In-house ACCess : In-house ACCess: Association of Corporate Counsel : ACC : The In-house Counsel Bar Association

The ACC Value Index (AVI) is a tool meant to inform in-house counsel decisions as part of a larger process of selecting and retaining a law firm. The AVI is a searchable database for in-house counsel to share subjective evaluations of the firms they engage.  It is key to note that this is a process that already takes place naturally among in-house counsel who often seek their colleagues opinions on firms that offer good value.  The Value Index builds upon this tradition by encouraging in-house counsel to contact or “ping” other evaluators to discuss the firm’s work in greater detail.

As we begin the process of rolling out law firm access to certain information in the Value Index this week, I want to take a moment to outline the who/what/when/where/how and why underlying this process.

Who – Access is being offered to law firms evaluated in the ACC Value Index since its October 2009 launch.

What – Each evaluated law firm will be able to access aggregated results pertaining to that firm.  This includes average scores for that firm by criterion, office location and matter type.  The firms will also receive overall Value Index averages for benchmarking purposes. Here’s an example of what a law firm would see:

When -- Starting today, February 3, 2010, through the foreseeable future.

Where – Access to the information will be available to law firms through an online portal on ACC’s Web site using the protocols below. 

How – Here are the key steps for law firms to gain access to the AVI information:
1.    Firm management decides who in the firm will manage the AVI access to the firm’s results.
2.    The firm representative who will serve as the “administrator” on behalf of the firm goes to the AVI Law Firm Access Portal at: http://www.acc.com/valuechallenge/valueindex/lawfirms to obtain administrator access.
3.    The administrator can then view the firm’s AVI results anytime and share them within the firm.

Why – As I wrote on this blog last October during the ACC Value Index launch, coinciding with the overarching goal of the ACC Value Challenge – information gleaned from the AVI will help to foster a greater dialog between clients and their outside counsel.

The AVI is only one part of the ACC Value Challenge, which encompasses a larger effort to reconnect value to the cost of legal services.  Other aspects include a) “Meet. Talk. Act.” which encourages clients and law firms to engage in discussions about value and their relationship; b) a law firm economic model; and c) specific resources with examples of value practices and ideas on ‘how to’ implement practices focused on value.  Resources, success stories and updates are continually added to the ACC Value Challenge community pages and we encourage law firms to get involved and help to provide additional information/resources.
 

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ACC filed an amicus with the US Supreme Court on January 27, 2010 in the Textron case. This is the third brief we've filed in this matter as it's cut a tortuous path through the appeals and circuit courts; the press release we issued recounts it all for those inclined to read it.

The case is about whether the attorney work product doctrine extends to the protections of an in-house lawyers' internal analysis and notes regarding a proposed tax position the company was considering and that the IRS eventually challenged. This case, and I've done many of them for ACC, makes me so hoppin' mad that I decided I needed to share my pain with all of you. (You're welcome.)

Let's remember that attorney-client privilege protects the client's right to confidentiality of  communications with their lawyers. It protects the conversation, the request for advice, and the delivery of the advice by the lawyer. Work product doctrine is an offshoot of privilege, but not the same thing: it protects the attorney's mental impressions and analysis, and is limited to protecting that which the attorney works on that was prepared in anticipation of litigation.

Way back in the dark ages when the US Supreme Court defined the concept of work product protections in Hickman, the concept of "in anticipation of litigation" was perhaps narrower. Most companies didn't have in-house legal staffs and not much work was done in the field of preventive law or compliance practice by firms or departments, in part because there wasn't so much regulation to comply with, and in part because companies didn't need to call a lawyer until someone sued them. But courts from the Supremes on down have broadened the parameters of work product protection as the complexity of corporate legal practice has expanded: recognizing the important role that lawyers play in helping their clients navigate regulation and a litigious world, and knowing that companies should make decisions on a daily basis with litigation and risk avoidance in mind, courts in every circuit have issued opinions recognizing that lawyers not only do, but should be working 24/7 in anticipation of litigation, even if the case has not yet or hopefully may never be filed.

In today's world, pretty much everything an in-house counsel does is in preparation for real or potential litigation.

So for the First Circuit opinion to suggest that an in-house lawyer analyzing the risk and best practices his client must consider when adopting this or that tax position isn't acting in anticipation of litigation but rather is just some kind of business-not-legal number-cruncher is just silly. It ignores reality. And the public policy implications for lawyers and clients (as well as the stakeholders who rely on the company's legal health) are dire. Read the brief if you don't understand why. And for those of you who already get it: time to get mad.

Can anyone out there honestly believe that this case would have been so decided or would have made it to the US Supreme Court as an ongoing debate if the lawyer providing that analysis was an outside counsel and not the in-house lawyer? Do you think that the IRS would have subpoenaed the XYZ AmLaw 50 New York firm partner to produce his files containing his legal and risk analysis of the tax position being considered by his client at Textron? Of course not. The IRS issued document requests for the company, and the in-house lawyers files were examined as part of that process: that which could be produced was, and that which was lawyer-client privileged or attorney work product protected was not. The court's decision to discount any protection for the in-house lawyer's work product shows that they are laboring under the misguided belief that in-house lawyers somehow aren't really lawyers, but some kind of non-objective, non-professional, quasi-business functionaries who don't quite qualify for the same status and protection we would afford to outside counsel at firms.

While I recognize that many in-house counsel are extremely business savvy and have provided increased value to their clients by approaching their legal practice with an institutional and deep knowledge of the company and business which is their client, and that indeed, some in-house lawyers carry responsibilities in their job that aren't legal, that’s not what’s relevant here when discussing these attorneys' legal work papers and analysis. The fact that they deeply understand their client doesn't mean that in-house counsel are not lawyers or that their work product isn't just as clearly worth protecting as the work product of lawyers in outside firms. Most outside counsel I know spend a lot of time and energy trying to assure everyone who will listen that they are business savvy and able to help their clients fulfill business needs as an "institutional" member of the client company team. This is simply a surreal conversation to be having if you're an in-house lawyer in the 21st century.

Many of you have (been unfortunate enough to have) heard me deliver my "privilege is under attack" speech or have read my previous diatribes; maybe you've followed and recognized ACC's highly focused and very successful efforts at pushing back abuses by prosecutors and regulators of corporate rights to assert the privilege when under investigation; perhaps you recently joined us in demanding protections for the risk analysis that lawyers provide to their finance folks in setting litigation reserves, which is under attack by the FASB folks looking to revise FAS 5: all of those efforts, crucial as they are, pale next to the implications of this case. This is an attack on the most fundamental premises of a lawyer's value and work product: the ability of a lawyer to analyze the facts and the law to develop the guidance that clients need to do the right thing. And if this doesn't get fixed, your work product is about to become Exhibit A in your adversary's brief. Get on board, corporate legal community, and get involved! Your rights as a lawyer, your client's rights to confidential counsel, and the very underpinnings of value in your client relationships are at stake.

Contact me at hackett@acc.com

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As we enter 2010, many law departments and law firms are still reeling from the tumultuous paradigm shifts of 2009, and working to bring order to the budget and staffing chaos of the last several months.  If 2009 was the year we all scrambled just to get it done for less and with fewer hands on deck, 2010 will either be the year that we all go back to doing things the way we did before, or we decide we’re going to implement practical changes in the way we work together that that will improve the management of our relationships and the predictability of our costs going forward.  

While it’s easy to sink back into familiar habits, I don’t know anyone on the client side who is eager to tell their management they’d like to re-institute higher fees typical of the “Golden Age of Law Firm Profitability,” forego new opportunities that were successful in lowering or better managing costs for a number of departments and firms, and return to the unpredictable budget and soaring costs we all abhorred.  As you gird yourself for the work of re-inventing and then cementing new ways to work going forward, here are 5 ideas for relationship managers in both firms and departments to consider.

1. Assess the State of Your Union and Meet.Talk.Act:  Outside the heat of any particular retention or matter and with your best firms (you shouldn’t try this with everyone before you try it with 3 or so strong relationships and get better at the process):  sit down and Meet.Talk.Act.   Talk openly and without reproach about how your relationship can improve in terms of budgeting practices; metrics, goals or targets you’d like to set and targets to process efficiencies you’d like to examine; knowledge management systems you might adopt; performance feedback mechanisms you could adopt to drive continuous improvement and team engagement; new ideas for staffing and fee structures; in short, better ways to institutionalize the relationship to create sustainable profitability for the firm and seamless value-based service at a predictable cost for the client.   

While there will likely be unique ideas or concerns to address with separate clients, matters or firms, the point is to begin a process that’s not just based on evaluating the relationship one experience at a time, but looks instead at universal “truths” affecting the entire relationship and every matter.  And I strongly encourage you to make lists of things you’ll attack immediately and things to work on over time: it’s often too hard to do it all at once, so adopt a realistic and ongoing process to make sure you get it right and folks see how they can succeed; there’ little merit in doing it stupider faster.  

Just choose some things to do now and get started before the window of acceptable experimentation closes.

2. For both new and existing matter types, do the hard work up front:  Do your “relationship” work in defining scope, expectations, staffing and fee structures and such before the legal work begins:  don’t begin work without an mutual understanding of what is and what is not acceptable and “valued” in a matter.   It’s too easy for busy people to look at the pile-up on their desk and simply “throw it over the wall” to whomever is going to work on it, without making sure that everyone agrees to and understands the client’s fee expectations and ultimate goals and expectations.  (And since the client itself usually doesn’t know what its specific goals/expectations should be for any matter, that’s something you’re going to need to help define, too.)  

Scoping work early on is necessary to avoid the problem of spending large amounts of unproductive and even relationship-damaging time managing the bill after the work begins.  While you can always amend your budgets or work plans as the project unfolds, be as specific and detailed as possible at the start, and then save your time and money by unleashing the team members to do their work within the defined parameters – it’s now their responsibility to do so or to propose needed amendments.  

For folks at firms, try to define what is not covered by the retention’s terms and safety valves for unanticipated (but not unimaginable) exigencies since the goal of up-front scoping is to get in-house counsel out of micromanaging and you best positioned to succeed in delivering what you’ve promised.  

Both firms and departments may wish to invest in creating standardized decision trees, process maps, or project management plans for different kinds of work that their clients repeatedly experience, and then reap the benefits of simply adapting or customizing these “form” documents to the specific needs of every new matter that lands in front of you.   You will now clearly see which work is operational and which is the “norm” that falls within understood processes and parameters (that’s not to say all such cases are not important, just not unusual), and you will be able to focus on cases that truly are different or present new strategic challenges.  

Final note:  Make sure you talk about more than fees and timing when setting up your scopes: discuss staffing options, what kind of expertise is needed, what knowledge can be recycled from other work, what new processes might improve the workflow, where non-lawyers can help, etc., since the savings from good advance planning in those areas may be greater than that realized in any other cost-related discussion.

3. Change management is all about the people, not just the process: The most important role you play as a relationship manager is understanding that you can manage processes, but you don’t “manage” people:  you lead them.  EVERY member of the team – inside the department and inside the firm – must understand what the relationship managers agreed the work is worth, how it should be done, and how it is that the value of the product the team produces will be judged since you can’t lead them and they can’t follow you unless the direction is shared.  Change is the hardest part of the process as we look to move toward more efficient or alternative models from those we know.  

Remember: people don’t like to change (especially lawyers) … it’s hard work to change (and easier to do the same things, even failed things, over and over) … there’s always risk in new or untried methods … it may be unclear if those who change will be rewarded, and there’s usually evidence that those who simply keep their head down are “safer.”  So make the path clear and unambiguous; communicate about what you’re doing with everyone who touches the work, and make change requirements applicable to everyone; enforce the consequences of non-compliance evenly (or apply the rewards of success visibly).  To succeed in changing practices, an agreement between two relationship managers to go a new route will not suffice; it must be the first step in a conversation that each team leader takes to every member of their staff and then leads them to succeed in implementing.

4. Define goals and set measurable targets and timelines:  Related to this, set targets and goals for matters and people involved in the process (both in the firm and department). Then, measure performance and tie compensation/fees and evaluation to performance-to-goals.  If goals and targets are institutionalized, if they include both long-term and short-term measurements and steps, and if they are discussed in advance and frequently reviewed, then the evaluation of performance-to-goals is not as personal or mysterious (but rather, is simply institutional), it’s more approachable and manageable, and will not be as easily excused by a never-ending list of special circumstances to explain away this or that failure or deviation.  

No one likes to do performance evaluations – but making them the norm for everyone and a part of the process of working on every matter actually makes them easier and better (as well as more “impactful”).  And you shouldn’t be the only one responsible for them; spread the accountability throughout your ranks.  Finally, both inside and outside counsel should be subject to the same evaluation processes, even if their goals and targets are different.  The ACC Value Index is also a tool you can use to see how other clients evaluate the overall performance of their outside firms to compare how your firms stack up or look for firms that have excelled where your may not.

5. Support the development of (and experimentation with) new skill sets and flexible toolkits:  Every firm and department needs a flexible tool kit that allows them to consider a variety of options for how any particular matter or group of matters is accomplished.  Some tools may focus on speed of delivery, some on process and improved efficiency, some on cost effectiveness (both in terms of predictability or lowering costs).  There should be no presumed “default” mode for doing work unless that is a decision for a kind of work that the department has made and wishes to implement going forward.  Once a decision is made that allows the firm and department to select the best method by which to handle a matter (fee structure, alternative staffing, etc.) that creates an alignment and balancing of interests, then clients need to allow firms to profit if they do well (and not ask them to return a windfall when they’ve assumed a risk and “won”), and firms need to get comfortable with the risk that sometimes they’ll swallow the occasional matter that does not return their costs in pursuit of long-term profitability from the relationship.  

You will not find value in any relationship founded on a one-off mentality, or by seeking to own one-sided leverage in every matter.  If your philosophy is “heads I win, tails you lose,” you are not a partner in a relationship, and you will not enjoy the benefits of a long-term commitment.  Indeed, think of your relationship as a marriage, wherein occasional losses or failures are offset by the benefits of an institutionalized, trusted and alignment with people you like to work with who share not only your daily work, but your goals.  In such a marriage, the firm can plan to be profitable, train its younger lawyers and derive a satisfying portfolio of work; the client has the confidence of trusted counsel that returns predictable, cost-effective results and doesn’t need to be micromanaged.  Value relationships require clients to incent and reward firms to profit by making it their business imperative to maximize efficiency, focus on results through great staffing decisions, institute transparent and meaningful knowledge management techniques, and improve internal process management.  This is the essence of client/firm alignment.
 
Bonus Fundamental:  Transparency and accountability are requirements for the personal integrity of relationship managers.   The in-house manager must learn to tell his trusted relationship partner what the matter is worth to the company without games, and the firm relationship manager must be willing to stake her reputation not just on the advice she gives and the results she delivers, but the accountability of the firm to do the best it can for the most reasonable price.  Firms that get really good at process management and staffing decisions (it’s presumed that they’ll practice great law!) will have totally transparent costs that they will happily and openly shared with trusted clients; clients must not “punish” them for that transparency (especially since there are still so many firms that don’t make the commitment to improved efficiency are nonetheless rewarded with less scrutinized business practices and heftier profit margins).   

There are still some lawyers in some firms who do not yet realize that when the bubble burst in 2009, it burst in part because law firm profitability expectations in many big firms were far too often unsustainable, if not ridiculous.  Likewise, corporate counsel must respect that fact that the firm needs the incentive of profiting in return for its improved efficiency and value.  The “new” aligned relationship is not a zero sum game -- all boats will rise when the focus is on delivering great value and results for the end-client.

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I understand that most firms employ the business model of selling rates and hours, and thus the only way to make more money for them is to raise rates or increase hours.  Since many are still struggling to secure the hours (even though the billable "expectations" have not decreased), they'll seek to raise rates for the lawyers who remain working.  Are they really that tone deaf?  Do they really believe that the path to profitability is made smoother by increasing rates in 2010?  Don’t they see the imperative (for their own survival and for longer-term-profit sustainability), as well as the opportunity, to start moving toward another business model of valuing their legal services based on the worth of what they sell and the efficiency with which they provide services?

While my information is anecdotal, everything I have heard from firms I'm talking with as a result of the ACC Value Challenge and from clients who have been whacking back their budgets, is that a firm would have to be foolish to announce any kind of increase right now. Do they believe that with some markets rebounding that they'll be able to return to the "Golden Age of Profitability" that all the consultants use to describe the last 10 years?

Sure, many firms will engage in a "paper" exercise of increasing rates so that when they were asked to provide a discount they will be at least somewhat ahead of the game, but surely, firms don’t believe there will be a rise in the amount of money that clients will pay for work overall?

Here's the scenario: the CLO goes down the hall to the CFO's budget meeting for 2010.  The CFO says to all the leaders present: "It's been a hard year for us, and you've all done a great job in driving down costs to keep this company afloat. I'd like to especially recognize the law department, which after years of uncontrollable cost-overruns and a 75% increase in legal services costs to the company over the last 10 years (a stat he has retrieved from the Conference Board), succeeded in bringing home a 25% decrease in legal costs in 2009.  We knew you could do it!  Congratulations and welcome to the team!  You've done so well, that this year, we're only looking for another 10% reduction in your budget while everyone else will have to cut 15%!"

What will the CLO say?  Is his/her answer is going to be: "Well, actually folks, our firms were so great about discounting their fees last year, that we want to repay them for their investment in us during our hardest moment, and so we're looking for our budget to be back up to what it was in 2008, plus a 5% increase for the firms for 2010!  Those poor guys saw a decrease in their profit per partner last year from 1.8 million per partner to about 1.6 mil after they fired 1/3 of their support staff, de-equitized our best servicing partners, and deferred the starting date for their incoming class of 38 new associates."

If you're the CLO who responds like that, it's you who’ll be looking for a new way to fill your hours this coming year.

Any firm watching attuned to the economic climate and to their clients this last year should have engaged in some kind of cost-cutting or efficiency exercise that did more than cut dead weight or marginalize those who actually do the work, but that fundamentally addressed inefficiencies in the firm's business model.  And that, hard as it will be to take, begins the process of re-setting the compensation expectations of some of their highest paid lawyers.  

Many of the larger firms are simply going to have to tell people at the top that their take-home expectations are simply going to have to change IF THE FIRM IS TO REMAIN PROFITABLE.  Lawyer comp in many firms is not realistic, not supportable, and has to go down because the bubble has burst.  So it's time for them to ante up to the discussion of what it's all about - will they choose the firm's sustainable path to shared profitability, or an attribution system that often puts individual partner comp ahead of the firm's best interests.  Either all boats will rise, or all may sink.

The idea that firms should look to maintain their stature as a top player by raising their prices is based on old thinking.  Value firms will proudly strut their increasing portfolio and profitability by pointing to an increase in client satisfaction with the value of their services, or an improvement in their efficiency, or a reduction of their costs because of an innovative new way they're working in this environment; raising rates to "assure" profitability is a failing strategy.  As this becomes increasingly apparent in the coming months, I hope that more firms will join the ranks of those who've already begun to think about new ways to value their services that don't rely on rate x hours at all.

Get with the program, law firms:  Just because many of you sell an overpriced inventory of hours doesn't mean that that's what clients are going to purchase in the new paradigm, and raising rates is going to make your pitch to sell all those hours even more unattractive.  Furthermore, it will indicate clearly your lack of alignment with the clients you serve.  It will also hand your current clients the permission slip to visit other firms that will provide the services you've always provided, but for less, or better, or for a more predictable cost.

Perhaps the silver lining for firms that haven't figured this out in the short term is that clients are increasingly uninterested in rates at all; they are increasingly focused on the all-in cost of the work. Rates are becoming irrelevant to many clients who say: "I really don't care what your rates are - that's not my problem; this is what I'm willing to pay for the work, since this is what it's worth, and you figure it out from there."

Again, it is time to get off the merry-go-round of "firms-raise-rates-so-clients-will-demand-discounts." This is no way to sustainable profitability or support strong, institutionalized, trusted relationships over the long-term.  

Hopefully, 2010 will be the year NOT of the rate increase, but instead, one where there is significant movement of firms toward other options for valuing the services they provide.  This must happen while there is still an opportunity to experiment with new models and adjust to the new order without as great a penalty - indeed, with a distinct upside for early adapters.  The window of this opportunity will begin to close soon as some folks get it and others don't: those who haven't been moving to accommodate new client expectations will find themselves keeping company with their newly-hiked rate structures on the sidelines.  Seated right next to -- as Mike Dillon so aptly put it – the Mastodons.

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We are pleased with the interest in the ACC Value Index (AVI) since its release last month at the ACC Annual Meeting in Boston. The attention from the media and law firms at this early stage of development reflects the potential value of the AVI to our members. Recent Blog posts and articles, especially those that show “purported ACC law firm rankings,” require clarification:

• The ACC Value Index is in the early data-gathering stage and it will take time to develop a robust database.
•  It is premature and inappropriate at this time to cite "rankings" of law firms given the limited number of evaluations submitted thus far.
• The AVI is a service for ACC members that will enable them to share information and communicate with each other about the selection and retention of law firms.
• ACC will share with each law firm the evaluations it receives about that firm as soon as we finalize the appropriate formats and procedures.

We welcome the continued input, feedback and engagement of the legal community in the ACC Value Challenge.

ACC President Fred Krebs on the ACC Value Index

Friday, November 13, 2009

 

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The recent launch of the ACC Value Index at ACC's 2009 Annual Meeting generated significant interest and commentary, including both praise and criticism. 

We welcome these comments because they not only further the attention and discussion about value in the delivery of legal services (a primary goal of the ACC Value Challenge), but they will also help us to improve the ACC Value Index (AVI).

            A few additional thoughts on the AVI:

 

1.           We created the AVI as a member service, so by definition, it is available only to ACC members.  Stated simply, it provides two specific benefits to our members:  a) the compilation of individual ACC member views on the value received from specific law firms; and b) the ability to find other members who have used a firm in order to communicate with them and engage in a dialog about their experience.  The AVI is a specific tool meant to inform decisions as part of a larger process of selecting and retaining a law firm.

 

2.           Members may post an evaluation anonymously or with identification at their option.  We believe the anonymity option to be important - particularly at the outset of this initiative.  Over time, as the AVI gains acceptance among our members, I anticipate that the percentage of anonymous postings may decline.    Evaluations can be posted with attribution - or anonymously -  as we seek useful and candid information to build acceptance of the evaluation concept generally.

 

3.           We will make the evaluation summaries available to the law firms. When and how best to do that remains under consideration by our Advisory Committee.  A corollary benefit of the AVI will be the ability to recognize those law firms that provide value in the collective judgment of our members.  Coinciding with the overarching goal of the ACC Value Index – information gleaned from the AVI will help to foster a greater dialog between clients and their outside counsel.

 

4.           The AVI is a work in progress and we are pleased with the interest and input it has generated to date.  Nevertheless, it will take time to populate the database with sufficient evaluations to reach a meaningful threshold.  The AVI database has been populated with over 1,500 evaluations, reviewing over 400 firms, and we will continue with our member outreach for additional evaluations.

 

5.           The AVI is only one part of the ACC Value Challenge, which encompasses a larger effort to reconnect value to the cost of legal services.  Other aspects include a) “Meet. Talk. Act.” which encourages clients and law firms to engage in discussions about value and their relationship; b) a law firm economic model; and c) specific resources with examples of value practices and ideas on ‘how to’ implement practices focused on value.  Resources, success stories and updates are continually added to the ACC Value Challenge community pages and we encourage law firms to get involved and help to provide additional information/resources.

 

6.           One important observation on the evaluations received to date: law firms generally do good legal work, but all too often, do not have costs and matter management under control. Effective cost and project management should be a key objective -- for both clients and firms to effectively work together. By managing legal matters in a business-focused, client-centric way, as opposed to basing solely on “hours worked,” the agreed upon business objectives will drive greater efficiency, and ultimately, value.   Law firms must learn to reduce their costs while improving quality.  Our members’ companies operate under this imperative, and their outside law firms should, as well.

 

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The second day of a two and a half day conference can sometimes wane in attendance and engagement, but Day 2 at ACC’s 2009 Annual Meeting in Boston didn’t show any sign of diminishing interest. Attendees dispersed throughout the exhibit hall for their morning coffee and croissants, while chatting with the 100⁺ exhibitors and sponsors on hand to offer insight about their services and in-house counsel offerings. The majority of this year’s sponsors were returning exhibitors, but there were a number of new organizations, as well. Washington, DC-based law firm, Sutherland Asbill & Brennan LLP, was one of the new firms exhibiting this year, and Felice Wagner, Chief Client Service Officer, said it was a great experience for the eight attorneys that joined her.

“It was illuminating for some of the attorneys to not only see the number of in-house counsel, but also, the number of Sutherland clients that were here. The high-level of the attendees, along with their genuine interest and engagement, has been great,” Wagner noted.

A long-time supporter of ACC, and recipient of the 2009 President’s Award, Ogilvy Renault, too, believed there was a higher level of engagement with those they spoke to. Senior Partner, Andrew Fleming, commented that this year attendees were not just looking for general information, but had specific questions. “We’ve spoken to attendees that had questions about a particular issue, or to others that weren’t happy with their current outside counsel and interested in learning more about Ogilvy.”

Lise Monette, Ogilvy’s Chief Marketing Officer, was happy with the added feature of being able to qualify leads on the lead tracking device, saying that it will be useful for when they get back to the office and coordinate follow up plans for those they spoke to at the conference.

For others, the Annual Meeting provided a platform for unveiling new products and/or services geared toward the in-house counsel market. Fios Inc., a provider of electronic discovery services, and Ajilon Legal, a worldwide expert in legal staffing and litigation management, unveiled a partnership to help corporations and law firms effectively inject cost control and predictability into the complex e-discovery process.

Brad Gragert, senior vice president of sales at Fios, noted that "By combining the core Fios and Ajilon competencies and expertise, legal teams now have a single resource for processing, review and production services. Additionally, our combined services will provide legal professionals with improved cost predictability and budget management for e-discovery projects."

The ACC/Serengeti Managing Outside Counsel Survey was released during the meeting, and the media and attendee interest kept Rob Thomas, Serengeti’s Vice President of Strategic Development, busy. For the first time in three years, the survey found that controlling spending on outside counsel returned as the top priority for in-house counsel, topping compliance concerns. The need to drive efficiency is leading to more value-based policies to reduce overall legal spend, and clients are looking to negotiate more flexible value-based fee and service models.

“In-house counsel want a single online system where they can manage all of their legal work directly with all of their outside counsel worldwide, not a maze of different law firm extranets or internal systems that don’t connect with outside counsel,” says Thomas, the author of the survey report.

Several of attendees that stopped by the Serengeti booth asked Thomas about the survey, wanting to know more about this year’s findings and interpretation of the data. Thomas, too, acknowledged that substantive inquiries dominated the questions he addressed with this year’s attendees.   

Practical Law Company, a leading provider of practical know-how for business lawyers and newest ACC Alliance partner, introduced its new “PLC Law Department” service, which will officially launch in 2010.  Designed to help in-house law departments maximize value, practice more efficiently and control legal spend, the new service has been catered specifically for legal departments to make sure they have the practical resources needed to get the job done.

“The interest in hearing about the new service has been terrific,” explained Ian Nelson, PLC’s Vice President of Business Development and Marketing. “We’ve had great interaction with everyone that has stopped by to learn more about the service and many have had questions about substantive issues and how to use practical resources to be more efficient.”

At a time when it is critical to be as efficient as possible and deliver even greater value to clients, it’s no surprise that attendees were interested in hearing more about ways to streamline internal processes. The topic was repeated many times throughout conference and during the session, “The Slow Motion Riot – Revolutionizing Law Department Cost Management,” law department leaders and law firm management discussed how the ACC Value Challenge can help to support this high priority goal of efficient, effective and professional practice.

For Jeff Carr, Vice President, General Counsel & Secretary of FMC Technologies, Inc., value means “efficiency, effectiveness and customer satisfaction,” something to which he holds his outside firms accountable to. And, the move away from the billable hour (yes, fodder, for a future – more in-depth Blog post) is forcing law firms to sit up, listen and respond to the wave of change that is forcing alternatives to the traditional business model. While law firms grapple with the increased demands, in-house counsel, too, are wrestling with their own internal processes to ensure greater efficiency and value-based legal services.

The over 100 event sponsors and exhibitors that were on hand  - from international law firms, to top litigation support providers and to leaders in knowledge management – were all afforded with the unique opportunity for one-on-one interaction with in-house counsel to educate them about cost efficient solutions.  As ACC President Fred Krebs noted, “I often hear from in-house counsel that they welcome the opportunity to interact with Annual Meeting sponsors as it provides them with a one-stop way to engage with organizations and learn more about value-based solutions.”

As this year’s Annual Meeting approaches its final sessions, the information gleaned from the sessions, interaction with attendees and conversations with supporters will be taken back to legal departments for implementation. For some, it will provide them with a new way of thinking and acting, for others it will reconfirm processes already in place. And, while the tchotchkes and give-aways were fun and drew interest, it will be the tools, resources, educational information and newly formed relationships that will have long-term value.

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 “Automating broken processes won't make us smarter; it can make us stupider faster.” ~ Steven Levy

Participating in a panel discussion at the International Legal Technology Association (ILTA) conference last month was yet another opportunity for me to engage in a discussion about the ACC Value Challenge.  But, instead of speaking to in-house counsel and law firm partners, this time I addressed technologists.  It was an excellent opportunity to discuss IT’s involvement in the initiative to close the gap between the cost of legal services and the perceived value clients received from those services. 

Tim Corcoran (Altman Weil), John Alber (Bryan Cave) and Constance Hoffman (Bryan Cave) provided a number of practical examples culled from their own experiences, explaining how technologists can play an integral role in strengthening the relationship between law firms and their clients. The questions from those in attendance reinforced the significance of this group’s involvement in the ACC Value Challenge.

Steven Levy, principal of Lexicon Steven Levy & Associates and former senior director of Microsoft’s Legal Information Systems Department, addressed this same topic in a recent Law Technology News article by focusing on trust and productivity. Levy discussed 10 ways IT Departments can work together with their law firms to “deliver more value,” and in doing so, he honed in on how an IT department can not only assist its law firm in strengthening the relationship with its clients, but also help it to be more responsive - and proactive - in this effort.

One of Levy’s suggestions resonated with me: Don’t Automate Broken Processes. Improving processes should not be confused with moving things around to just look different.  This does not work.  I often hear, “Sure things are different, but they aren’t better.”  Technologists need to listen to their lawyers to hear what it is the clients want and how they can help the firm change systems to achieve that goal.  By conducting internal reviews, such as document management system assessments, data can be analyzed to actually improve productivity and not just “shuffle things around.” 

Indeed, it’s a two-way street and the weight of this endeavor should not be dropped on the IT Department’s shoulders.  Lawyers must convey the information correctly and provide their technology team with the necessary information to effectively implement these changes.  The IT Director needs to ask the right questions, repeat the issues and concerns and confirm what he/she believes the intended results should be.

An even better solution would be to bring the IT Director into client meetings. As Hoffman noted during the ILTA panel discussion, she has been involved - on the front lines – working with Bryan Cave clients to identify needs and determining the best practical applications to ensure success.  Her intricate knowledge of the technology involved enables the firm to be better prepared to not only respond to client requests, but to also appreciate how working together can strengthen the relationship between clients and firms.

By involving IT in the process – from the start – law firms are better equipped to manage client expectations.  As Levy so aptly noted, “Unlike Wine, Bad News Does Not Get Better with Age.”  Law firm attorneys cannot afford to be in the dark, nor can they keep their clients in the dark.  When an open dialog between attorneys and technologists exists, there should be no surprises.  No surprises means keeping clients abreast of the progress – and the delays. For those of us who travel frequently, we know the feeling of sitting on a plane, delayed on the tarmac … wondering what’s causing the holdup.  When the pilot explains that air traffic control has delayed our take-off by 20 minutes due to incoming traffic, our expectations are managed and we can relax.  Without the pilot giving us an update, we’re left to fret and to worry (or get agitated!). Being honest, upfront and providing assessments throughout the process ensures a win-win for all involved.

An underlying principle of the ACC Value Challenge is to “promote a dialog among corporate counsel, law firms, law schools and others who are interested in driving an alignment and focus on value.” The success of the initiative encompasses the participation of everyone within the legal services industry.  The ACC Value Challenge is not a “silo” initiative where everything is compartmentalized. It’s an initiative based on collaboration and sharing, and IT’s role cannot be overemphasized. Value is in the eye of the beholder and without effective communication and sharing, this, too, will fall into the bucket of automating broken processes that yes, “will make us stupider faster.”

Frederick J. Krebs

Next Up: The Chief Marketing Officer’s Role in the ACC Value Challenge

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“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.

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The former CFO of my former company called me this morning outraged by an article in the Cleveland Plain Dealer touting the hourly rates that Jones Day lawyers were charging Chrysler in the Chrysler bankruptcy. They apparently billed 18.9 million since November trying to keep Chrysler out of bankruptcy. Not bad for being unsuccessful, even with the weight of the US government on your side.

The article goes on to say that they may be awarded up to 115 million by the court when the bankruptcy is over. With hourly rates from 950/hr to 400/hr, the number is not hard to imagine given the minutia law schools teach you to considered no matter how tangential the relevance—and of course unrestrained hourly rates reward.

Perhaps what makes this entire thing a bit ironic is that the effort is to save the US auto industry is apparently being accomplished by making it Italian. I am a dual US-Italian citizen, having recently had my bloodline Italian citizenship recognized, and I ride a Vespa, so to me Italian is sort of American, unlike Toyota and Hyundai among others who have had auto plants in the United States for years. Good job Jones Day—you saved the American auto industry by making it Italian; and guess who is paying for this effort—us taxpayers. Enjoy some of our money on the Amalfi coast and in Tuscany.

Hey Susan Hackett—you might want to rethink the ACC Value Challenge over a cappuccino—do not worry about the cost of the cappuccino just send the bill to the Treasury.

 
 

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The situation:

•    The economy is in recession
•    Businesses of every size are being impacted
•    Internal staff is being asked to do more with less
•    Layoffs are a matter of fact.

It should be no surprise that this slump is impacting the legal industry. Many blog sites, including the Wall Street Journal and Above the Law, have daily posts on staff cuts and other changes in the marketplace. Numerous surveys indicate a gap between in-house counsel and outside counsel. Where is value and how does it relate to annual spend?

On April 13, 2009, I had an opportunity to attend my second ACC Value Challenge event. Unlike nearly everyone else in the room, I’m not an attorney. My background in the legal industry and understanding of law firms gives me an interesting perspective of the two somewhat differing worlds. In attendance were a number of law firm partners and in-house counsel, including a number of general counsel from local corporations.

My twitter stream (@time2simplify) had a few gems:

One attendee recognized that the ACC Value Challenge event is being held at the Ritz-Carlton... many lols. "best place at best price"

Both law firms and in-house departments share a similar problem: Desire to impact the bottom line is shared by both managing partners & CFOs

Take-away items from the event include:

• One definition of value: Good work – and perhaps value - is not over-lawyering (defined as anything that is not needed and appropriate)
• How are attorneys using technology? Extranets, e-billing, and knowledge management were a few examples.
• If the golden gate bridge can be built on a contract, couldn’t a large legal matter?

So legal community, what’s your point of view?

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Listening to NPR on the way home last night, I heard a rather depressing story about folks affected by the financial meltdown who were planning to release some of their anger and frustration by dressing up as zombie bankers, lynched financial investment strategists, or donning themselves with copies of plunging 401K account statements. These happy bands plan to join Halloween fetes, from the Greenwich Village parades to burst-bubble parties Missoula, Montana, where they can publicly vent their anger and frustration.

So my question is: What's Joe the Lawyer wearing tonight for Halloween?

Is Outside Counsel Joe wearing something terribly basic and girdled in an effort to minimize the obvious fat at his firm and appear as if he's cutting back on unnecessary expenses? Is In-house Counsel Joe donning something transparent” in the effort to join the accountability culture?  Perhaps Joe In-House might be better off wearing something non-descript in an effort avoid attracting any attention from management as a cost center in a time of fiscal crisis?

Here's my advice to both Joes: don't focus on the costume, focus on the trick or treat. Folks who don't take the downturn seriously are in for the trick; but those who are actually looking at the downturn as a great opportunity to re-assess the way they work and how they can do it better are likely to get the treats.

Fortunately, guidance is right here at your fingertips. There's all the material we are posting on ACC's Value Challenge (ACC's effort to help the legal profession re-align the cost of legal services to the value of the service provided).

But there's a great new tool for you to consider, too, whether you're in-house or outside and looking into the financial crystal ball: we've just released the 2008 version of the ACC/Serengeti Managing Outside Counsel Survey (PDF).

More than 2,000 law departments have completed the ACC/Serengeti survey since its inception in 2000, vividly and practically drilling down deep to describe their experiences working with outside counsel. While the comparatives from year to year make this survey the best of its kind since it tracks more than snapshots of activity (allowing you to discern trends in the profession), I think we can all agree that this year may not be as easily informed by past years activities: instead, we have to see what the trends tell us about how eclipsing change in the next year might be platformed and shaped based on where we've been going and what we're geared up to leverage.

The current survey details increases in in-house cost control activities such as convergence, RFPs or competitive bidding for new work, requiring minimum levels of experience for associates working on their projects (as well as bans on first and sometimes second year associates billing entirely), discounts for early bill payment and increased evaluation of outside counsel performance. In my next post, I will tell you my predictions on the 2009 survey.

In the meantime, tell me: What do you think Joe the Lawyer is going to be wearing next year?

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I'm sitting here in a meeting room set for 150 in the Seattle Convention Center at the ACC Annual Meeting praying that the fire marshall doesn't come to Room 612.  There are so many people in this room - standing in rows lined up against  the walls, in lines sitting on the floor in the aisles (in full business regalia), every single seat taken - heck, the moderator took his chair off the podium to offer it to a registrant since he's getting all the exercise he needs just passing the microphone around.   There are easily 300 people in this room.  Inside and outside counsel.

Why are they here, and why is everybody having such a good time? 

They're here for the ACC Value Challenge program to talk about the prison we're all locked in and how each of us has a piece of the key that would allow us to break out.   We are talking (r)evolution: how to free ourselves of billable hours business model, and re-discover what it was that we all wanted to do for a living when we went to law school.  How to collaborate, rather than argue over bills.  How to align what it is that we do with what it is that clients want to purchase.  There are CLOs of Fortune 50's, managing partners of AmLaw 200's and legal products vendors in this room laughing and talking about the future and how they can prepare to meet its challenge: it's value challenge, that is.  There are folks talking about how to completely re-invent and re-align what it is that we do, and they're so excited to get started, that the energy is palpable.  I wish you were here ...  if you aren't, I'm going to make it my personal mission to find ways to bring you the solutions, the passion, and the intellect that's flowing in this room.   You ready?  The (r)evolution has begun. 

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The NEO ACCA presenters offered a number of examples of new arrangements for billing. I have categorized them into three categories, none of which should be surprising. They are fixed rate, contingency and fixed rate-contingency. Another hybrid is the addition of hourly billing as a part of the models.

One of the fixed rate models was an agreement to handle all the cases that rose in a certain geographic area in a particular category, such as product liability for a given period.

Like any contract one had to define whether the geographic area meant where the case was filled, the location of facility where the product was made, the headquarters of the operational group or where the injury occurred. Similar issues arise in multiple causes of action cases. None of these issues were discussed and presumably had been addressed so that no controversy occurred.

The law firm covered all out of pocket expenses, such a deposition fees, travel etc. except trial was handled on an hourly basis and expert fees were billed directly to the client. The rationale for the distinction in the trial and expert fees was that inability to accurately predict these expenses. The trial exception makes some sense to me because they would be rare. I am not that sure why expert fees were excluded particularly if the product claims involved the same of similar products, but the issue was never fully explored.

The presenters claimed that this arrangement resulted in constant legal fees over a 5 year period while product input costs went up 178% and the number of cases rose as well. The constant nature of the legal fees is attractive if for no other than budgeting reasons. Because of extreme commodity inflation, the apparent savings would seem exaggerated. Comparison of legal fee inflation in the industry using data complied by a legal consulting firm survey might be a better reference.

One note they made, apparently thinking it was another indicator of success was that during the same period the litigation rate increased. It was an alarm bell to me because the one problem with fixed fee arrangements is that it creates an incentive for firms to under lawyer a case; nothing is perfect. When I raised this question they said that there was method of measuring the company's liability, or somehow sharing the risk of that liability in the agreement. I am sorry but my notes don't contain a description of what they said. It does, appear however, that the increase in the litigation rate was also attributed to some acquisitions, but I wonder why that would not have resulted in a revision to the contract price.

Bottom line, this is not a new idea and the prior renditions of this form of legal structure, some quite grand in nature involving all the legal work of a very large company, do not have appeared to stand the test of time.

That does not mean it won't work. Success, however, seems to require that the purchaser must focus clearly on what their prime objective is--for this arrangement budgetary consistency may be worth other trade offs. What are they? One is probably less active control of the case since it is a lot of their dollars being spent. An incentive of the firm is to under lawyer a case--that may result in more costly future litigation exposure, not merely to save money under the present contract, but to create demand under the next.

And there is always that potential that you may under up over paying--a fixed price is not often the least expensive. In economic terms this looks a lot like buying legal services in an insurance agreement without the indemnification and, at least at present without a liquid market for price reference. If savings is the objective a better method of gauging that needs to be developed, and will likely have to be adapted to unique circumstances of every buyer.

Developing a method and data base, sort of a market approximation, might be one project to evolve from the ACC Value Challenge. Sorry Fred, I hate to suggest more projects for you.

-Larry Salibra
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Here we are one week after the launch of the ACC Value Challenge. As we all take a breath and get ready to dig into the real work, I asked a few members of our steering committee for their thoughts on "value."  In keeping with the idea of revolution and change, I didn't want prepackaged bits, I wanted something that was 140 character or less.

As a leader of the revolution here at ACC,  I started off with the following:

Costs over budget
The C-F-O faints and moans:
"There goes my quarter."

 First to repond was Miguel R. Rivera, Sr., Associate General Counsel, Walmart, with a chilling set:

Red faced CLO
Water glass trembles
Mourn the death of value.

Invoice read and marked
Shock at final number
Budgets burned in sacrifice.

Heed the cold wind blowing
Law firm practice slowing
Failed to heed the warning.

The question then went to Mike Dillon, Executive Vice President, General Counsel and Corporate Secretary of Sun Microsystems, who merely responded with "Arr."

Let's keep in mind: this isn't an issue that's limited to ACC. The disconnect of value from legal services impacts our profession and the ability to serve our client, either internal or external. How this disconnect can be rectified is the goal of our discourse.

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Gee, is it just me, or are our Value Challenge issues the issues at the top of everyone's "news" plate these days? 

Let's take a run through some of the posts and articles:

• Bruce MacEwen, the force behind Adam Smith, Esq, discussed elements of importance to firms, including partner acquisition, client loyalty and hoarding of clients by partners. (Does that happen much?)
• Paul Lippe of Legal OnRamp included both an article and a blog post declaring "the future is here." Thanks for the notice Paul. 
• Patrick Lamb, author of In Search of Perfect Client Service, notes that "change is coming faster than many believe" and gives a shout out to our efforts at ACC.
• The ABA journal's Top 10 Stories of the Week for October 3, 2008 includes 5 items relating to issues of value.

Now that we're generated some buzz, how are we plan on building more discussion? More to come!

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In the last week or so, we discovered that an entire banking model, the investment bank was a flawed business model. The last of the two investment banks, Goldman Sachs and Morgan Stanley reconstituted themselves into regulated bank holding companies.

In my last blog I suggested ,based on what was happening in the financial community, that traditional surrogates for competence, fees and office location, may not be particularly good indicators of competence in the practice of law as well.

The traditional law firm model has been subjected to scrutiny for many years, and it has persisted. But there has been a significant change, at least since WWII, and that is the growth of law firms that do not have intimate relationships with their clients. They look more like detached business organizations, whose success is not intimately tied to the fortunes of their individual clients.

Perhaps one of the biggest recent reformations in legal practice was the emergence of in-house practice, of which ACC is a direct reflection, but there has remained beneath the surface a continuing concern about the law firm model. NEO ACCA is sponsoring a session, which I hope to attend which is reexamining the validity of hourly billing. The notion is not new. Prior attempts to address this issue of which I am familiar have not been successful. Nor have any of the modifications to hourly rates revealed any model that seems clearly superior.

I read a summary of ACC's Value Challenge in Legal BIZNOW in which the author noted that this issue of hourly billing had been raised before but "something felt different at the Reagan Building ...." Excuse me for being skeptical, but I have been there, done that.

I will let you know what I think over the next few blogs, but my gut tells me that the issue of cost control, hourly rate notwithstanding, is well within the control house counsel if they really wanted to control it. This is one big reason why as a guest lecturer at the University of Akron Graduate School of Business in October I will be describing how and why businessmen must assume control in managing lawyers and legal issues, because lawyers have not demonstrated a capability of managing either themselves or legal issues very efficiently.


- Larry Salibra
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Are these competing forces or can we implement both, resulting in a long
need change in the in-house/outside counsel relationship? We have a 20th
century structure trying to hold up a 21st century market. The seams are
giving way and cracks are in the foundation. We can no longer patch it
along the way with small concessions. ACC is calling for a monumental
change.

Get rid of the skyboxes! Get rid of the fancy recruiting of new attorneys!
And, get rid of those plush offices! This is the first step in reaching a
new structure, according to some leading in-house counsel.

Communicate! Communicate! Communicate better to the outside counsel your
needs, goals, and corporate values! This is the cry from the outside
counsel to reduce the friction between the parties.

In the end, I think it would be best to start with the premise that most
lawyers do not have a business background/education and we need to stop
trying to function as we do...and get some help from sound business minds.
It is sort of like the premise that only a fool for a lawyer represents
him/herself. May we begin the process today.

Learn more about the ACC Value Challenge at www.acc.com/valuechallenge

-Ellen Zavian, Associate General Counsel, ACC

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Today from 1pm - 4pm EST, is the launch of the ACC Value Challenge. Months in the making, I can't tell you how excited I am about this event. Aside from a live Webcast, something that we have never done before, the lineup of experts and faculty for the discussion is tremendous. Take a look at our steering committee:

 

Michael Roster, Chairman
2001 Chairman, ACC Board; retired General Counsel, Golden West Financial and Stanford University; former Managing Partner of Morrison & Foerster, Los Angeles 

Jeff Carr
Vice President, General Counsel & Secretary, FMC Technologies, Inc.

Janine Dascenzo
ACC Board Member; Associate General Counsel, General Electric
Company

Mike Dillon
ACC Board Member; Executive Vice President, General Counsel & Corporate Secretary, Sun Microsystems, Inc.

Ivan Fong
ACC Board Member; Chief Legal Officer & Secretary, Cardinal Health, Inc.

Kerry Galvin
ACC Board Member; former General Counsel, Lyondell Chemical Company

Al Gonzalez
ACC Board Member, and former General Counsel for Tyson Foods

Miguel Rivera
Associate General Counsel-Class Action Division, Wal-Mart Stores, Inc.

Laura Stein
ACC 2008 Chairman of the Board; Senior Vice President & General Counsel, The Clorox Company

The launch is being held in the Ronald Reagan center in Washington, D.C. -- the only problem we've had so far today are the stream of VIPs coming into the Treasury Building nearby. I think there was talk about a financial meltdown of some kind. All joking aside, the uncertain economic times we find ourselves in provide yet another reason for in-house counsel to look at their relationships with law firms.

What's next for the Value Challenge? The work put into this project goes beyond an academic exercise or a speaking engagement: we want to redefine the value of legal services. Watch this blog for new and innovative resources to help facilitate this revolution.

 

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This blog is another in a series of blogs around the fringes of ACC's Value Challenge. As I said in my Bio, one of my purposes in these blogs is to give you an opportunity to think outside the box, a luxury that your daily routine may not permit.

So why do law firms grow? If you go to a big firm what are you buying. The firm would tell you that you are getting a great array of services. So why do you need a great array of services? One of the reasons you exist is to provide your client access to the precise legal service it needs. Perhaps that means giving the advice yourself. Or it may mean finding the expertise that is more cost effective and better than the big firm.

Well, you say big firms grow because they have the best talent, attract lots of clients because of the quality of service they provide--wrong answer. They grow because they have to grow--it is genetic. To be sure, going beyond the demand for services or at least the ability to artificially create demand does have limits and portends change

In the Tournament of Lawyers; the Transformation of the the Big Firm, University of Chicago Press 1991, the authors describe the tournament to become partner, and the need to create partners to give legitimacy to the tournament as the reason large firms get bigger and they predicted a lot of the changes we have seen since the book was published.

However, there is one thing that can have a very dramatic impact on the existence of the big firm--a rigorous, objective standard to evaluate actual quality of service. The first thing you are probably buying at the big firm is prestige--because in an environment where the ability to evaluate quality is hard and the costs of misjudgments (as distinguished from wrong judgments) is high, prestige becomes a surrogate for judging quality, or at least a source of cover for you if you selected that firm over a small firm who might have gotten the same adverse result for the same reason.

Please note that when I said judging quality was hard--I did not say impossible. We will explore some options in later blogs to see exactly what you are buying.

-Larry Salibra
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