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To fee or not to fee?

Week 2. Each week via the In-House ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. ACC Value Challenge steering committee member Ken Grady, General Counsel and Secretary of Wolverine World Wide, offered to profile his selection and start-up process of launching a trademark portfolio management engagement with law firm Seyfarth Shaw. Ken's co-blogger is Lisa Damon, a member of Seyfarth's Executive Committee and leader of the firm's efforts to incorporate Lean Six Sigma into its business. To catch up on the story so far, click here.

The client side:

From Ken:

How do you chose a law firm without talking about fees (and, was I out of my mind)? It really isn't that different from what in-house lawyers did from the 1970s until recently. We talked to our friends, asked for some client references, talked to attorneys at the firm, listened to their speeches, read their articles, and so on. But, when we talked about fees, it was often an awkward conversation about billing rates:

"So, how much do you charge an hour?" 

"Well, I'm at one gazillion now." 

"Ow, that seems higher than where some other firms are at." 

"Of course, for a matter like this, I think I can convince my managing partner to let me go to our discount schedule where I'm at a bazillion." 

"Oh great, that seems more like the market - and the same discount for others on the team?" 

"You bet!" 

We knew the rate, but not how many hours. I didn't look at that as knowing the fee, at least not like I know the fee of the guy who paints my house: "That will be $2,561, Mr. Grady, and that includes whatever wall prep and patching we need to do to give you a great job." (Remember, I'm in-house counsel so we have small houses.)  Now, I know many of you have a more sophisticated approach, but there are still plenty of in-house lawyers for whom the script above will seem all-too-familiar. 

Instead, I employed a "new-old" strategy. I went back to the days where you spent time getting to know your lawyer, made the choice, and then worked out the fees, based on the value you were getting. You chose the lawyer (referral from friends at the club), he did the work, he sent you a bill, and then (for those of you with chutzpah) you discussed adjustments, based on how you perceived the value of the services (for those without, you just paid the bill). Our difference was to meet and talk to the lawyer, chose the lawyer, discuss the mutual value structure, and then re-evaluate as we go along.

So, we met with the lawyers, and met again. We talked by phone, and talked again. We emailed, and emailed again. Overall, we spent about six months in discussions. "We" included all members of my team talking to members of Seyfarth's team, including paralegals talking with paralegals without an attorney. Trademarks are a major part of our practice, so really getting to know the Seyfarth team was important. 

To us, it was important Seyfarth understood our company, its culture and what value legal services had in that culture, and for us to understand how the SeyfarthLean culture would mesh with us. We shared how much we spent on our trademark work and we gave themportfolio information, so Seyfarth could gauge the value of this engagement to the firm.

To me, I would be out of my mind if I didn't build a relationship first, and then look at ways both parties could profit from the relationship.

Next post: Let's talk metrics.

The firm view:

From Lisa:

Ken relayed a typical conversation in house to outside and it resonates in many ways…although 10% off a bazillion is often discussed. Just kidding. Sort of.

On a serious note, we as outside counsel experience a good deal of frustration right now in dealing with the fee discussion. While many clients may express they want to move toward new "value" or an alternative fee structure, in actuality, there has not been much change. Now, the conversation often goes like this:

"Can you do an alternative fee?”

"Of course." [Then we lay out the options - flat, fixed, risk-reward, pure value, portfolio, phased, periodic...]

"Thanks. Interesting. But, you know, those fee arrangements are all well and good, but they [fill in the blank: 'don't fit in our chart'; 'don't let us compare the firms'; 'aren't what we are ready to do yet'; 'are not acceptable to procurement'; 'are scary']. Can you just give us your lowest possible billable rate?"

Ken's approach was so different because there was no fee discussion – really, none at all. The initial focus was on the relationship, the core values and the business fit. Often, in the press to find new business, many of us in outside firms can easily forget that relationship fit is key for us, too. Our best stories have to do with clients that we know, like, trust, understand and vice versa. The cornerstone of trust makes all the rest work out. In these times of a much more business-oriented relationship, that concept may seem old-fashioned, hearkening back to the days of Lincoln and candlelight. In reality, it remains just as true now as it did then. That's why, in retrospect, Ken's approach worked so well.

In his post, Ken talked about the relationship building we went through and the pace we moved. Let me give you context from our side: It was excruciating.

Our team wanted this work so much. We loved the brands, we loved the people, we even looked like the people in their ad campaigns (okay, not the Harley brand). We already wore the shoes (okay, not the Harley brand…yet). Why didn’t they just pick us? Ken told us right up front that he was going to go slowly -- very slowly. He told us that the trust and relationship had to be right, that we needed to be patient. It was hard.

After our first web meeting, we met in person in Michigan. We brought our team, they brought theirs. It was a phenomenal two days. We really liked the people, but what we came away with was an appreciation for the collective passion of the Wolverine groups and what they were doing. We will always remember Ken and his team taking several hours and walking us through the shoes -- every brand, its distinguishing features, its history, and then showing us the signature shoes. We were on our feet, handling the shoes, looking at showrooms and feeling their passion for their company. When it was our turn, we were on our feet, showing our SeyfarthLean and walking through all of the exciting things we were doing. Hopefully, they too felt our passion.

What followed were several months of more meetings and extensive reference checks where Ken spoke to our clients, questioned us on SeyfarthLean, pushed back on the program and challenged our ability to do what he needed. In the end, it worked, and here we are.

Now, Lean Six Sigma. I promised you three painless sentences to set the stage. For the blogs to come, it is important to the story, so here goes:

·       For us at Seyfarth, Lean Six Sigma is a structured data-centered discipline, driven by client requirements, and designed to eliminate non-value-added steps, reduce inefficiencies and improve key components of processes.

·       In a nutshell, it is delivering the highest value services, to ever-more delighted clients at an efficient price, so what’s not to like?

·       At Seyfarth, we follow DMAIC (for the Lean-friendly crowd), but have adapted the discipline for the legal environment – one that is wildly variable by nature and, at a distance, seems to resist any process methodology.

More as we go.

Next post: Ken proposes metrics, and we wonder what we have gotten ourselves into.