How to Take the Risk
out of Referrals

Making referrals can be a win-win. From your client’s perspective, referrals to another trusted or respected provider are perceived to be a valuable service. From your firm’s vantage point, rather than turn work away, it gives you the opportunity to help meet your client’s needs; it strengthens your business relationship; and it helps build credibility.

Caveat emptor: Referrals can quickly turn into a lose-lose if they’re not done right.

Today, referrals to friends and colleagues are common practice; finding – even looking for – the right situation to throw some business a buddy’s way. But, it’s not as simple as doing a favor for a grad school friend anymore. Firms are increasingly under fire for cases where a client is dissatisfied with the quality of service they received from a referral.

In "My Bretheren’s Keeper: Professional Liability by Association" (www.cetcap.com/keeper.htm), David A. Grossbaum, Esq., reviews cases where law firms were held liable by unhappy clients for the malpractice, ethical violations or even fraud of the lawyers they referred to or with whom they associated.

When you have a client who relies on you to make credible referrals or a client for whom you coordinate a referral in order to maintain your primary, long-term relationship, how do you avoid the pitfalls – in some cases legal exposure – of such activities?

Outsourcing – The Referral Safety Net

As the legal profession becomes more specialized and clients seek counsel about issues outside your or your firm’s range of expertise, outsourcing represents a more suitable – a significantly less risky -- alternative to referrals.

Outsourcing to companies with the know-how to meet your clients’ issues, helps decrease liability and increase the likelihood of success. Moreover, outsourcing allows you to establish formal guidelines and agreements that reinforce your firms quality and integrity standards, while enabling you to maintain the lead in managing the relationship.

The crux of the outsourcing solution is to separate the risk from the reward. So, how do you best select and reap the benefits from your outsourced partner?

Due Diligence is Job #1

Be Selective. When it comes to outsourcing, only recommend "best-of-breed" firms. In other words, pick firms that have a proven record for putting clients’ needs before the firm’s needs. Boutique firms or medium-sized service providers often serve up the best value for your client’s dollars, and make you look good.  Check these claims with local professional associations, research prior malpractice suits, and, as the old adage goes, "get everything in writing" including proper indemnifications for the parties involved.

Standardize Service Approach. Systems, checks and processes first! Establish written standardized approaches and guidelines for servicing firm personnel and clients, including referrals and associate relationships. Not only will this dramatically reduce the likelihood of legal exposure, it will help improve office productivity.

Create a Trusted Vendor List. Document respected and proven vendors to whom your firm will refer clients. Be sure to outline how each firm’s costs and fees for the alliance are to be addressed, eliminating questions and later issues. Remember, this doesn’t eliminate the need for re-evaluation and due diligence, but it makes the process more consistent and reliable.

Stay Involved. Get copies of the vendor’s standard engagement letters before referring clients and work with the clients you refer on explaining the service relationship as detailed in the vendor’s agreement. Clients will feel good from the get-go with the alliance introduction you make and lead them through.

 

Help Make Good Companies Great

Finally, consider client advocates rather than single source vendors or intermediaries. Law firms and many other professional services firms today consider outsourcing to credible advocates, rather than intermediaries or single source vendors, as the solution to helping their clients with complex or specialized issues.

A client advocate is generally a reputable, well-established and experienced company which has access to a deep network of industry contacts. But, it’s how they use such resources that distinguish their services.

In the financial industry, advocates traditionally go beyond making introductions to a series of lenders the way brokers and intermediaries would. Nor do they try to fit a client’s financial needs into one lender’s guidelines the way single source lender must. Rather, an advocate increases the likelihood of approval by focusing on individual circumstances and relying on their own experience, reputation and credibility.

Primagency’s independence enables this finance advocate to target the right lenders for every deal. In an environment where lenders turn down over 90% of all requests made by middle market companies, extensive experience, specialized counsel and an expansive network can dramatically increase the likelihood of approval.

Process is the Key

While outsourcing, more often than not, provides a win-win for your firm and your clients, remember to look before you leap. No matter the past experience, reputation or relationship involved, proper research should be done and management controls must be in place before any outsourced solution – or referral – is offered. Done properly, outsourcing can provide firms with the best of all worlds – better client service, enhanced revenue to the firm, and separation of risk from reward.