07 Aug Scoping strategy and the value of broader scopes

What’s your approach to scoping?

• do you prefer a detailed narrow scope, or something broader?
• do you consider how you communicate this scope to the client?

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In my experience, the development of a scope – and how this is communicated to clients – is an important issue that is absolutely central to both profitability and the client engagement process – and deserves much more discussion than it seems to get.The act of defining the scope impacts:

• how the value of your work is communicated and sold
• how an estimate is developed and then (maybe) sold
• client perceptions of costs consciousness, overservicing and how ‘commercial’ you are
• the likelihood of needing costs updates

 

Narrow, detailed scopes

The default assumption amongst many solicitors is to see narrow, detailed scopes as ‘good’.

This makes sense at first glance: more detailed scopes should help with the development of more accurate estimates and matter plans in line with the principles of legal project management.

That makes sense – but let’s be honest, how many people really get into detailed project management (although maybe they should). I suspect the real reason that narrow, detailed scopes are favoured is that they give solicitors a reason/excuse/justification for either sending a costs update or increasing the bill as and when scope creep is experienced and WIP then exceeds the initial estimate.

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“Yes”, says the solicitor, “I know our bill is 40% more than we estimated, but look, that estimate was based on a specific scope, and the matter ended up being far more complex than we could have possibly anticipated, so our bill is absolutely fair for the work we had to do.” 

Yes, the above approach has some strong logic, at least in terms of the solicitors instinct to ensure they are paid for their time, but look at it from the clients point of view.  They reluctantly accept the bill in most cases, but are they happy? Of course not. They expect solicitors to be able to anticipate better so that they can rely on initial estimates.

Of course it’s difficult. I’m not suggesting that solicitors should be able to accurately estimate the time cost of all matters down to the last $1k – but I am suggesting that some more sophisticated scoping and estimating can avoid some problems like the above.

Narrow, detailed scoping tends to encourage lower estimates on the false assumption that time can easily and painlessly be charged for out-of-scope work further down the track. But it isn’t easy and it isn’t painless. Firms that do issue costs updates or revised bills risk client dissatisfaction. Firms that don’t are writing off profits.

Narrow detailed scopes also focus the client’s attention on inputs and activities rather than outputs and value. They encourage analysis and questioning, which ideally solicitors want to avoid. Whilst detailed scopes are transparent (normally a plus for clients), they shift client focus onto costs rather than the value of outputs.

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Broader, output-focused scopes

Broader scopes tend to focus more on outcomes and therefore bring some of the philosophy of value pricing (sorry if I’m scaring you!). See also my article ‘Fixed fees and underpricing: seller beware”

By limiting the specific inclusions and exclusions and focusing more on outcome – a defence, a transaction etc – broader scopes have more value and are easier to sell. They are inclusive rather than exclusive and therefore offer clients more reassurance and less risk.

Because they are easier to sell, it is possible ( and necessary) to up the price, and to include a risk premium to take into account the possibility of unexpected extra work.

Yes, the opportunity to issue a costs update or a bill that exceeds the estimate will be more limited, but a broader scope allows you to charge more to compensate for this risk.

You can see where I’m heading with this: the difference between fixed fees and time costing isn’t black and white, its gradual and linear: it all depends on the scope, how it is communicated and the extent to which both clients and solicitors are willing to play the game of cost-updates and frustration.

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Flexible, sophisticated scoping

Neither broad scopes nor narrow scopes will be effective in all circumstances. Variables to consider include:

• the degree of uncertainty in the matter – and how this uncertainty can be reflected in the estimate
• client sophistication in terms of being able to understand the impact of variables
• client preferences
• the extent to which the law practice is willing to, and is good at, issuing costs updates and invoices that exceed estimates
• the extent to which clients are likely to genuinely accept costs updates and bills exceeding estimates
• the ability of solicitors to sell the value of their work (rather than justify their inputs)

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All scopes should seek to communicate the value of your work in terms of:

• what work propose doing,
• why you will be doing it,
• why you will be doing it in a certain way,
• the risks of not doing it, and
• how all this benefits the clients

I do, however, believe that broad scopes should be used to help justify bigger estimates more often. Too often I see detailed scopes accompanying low estimates resulting in either lost profitability or client frustration. Relying on the option of issuing a costs update simply isn’t an effective strategy. Use broader scopes and increase the $$s at the outset.

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Want to learn more?

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Register now for Client Engagement Success, a half-day workshop in Brisbane, August 31.

Or contact me on 0404 266174 / [email protected] to discuss in-house training for your team.

www.gileswatson.com.au