Unhappy customers

The Legal Ombudsman has been riding a wave of publicity again thanks to a report it commissioned to find out exactly why it makes sense for lawyers to get to grips with complaints-handling.

The Business Case for Good Complaints Handling in Legal Services argues that there is ‘significant scope’ to improve complaints-handling in the legal industry and cites consumers’ complaints as often originating from the complaints process itself. The LeO makes a fair point that in other industries, complaints-handling is invariably tied to businesses’ overall customer proposition and that there is therefore a natural ‘commercial incentive’ for businesses to get it right.

The report says that in practice ‘some providers of legal advice may not have complaints-handling processes that fully meet customer needs’. But this seems to belie the true position that there are plenty of firms out there that struggle with providing a good customer service while handling complaints – more than they would care to admit.

Making for a long read and peppered throughout with flowery language, the report does, after much soul-searching, reach the crux of its conclusion with the announcement that: over 10 years, the total net benefit (of complaints-handling) could be between £53m and £80m in present value terms. And if that is not enough to make most lawyers sit up and pay attention, it is further estimated that this translates in real terms to a 2%-3% increase in operating profit.

That is not a bad return for even the most modest investment by firms in getting internal complaints-handling procedures up to scratch. Regardless of your views on the statistics, the benefits of client satisfaction and effective complaints-handling cannot be overstated for law firms.

One difficulty with complaints-handling is that firms – and particularly individual lawyers – often become emotionally attached to matters and view complaints as a personal attack, which often ends up affecting their judgement. But as the saying goes: it’s nothing personal, it’s just business. Big business, too, and this appears to be part of the problem. Not all lawyers appreciate the economic and commercial benefits of properly dealing with complaints.

Not only do complaints create direct costs, such as refunds, compensation payments and LeO case fees, they lead to indirect costs, such as increased professional indemnity insurance premiums, adverse publicity and reputational harm. This is before you even consider the amount of time spent dealing with complaints, which quickly adds up and is seldom recorded by firms, even though those tasked with the responsibility could instead be spending that time doing chargeable work.

With this in mind, and given the fact that consumers of legal services are becoming increasingly savvy and demanding, it is now imperative that firms factor in the cost of complaints when budgeting for compliance. Once you know the true cost of a complaint, it becomes easier to take a commercial approach to the resolution of the complaint.

But again, deciding whether or not to take a commercial stance is more difficult for the lawyers involved in that matter because the bias mentioned above automatically creates a conflict. At the very least lawyers should seek a second opinion or independent review of their draft resolution, but a more cost-effective way to manage complaints-handling is through outsourcing. As well as providing assurance to complainants that your procedure is objective, outsourced complaints-handling is invariably more efficient and can have a positive impact on profitability.

Whether or not you agree with the LeO’s approach to dispute resolution, this latest report serves as another reminder to lawyers that compliance is now a significant cost, and there are compelling arguments to suggest effective complaints-handling will improve your bottom line.

Mike Grant is head of professional risk at national law firm Weightmans