“Your problem is to bridge the gap which exists between where you are now and the goal you intend to reach.” ~ Earl Nightingale
Accountability, efficiency and value — three words that are reverberating throughout the legal services industry these days. In-house counsel are being held accountable by their companies to contain costs and predict expenditures; law firms must demonstrate efficiency and provide metrics to help communicate the value of the services provided. We’re in an era of transparency, one that demands, as Association of Corporate Counsel (ACC) President Fred Krebs, recently noted, “open communication and dialog.”
The recent International Legal Technology Association (ILTA) conference, held August 23-27 at the Gaylord National Resort & Conference Center near Washington, D.C., provided a forum for discussing technology’s role during this period of intense scrutiny. One of the final sessions of the conference, “The ACC Value Initiative and What It Means to Technologists,” brought together the following panel with vast experience and insight from both sides of the legal aisle:
Fred Krebs, President, Association of Corporate Counsel
John Alber, Partner and Leader of the Technology Group at Bryan Cave, LLP;
Constance Hoffman, Chief Information Officer at Bryan Cave, LLP;
Timothy B. Corcoran, Senior Consultant, Altman Weil
Alber, a practicing attorney with over 25 years of experience who also served as CEO for a software and database company, opened the discussion with an analogy, “Ten years ago newspapers made most of their money from display ads. That was also the start of monster.com and the dot-com explosion. Well, we’ve seen what can happen over a ten-year period to one segment when a critical mass bands together to affect change; and the legal industry is not immune to succumbing to this type of pressure to change.”
A recent study by Corporate Executive Board, found that over the past ten years costs to U.S. companies went up 20%, but that legal costs went up 75%. Law firms and clients are both under pressure to reduce legal spend, while still performing many of the same functions. Clients are now creating joint and highly-structured initiatives, such as the ACC Value Challenge, aimed at closing the perceived gap between what legal services cost and the value clients receive from those services. Law firms are finally sitting up and paying attention and as they develop ways to demonstrate their value to clients, those working with – and inside – legal technology departments can play a vital role.
“The ACC Value Challenge developed in response to member dissatisfaction,” explained Krebs. “Rising costs, the disconnect between costs and services delivered in relation to hours billed and lack of communication, have all contributed to the development of this initiative. ACC is calling for an increase in communication between in-house counsel and law firms to bridge the gap and work toward value driven solutions.”
In painting the picture of what it is clients want, Krebs highlighted the numerous opportunities that exist for technologists to help their firms respond to client needs. The key areas where they can help, from the client’s perspective, are:
1. Better management; lean/efficiency (two-way)
2. Certainty /predictability (up-front budgets/scopes that stick)
3. Focus on outcomes and results, not just on process and analysis (driven by evaluations and metrics)
4. Costs that equate with value received
5. Outside counsel and firms whose motivations and business models are aligned with the client’s
“The emphasis on predictability cannot be stressed enough,” explained Krebs. “This is where technologists can make a real impact.”
Coinciding with the ACC Value Challenge is the “Value Index,” an evaluation tool that will allow ACC’s in-house counsel members to rate their law firms and exchange information amongst each other. Scheduled to be unveiled in October 2009, during ACC’s Annual Meeting in Boston, the goal of the Value Index is to enable in-house counsel to “tap into the wisdom of the crowd,” and gauge first-person feedback on the performance of outside counsel.
Law firms need to communicate with their clients and ask the hard questions, “Are they performing to the level expected? What is [their] perception of the firms they engage and the legal teams working on their matters?” Lawyers need to address these concerns, because soon, their clients might just be sharing their dissatisfaction with their colleagues. Law firms cannot afford to be in the dark and must identify ways to not only address concerns, but also head off problems before they occur.
The smart use of technology (making sure systems work efficiently), metrics (analyzing the data and improving processes) and collaboration (internal dialog) all play a significant role in helping firms to be more responsive to their clients’ needs. Technologists, working closely with the attorneys and other administrative departments, can develop streamlined solutions and processes that can help with efficiency, reducing costs and long-range forecasting.
Improving processes, however, should not be confused with “moving things around to just look different,” explained Krebs. Referencing an article by Steve Levy in the August issue of Law Technology News, Krebs noted that, “Automating broken processes won’t make us smarter; it can make us stupider faster.”
Having worked in-house with a law firm, as well as with a leading legal service provider and now with Altman Weil, Corcoran draws from his experience, and agreed with Krebs that, “After years of training, change is upon us and our time has come….but it’s not going to be easy.”
Corcoran referenced a recent Altman study, which showed that, in 2009, 40% of the In-House counsel surveyed planned to reduce the use of outside counsel, and almost 30% had reduced their internal staff.
“We grew up with the belief that property values will always rise, and we see where that got us,” Corcoran said. “The same has been the case for lawyers, believing that demand will continue to rise and clients will continue to pay. But clients are insisting on change. We’re hearing more about the challenges our clients are grappling with, and our surveys confirm, there is a movement going on. ACC has provided a framework – a voice – to hear and respond to those challenges.”
While the use of outside counsel is declining, the work still needs to be done. Corcoran believes this presents firms with a challenge, as well as an opportunity, to do things differently. “Firms need to look at the cost base and figure out a way to deliver their services at the lowest cost and in the most efficient manner.”
Law firms must acknowledge that this is not “everyone else’s problem” – they must face reality and recognize that they are part of the solution. Culling from other industries, Corcoran outlined how law firms can be more responsive to the changes taking place:
· Cross-Selling: For law firms, the concept of cross-selling is seen as a “nice to have,” and one that is inconsistent throughout law firms around the country. For most corporations, however, the idea of looking for opportunities for more business with the same client is “a matter of life or death.” It’s the lowest cost of sales – expending less on an existing client than trying to woo a new one. Having technologists’ insight and input – to better understand client needs (from a technology standpoint) – will help to strengthen the relationship. Law firms need to make cross-selling a priority.
· Project Management: Lawyers need to have more than just legal skills – they need to have an aptitude for project management. They would be wise to look to their own clients as models for project management – construction, transportation, manufacturing – all industries that require intense, seasoned managers to ensure projects are on target and within budget. Clients don’t like surprises. Without an experienced project manager to ensure matters are on track, law firms are exposed to unknown risks. Technologists have the knowledge from a project management standpoint and can convey to lawyers similar insights. Law firms need to recognize the importance of project management skills and tap into technologists’ skills, as well as increase training in this area.
· Outsourcing: When some think of outsourcing – they automatically equate that with legal departments using “non-traditional sources for their legal work,” but in actuality, outside law firms are an “outsourced provider.” Companies focus on their products and core competencies; they don’t do legal work. Law firms are one of their solutions. Technology departments and legal resource vendors, provide law firms with the necessary tools and resources to get the job done. They are an integral part of the success – or failure – of a relationship and should be seen as a necessary partner in the firm/client relationship. In addition, a law firm can find ways to do some tasks a lot more cheaply, so the client does not turn to outside vendors.
Companies, such as Practical Law Company, a leading provider of practical know-how for business lawyers, can help law firms provide their clients with the resources needed to practice more efficiently and deliver greater value. NOVUS Law, a document management provider, is another example of an external company that can help firms understand how to eliminate redundancy and find ways to do things more quickly, with less people, and improve the quality of the work provided. Off-shoring/outsourcing companies can help firms improve their business processes. Law firms need to embrace this concept and see the value in their technology departments and outsourcing companies to help them to be more efficient.
While technology can enable business process improvements, the answer, Tim noted, “isn’t technology, it’s the business process that needs fixing.” Too many IT leaders get hung up on the technology and miss the wider point, which Krebs emphasized earlier: “good technology on top of a bad business process is meaningless.
Understanding the kinds of technology initiatives clients expect firms to undertake in order to reduce costs and increase value is key. Hoffman, who has been involved in identifying these needs for Bryan Cave clients, recognizes the practical applications of what can be done to transform relationships – bridge the gap – between clients and firms.
In order to be responsive, firms must have an open dialog with their clients. This dialog, explains Hoffman, “will provide law firms with the insight needed to develop systems and processes that will keep clients informed and abreast of issues that might change the timing, or even, budgets. “
Again, clients do not like surprises.
“By having that in-depth conversation with clients at the onset, explains Hoffman, “firms can put systems, such as detailed databases, in place to track progress on a continual basis. Not only can this help to reduce transactional costs, but it also allows for better reporting and transparency for the client.”
“The efficient use of junior lawyers or contract lawyers, with assistance from technologists, to collect the necessary data,” explained Alber, “enables senior lawyers to adequately analyze the data to evaluate the situation and keep clients informed throughout the process.”
This streamlined process helps eliminate surprises at the end of an engagement. Law firms can better manage expectations and in-house counsel have access to the necessary information to keep their CEOs apprised.
This is a fundamental concept of the ACC Value Challenge, to bridge the gap of uncertainty, encourage transparency and connect expectations of value to the costs of the services provided. The momentum for such discussions and frank negotiations is gaining and law firms are responding. For those firms just now reacting, Corcoran noted, “they will not be first – they will be trying to keep up with the pack.” Law firms cannot afford to lose their role as trusted advisor, because if they do, it will be years before that relationship is salvaged.
Technologists’ ability to help streamline processes, improve efficiency and provide measurement tools is a reality in today’s legal environment. Technology experts need to be part of the process from the start and valued members of the law firm/client team. Paraphrasing Churchill, Krebs noted that in discussions about the death of the billable hour, “never has so little been accomplished by so many for so long” the time for change is now. Real change has begun as clients and firms implement value based arrangements.
Susan E. Jacobsen, President of LUV2XLPR, Inc. has over 15 years of experience helping attorneys and corporate executives with public relations, business development, not-for-profit and advocacy communications, and continues to work with clients to developing successful new media and traditional public relations strategies.