As I say to my students before any negotiation simulation, remember to focus on interests (yours and the client’s) – Is this relationship worth working for? Is there something apart from a discount that will keep the client happy? Is there a concession that the client may give which would offset the discount?
There is always a path forward, but it won’t be a simple conversation. Consider this an opportunity to discuss how you can best align your services with your client’s priorities. If your response starts a conversation instead of ending one, you are moving in the right direction. Treat the discussion as a joint improv exercise as you consider possibilities and options. If you have a client willing to expand the discussion beyond this one bill, keep the first rule of improv in mind and “Always say Yes.” As one master of the art has said, “in real life you’re not always going to agree with everything everyone says. But the Rule of Agreement reminds you to ‘respect what your partner has created’ and to at least start from an open-minded place.” [1]
[1] Tina Fey, Bossypants, 2011.