Tracking Procedures Lacking in Lawyer-to-Lawyer Referrals

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A global study of lawyer-to-lawyer referrals reveals that referrals among law firms represent a significant percentage of annual revenues, yet the majority of firms polled have only basic tracking procedures, if any at all.

More than a quarter (26 percent) of those surveyed claim more than 20 percent of their annual revenue is derived from referrals. However, 27 percent of respondents claim their firm doesn’t track referrals.

The study “Lawyer-to-Lawyer Referrals: A Global Perspective” commissioned by LexisNexis Martindale-Hubbell and conducted by independent strategic consultancy Fathom Consulting, consisted of 734 legal professionals from mid- and large size law firms in Western and Eastern Europe, Asia, Latin America and the United States.

  

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The survey shows that the majority of all respondents consider that they receive and refer equal amounts of legal business from / to other law firms. But there is a marked geographic trend as 95 percent of U.S. firms support this view, compared to 58 percent of respondents outside America. More than one-third (38 percent) of non-U.S. firms claim they are primarily a recipient of referrals.

Of those firms based in Eastern and Western Europe, 63 percent consider Western Europe to be the most important source of referrals. Asian and Latin American firms tend to primarily rely on U.S. referrals (38 percent and 63 percent respectively), followed by referrals from within their own region. The U.S. is more self-reliant, with 94 percent counting on referral work from other U.S. firms.

When looking at the proportion of annual revenue that is generated by referrals, Latin American and Western European firms derive the highest proportions. In Latin America, 70 percent of firms consider referrals to account for up to 30 percent of annual revenue, which is comparable to 72 percent of Western European firms.

Of all non-U.S. based firms, 15 percent don’t track referrals at all. More significantly, U.S. firms have the highest proportion of not tracking referrals, which directly contrasts to the earlier claim from 94 percent of U.S. respondents that heavily rely on referral work from other U.S. firms.

“Based on our initial qualitative research with non-U.S. firms, this is not surprising. The majority of firms have a fairly unsophisticated approach to tracking referral work and do not appear to formally track either the volume or value of the work referred,” said Derek Benton, Director of International Operations at LexisNexis Martindale-Hubbell.

“Any tracking tends to be via informal channels or non-structured discussions. However, larger firms, especially in Western Europe, wish to improve their tracking by better leveraging their existing CRM systems, capturing referral data in matter opening procedures or allocating responsibility to individual partners.”

Linked to tracking the source of referrals is the expectation – and likelihood – that firms will receive a referral in return. Compared to all regions, practices based in Western Europe have the highest expectation of a reciprocal referral – 36 percent expect something back from a referral partner. However, less emphasis was placed on the nature and importance of reciprocal relationships overall, with just under 40 percent of all firms placing “some” importance on this factor.

“Referrals are clearly a key revenue stream for law firms, especially given the negative impact of the global recession on the ability of firms to generate new work,” concluded Benton. “Nearly half of all respondents expect referral revenues to remain the same over the next 12 months, but unsurprisingly many plan to take action to protect or increase the amount of referral work received.”

Looking ahead, firms are taking actions to protect their referral revenue stream in several significant ways. In response to what steps they are taking to either protect or increase the volume of referral work received, the top three significant actions were improving the firm’s service capability (52 percent), developing or improving the firm’s website (49 percent) and listing the firm in international directories (30 percent outside the U.S. taking significant action).

To obtain a free copy of the summary or full research reports: “Lawyer-to-Lawyer Referrals: A Global Perspective”, visit: www.martindale-hubbell.co.uk/referrals.