CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS:WHY THEY FAIL, HOW TO SUCCEEDBY JOSEPH PRZYBYLA AND ANN PARKERIn collaboration with Michael Warren of Stanton Allen

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Customer relationshiP management systems: Why they Fail, hoW to suCCeed

In any business—be it a Fortune 500 organization or the corner mini-mart—customer relationship is the key to success. With this in mind, many law firms have turned to customer relationship management (CRM) systems in the hopes of increasing efficiency in their marketing and business development department.

But, as many have discovered, it can be a bumpy ride, and firms don’t always get the kind of results they would like. In fact, according to the ZDNet article CRM failure rates: 2001–2009 1, by Michael Krigsman, reported failure rates for CRM projects across industries are notoriously high. From 2001 through 2009, a variety of analyst firms reported failure rates ranging up to 70 percent, with over 50 percent of organizations in 2009 indicating that CRM projects did not fully meet expectations. Yet the need for such projects and systems continues to rise. In the July 2010 issue of CRM Magazine, the article CRM: Then and Now 2, by Joshua Weinberg, noted that the percentage of firms implementing CRM has increased, from 53 percent in 2003 to 75 percent in 2010.

In addition, as firms add other software solutions to support their business —whether it be financial systems, billing systems, document preparation systems, etc. or any other system—they often find that integrating their existing CRM system is a complex and expensive proposition, which doesn’t always work out well. Costs are compounded when, in an effort to find an integrated solution, a firm must switch to a different CRM provider. Not only are financial costs incurred, but users are faced with learning how to use a new system, a process often viewed with annoyance if not outright rebellion. All in all, whether starting with a new, out-of-the-box solution or substituting “new” for “old,” there are many hurdles to overcome if a CRM project is to be viewed as successful. This paper aims to better the odds of success for such projects, by investigating the reasons why such projects fail, providing some guidelines for measuring how well a project is doing (success vs. failure), and offering some solutions that can be put in place to encourage success. Finally, we explore the “next steps” beyond CRM and points to keep in mind if you decide to integrate a CRM system with other software solutions.

What is Customer relationshiP management (Crm)?CRM is a model for managing a company’s interactions with current and future customers. It involves using technology to organize, automate, and synchronize sales, marketing, customer service, and technical support.

disseCting Failure—ProBlems and PerCePtionsThe reasons CRM projects usually fail can be summed up as follows:

• ThefirmdoesnothaveaclearvisionofwhattheCRMsystemisactually for.

• Attorneysandotherinternalstakeholdersdon’tseeacompellingreason for using the CRM system.

• Aprocesstomeasuretangible“returnoninvestment”isnotputinplace at the start.

Thus, most of the problems that crop up with instituting a CRM system are not software-induced, but due to internal issues and a firm’s culture. We’ll take a look at each of these pitfalls and discuss how a firm can guard against them.

Crm—Clear or Cloudy VisionThe firm does not have a clear vision of what the CRM system is actually for

If a firm does not have a clear vision of what is expected of a CRM software package and what it can do, this will lead to disappointment and the belief that the system has somehow failed to live up to expectations. In this situation, users are uncertain as to what the CRM system is and what it is for: Is it a “firm-wide address book” or something more, or different? A lack of communication between the department that implements a CRM project (typically the marketing department) and other affected business areas in the organization, such as IT and finance, can lead to a lack of commitment to the project from those whose input is needed most. Additional problems arise when such systems are hastily implemented as a reaction to negative forces on a firm’s performance, forces such as customer dissatisfaction, a decrease in client retention, or changes in market dynamics. Without knowing the capabilities of a CRM system, when changes and upgrades are required (as is inevitable with software), poor change-management ensues, resulting in even greater confusion and disillusionment on the part of users. The result is a downward spiral concluding in the perception that the system has “failed.”

Thus, the first step to take to guarantee that a CRM system will be accepted and successful begins before buying and installing the system itself. First, the implementation team needs to gain buy-in from those who will be expected to use or contribute to the CRM project. Talk to those individuals, teams, or areas whose commitment is essential to the success of the project. Paint a very clear picture of what you want such a system to do and explain why they should care (i.e., what’s in it for them), and ask for their input and suggestions as to what they would like to see in such a system. Once you have buy-in from the essential people and a clear picture of what is needed in a CRM solution, you will be able to look for a system with the tools and capabilities that will fit the bill.

1 http://www.zdnet.com/blog/projectfailures/crm-failure-rates-2001-2009/49672 http://www.destinationcrm.com/Articles/Editorial/Magazine-Features/CRM-Then-and-Now-68083.aspx

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Customer relationshiP management systems: Why they Fail, hoW to suCCeed

Two elements to consider before buying are what kind of data management you want from your system and what functions do you want it to serve (See Figure 1). This will help determine whether you want a system with a limited or rich functionality, and whether you want a system that provides central or decentralized data management. Answers to four questions will help you narrow the choices:

• Does your firm want capability to manage contacts? Most firms want at least this particular resource. But if this is all your firm requires, then a decentralized system with limited functionality will serve your firm just fine. In fact, buying and installing a system with a lot of bells and whistles that will never be employed and/or will lead to only confusion would be counterproductive. A word of caution: when purchasing a CRM ensure that system is scalable and has a clear product road map that will grow as your firm expands its business development capabilities.

• Does your firm want to manage contact lists centrally and use the data for tactical marketing purposes, such as email marketing and mail campaigns? In this case, a CRM system with a centralized database and limited functionality will provide the narrow focus with data accessibility you need.

Note: When building your CRM requirements, don't lose track of how your firm will evolve once the system has been implemented and adopted. Don't think about the capabilities that you will need in just the next 12-18 months, but rather over the next 36-60 months.

• Does your firm want a knowledge store and robust marketing database? If your firm wants a CRM system to be a knowledge store—a “place” that stores ever-changing customer information and that contains the software engine needed to access that information—and want the capability to mine the data for targeted marketing efforts, you will want to look for a CRM system that has rich functionality with centralized data management.

• Does your firm want a capability for business development and strategic marketing that will allow for finding creative ways to reach clients? If your firm is positioning itself to grow its market share and be more responsive to its client base, most likely it wants a CRM system that supports the development of sophisticated marketing plans focused on existing and potential business opportunities. In this case, a system that allows decentralized or limited data management, but a rich functionality, is best.

attorneys vs. the Crm system: “Who cares?” and “What’s in it for me?”Attorneys and internal stakeholders don’t see a compelling reason for using the CRM system.

Another reason a CRM system can fail stems from the firm’s attorneys and other internal stakeholders not seeing a good reason for such a system. In this case, the system is viewed as an annoyance and a waste of time and, frankly, time away from attending to clients. Often, there is no urgent reason given to change “how things have always been done.” The human element also comes into play: When faced with something they don’t want to do, reluctant participants will resist the attempts to institute change. Finally, although the capabilities of such a system may be clear to the IT and/or marketing staff, if the technology is complex, it may be difficult for “non-technical” people to understand. If internal stakeholders don’t understand the technology and how to use it, that is yet another reason to drag their feet. All of these dynamics can interact with the final result being that the people who have the information and must input it are the very ones who ignore the system and contribute to its downfall.

In addition, the very departments who stand the most to gain from the system’s success—marketing and business development teams—can contribute to failure by not focusing on demonstrating how the output can be valuable to others in the firm. Oftentimes, marketing and business development staffs are focused on input, and unable to see past the data. If the system is to succeed, these teams should ask the internal clients—attorneys, financial managers, and other principals in the firm—what would help them do their tasks more efficiently and simply. If marketing and business development efforts are inward-focused, this outlook, coupled to the “who cares?” and “what’s in it for me?” attitudes of internal stakeholders will only serve to make a bad situation worse.

measuring for success: roi and Crm systemsA process to measure tangible “return on investment” is not put in place at the start.

It’s hard to claim a project is a success if the measurement for success is not clearly defined from the onset. Furthermore, “success” can take on many different definitions. For a legal matter, for instance, success might be determined by whether a case is won or lost. But success could also be defined by whether a firm makes a profit from a matter or whether the client is retained and generates future business. Determining what constitutes a success is just as important when it comes to a software system.

Unfortunately, firms don’t often put as much effort in determining what defines success for a CRM project. Firms often implement such systems to “keep up with the Joneses.” If, a competing firm has one, the thinking

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Figure 1. First step: determine what kind of CRM system is best for your firm.

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Customer relationshiP management systems: Why they Fail, hoW to suCCeed

goes, it must be important to have one as well. Other factors also make it difficult for a firm to measure whether a CRM system is successful or not. Historically, software vendors have tended to shy away from offering return on investment (ROI) measurements for CRM applications. Part of the problem is that, in the past, the processes themselves were not sufficiently well designed to be easily measurable. There is also the question as to whether success is defined by system use (how many users does the system have?) or by firm results (how much business does the system help the firm win?). And finally, many firms aren't ready to instill a sense of accountability for business development, which may lead to the lack of CRM adoption and utilization.

and that’s not all…Other issues can also increase disappointment with a CRM system, leading staff to stop using it and/or deem it useless. Sometimes, the yardstick of success is the speed with which a CRM project can be deployed. This sense of urgency can occur when a firm decides it is “running behind” the competition. In this case, getting a CRM system up and running as soon as possible becomes the primary criterion for determining success. Finally, office dynamics can ambush a system’s effectiveness and, ultimately, its perceived success or failure. Historically, marketing people have not been data or IT savvy (although in today’s tech-driven environment, this is rapidly changing), and IT people have not always wanted to “own” CRM systems. The opposite problem can also occur when the system is claimed by several organizations. In this case, when a project is driven by two or more support groups, the internal clients (such as the attorneys) and their needs can be forgotten or overlooked. This particular situation can lead right back to attorneys shrugging, and saying, “Who cares?” and “What’s in it for me?”—and once again, the perception of a failed system that does not deliver looms over all.

guidelines For measuring suCCessBefore declaring a project a failure or a success, it’s important to know what measurement system you are using and what parameters are in place to define failure or success. Begin by deciding what quantities you want to measure and how you plan to measure them. These decisions can help guide your system selection.

Some of the metrics that are commonly used to measure CRM system success include:

•Dataquality

•Systemusage(attorneyadoptionandutilization)

• Increasedfirmrevenue

• Improvedefficienciesinmarketing/businessdevelopment

data QualityIf data quality is a metric you want to employ, consider gathering information that demonstrates whether the CRM system leads to increased data effectiveness, accuracy, and relevance. Areas you could explore include the following:

•Dataeffectiveness

- Do your attorneys understand the system’s capabilities?

- What percent of the contacts in your CRM system have the minimum level of information listed?

- What percent of the contacts are on an active marketing list?

•Dataaccuracy

- What is the bounce back/fail rate for your firm’s email marketing campaigns?

- How many duplicates are in the CRM database?

•Datarelevance

- How many active relationships exist in the CRM database?

- How many contacts are genuinely valuable?

system usageAnother possible metric is system usage: who is using the system, how people are using the system, how much and how often they are using the system, and so on. Some of the questions you can pose to gather data are as follows:

• Who,byjobclassification,aretheusersoftheCRMsystem?

• Whatpercentofyourfirm’sattorneysaresharingcontacts?

• Howoftendoesanattorneymakechangestocontactinformation?

• Doattorneysusethesystemworkflow—toolbars,listmanagement,etc.—to engage with marketing staff, and with what frequency?

• Howmanybusinessdevelopmentactivitiesarebeingrecordedbyattorneys?

All these quantities are measurable, if the software is set up in advance to record the information.

increased Firm revenueOne definitive metric of success for a CRM system in a for-profit organization such as a law firm is: Does it help increase revenue? Gathering data to answer the following questions will help you determine whether your CRM system is helping to drive the bottom line in a positive direction:

• Areeventsbeingtiedbacktomattercreation?

• Areyourtopclientsgettingtherightlevelofattention?

• Doattorneysexecuteontheiroutreachplans?

• Hasthefirm/systemintegratedwithpitchandproposalmanagement?

• Doesyourfirm’sNewBusinessInitiative(NBI)processfeedintoCRMto track the source of business?

improved efficiencies in marketing/Business developmentIf a CRM system increases the efficiency of the marketing and business development function of your firm, that means better use of resources and less time wasted. You can determine whether your CRM system is contributing to improved efficiency by considering the following questions:

• Isyourmarketingteamdoinglessbusyworkandnon-valueactivities,such as running reports, providing contacts, and correcting erroneous/outdated contact information?

• Isyourmarketingteamreceiving“firedrill”requestslessoftenandwith less urgency?

• Areyourmarketingandbusinessdevelopmentteamsbecomingvalued “consultants” to the firm’s attorneys and practice leaders?

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Customer relationshiP management systems: Why they Fail, hoW to suCCeed

estaBlish solutions For suCCess No one implements a project with failure as the goal. However, by not planning ahead, one can almost guarantee that a project will stumble, and most likely face disappointment if not outright failure. To avoid this very preventable situation, you can incorporate five simple, practical solutions focused on achieving a positive outcome for the implementation of your CRM system.

1. Sell the CRM system as a tool to support your firm’s wider business objectives. For your CRM to be viewed as a success by the firm, begin by clearly stating how the system will directly impact your firm’s objectives. For instance, a successful system should provide enhanced client outreach, targeted messaging for clients, and informed data on activities such as email marketing campaigns, event management, awareness generation, cross-selling, and “taxi reports.”

2. Communicate to your firm’s attorneys how the CRM system will generate more business for them and make their jobs easier. Help your attorneys understand how they would benefit from a CRM system. You can begin this process by gathering input from them and by focusing on the links between their work and the potential capabilities of a CRM system. Ask questions such as “What is forcing

you to do double work?” and “What are the top five things that marketing could provide as self-service to help you do your jobs?” (Conversely, if they have no ideas to offer, you could list a few key self-service capabilities that marketing could offer, once a CRM system is implemented.) You could also point out the ways that a CRM system will help their assistants do their jobs more effectively and efficiently.

3. Ensure that your system has good quality data. Limit the chances for people to lose faith in the system by gathering accurate data on the system’s performance and use and reporting it back to the attorneys on a regular basis. Put mechanisms in place to conduct regular data audits to keep the system from becoming populated with inaccurate and irrelevant information. Firms can leverage services like LinkedIn and other business directories to ensure that the most current data is in the CRM.

4. Focus on the outputs, not exclusively on the inputs. Develop comprehensive reporting capabilities that are automatic, regular, and targeted to the needs of your firm’s attorneys and management. Such reports could include, for instance, summations of Business Development activities that show at a glance pitches won, lost, and declined for key clients, as well other meetings and activities (Figure 2) or taxi reports and ROI.

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Figure 2. Reports that show how a CRM system collects and displays information relevant to your firm’s key staff will demonstrate the system’s value to the firm. (Graph courtesy of Michael Warren, Stanton Allen)

Customer relationshiP management systems: Why they Fail, hoW to suCCeed

Beyond the BasiCs: Building on the PoWer oF a Crm systemThe success of a CRM system increases when it can be easily integrated with other key systems of a law firm’s business. For instance, integrating CRM with calendaring, document preparation, financial, and billing systems creates a rich internal database of information that can be used to track how an organization or staff is performing. By adding links to external data sources, a firm can also capture industry information that, in combination with information gathered by the firm’s CRM system, could be used for industry and market intelligence. The ability to link CRM and enterprise relationship management (ERM) offerings into a single unified solution takes CRM one step further, increasing the power of relationship knowledge. Firms gain a unique advantage with such a solution, in that it maximizes the potential of each relationship by showing not only all the contacts at a firm, but also how strong those relationships are.

Whether you are looking for a specifically limited CRM solution—such as one focused on keeping contacts up-to-date without duplicate information—or a solution that also provides rich functionality for both marketing and business development activities, it is important to implement a solution that not only meets your firm’s present needs but can also be easily expanded to meet the needs of the future. Thus, to create a “winning situation” for your firm, keep four objectives in mind when choosing and implementing a CRM system:

• Identifycommonstumblingblockstosuccessandbepreparedtocounter them

• Implementmetricsandmethodsthatwillmeasuresuccessinquantifiable terms

• Establishsolutionsthatencourageacceptanceanduseofthesystemby the firm’s attorneys, management, and other key players

• Plannotjustforthepresentbutforthefutureaswell,byimplementinga system that is easily expanded and can integrate with other key software systems, such as financial and billing systems.

With such guidelines in place, you will be well situated for implementing a CRM system suited to your firm, a system that has the potential to be viewed as a “success” by all.

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