A Value-based Client-firm Relationship: Part IV

Picking the metrics that matter

Week 4. 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:

Now to metrics. To get Lean, you need measurements. When I did Lean in the manufacturing world (I ran a large plant), we measured productivity (revenue per hour worked), quality, safety, and orders complete and on time. Easy on the shop floor, but how do you measure legal work?

Many lawyers argue that legal work is bespoke – each matter is custom designed to fit the facts and circumstances of the occasion. That, my friends, just ain’t so. (Richard Susskind does a nice job of explaining this in great detail in his book, "The End of Lawyers"). These posts are about our trademark story, so I’ll stick with trademarks but the same analysis could be used for any legal project (and by the way, Lean works on the one, multi-year litigation matter, just as well as it works on the 1,000 slip-and-fall cases).

I divide legal work into two categories – industrial services and artisanal services. Industrial services are commodity services, such as trademark applications. We do lots of them and they typically involve the same steps each time. We want to do these as efficiently as possible to keep the costs and the time to issuance low and brief. Artisanal services are custom (to a degree), such as an opposition matter before the Trademark Trial and Appeal Board. While artisanal services have more custom steps, there still is a lot of room to make them efficient (just because a tailor makes a suit that fits only you, it doesn’t mean he has to do so inefficiently).

We need metrics to measure both the industrial and artisanal trademark services. We need to measure today, and then to measure in the future, to determine how much we improve. Ideally, we want quantitative metrics. We need to measure them periodically (in the plant, we measured daily but for this project, monthly, quarterly and annually should work). We also want at least some metrics that tie back to our business objectives. Efficiency is great, but having a very efficient trademark portfolio that doesn’t do much for the business makes no sense.

The Seyfarth team pulled together some draft metrics. I’ll let them tell you about the ones they proposed. I put together some alternatives. Remember, there are no perfect metrics. They all have flaws and we can manipulate them. The goal is to pull together metrics that will help take inefficiencies out of your processes and measure whether you are increasing the value of your processes.

Here are just a few of metrics that I proposed (in no particular order):

Trademark Risk Rate (total dollars spent defending trademarks, divided by total number of trademarks defended)
Counterfeit Recovery Rate (total dollars spent on anti-counterfeiting actions, divided by total number of units seized)
Specimen Response Productivity (days from first request for specimen to receipt of acceptable specimen, divided by number of trademarks for which specimens requested).

Tell us what you think.

Next: The mother metric and starting the leap: metrics to fees.

The firm view

From Lisa:

As we have been on our Lean journey, we have come to understand and even embrace metrics. Measuring performance and rewarding internal teams can allow you, as the in-house client – to bring laser-like focus on what you value in your business. There is much truth to the Tom Peters maxim, "What gets measured gets done." Historically, in firms, internal metrics focus on hours and realization, and when we work with clients, it is often (and sadly) just cost.

When you start to expand your definition of metrics, however, amazing things happen.

To see the power of this, pick something you value. In a litigation, it may be something as simple as comprehensive early case assessment being performed in all matters within 45 days of filing. It might be resolving a matter under a certain number by a certain date, or it may be winning a trial while staying on budget and keeping your business folks engaged and satisfied. (See what fun this is? You can have it all).

Once you start with what you value (and it can be several things), then step back and design the metrics. Our friend, Jeff Carr, has worked his terrific FMC ACES model so that he can do this in a systematic way across the spectrum of legal services, but you can employ simple value-to-metrics steps on any matter.

As I mentioned in last week’s post, we often start with cost and satisfaction/quality (we love the components of the ACC’s Value Index), but then we try to work with more specific measures, tailored to the individual client. Ken led us into this discussion beautifully – but then pushed us even further. As you can see from Ken’s post, we are right in the middle of this discussion now.

We initially proposed three buckets of metrics: transition-related (we were taking over a very large trademark portfolio), ongoing metrics and qualitative measures. Here are a few of the overall categories of metrics we proposed:

"Success" rate, measured by things like first action allowance, watch hit outcome
Overall satisfaction
Timeliness of communication
Effectiveness of "lessons learned" sessions
Strategic participation/understanding of Wolverine business
Proactive issue identification
Budget variance
Cost management effectiveness

When we got Ken’s metrics back, they pushed into far more creative thinking. Internally, we are now thinking through how we approach fees that are tied to a client’s business performance – we know it makes sense from a "value" perspective but how to get there is key. it is certainly not the norm for the law firm world.

Please let us know how you have used metrics. What works for you? What has not worked? Thoughts on different metrics that the Wolverine/Seyfarth team should use?

Next post: Responding to Ken’s ‘mother metric’

Thomason

Tom’s three metrics don’t seem to dovetail with the eight suggested by SeyShaw.
With trademark apps, and actions against counterfeiters, an approach to use is the 1 out of 6 (can be negotiated to 1 of 9 or of 10, etc.) rate metric. It relies on experience that predicts 6 of every 7 actions will require nearly the same amount of work, but that other 1 will require more work. So, you agree on the price for each of the 6, then agree that 50% more (+ or -) will be paid for that outlier 1, plus to have a procedure to ask for even more pay for work on the outlier action. Even if that 1 ends up being as routine as the 6, the firm still get the added pay on the 1. This adds certainty for counsel and for the client, who both should be experienced enough to know what is fair pay for the 6, and competent enough to be able to do the work for the agreed rate.
Jeff Carr

Your stuff is great! Please keep it up.
Your quest for metrics is spot on. One of my takeaways from a great podcast series called “Manager Tools” is that you can indeed measure anything and building on Peters’ and others, what you can’t measure, you can’t manage. The issue, of course is finding the right metric or series of metrics. Often the metric itself is not important but it serves as a surrogate for what you’re trying to accomplish and as such requires a little bit of creativity and ingenuity.
As an example, we measure litigation cycle time (from case opening to closing). In part that’s because time is money and the longer it takes to resolve a dispute, generally speaking the more it costs to do so. In that instance there is a direct correlation between what we are trying to accomplish (early dispute resolution) and the metric. However, as Disraeli opined, “there are lies, there are damned lies, and then there are statistics.” It’s easy to drive cycle time down if one overpays to settle disputes. As such, focusing on the one metric, without measuring deviation from expected value (the actual settlement v. the risk-weighted estimate of liability) risks the same false positive as a discount off hourly rates without looking at the total hours spend on the matter. A 20% discount is valuable and effective if and only if it delivers overall savings in total spend on the matter.
Another example is our focus on number of after actions conducted and number of ethics hotline reports received. Each metric in and of itself is not all that important. But if the number of after actions deviates from the number of closed matters, then my team isn’t executing on our required “lessons learned” discipline – and we’ve learned that doing a “Hot Wash” after every matter is the single most powerful resource in our tool box to drive continuous improvement and create a high performance legal team. Similarly, the number of hot line calls is not as important as the utility of this metric as an early warning device to identify business units that might be under stress or might pose risks for upcoming disputes
To me, the “mother of metrics” is % legal spend/revenue and if we could only have one metric, that would be the one we’d use. Today we use this metric as an indicator by type of legal spend and by business unit. Lower is not, in and of itself, better – we find that particularly in IP related work, business units spending little might need to invest more – conversely, those with a large % spend may not be spending wisely. At the end of the day, we look at the trend lines and benchmarks to have a dialogue about what the business is spending on. Over the past 9 years we’ve seen our overall spend staying relatively flat in absolute terms and declining in terms of % of rev. When we parse that a bit more, we find that our IP and litigation spend has declined a percentage of total legal spend and our general advisory spend has increased in share. Generally speaking that means we’re doing more proactive counseling than reactive fire fighting. And that’s precisely what we’ve set as our objective.
By the way thanks to Lisa for the mention in the 4th post. Does my little heart good!
http://intelligentchallenge.wordpress.com/ Mark Smith

Love this article. Law firms have a huge amount of information about clients and operations, but don’t leverage that information at all well in my experience. In so many other industries, analytics is becoming a key area of competition, but it looks like it will take the profession a while to catch up. Perhaps the winds of deregulation will accelerate this trend?
I wrote a bit more about this here: http://intelligentchallenge.wordpress.com/2010/07/26/makingbetterdecisions/