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

By Emily Jelich

Emily Jelich is Vice President and Associate General Counsel with the Royal Bank of Canada in Toronto, Canada. Ms. Jelich heads both the Global Capital Markets Legal Team and the Global Dispute Management Legal Team, which include team members in Canada, the US, UK and Hong Kong. Ms. Jelich is a member of the ACC Value Challenge Steering Committee and champions several initiatives within the RBC General Counsel Team aimed at working more efficiently with business partners and external counsel.

The voice, views and stories expressed in this posting are of the author and do not necessarily reflect the positions, strategies or opinions of the author’s employer or ACC.

While there has been a great deal of discussion in the legal community on the topic of value-based fee arrangements (VBFs), I find it surprising that the vast majority of law firms still seem to try to avoid these arrangements in hopes that they will disappear. I do not mean to disparage those law firms that are trying, but I am continuously bewildered by the fact that they are the minority. I’m not here to define VBFs— the Value Challenge material does that much better than I could — but I will say that VBFs are not discounts. They are not even discounts of annual fees.

As part of their reticence, I am struck by some law firms’ responses to requests for VBFs. Particularly, when I ask a firm for a VBF in litigation or regular transactional work, the firm will often respond that it can only propose a VBF if I “promise” the firm all of our work in that specific area for a period of time. Why are firms not sufficiently interested in developing and marketing skills to provide cost certainty and case management through VBFs unless there is a promised stream of work? Why is this promise so useful to the firm? Work in these areas can always end.  

In my mind, the process should be the exact opposite of what I am experiencing. Firms should actively enhance their understanding of cost structure, and then develop and market VBF models. This way, the firm would create an expertise across clients, and would create a valuable differentiator for itself in the market. The few firms that are doing this are gaining the fame they deserve, but the vast majority continue to resist and ignore this trend.

I don’t pretend that VBF capability is easy — presumably, that’s one reason that firms have struggled with, or avoided, it. However, it does surprise me that firms don’t seem to realize the power behind this opportunity. As a client, the firm that understands what may increase or decrease overall costs in a matter, and provides a VBF by assessing which of those factors are within its control, will be a firm I want to retain. This firm would further assist me by identifying which factors I control as the client, and what actions I may take to change the assumptions behind the VBF. This knowledge is very valuable because it helps me to consider where to spend my money and time. 

VBFs are most often discussed in terms of cost management, but they also address a long-heard request from both clients and law firms: they necessitate a conversation about goals and expectations at the beginning of a matter. They also continue discussions, which become based on actual experience instead of assumptions. VBFs may emerge as a simple way to ensure that important communications occur throughout a matter, in addition to their function as a cost management tool.

I believe that the firm that pursues the goal of becoming systemically better at VBFs for its own sake will at the same time become more attractive to clients and will be more likely to develop strong, on-going relationships as a result.

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Do you remember the end of the iconic movie, Revenge of the Nerds, when Lewis takes the mic from Gilbert and suggests that more of us are nerds than jocks? The pretty cheerleader exclaims she’s a nerd too; most of the crowd joins Lewis, Gilbert and his nerd fraternity brothers in an effort to end nerd persecution, and the familiar strains of “We are the Champions” begin to play. Well, that cinematic moment was one of the formative experiences of my youth (I didn’t get out much) and it came to mind when I was thinking about ACC’s new Value Champions program, our new initiative to identify and celebrate law department and law firm leaders who incorporate value practices into their legal projects. 

I've paid my dues/Time after time

I've done my sentence/But committed no crime

And bad mistakes/I've made a few/I've had my share of sand kicked in my face -

But I've come through

Three years ago, ACC challenged the legal community to embrace value practices that are commonplace in every service industry, save one. While we heard some folks sing their hosannas, there were, and still are, folks who believe that the legal services industry can remain the same and still meet client expectations. Like the dinosaurs that were unaware of the meteor, the firms and law departments that continue with the old business model will not find the future climate hospitable. Wait a sec. Wrong analogy. Like the jocks who thought that they would continue to rule the campus on their terms. Sorry about that.

But, like Lewis and his new self-proclaimed nerd supporters, those of us implementing change are in a growing group. In fact, outside and inside counsel who focus on value practices, such as effective project management, value-driven fee arrangements and continuous improvement, are fast becoming the norm, not the exception. And, that’s what the Value Champions program is all about. We’d like to shine a spotlight on them, so that the world can see their accomplishments and learn from them.

I've taken my bows/And my curtain calls/You brought me fame and fortune and everything that goes with it/I thank you all

But it's been no bed of roses/No pleasure cruise

I consider it a challenge before the whole human race/And I ain't gonna lose

Of course, some value practices are easier than others. Some of them require the simple application of business principles from other industries. And, we want to identify and celebrate individuals who have employed those practices, because we believe their accomplishments can be replicated by our members and the rest of the legal community. But, of course, some projects are harder, more complex and more frustrating at times, because the ideas animating them are so novel. Think of the nerds' effort to beat the jocks in the fraternity competition. So, we’d like to celebrate innovative strategies as well. If you’ve tried something novel or something more garden-variety, please let us know about it. Our only requirement is that the submitted project has reduced legal spend, increased predictability and/or reduced the unwelcome types of legal issues confronted by the company over time.

We are the champions – my friends/And we’ll keep on fighting – ‘til the end

We are the champions/We are the champions

No time for losers

'Cause we are the champions – of the world 

Our deadline for submission is March 15, 2012. If you’re in the legal community and you’ve ever cared about value enough to incorporate it into your day-to-day practice, turn up the volume on Freddie Mercury’s classic and join us and submit a nomination form. The legal services industry just won’t meet client expectations until value persecution ends. We look forward to hearing from you.

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ACC’s 2011 Chief Legal Officer Survey was unveiled at this year’s Annual Meeting in Denver. The annual survey and the resulting AM CLO session offered important insights for in-house counsel. I can’t tell you, though, that I was surprised by the results or discussions that followed. They included:

• CLOs are concerned with regulatory issues that put them on the front line for potential liability, but are more concerned with protecting the company by knowing all activities that could have legal implications;
• While they are typically happy with their chosen profession, they are affected by having to do more with less; and
• They want to see the value in their outside counsel relationships and improve communication there, as well as within their own legal departments.

These issues are at the core of what in-house counsel grapple with on a day-to-day basis. The findings of the survey make perfect sense to me, and here’s why:  

The increasingly important ­and changing role of the CLO

As in-housel counsel, one of our main goals (if not the goal) is to protect the company we work for from harm. Risk management is a crucial part of our day-to-day activities, and CLOs are on the front line — expected to offer solutions as problems arise, and ensure solutions are easily accessible and compliant with ever-changing regulations and laws. We can also be held personally responsible when something goes legally amiss. There was a time when the attorneys in the company didn’t have to worry about being prosecuted for the “crimes” of their employer. All you have to do is turn on the television to know those days are over.  As I said during our CLO panel at the Annual Meeting, general counsel are considered key players in government investigations, and are therefore prime targets. While not programmed to shrink from a challenge, almost a third (31 percent) of the respondents said that this increased scrutiny is actually affecting their next career move.

Up to the challenge and satisfied

Yes, CLOs are expected to do more with less, while under more scrutiny from the SEC than ever. And yes, these facts can be challenging, but in-house counsel are entrusted with finding solutions. In fact, we thrive in this role. The survey shows that 92 percent of CLOs generally like their jobs. Well, I didn’t need a survey to tell me that, having met and reconnected with many of you in October at the ACC Annual Meeting. I overwhelmingly heard your testimonials that you are engaged and enjoy what you do..  

The economy and staffing

The survey found that fewer CLOs are feeling the effects of the economic downturn (54 percent) in 2010 than in 2009, when 74 percent reported the same. Those who are feeling this crunch are decreasing staff and increasing their work for outside firms at a higher percentage than in 2009. However, despite a challenging economy, many CLOs are planning to increase staff. According to the survey, 37 percent plan to bring on new hires in the coming year. While some organizations and firms, for that matter, are cutting staff, in-house counsel are adding to their own. This, of course, has something to do with the increasing responsibility of the legal department: Three-quarters of your departments have experienced an increased workload.

Fee structures and working with outside counsel

Working with outside counsel, and getting value from those relationships, is always a key concern for CLOs. Most CLOs are currently using hourly-based fees, and 45 percent of them experienced an “increase in hourly rates charged in 2010.” However, a growing number of CLOs (63 percent, according to the survey) have implemented a form of value-based fee arrangements, with 77 percent seeing an “increase in value of work performed by outside counsel.” This is encouraging news, but there is always room for improvement, as 59 percent of those surveyed would like to see more focus on improving matter and budget management. Again, it all comes back to value.

I could go on and on about other tidbits from the survey of ACC members. For example, CLOs in the United States have increased by 5 percent in the past three years, but the growth of those located in other countries has increased by 20 percent. Similarly, ACC’s international reach as an organization is growing, as is the presence of the international in-house counsel and law department. Please view the entire CLO survey, as well as those from previous years, at www.acc.com/community/clo/surveys.cfm.

You’ve made it clear that CLOs want to add value to their organizations and legal departments by managing the risks and supporting the business objectives. CLOs are seeking value from the outside counsel they employ. And they are seeking personal value in their career choices.  

It’s all about value.

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 Part IV. Follow along in this four-part blog series featuring a timely and provocative look inside Hewlett-Packard Company’s innovative new legal talent development program. This blog takes a look at the training program from the perspective of a participant, HP new hire, Gail Su. Gail is a graduate of Harvard Law School and is currently Counsel on the Intellectual Property Transactions Team. Prior to joining HP, Gail attended Harvard Law where she served as the President of the Harvard Asia Law Society, as Conference Chair for both the Asia and Pacific American Law Students Association and the Journal of Law & Technology. The voice, views and stories expressed by the authors below are their own and not ACC’s. To read the first installment of this series, click here.

Part IV: Who Says Attorneys Can’t Be Trained In-house?

When I first started at HP, I was excited but nervous. I wasn’t sure what to expect, but much to my relief, HP had it all sorted out.

My training has come primarily from two sources: a set curriculum that all new attorneys are asked to complete and my on-the-job experiences. The set curriculum is composed of classes (that I attend both online and in person) and practical experiences. The training was designed to give me broad exposure to the workings of a large company and to help me develop certain skills. It has given me the opportunity to attend classes on core legal topics such as antitrust and contract law; I have had the chance to present a legal recommendation to a company executive; and later this year, I will spend a week at a legal outsourcing site negotiating sales agreements. In addition, I’ve attended a customer meeting with an HP executive as well as a negotiation workshop, and participated in a business simulation where I helped a fictitious company evaluate business options.          

In my day-to-day training, I am fortunate to be under the instruction of managers who are committed to my development as an attorney. I am also fortunate that the entire IP Transactions team has joined together to mentor me. I have been exposed to a wide range of matters and have learned from lawyers with different styles of practice. Sometimes I work on projects by myself. Other times, I work on projects with other attorneys. In all cases, I am encouraged to take on as much responsibility as I believe I am ready for. There are no rules as to what I am capable of, and there are no rules as to which projects are too complicated for me. 

Additionally, my manager encourages me to take ownership of my career, including choosing experiences that will benefit me professionally. One of my professional aspirations is to work on cross-border transactions, especially in Asia. Upon hearing that I would be interested in spending time in HP’s Shanghai office, my manager’s words to me were, “Let’s try to make that happen.” I am pleased that it worked out and I will leave for Shanghai in October.  

Finally, I am encouraged to participate in pro bono activities. In fact, each HP attorney is asked to complete 20 hours of pro bono service a year. In the short time that I have been at HP, I have worked on a VAWA immigration self-petition, advised non-English speaking clients at a legal clinic for small businesses, and instructed middle school students on the law.  

Ten months ago, I couldn’t have imagined that my career would be off to such a fast-paced and exciting start. Thank you, HP, and I look forward to experiencing all that you have to offer.

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Part III. Follow along in this four-part blog series featuring a timely and provocative look inside Hewlett-Packard Company’s innovative new legal talent development program. This blog takes a look at the training program from the perspective of a participant: recent graduate and HP new hire, Dargie Bowersock. Dargie is a 2010 graduate from the Northwestern University School of Law and currently works in HP’s Legal Corporate, Securities, Mergers & Acquisitions practice group. Before law school, Dargie taught writing courses at the University of Michigan. The voice, views and stories expressed by the authors below are their own and not ACC’s. To read the first installment of this series, click here.

Part III: In-school to In-house: Who Says Your Law Career Must Begin in a Firm?  

          There will be no start dates in 2010.

           It was the summer of 2009, and all of the associates at the law firm where I was spending my second summer were told the same thing. That simple sentence forced me to completely alter my career path. I would graduate from law school in May 2010, and I didn’t want to spend up to 18 months waiting to start my new career. I had spent seven years working before I went back to law school, and when I made the decision to go back, it was based on a straightforward, three-years-and-you’re-employed calculus. The economic melt down forced me to look at job prospects in a whole new light. Luckily for me, my future employer was recruiting in-house counsel in a whole new way.

            When I saw the on-campus interview posting for Hewlett-Packard (HP) in October of my 3L year, I knew I had to apply. I wanted to do business transactional law, and I figured working inside an exciting company with a strong legal department would be a way to start getting great experience right away.

            And it has been. I joined HP in October 2010 in the Corporate, Securities, M&A group. I work as a junior attorney on many aspects of corporate transactional law, especially acquisitions. I also work on sophisticated matters as part of a talented team with extensive big law experience. This opportunity has allowed me to work closely with other HP lawyers, who have exposed me to a variety of practice styles and strategies. Further, I’ve been able to take on projects from a range of practice areas. HP provides extensive training, covering everything from the business units within the company, to pro bono opportunities in the legal department, to sharpening negotiation skills.

          In some ways, my role mimics that of a first-year firm associate: I do diligence; turn documents; prepare schedules. However, I also sit in on meetings with company leaders about how a prospective acquisition fits in to HP’s strategy; get a sense for how a public company answers to its investors; and experience how a Fortune 11 company operates from the inside. Although I don’t work in the same array of industries I would at a firm, I have my foot in the door at a company that operates in more than 170 countries around the world. Working in HP’s legal department exposes me to multiple business and go-to-market models, allowing me to feel like a part of a highly competent team that faces exciting and ambitious goals.

            It’s been a great opportunity so far, and I wouldn’t change a thing. HP’s visionary recruitment and training model can impact the way the legal industry hones a lawyer’s skills. I hope that other legal departments consider adding this type of program to their strategic plan.

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Part II. Follow along in this four-part blog series featuring a timely and provocative look inside Hewlett-Packard Company’s innovative new legal talent development program. This blog takes a look at the training program from the perspective of an HP staff member, Susan Goodhue. Susan is Vice President and Associate General Counsel, IP Transactions in HP’s IP and IP Licensing Group. She leads a team of thirty IP transactional attorneys in the US, Europe and Asia. The voice, views and stories expressed by the authors below are their own and not ACC’s.To read the first installment of this series, click here.

Part II: Integrating into the HP Legal Team

Rewind to September 1, 2010. Two weeks earlier I joined Hewlett-Packard to lead a team of Intellectual Property transactional attorneys who provide IP counsel to HP’s businesses. My team is one of the practice groups in the larger IP Group at HP. Joining my team in HP’s inaugural New Attorney Graduate Program was Gail Su, a newly minted attorney right out of Harvard Law School. 

I had, in the past, mentored and developed many new attorneys in both private practice and in-house. With Gail, I had been entrusted with both a tremendous responsibility to nurture an obviously smart and nascent talent, as well as an opportunity to develop an attorney who could learn to appreciate the critical nexus of law and business, while providing practical, solution focused legal counsel.

At HP, Gail benefitted from what previous companies had not afforded me—the framework and support of a new attorney program. New attorneys receive training about the company, including: what Investor Relations does; how HP analyzes its competition; the structure of the legal department (who does what); and about substantive legal areas, such as antitrust and privacy. In addition, the program includes training in contract drafting; negotiation, speaking and presentation skills; and solution-focused counseling.

Because the new attorney program took care of much of Gail’s foundational training in her early days at HP, it enabled her to hit the ground running; it also freed me and my team to focus on integrating her into our group. Included in the annual goals of each attorney on my team was a requirement to work with Gail on at least one project. This served two purposes. First, Gail became acquainted with the team members. Second, she observed the practice and negotiation styles of different attorneys––developing a personal legal style consistent with his or her personality is critical for any new attorney. Therefore, observing other attorneys and “trying on” different approaches helps. 

The program also requires that new attorneys receive practical experience in research and writing, contract drafting, M&A due diligence and executive presentation. Within the first six months of joining our practice group Gail had completed all requirements. In addition, because Gail expressed an early interest in patent prosecution and is a member of the patent bar, she was able to spend a portion of her time learning to write patent applications.     

Fast forward to June 2011: Gail is now a fully integrated, key contributor on my team and a member of a sub team that provides IP counsel to the Personal Systems Group (PSG). PSG develops and markets business and consumer computers and mobile computing devices, including Palm® products. Supporting PSG provides Gail direct contact with business clients and their real world issues where she can, with the ongoing support of my team and I, continue to develop as a pragmatic, business-oriented attorney. Gail is off to a great start to what we hope will be a long career with the HP Legal department. 

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The latest addition to our “value practice” blog series features a timely and provocative four-part discussion on training legal talent, all focusing on different aspects of Hewlett-Packard Company’s innovative new legal talent development project. This series will provide an in-depth look into HP’s post-law school training for new lawyers, with entries on how HP integrates their new hires into the legal team, how they plan to develop their new lawyers’ client service focus and skill set, and will also feature the perspectives from their new-to-in-house counsel. This series will also provide an exclusive look at a successful value-based staffing practice that focuses not just on the experienced counsel, but on the pipeline of talent that the company will rely on in future generations. It will provide a rare insider’s look and a terrific model of how to prepare attorneys to meet the challenges of complex and sophisticated corporate practice and client service. 

We are pleased to welcome, Amy Schuh as our first guest blogger. Amy is the Legal/GA Chief of Staff and Vice President of Operations for Hewlett-Packard, where she is responsible for driving operational excellence across the law department.  She also serves as the Co-Chair to HP’s Pro Bono Program.  Amy will open up this series with an overview of the program.

Thank you to everyone at Hewlett-Packard, for your time and for offering to share your experiences with us. As always, any comments, questions, constructive criticisms, cries from the bewildered and notes of appreciation are welcome in the comment area at the end of the blog posts.

Part I

It was the fall of 2009. Law firms were canceling summer programs and deferring start dates. We were staffing our cases with junior associates whose hourly rates seemed high, and worse, we had little prospect of retaining their work product after staffing an HP case. At the same time, we had a need for top talent, especially in the junior ranks, as we historically hired attorneys 5-7 years or more out of law school. We had a perfect storm. We knew there was a pool of law school students who were incredibly talented, smart and eager to find a job. This has rarely been done in-house, but we also knew that we could be the pioneers — we could train new attorneys as well as, if not better than, any major law firm. Best of all, we could shape them in the ways of an HP attorney.  Not only that, but we could develop them and provide them with enormous future opportunities by leveraging the many practice areas in our large, global, diverse law department. 

And so started our new graduate attorney program. That winter we met with students at the top law schools in the country, seeking three lawyers who would be interested in entry-level litigation, intellectual property, corporate and commercial law positions. We chose four (and it turns out we chose really, really well), who started at HP in the fall of 2010. Each attorney was assigned a buddy, someone experienced in the law department who could help orient each new graduate to the ways of HP and answer any questions. We also developed an awesome onboarding website. Our GC and his direct staff personally selected four supervising managers to ensure that each new attorney received critically important mentoring and day-to-day oversight. We then created a two-year formal education and development program, which was kicked off by two training boot camp sessions. That program was so effective that we extended invitations to any new professional joining the legal department. Our new graduates receive a mix of core content, practical experience and targeted training for the area in which they are assigned. The training program was well-received and is evolving as we prepare to onboard a new class in the fall — five more in the United States and three in India — and are already recruiting in the fall for the class of 2012.

Initially, we selfishly sought to train lawyers who could be great, lifelong HP attorneys. But the reality is that we also freed up our more senior lawyers to do the complex work we are paying them to do, and exponentially increased the energy level in our teams just by adding four fresh faces, who were excited and proud to say that they are the inaugural class of this cool program HP Legal, concocted just a few short years ago.

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by Martine Turcotte, CLO of BCE, and Zygmunt Jablonski, CLO of Domtar

Click here to download the French Translation (pdf) of this post.

As general counsel for two different kinds of clients, there are many things that distinguish our respective roles. One of us has a large department, one has a smaller department. One of us works in a company that is in the tech and communications space, and one of us works for a company that is resource and product-oriented. One of our clients has a strong focus on domestic work in Canada, and one is a Montreal-based Delaware company with a North American manufacturing base and a global customer network. 

But in terms of our roles as general counsel, what distinguishes us is not as significant as what we have in common — namely, that we have many varied responsibilities that require us to juggle a number of roles and constituencies every day. We solve legal problems, manage risk, coordinate brands, monitor public and governmental affairs, fulfill corporate secretariat roles — you name it, we are responsible for it. 

Today’s general counsel – regardless of the company in which he or she works – is pulled in any number of directions by the sometimes competing demands of management executives, stakeholders, board members, employees, adversaries and competitors.   We have a great deal of work that requires our immediate attention, but at the same time need to focus on long-term strategic needs for our law department and our companies. So, who has our back? Our great department team members, our management, and of course, our personal support network of friends and family outside the office.

Who is missing from that list? While we are both fortunate to work with extremely talented outside counsel, many of whom we cherish for their skills and friendship, there are still not enough firms out there who think of themselves as truly part of our teams and who “have our back” at all times. 

Many Canadian firms do not seem to understand that the general counsel’s agenda and service expectations are changing — far too many of the firms upon which we have traditionally relied are too slow to work with us using new value-based techniques such as innovative pricing, staffing, knowledge, and process-based solutions that our businesses and complex legal problems require. There are some really notable exceptions, but they are exceptions, rather than the rule.

At a recent ACC CLO ThinkTank meeting (hosted by Zyg at Domtar Corporation HQ in Quebec, sponsored by Ogilvy Renault and attended by Martine (Martine is also a member of the ACC Board of Directors), a number of Montreal’s top CLOs met to discuss law firm/client value issues: what’s working and what’s not.  

We were struck by the common experiences of every general counsel in the room. There was a strong sense of disappointment over resistance from many of Canada’s top firms when we asked them for a new approach our legal work and legal spend that will drive efficiency, and not just hours. There was also dissatisfaction with the firms’ lack of focus on process and project management skills. For the most part, we are still not seeing law firms truly align themselves with us in terms of profiting from our outcomes in a manner that is commensurate with the value of the services they provide to us.

Coming out of that ACC CLO ThinkTank, we wanted to pen this blog to help Canadian CLOs and GCs start the conversation between in-house leaders and Canadian law firms. It is important to remember that there are two sides to the story here — we both need to do better at having the “value” conversation. As in-house counsel, we need to be clear in defining what value means to each of us, and to reward firms that provide it; and firms need to improve and adjust, or reinvent their service models to accommodate the “new normal” of efficiencies and work based on results, not hours.

In concert with the ACC Value Challenge initiative, we aim to drive the conversation to get each side, clients and firms in Canada and elsewhere, focused on how we can do better, together. 

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Post 8 

Having Our Final Say on Alternative Fee Arrangements

Week 8. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client view

From Karen:

It is hard to believe that this is the last post of the series. When Nicole and I began this undertaking, I wondered if there would be enough to say about alternative fee arrangements to fill eight posts. Now I know that we could each fill many more posts than that -- if only we didn't have our day jobs. In trying to think about how best to conclude the series, I thought it would be helpful to summarize what I've said before, and provide advice to those in-house counsel who are thinking about using alternative fee arrangements or are at the beginning of doing so. 

First, with anything new or novel, it takes time to feel comfortable with it. My entire career was based on the billable hour system, and I suspect the same is true for most of you. It is not easy to change the mindset that has been ingrained in you immediately, so do not become frustrated if you do not understand every aspect of using alternative fee arrangements at the get go. Like so many elements of doing the simplest things -- riding a bike, driving, reading a case, getting the fundamentals down is only part of it. The more you use alternative fees, or even the more you discuss that prospect with outside lawyers well-versed in providing litigation services under such arrangements, the more comfortable and knowledgeable you will become.

Second, as with any relationship, communication is key. While you should have open communication with all of your firms, even those billing by the hour, the nature of the alternative fee arrangement makes it that much more necessary to have solid communication with your lawyers, especially at the outset of the matter. In order to fashion the fee arrangement itself, it is necessary to identify the goals you have for the litigation and define the outcomes that you seek—a win, a quick resolution, or something else. This alone typically requires more communication than usually takes place at the beginning of a case being handled under the billable hour system.

Third, remember that there are times when the arrangement you've agreed upon may change. It is helpful to use the example of building a house: sometimes you change your mind about the type of finish you want, or sometimes an unforeseen problem can occur. These problems are addressed via a change order.   If something in the litigation causes the scope originally agreed upon to expand, and that is not the fault of your lawyers, then it will be necessary to revisit the arrangement in some way. Again, communication and careful scoping are key. 

Fourth, if you are concerned that your firm will not have the necessary incentives if you devise a flat fee or flat monthly fee arrangement, seriously consider having a bonus element as part of the fee. Knowing that there is a significant amount of money riding on the outcome (or whatever goals you and your firm identify) will give you the peace of mind that your firm is always aligned with your goals.

Finally, remember that budget certainty is something that others in your organization (your CFO, CEO) value greatly. Knowing in advance what litigation will cost is something that most business people will be thrilled about, and only alternative fee arrangements can provide that budget certainty. Also, having the ability to have the most senior members of your outside legal team collaborate without being charged by the hour for that collaboration is priceless.

As I said at the beginning, a fixed fee arrangement is simply one type of method I will use for my matters. Even though it will not become the sole arrangement I use, having the option of using alternative fees for litigation or other matters is something I view as very valuable. I am happy with my decision to step out of my comfort zone in order to learn more about them and experiment with them. Once you do that one time, the benefits of alternative fees are self-evident. I encourage everyone faced with growing legal fees and shrinking legal budgets to give them a try.   

The firm view 

From Nicole:

First, I would be remiss if I did not start this post with a heartfelt thank you to my partner, Patrick Lamb, who filled in for me last week. I was busy working on an expedited matter (for Kayak, coincidentally), and, I truly appreciated both his help and his insightful post.

I echo Karen's sentiments that this series has progressed far faster than I imagined when we started. In only seven previous posts, I think we have addressed a number of important issues relating to handling litigation using alternative fee arrangements. And though we come from different perspectives, inside and outside counsel, it is evident that even from these different vantage points, we see eye to eye on the issues we have discussed. For me, that is no surprise. I have always seen the option of alternative fees as something beneficial to the industry as a whole, regardless of where you work. And, for those firms and clients who embark on such arrangements in the right manner, the alignment of interests is a natural by-product.

As Karen concluded by providing advice to her fellow in-house lawyers who have not yet taken the proverbial plunge or are early in their experience with alternative fees, I will aim for the same audience, but obviously from a somewhat different standpoint.

1. There is no time like the present. Understanding alternative fees is not something that will happen faster if you wait. As we both said early on, it takes a certain confluence of factors -- the right case, the right firm, the right motivation -- but waiting for those factors to occur automatically may mean you are waiting a long, long time. Consider finding the right case, finding the right firm and then trying it.

2. Stop worrying that the fee proposal you have been given has a "catch." I have met with a number of people since we started Valorem three years ago, and there always seems to be this initial concern that the fee arrangement has some secret mystical quality to it that clients worry will cause a windfall for the firm. Trust me, there no hidden "trap." As we have always said, we are in this for the long haul. As a result, we hope to keep our clients, not take advantage of them on the first matter and never work with them again. I suspect the same is true for most lawyers using alternative fee arrangements. It all comes down to that one word -- trust. For us, we want repetitive clients, not one-offs. If we aren't open and fair in all we do, chances are, we will never see you again. And believe me, we know that you talk to your friends in other companies, so chances are, we won't have much of a client roster if we are trying to take advantage.

3. Be realistic and as accurate as possible when explaining the case at the beginning so that we have the ability to do due diligence and to appropriately define the scope. If you have archaic e-mail systems, but you have retained every email since the disco era, that would be something relevant to mention, as e-discovery is often the most costly part of a case. If you do not want to have to revisit the billing arrangement, then be as comprehensive as possible at this stage.

4. Remember that part of going to an alternative fee arrangement is to take advantage of efficiencies and creative strategy to streamline a case. Do not engage in a flat fee arrangement but then expect your outside firm to do all of the things your billable hour firm used to do. Because not much of the "uncover every stone" mentality adds to achieving the goals of the case, you must be willing to let it go. If you are not, you are guaranteeing your firm will lose money on the deal and will not likely want to work with your company under similar circumstances again.

5. Particularly if you have a discretionary bonus at the end, remember to reward your firm appropriately. Most companies think lawyers are overpaid as it is, but this is a result of the billable hour scenario, not alternative fees. If your firm puts itself at risk for your matter and knocks it out of the park or gets a better than hoped for result, reward them appropriately just as you would want to be rewarded internally for similar performance. In the end, when firms feel that their clients appreciate them and understand the efforts they are making, the loyalty and willingness to go the extra mile becomes automatic, and that makes for a beautiful partnership.

Overall, I hope that this series has provided some insights to those facing similar issues to Karen and Kayak. I welcome the opportunity to speak with anyone with direct questions or opinions about what we provided.

And finally, my trip of the week is to Japan. Not the place most people would aim to go to after last week's disaster, but my heart goes out to the Japanese people and this is my way of keeping them in my thoughts.   

Final thoughts from Susan Hackett:

I want to take this opportunity to thank Karen and Nicole for joining us on this journey to ‘lift the curtain’ on value-based client-firm relationships. We sincerely hope that this series provides you with different approaches to consider when managing litigation work, and helps you assess how you can learn from these examples and apply value-based practical solutions.

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 Post 7

Making Time for Value

Week 7. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The firm view

From Patrick Lamb:

Nicole has a day job, and unfortunately (for this column, at least) it is going gangbusters at the moment. Since I am no stranger to writing blog posts and have been following Nicole and Karen’s posts very closely, I volunteered to guest post this column. I apologize for the interruption and hope I can measure up to the high standards Nicole has set in her earlier posts.

I have been a huge proponent of pricing using non-hourly arrangements for a long time. Even as a younger lawyer, I was always bothered when I saw that my opposing counsel was getting paid the same or, many times, more than my firm was without regard to outcome. That struck me as fundamentally unfair. I also saw from close proximity how some lawyers took advantage of deep pocket clients to do (and bill for) all sorts of crazy stuff that was never, under any plausible set of circumstances, going to make a difference to the outcome of the case. The rationale used was at times candid (“we make money this way”) and at other times questionable (“we need to do all this work so the client knows we are being thorough”).   The point is that, to me, the flaws in the hourly model and the abuses of that system in the name of “defensive lawyering” (think, defensive medicine for lawyers) made the system unacceptable. I still have to confess to being somewhat surprised when clients, the victims of the system, are not as fed up with it as I was before we started Valorem.

In our three plus years of operating Valorem, we’ve learned that there are far more in-house lawyers like Karen than there are ones who are fully committed to non-hourly arrangements. This series of blog posts has been enlightening as Karen explained the development of her thinking on alternative fees, including how using alternative fees required her reallocate how and when she spent time on matters, particularly at the outset. As some have said, when you are putting out fires every minute, it’s not easy to set aside time to plan the handling of a matter, even if you know in your heart it is the right thing to do and ultimately a better way of handling problems. Time for in-house lawyers is the rarest treasure, and it must be safeguarded.

One of the results of thinking about this widespread problem—the I-think-I’d-like-to-try-alternative-fees-but-I-don’t-know-where-to-begin-and-how-do-it problem—is that I think it is incumbent on lawyers who want to provide service on this basis to make it easier and more convenient for in-house lawyers to do so. We need to provide detailed planning maps that show what will be accomplished over a given segment of time, when settlement discussions will be suggested, when the trial is likely to occur, and when expenses will have to be accrued. These benchmarks allow a basis for evaluating performance along the way toward final resolution. I think these kinds of tools will prove themselves useful to in-house lawyers and ease the pain of trying alternative fees.

It goes without saying that even the best battle plan never survives contact with the enemy, so both client and lawyer will need to see these plans for what they are, a starting point. But the ability to abide by the plan and force events to move as desired can be an important way of judging performance, both in the quality of the planning to start with and the execution of the plan strategy.

I’d welcome reaction from the in-house world. Are there things we as proponents of AFAs could do that would make it easier for you to implement non-hourly fee arrangements?

Kayak pick of the week: Chicago to Ireland. Erin-Go-bragh!

The client view

From Karen:

I know that Nicole is under the gun (for one of my cases) and a bit under the weather, so I appreciate Pat stepping in to write this post for Nicole. 

Recognizing the demands on in-house counsel time is very important. If we had the ability to leisurely consider how to achieve the results we need to produce for our companies in the most cost-effective manner, our jobs would be so much easier. But so often, we simply need to delegate a problem to a trusted advisor and focus on the next problem. So the more an outside lawyer can do to show how things will work smoothly, the easier it will be to at least try an alternative fee arrangement. That doesn’t mean it will be easy, but at least easier.

I want to comment on the planning aspects of managing an alternative fee arrangement. My background is not as a litigator, and while I understand the process, I am not in the same position to evaluate things as someone who has spent their career in a courtroom. For that reason, being given a roadmap, with attendant explanations of why certain non-obvious things need to, or are likely to happen, what the strategic points are, what options might reasonably be available and other executive level information that will help me evaluate the contemplated strategy, including how it meshes with our business plans, is really important. One of the reasons I value working with Nicole is her ability to explain the strategic and tactical options available and the pros and cons of each in a way I can use to explain to my business colleagues. 

Kayak’s foray into alternative fees has been eye-opening, and despite what we have said about time, I look forward to the passage of some time so I can look back at our alternative fee approach with some distance and compare what we have experienced with what we would have under the more traditional approach. I appreciate the ACC giving us this forum to write about our experiences, and I also am looking forward to speaking with my in-house colleagues about whether my concerns, experiments, experiences and results with AFAs match theirs.

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 Post 4

Adaptable Fees to go along with the Legal Work Flow

Week 4. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client view

From Karen:  

Last post, we talked about the structure of some of the alternative fee arrangements we have been using for our litigation. As I noted, sometimes things do not go exactly as planned, through no fault of ours, or the firm's, initial assessment of the case. In those situations, we think it is important to work with our firm to assess whether changes to the arrangement should be made.

It helps when the original fee proposal spells out the scope of the matter, including what is and is not included in the fee arrangement. That way, if something occurs that is outside of the original scope, it is easy to determine whether the scope (and/or the fee) needs to be expanded. In one of the examples of litigation I gave in last week's post-- the one involving expedited litigation, we originally priced the matter based on the number of months the matter would last before trial. For various reasons, the matter was delayed for several months. In addition, the other side brought in a number of experts -- something not contemplated at the beginning. As with most litigation, the longer things drag out, the more work that tends to be done. As that was the case here, we were willing to entertain an expansion of the fee arrangement since the addition of the extra months caused additional work. Because one of the extra months involved was much slower than the others, we did not do an exact month-to-month expansion.

In the end, the negotiation on the revised arrangement was very similar to the original discussion regarding fees. It was a give and take that allowed us to come to a mutual agreement on the changes. I suspect that because I had a better handle of the scope of the litigation due to the front-end attention we gave it, coming up to speed on the need for a revision was fairly easy.

I think it is important for client's to understand that changes occasionally do occur when it comes to fixed fee matters, and it's important to understand them and be open-minded to them. It is not a natural reaction. It is similar in some respects to a case budget that was exceeded by a firm billing by the hour, but it is different in that budgets tend to be considered “guesstimates” while fixed fees are perceived as more certain. While in the billable hour scenario, although no one likes budgets to go south, you tend to be accepting of changes because so much information is not provided or available at the outset. So long as you believe the firm is not being inefficient, changes to the budgets are accepted. The notion of a changed scope in a fixed fee agreement is generally clearer and should, therefore, be easier to understand. If something is not in the original scope, the additional work is akin to a change order, and most businesses are comfortable with that concept. The changed scope concept is a two way street though: I would expect a similar adjustment if we had based the original arrangement on six months of expedited work but for some reason the matter was set for trial in three.

As I have said before, the trust aspect is key. While I don't want to be taken advantage of, I also don't want to put my law firms, who I consider valuable partners to our business, in a difficult financial position when circumstances of a particular case are outside of their control.

The firm view

From Nicole:

Clients who utilize alternative fee arrangements sometimes have difficulty coming to terms with the fact that occasionally, the fee structure should change. This may be because of the notion that a fee that is fixed should remain fixed. The truth is that firms working on alternative fee arrangements tend to bear most additional unanticipated costs without asking for a revision to the fee arrangement. This is because the firms recognize that certain things that were not expected -- i.e., a motion to compel filed by the opposing side or a larger volume of documents produced by the other side than anticipated -- should have been factored into the overall fee proposal. Firms also are loathe to keep going back to clients to make adjustments. It makes the concept of fixed fees appear illusory.

Still, it is impossible for the firms to bear the burden of substantial change that was unanticipated in every situation and still stay in business. In the scenario Karen mentioned, there was a date by which trial was to occur by virtue of a contractual clause. It was safe, therefore, to assume that the term would be adhered to. However, certain external factors caused the date to get delayed. Accordingly, it simply was not a matter of not estimating the proper scope of the matter. It was the type of contingency that would not have made sense to include in the original fee proposal. And because the time to trial is one of the most important factors in determining a fixed fee, adjustments were warranted.

We are finding an analogous situation when clients want us to price a matter entirely, rather than in phases. If you include trial in the price, the fee increases disproportionately because less than three percent of all civil cases go trial www.northwestern.edu/newscenter, and if they do, the cost of trial is far higher than the cost of other aspects of the litigation. When we priced matters entirely with one fee that included trial, we noticed that there was a fair amount of sticker-shock involved on the client's part. Now, we always break out charges for trial separately from the rest of the case. So, it is x for the matter, and an additional y if it goes to trial. Psychologically, this was easier for clients to get their arms around. (I'll address the psychological issues inherent with alternative fee models in another post).

Like the disproportionately skewed fees when pricing a matter with trial included, if firms included in the original fee additional amounts for all of the potential contingencies that could occur, the price would be too high for any client to want to go forward. But since many contingencies don't come to fruition, it makes more sense to price based on the mutual and reasonable expectations of the firm and client and then adjust for the outliers. That is the normal course, but as with every aspect of alternative fee pricing, it is subject to discussion. If mid-course corrections are difficult to deal with, say for budget reasons, it is possible to build in certain amounts for the unlikely but possible contingencies. The decision on what to include and how to approach change orders is the client’s call, but it is something to be addressed upfront.

My Kayak selection of the week is from Chicago to China. I've always wanted to visit, and as I am quite busy at work and can't quite fathom when I might have time for such a trip, I will go there via my imagination instead.

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 Post 3

When the Fees Align 

Week 3. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client view

From Karen:

When the stars we have been discussing aligned and there were some pieces of litigation that lent themselves to alternative fee structures, I wanted to consider structures that would provide budget certainty. But it was very important to agree on a structure that provided me comfort that Nicole and her firm would continue to give it their highest attention if the litigation dragged on. I didn’t want to experiment with a structure that created a risk of a short attention span by the firm. We accomplished both objectives.

The first matter that we priced on an alternative fee basis was a copyright infringement matter where we were plaintiff. I was concerned that if the opposing side did not want to resolve the matter early, we would be in for a long fight -- i.e., high fees. Knowing the goals we had, Nicole priced the matter in phases, with a bonus incentive if a favorable settlement or judgment occurred. The bonus demonstrated that she and her firm were putting themselves at risk on the matter, and therefore, it eliminated the concern that our interests might not always be aligned. (The fact that her firm includes a "value line adjustment" on every invoice so clients can adjust the amount up or down to match the value they think they received also helps). This approach allowed us to have the budget certainty we wanted, and to link the bonus to a specific result. The matter settled early and we avoided paying for the additional phases, but Nicole and her firm were rewarded for the work they put in on the front end via the bonus that they achieved. It was a win for Valorem relative to the amount of time invested, and it was definitely a win for Kayak.

The second matter provided for a different fee structure, and is probably the more typical type of arrangement for most companies our size. In that case, we are defendants in expedited litigation. Although the parameters of what will be done in the case are similar to most substantial pieces of litigation in that there is written discovery, a bunch of depositions, the likelihood of experts and then a trial, the expedited nature makes it necessary to do a lot more work in a shorter than usual time frame. Again, because we wanted the budget certainty, we structured the fee by using a fixed fee for the entire case, but we pay in equal monthly installments for the duration of the matter. There is also a bonus component based on the outcome.

Another type of arrangement we have entered into allows us to bundle a bunch of similar issues or smaller matters together into a monthly portfolio fee. While the volume of work that falls into this category will fluctuate every month, we have the budget certainty we want, and previous data that Nicole shared with us when she was handling this on an hourly basis leads us to believe that over the course of the year, amount of work done will even out. The budget certainty works in Valorem’s favor as well.

As with all fee arrangements (and cases, regardless of what arrangement) sometimes things arise that are unexpected. More on that in next week’s post.

The firm view

From Nicole:

The beauty of being able to look at each case individually is that we can structure the fee arrangement as necessary to accomplish the goals of the client for each particular case. While the most popular type of fee arrangement for litigation involves a fixed fee, almost always with a bonus element, we have entertained fee arrangements that run the gamut of pure contingency to a modified hourly rate with a bonus. 

When we are dealing with a matter with a clause or statute that allows the prevailing party to recover fees, we always track the fees on an hourly basis lest we find ourselves in a not so modern court that won't entertain the non-hourly model in awarding fees.

Of course pricing a portfolio of matters, as Karen describes, is easier for us and better for the client because it allows us to spread the risk inherent with one case across more. This allows us to provide a lower overall fee since the risk of an outlier, a deviation from the norm, is diminished. It also allows us to customize the bonus on either a case-by-case basis or some achievement for the portfolio overall. For example, our bonus can be tied to the overall savings in litigation spend, or simply the amount of savings we achieved across the portfolio in connection with settlement or judgment payouts.

In structuring our bonuses, we take into account that settlements, particularly between parties with an ongoing business relationship, may not always come in the form of a cash payment. For example the parties may agree to extend a contract's term in order to resolve the litigation. If our bonus were to be a percentage of the recovery (an easy scenario when our client is the plaintiff), we would simply ask the client to value the settlement (i.e., in the example I gave, the value of the additional one year term) and pay us based on that. This places a lot of trust in the clients, but that is the nature of these types of arrangements, and we'd rather have a trusting relationship than the opposite.

We have noticed that as clients develop experience with alternative fees, they are developing firm ideas of the type of behavior or results they wish to reward, making the discussions about the alternative fee that much more streamlined and focused.

A brief aside. We have just launched the free Valorem App from the iTunes App store (search "Valorem") The App contains a "Tip of the Day" feature where you will find some tips on fee structures, with more forthcoming. Shameless plug, I know, but I do think it provides value. (If you like the app, review it or tell a colleague).

My Kayak trip of the week is from Chicago to the Bahamas. Given that the wind chill was about -5 F this morning in Chicago, it helps to think of summer.

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Post 2

Alternative Fee Arrangements, Time Well Spent

Week 2. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client view

From Karen:

Last week, we discussed how a lot of things needed to be aligned for me to be willing to use an alternative fee arrangement for litigation.  One of my greatest concerns, because it touches upon the one critical resource that I have the least of, was how much time it would take to work out a fee arrangement.  As I mentioned, in a small legal department, when everything that hits my radar is something that needs to be resolved yesterday, it takes no time at all to agree on the billable hour model.  Typically, if we are the defendant, the time it involves is the five minutes it takes me to pick up the phone, call my lawyer of choice and say, "We just got sued in this court by this party about this thing. Can you handle it?" Assuming no conflict, the answer is typically, "yes," to which I say, "I'll send you the complaint." Done deal. It may take a few minutes longer if we are plaintiff, but not much.

When it came time for me to consider an alternative fee arrangement, I worried about the time on the front-end, as I suspected the negotiation would be time-consuming.  While I'm sure the front-end aspect was much more time-intensive for Nicole, as it turns out, for me, it simply entailed answering some questions about our goals for the case, how many witnesses both sides would likely each have, the universe of documents we possessed and in what format, and the value of a win so that she could then put a proposal together with options for fee arrangements.  I then got a detailed fee proposal with more than one option so we could decide which arrangement best fit our needs. The proposal was specific in terms of the phases of the case and the assumptions that it took into account. It was in simple enough form for me to forward to our VP Finance and to recommend one of two options offered. Done deal.

In retrospect, the discussions we had at the onset, and the consideration I had to give to what our goals were and what the scope of the matter appeared to be, were a valuable investment that is often missing in the initiation of a case under the billable hour model.  The expenditure of time spent thinking through the case helped me focus on what I wanted to accomplish in the litigation. That benefit was well worth the expenditure of a little more up-front time.

One other by-product that I underestimated, but truly appreciate from the time standpoint is the elimination of monthly invoices that I have to pour through in order to approve.  That is one less administrative task that I am quite thrilled to have off my plate.  And, because the arrangements that we've entered into typically involved some fixed aspect as well as an incentive bonus, I don't have to worry about whether the firm's interests are aligned with mine.  More on that structure in a future post.

The firm view

From Nicole:

Karen raises a common concern that many clients seem to have about entering into alternative fee arrangements. Because the details of alternative fee arrangements, particularly customized ones like we create at Valorem, can be made quite complex, there is a concern that the alternative fee is more difficult to grasp than billing by the hour. Busy clients tend to shy away from an alternative fee because, like Karen, they are reticent to spend precious time at the beginning of the matter.   While there is certainly more time involved than simply picking up the phone and saying, "You're hired," the expenditure of time for the client is far from extensive. In fact, our experience is that clients who try the alternative fee and focus on the key questions about the litigation at the onset generally prefer this method because it puts them on the same page as their outside lawyers from the get go. And, as Karen has experienced, the net investment (including bill review) over the life of the case is frequently less.

Some of the questions we ask that might never be expressly discussed under the billable hour method are: what does a victory look like (i.e., is it -- just settle the case quickly, or might it be, settle within this fiscal year, but for no more than x); who in your company is going to be involved (or inconvenienced?) as a witness; are there any internal political or external public relations issues we need to be aware of; what do you think the motive of the opposing side is; are there non-cash ways to resolve this (extend a contract's term, commit to order x amount of product); who owns the problem from a business standpoint, and what are their views and expectations, etc.

What most clients don't know is that any firm well-versed in doing alternative fee work is then going to spend a fair amount of time vetting the case on its own so it can determine whether it wants the case, and if so, a fair way to price it given the perceived risks and rewards. This behind the scenes vetting process does not require any additional time by the client, and is merely the due diligence that comes along with understanding the scope of the matter in order to set a reasonable price.

Once the background work is completed, a written proposal setting out the key assumptions and one or more fee arrangements is then given to the client so they can choose which arrangement might best serve its purpose. It is extremely helpful if the client has data on how much similar cases have cost in the past. Similarly, if the firm has this type of data as well, it can lead to a more informed decision on both parts. In the end, agreeing on an alternative fee arrangement is not so time consuming for the client, and the additional expenditure of time at the front end can frequently lead to better outcomes for the case and more satisfied clients.

My Kayak choice trip of the week is from Chicago to Dallas for the Superbowl. That shows amazing client service on my part since Karen is a Green Bay fan and they beat the Bears for the NFC Championship.

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Welcome back to our “value practice” blog series featuring real-time and real-life value conversations between an in-house counsel and their trusted law firm.  For those of you new to this series, ACC hosted our first client-firm blog pair last year with Ken Grady from Wolverine Worldwide and Lisa Damon from Seyfarth Shaw, which focused on the restructuring of Wolverine’s trademark portfolio to incorporate new service methodologies.  Their fresh approach and candid commentary made these posts a must-read. 

For our next partnership, we are pleased to welcome two new bloggers, Karen Klein, General Counsel for Kayak Software Corporation, and Nicole Nehama Auerbach, a founding member of the Valorem Law Group. From now through March, Karen and Nicole will offer a weekly ‘behind-the-curtain’ look at the evolution of their developing plans and solutions to Kayak’s portfolio of litigation work.  I anticipate that they’ll be giving us all a run for our money – they are the original dynamic duo, but we’ll be working hard to keep up. So often we hear that value-based relationships don’t adapt well to the litigation context and/or that smaller law departments may not be as well-leveraged to convince firms to handle work using value-based fees (.ppt download). We fully expect that Karen and Nicole’s capture of their value discussions will demonstrate that both of those presumptions are fundamentally misinformed. First, some background on our featured bloggers: 

Karen Klein is the general counsel of KAYAK, a great travel site that uses innovative search methods to help you take your travel decisions to a whole new level.  Being a hot property on the Internet poses all kinds of issues that Karen must navigate for her company, for example she may call on Nicole to help her efficiently budget, manage and resolve whatever comes in the door. 

Nicole Nehama Auerbach is a veteran litigator and a leading innovator in value-based fee structures. She is a co-founder of a law firm, Valorem, which is premised on the principle that a lawyer’s work is best measured on a scale of client satisfaction and results for cost, not on a scale calibrated by rates times hours. What makes this even more fun is that both Karen and Nicole’s legal careers started in the same BigLaw firm that they both left, at least in part because institutionalized law firm practice did not accommodate the kind of creative relationship they’ve now set off to explore on this blog.

Thank you, Karen and Nicole, for your time and for offering to share your perspectives on the “Client-Firm Value” relationship.  As always, any comments, questions, constructive criticisms, cries from the bewildered and notes of appreciation are welcome in the comment area at the end of the blog posts.

A hearty welcome to Karen and Nicole: we’re grateful beneficiaries of your shared wisdom and innovative ideas.

- Susan Hackett

Lifting the Curtain: The goal of this effort is to ‘lift the curtain’ in order to help you assess how you can learn from this example and apply value-based practical solutions. The voice, views and stories expressed by the authors below are their own and not ACC’s.

Join in: Please be sure to join in the conversation with your comments and observations, and enjoy.

Susan Hackett, Senior VP and General Counsel, Association of Corporate Counsel and the ACC Value Challenge (hackett@acc.com)

The client side:

Blogger Karen Klein is General Counsel at Kayak Software Corporation 

Full disclosure: I was not an early adopter of alternative fees.  Some (like Nicole, perhaps), may even say that I came late to the party. But adopt (or adapt), I have -- at least on some of my matters.  I suspect that my pace in utilizing alternative fee arrangements is typical of most in-house counsel today. Some were instantly on board, some will never make the move, and most of us in between see their value in some, though not all, circumstances, and will use them when a number of variables come together at the same time. I also suspect that many other in-house attorneys have grappled with the same issues I've faced, or at least have had the same questions along the way. As Nicole and I discuss our experiences and perspectives in the course of this series of posts, I hope that we provide something useful to both the early adopters and those who are just getting their feet wet with alternative fee arrangements. My guess is that I may learn something new along the way as well.

I should first start by telling you a few things that I think have influenced my mindset. I started my career in the corporate department of a large Chicago law firm, and of course, the only way we billed was by the hour. When I left the firm, I embarked on a series of in-house jobs at start-ups and technology companies, including Platinum Technology and Orbitz.   As you probably know, currently, I am the general counsel of a travel metasearch company called Kayak Software Corporation. In the simplest sense, our website, www.kayak.com, allows users to search for travel-related services (air, hotel vacation packages, etc.), and then link to providers’ websites to make travel-related purchases. Until about 14 months ago when I hired an associate general counsel (a true godsend, really), I was a department of one with what seemed at times like enough work for a department of twenty.  To say that things move at breakneck speed is an understatement, and when I’m trying to staff something quickly, grasping the hours times dollars system is often the quicker and easier thing to do.

So, while I’ve always been open to change, I was simply too busy on a day-to-day basis to make such a change without some concerted effort from a proactive law firm. Even then, it needed to be the right matter, and I had to feel that I understood how the process was going to work. All of those stars aligned in the form of (a) some pieces of litigation we were involved with, (b) some (gentle) prodding from Nicole, with whom I had worked for several years and had a good working relationship, and (c) a VP Finance who loved the idea of budget certainty when I brought the proposals to her. And so, under those circumstances, I took the first step on a path that probably, if all continues to go well, will be walked upon a little more frequently and with less hesitation as the right situations arise.

The firm view:

Blogger Nicole Nehama Auerbach is the Co-founder and Partner of Valorem Law Group LLC.

Full disclosure: I was an early adopter of alternative fees. It was for that reason that, after more than 14 years, I left my career at that same large law firm in Chicago where Karen started. I left to help launch a litigation law firm built entirely on the alternative fee model. When the four founding members (we now have 8 attorneys), all large law firm refugees, started Valorem Law Group in 2008, we believed to our core that clients wanted: (a) budget certainty for their matters; (b) attorneys who were willing to tie a part of their fees to the outcome of the matter; and (c) lawyers who would focus on the end-goal, not “boil the ocean to make a cup of tea.” We were not at all surprised when alternative fee arrangements became the talk of the legal world so soon after we opened our doors.

And though we have been blessed with our share of the early adopters on the client side, one thing that we discovered early on was that many potential clients out there are like Karen – lots of work, great intentions but little or no time. Like anything new, alternative fees take time for people to get their arms around. And while most lawyers consider themselves to be very “cutting edge,” in fact, they are some of the slowest people on this earth to embrace change. Luckily for us, with all things, there comes a tipping point, and this one is being helped along by progressive legal department budget cuts that cannot be accomplished with a simple discounted billable rate.

As Karen said, it often takes a number of things for in-house lawyers to make the move to alternative fees.  From our perspective, it is (1) a lawyer (i.e., the general counsel, AGC) who understands that time invested up front will pay dividends and is confident enough in his or her role to be willing to risk using a new fee arrangement in the (unlikely) event that it does not go exactly as planned; (2) a matter where the scope is generally definable from the outset; and (3) a case that is not simply a routine and small-dollars matter, but also, is not a bet-the-company matter. Since we handle litigation only, we are constantly fighting against the fallacy that all litigation is uncertain. While many aspects of litigation may be influenced by the conduct of the opposing party, by and large, all litigation has the same core elements. As we hold ourselves out as expert litigators, identifying the scope of a matter is naturally within our expertise. In our firm’s three year history, we’ve seen that when the three things listed above are present, and the client or prospect is willing to embrace change, an alternative fee arrangement is born. 

As we continue in our series of posts, we’ll discuss the journey – the good, the bad and the potential pitfalls. Best of all, we won’t do it by the hour.

Each week, I will select a dream destination of choice through Kayak. This week, I choose Chicago to Auckland, New Zealand (summer there). For details, visit http://www.kayak.com/flights/ORD-AKL/2011-02-14/2011-02-28.

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Post 16 

Our Successes, Lessons Learned and Parting Thoughts

Week 16. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

There are some obvious questions when you complete a process, and structuring Wolverine’s relationship with Seyfarth is one of those points when you ask what lessons you learned.  First, the obvious question – would we do this again?  From Wolverine’s standpoint the answer clearly is yes.  We learned a lot about how we do things, what we do well, and where we need to improve.  To me, critical self-analysis always is useful.

Second, what did we not do well?  It took too long.  That one falls mostly on me.  Small legal department’s do not have a lot of flex time, and general counsel of small legal departments often (at least in my experience) get pulled in a lot of directions with little real control over their schedule.  That explains why at times it took me a long time to go the next step, but it isn’t an excuse.  The whole process should have taken three months or less.

Third, while we had pulled together information and done a fair amount of analysis, we should have done more to organize the material and our thoughts.  The more you really understand what you want, how you want to measure success, and how you can realistically work with your law firm, the smoother and faster the process will go.

Fourth, what did we learn through the process?  One thing we learned is that many law firms, though they profess their willingness to do value arrangements, still have not grasped what that means.  To one firm, it meant discounting their hourly rates.  To another firm, it meant reducing the amount they spent on things like photocopying and telephone calls.  To many firms, it meant that we just wanted lower costs.  While it may seem like everyone is talking about the demise of the billable hour and value fee structures, we found that many firms had missed the conversation.

Finally, I learned how far we (the legal profession) still need to go to catch up to our peers in other professions.  We haven’t scratched the surface on quality control.  We still spend too much time thinking our value lies in what we produce (the paper) not in what we counsel.  We are still, even the most progressive among us, highly resistant to change.  Perhaps most dangerously, we risk making ourselves less relevant.  No, I’m not predicting the imminent demise of lawyers (I think Richard Susskind may have that one covered).  I do believe, however, that if lawyers don’t keep up with the pace of change in the business world, then CEOs, CFOs and others in the C-suite will look for alternative ways to get the guidance and advice they need and will relegate lawyers to the technician category.  Of course this won’t happen across the board, but it could significantly restructure what we consider legal services and who provides them.

Overall, it has been a great experience to work with the Seyfarth team, to push ourselves internally to try new things, and to push our thinking on the structure of in-house counsel / outside counsel relationships in the modern business world.  I look forward to reading now about how others are pulling us away from the billable hour and into creative value fee relationships.

The firm view

From Lisa:

We too have enjoyed and believe we have benefited tremendously from this experience working with Ken and his team.  First and foremost, we go back to one of Ken’s prior points, about the establishment of the relationship -- including a significant amount of trust among Ken and us -- before the establishment (or even the discussion) of the compensation arrangement.

We spent a lot of time getting to know Ken and his team over about an eight-month period, starting with our first email exchanges, through our first webinar meeting, more email exchanges and telephone calls, an all-day in-person meeting at Wolverine’s headquarters, telephone conversations about various issues along the way, a few small legal "test" projects, and various interviews among Ken’s team and Seyfarth team members.  Ken also arranged for various meetings between limited groups of team members, in order to encourage relationship building, connection and trust -- our paralegals met the paralegals at Wolverine, our associates had separate meetings with Ken’s team, etc., all without participation or oversight by our partners.  Ken is a strong believer in empowering team members at every level of the organization (this is classic Lean) and encouraged us to let go of our natural desire, at these early points in the relationship building, to micromanage every interaction with Wolverine.

As a result, by the time Wolverine notified us that it had decided to work with Seyfarth in connection with trademark matters, every member of our team was already very familiar with every member of Ken’s team, and we all on this side felt a growing allegiance to Wolverine and its legal department.

Finally, by the time we began discussing the fee arrangement, we knew Ken thoroughly and he knew us, and each side had a comfort level that the other side was going into the fee discussions with the best interests of both sides at heart.  This allowed for a very candid and comfortable sharing of information about historical trademark costs, projected costs, projected efforts needed to manage the trademark portfolio, the definition of the scope of services to be included, and all of the other details that are critical to reaching a fair fee arrangement, but are often sticky or challenging to discuss openly in fee discussions.  It is our strong view that, had Ken not established the trusting relationship with us on the front end, it would have been much more difficult to have open dialogue that finally led us to what we think is a fair, metrics-oriented, compensation arrangement. Having participated in numerous "objective," formalized RFP processes in the past, which seem to be the rage these days, we know from experience how difficult it can be to begin with the discussion of compensation absent the relationship.  Accordingly, we come away from this process with great respect for the importance of relationship and trust in the process, and encourage everyone who is interested in establishing value relationships to be mindful of this key consideration.

Would we do this again?  By all means.  This has definitely been one of the more rewarding processes to undertake for us as professionals.  In addition to the development of a valuable personal relationship with the Wolverine team, we have participated in the building of the future, both for our firm specifically and in connection with the wider and broader task of demonstrating that we as law firms are not irrevocably and forever anchored to traditional billable hour relationships with our clients.  We have a long way to go in exploring the new world, as Ken points out in his post, but with this process we've taken some great steps forward.

What else?  We want to take the opportunity to thank Ken and Wolverine for joining us on this journey and to thank the ACC for providing us with this forum to describe our process.  We sincerely hope that this exercise has been helpful to our peers and colleagues both in-house and in outside firms and will motivate all of us to get to work and get creative in re-aligning the way corporate America and outside law firms work together.

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Post 15

The Current State

Week 15. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side 

From Ken:

So where are we?  We have built a relationship, started the transition of those 3,600 trademarks (and all the baggage they bring), developed a workable plan for the 2011 fee structure, and delved into the world of strategic trademark portfolio management.  For a small legal department with an assortment of other projects on our plate (and, oh yeah, those daily client matters that take up a lot of time and pull us away from these fun diversions), that is a lot of work.  We need to complete the portfolio transition this year, lock down the final numbers on the fee structure, finish some of the strategic planning tools, and keep up with the day-to-day portfolio challenges.  But those are the big tasks.

The real fun comes when we dig into the process improvement stuff.  Please, don’t all groan at the same time.  Who went to law school to become a process wonk?  Well, none of us did.  We went to law school to challenge our minds with interesting problems and come up with novel solutions.  Somewhere between law school and now, we got bogged down in grinding out the million or so things that need to happen.  One of my big goals is to move our team away from those million anchors (lean – take the waste out), leaving us more time to work on the things where we can add value to the business.  Fighting fires has its benefits, but working with the business team creatively is where we can take our skills and knowledge and showcase how in-house lawyers (with the assistance of our strategic outside law partners) drive asset value building not just asset protection.

This project has involved large steps, but getting out of the grind really involves many small steps.  We took our intake form for possible infringements, made it into something you can fill out online, posted it on an internal site with some instructions, and sent the word out.  Our clients are much better about giving us the information we need the first time.  We don’t fill out the form (which meant they took notes somewhere and then transferred them to us and we converted the notes to the form – now they do it once on the form).  This was small, but it saves a lot of time (again, 3,600 trademarks!).  It didn’t take long to do, but when combined with several other similar changes we freed up time for our IP paralegal.

The same small steps work for value fee arrangements.  The first one I did was for a retail store lease.  They were costing my then-client around $3,000 to $5,000 a lease.  We worked out arrangements with the firms handling them to do them on a sliding scale fixed fee arrangement, with incentives for fast turnaround when needed.  It took a couple of hours to work this out, and our fees became predictable and the income flow for the small firms we used also became predictable.

So where are we?  We are about to launch lots of small steps that by the end of next year will add up to (we hope) big gains.

Next: Final thoughts.

The firm view

From Lisa: 

As Ken notes, we -- as outside counsel -- must also move away from the inefficient “fire drill” realities that often characterize our practices. We need to provide a more strategic, streamlined approach to our work which allows our clients to focus more of their efforts on value-added activities. Right for our clients; right for us.

To help us move to a more Lean approach with Wolverine and other clients, we have used three key tools and practices that might prove helpful for others. There are plenty of available methods, tools, techniques, and approaches, (a number of which we have mentioned in prior posts), but these have been especially relevant in our trademark practice:

1. Information Management. In a prior post, Ken described the online matter tracking database. Every trademark project -- whether a new filing, a research project, an opposition, or otherwise -- is tracked in a collaborative online database that is readily accessed by everyone on both teams.  We have already populated the "active matters" database with dozens of entries, and it will grow as more of the portfolio is transitioned. 

The power of this database is hard to overstate. First, it frees up a tremendous amount of mental energy for more strategic thinking. (Need more of that.)  Gone are the days of poring through notes and emails to find the current status of matters. (Need less of that.)  All data on all ongoing matters is in one secure, online location. This let us all see both the forest and the trees. Second, the database keeps the matters moving forward and helps prevent missteps about who was supposed to do what when. Now, every matter and team member accountability is reviewed at least every week by the entire team. Third, it serves as an institutional memory of successes, failures, decisions made, and so forth for future reference. It relieves the burden of memory for those working on the portfolio to recall how a particular matter had been decided in the past, whether the company had encountered this counterfeiter before, etc. The database also provides a continuous, searchable record of "closed matters" to preserve past decisions, settlements, and so forth for future reference.

2. Strategy Tools. Strategy is easy to talk about and sounds great, but can remain amorphous unless you define and track it in writing. We have developed Lean tools that enable us to capture specific global trademark portfolio strategy on an annual basis in various areas, that include trademark clearance risk tolerance, trademark registration gap analysis and trademark enforcement prioritization by mark and country. While the upfront work with our client's business and legal teams takes significant effort, this investment is more than made up in the savings that result from streamlined, consistent, strategic decision-making down the road. By advancing specific, well-defined objectives in the trademark area, we add greater value to our client's business.

3. Process, process, process.  As Ken noted in a prior post, we are huge fans of process mapping. (Join us at the ACC Annual Meeting and, you, too, will be waving the process flag.) In the trademark area alone, we have now mapped many discrete tasks to attempt to find the optimal combination of quality, efficiency and cost containment. Process mapping also takes significant investment. Even the simplest processes (we have one for “Incoming Mail Flow”) take several hours to complete properly, as every single task and person within the process is identified and analyzed. No matter how familiar people are with a process, we find time and again that process mapping reveals areas for improvement in accountability, sequence of activity, elimination of re-work, and time savings.

Ken mentions launching lots of small steps in an effort to achieve big gain, and in working with a dynamic team at Wolverine, we are starting to see how our initial steps can take us to the next great level.

Next: Wrapping it all up.

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Post 14

Making it Work: A Value-Fee Partnership

Week 14. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

Last time, I described the mechanics of the 2011 fee structure, but what makes it worthwhile? The key is in the process improvements. Let’s say that in the first year (2011), Seyfarth and Wolverine implement process improvements that save $200,000 (these numbers are examples). Assume that $100,000 is saved from foreign agent fees and expenses and another $100,000 is saved by reducing the time Seyfarth spends on matters. Under the formula I described last time, Wolverine pays Seyfarth $175,000 as the bonus for achieving that $200,000 savings. It sounds like Wolverine gets only a $25,000 benefit. Since these are process savings, however, they don’t end after year one. They are built into how we do things. In year two, Wolverine still gets $200,000 in savings (assuming we still have a large trademark portfolio and are doing the same types of things with it we did in year one). Wolverine also gets those same savings in years three, four and five (and, in theory, continuing into the future). Many of you are probably familiar with net present value calculations. In simple form, if the value of the future cost savings stream offset by the payments to get that stream and discounted at the company’s cost of capital is positive, then you are delivering shareholder value (and if negative, you are taking away shareholder value). Plug the numbers above into an NPV calculation and use 10% as the cost of capital, and you get a five-year NPV of $600,000.

Sounds good from the client side, but why do this on the law firm side? I’ll let Seyfarth speak to this issue, but here is one reason – margin. I’ll go back to one of my earliest examples. Assume the law firm takes 12 hours to do a task and charges the client $300 per hour, or a total of $3,600. If the law firm can learn how to do the task in 6 hours and still charge $300 per hour, it would have the same margin rate (all other things being equal). The client is better off, but the law firm’s revenue shrank by 50% and its margin rate stayed constant. If, however, the law firm and the client shared the savings, both are better off. If the law firm does the work in six hours but charges the client $2,400, the law firm’s margin rate has increased (it made $400 per hour versus $300 per hour on constant costs) and the client’s total cost went down from $3,600 to $2,400.

For those of you who want to make use of that undergraduate psychology course, this structure sounds a bit like the “prisoners’ dilemma” situation. If both parties cooperate, they both win. If either of the parties don’t cooperate, they both can lose (law firms have attorneys working long hours on wasteful tasks, clients pay law firms lots of money to do those wasteful tasks). I believe one way to increase the odds that both parties will work together successfully is to start with relationship building. If the law firm and the client start with a solid relationship, the odds are much higher that they will structure an outcome where both benefit – a robust value fee arrangement.

I have had a great time both in structuring this new relationship with Seyfarth and in blogging about what we are doing. If you have any follow-up questions about the structure or these posts in general, please feel free to use the comment box below or contact me.  In the meantime, get busy with your own value-fee relationships – they work.

Next: Beyond the numbers--forging ahead.

The firm view

From Lisa:

Ken’s post gets to the real center of our enthusiasm for our work with Wolverine and others with our SeyfarthLean strategy.  We believe that the robust discussion around new fee models over the last several years represents a fundamental shift in the way many clients view the role of outside counsel. While the discussion is often framed around fees, we think the deeper core issue is that clients are looking for new and different service models altogether.

Clients need a model that rewards us for delivering top-flight legal services with real efficiency. By its nature, an hours-times-rate model doesn't incentivize for efficiency. Alternative fee models get at this issue to some degree.  They provide mechanisms that help clients to manage down fees, control spending and provide more predictable budgets. The problem is: altering the fee structure alone often leaves clients with questions about quality, resource allocation and the like.  If the firm hasn't really changed its model or its core strategies for delivering legal service, perhaps all that has been accomplished has been to shave the firm's margins, with the hope that economics will rebound as the economy recovers.

For us, this view was key.  We believe that clients are asking for far more than just short-term alternative fee structures.  They want a shift in strategy that makes us better partners with our clients, brings us to the table to offer more than an array of services from inventory and better aligns our economics.  We believe so strongly in this proposition that have built our core strategy around it, have developed our SeyfarthLean program into our institutional DNA and are working to include this discussion in every relationship we have with our clients.

So, to Ken’s point, what do we get out of the pricing model that we have developed with Wolverine?  Well, he is exactly right in his focus on margin.  We are a business, not a legal skunkworks, and appropriate economics are important to us. But Ken’s approach offers far more for us than the opportunity to develop opportunities for good upside. Beyond that, the Wolverine model is a strong manifestation of our view of the world, a response to what we hear the clients asking for and a very cool proof of concept. 

Next:  We look at creating a steady state.

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The power of project management

Week 10. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

First year efficiency gains in the trademark portfolio require that we know our starting point. To know our starting point, we must have our arms around 3,600 trademarks, all moving at their own pace. That requires a seamless transfer of 3,600 trademarks to Seyfarth, and that requires excellent project management. 

Let me talk about the Wolverine side of that equation. There are four of us who day-to-day touch the trademark portfolio. The old school way consisted of lots of e-mails, hallway chats, catch-up meetings and follow-up e-mails. We kept the ship running but it didn't look pretty. This transition brought us the opportunity to upgrade.

We established a several month transition schedule, rolling from our less complicated brand collections of trademarks to our most complicated collection. Approximately every two to three weeks, another brand moves to Seyfarth. Every week, we have a WebEx conference for the Seyfarth and Wolverine team. Using one of Seyfarth's project management tools, we work through (1) transition status and issues, (2) portfolio issues for the brands that have moved, and (3) general issues affecting the portfolio. The online tool lets us systematically work through each issue, coded using several criteria including importance and due date, to update the team. Since it is something we all can access at any time, the call gives us a chance to quickly identify any needed action items. We don't resolve many of them in the call - they are put on the list for separate in depth calls as needed. The call takes one hour, but keeps everyone on top of the issues.

Separate calls are scheduled, including one regularly scheduled call each week between Seyfarth's lead attorney and our lead paralegal, to cover in depth some of these issues. We have other ad hoc calls (and some e-mails) as needed. This sounds oh-so-straightforward and it is, but that is because the groundwork for a well-run project management process was put down by Seyfarth long before we darkened their doors. Oddly enough, I used a similar process some 16 years ago in the early ages of computer video conferences. The key here is that, while Seyfarth's implementation is much more elegant than the old version I did, the concept of project management isn't new and doesn't require huge amounts of time. In fact, properly done project management will significantly reduce the time it takes to keep things on track versus the ad hoc method we used and many of you may still use.

Another factor here is constant improvement. Each week the Wolverine/Seyfarth team improves the process management process.  We are handling more brands and issues as they transfer to Seyfarth, but we still do so in an hour or less. We also have started the real lean process - the team held its first process mapping session last week. Through a WebEx, team members from both entities started mapping out the process for trademark searches. This is the first step in defining what we do today to give us that springboard for improvement. Just as we break complex legal matters into manageable pieces to solve the legal challenges, we are breaking this complex portfolio project into manageable pieces to handle the transfer and start "leaning" the processes. 

Next: Strategy tools - how to get there by knowing where there is.

The firm view

From Lisa:

We have been pleased and excited about the reception that Ken and his team have given to the various project management tools we have adapted for our trademark practice. Ken's strong interest in Lean and his focus on the creation of a value relationship dovetail well with a number of previous projects we have undertaken to improve our global trademark portfolio management practices and file transition procedures.

We began our Lean trademark journey a little over a year before we met Ken, when the firm was already well into its larger adoption of Lean. The driving force behind the Lean trademark program was the perception that traditional law firm trademark practice, like many areas, contains various inefficiencies that increased cost and wasted time (increased "pendency" in our nomenclature). The net result? Ad hoc decision making and a focus on fighting day-to-day fires, at the expense of strategic thought and action. We tried to attack these problems through a combination of process standardization (we have "process mapped" ten standard tasks within the trademark practice), project management approach, and the development of new technology tools to improve client communication, collaboration and information management in the trademark practice.

As with any development project, the path wasn't always completely clear, and we made some mistakes before joining forces with Ken. In one case, we created a standardized process for a task that had previously been only loosely coordinated among various team members. After about three months, however, we realized that the new standardized process actually increased our cost and the time spent on that particular task -- costs that the firm absorbed as "R&D" for the program. After that experience, though, we developed "version 2.0" of that process map. Ultimately, we reached a solution that was an improvement over both version 1.0 and the prior practice.

We've also benefited greatly from our interaction with Ken's team. As we began to implement our trademark extranet product for Wolverine, Ken and his team were not shy about guiding us as to how the tools would best work for them. Ah, the power of feedback!

We then customized our platform in a manner that's actually much better than the original. Our experience reflects a critical point about building a relationship: Providing value and efficiency can't be a one-way street. While we have brought some innovative tools to the table, Ken's team has been extremely engaged in the implementation and adaptation of them. They have given us valuable feedback along the way. Had it not been for the level of engagement from Ken's team, the implementation would not have been as effective. That's where genuine partnership in the relationship becomes essential.

For those of you using project management tools in your practices, what is working? How has the collaboration been between in-house and outside counsel? What tips for success can you share for the benefit of others?

Next: Continuing the transition and working toward development and implementation of an effective strategy.

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Translating value and metrics into fees

Week 9. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

In all the fun of setting up our new trademark portfolio representation and fee arrangements, one thing I can’t overlook is the equally fun world of accounting. Our company focuses on building brands, and with about 3,600 trademarks in the portfolio those marks are an important part of our brand building process. Since they are valuable assets, we need to track the asset value from day one. In the old days, this was relatively straightforward, yet somewhat tedious. For each mark, we captured the dollars spent on acquiring the registration. That meant hours times billing rate plus expenses. Once the mark registered, we expensed the costs of keeping the mark so they were not built into the asset value.

As we work out our new structure with Seyfarth, the accounting piece becomes a bit more complicated. While Seyfarth will keep track of the time it spends on each mark, our fee structure looks at the total work performed by Seyfarth (with some exceptions, such as litigation) and puts that under one umbrella figure. We then adjust that figure based on factors such as efficiency gains.

That means we need to develop a way to determine the initial value of a mark. The method I am considering is to take the total number of hours worked by Seyfarth in a given period (e.g., a quarter), divide the total payments to Seyfarth for the quarter by those hours, and take that resulting rate times the number of hours worked on a particular mark application as the “value” generated for the asset during the period.

While the calculation works, it raises some questions. Is the “value” of the mark really determined by this “hours times average rate calculation”? Should the initial value of a mark be determined by the average cost to obtain a mark rather than the specific time spent obtaining the mark (this assumes all marks are of equal value out of the box even though some required more work than others)? Should the initial value be unrelated to the costs to obtain the mark, and instead be based on something else, for example, some metric based on sales during the period prior to when the mark is registered?

I’m sure the valuation experts could chime in with many other thoughts on how to get to the initial value of a mark and would point out various flaws with the methods I have listed. I’m not trying to get to the right answer in this post. My point (and I do have one), is that as we push ahead with modifying the way we compensate outside counsel we have to work with other groups to modify their thoughts about valuation. Many of our colleagues have learned to think about lawyer’s services based on hourly rates and have adapted their systems to this model. Educating others--corporate controllers, CFOs and CEOs – that the hourly rate is not an appropriate model is part of the process.

By the way, if anyone does have a great model for determining initial trademark values, please let me know.

Next: What are reasonable first-year efficiency gains?

The firm view

From Lisa --

Ken's last few posts have outlined critical standards and metrics of value that he expects us to deliver at different levels -- strategic, artisanal, industrial. During this time, we also have worked to demonstrate to him that we have the right expertise, chemistry or fit, and that an ongoing relationship with our firm would make sense to him and his team. (Chemistry and fit is important from our perspective, too, but hey, Ken’s the client!)  We also have begun to build the principal process design and project management mechanics of the first big project, the trademark initiative.

Now, our team is challenged to take all those needs and address them in a cohesive fee package that reflects Ken's definitions of value and also provides us with an appropriate return.

Here are some of the considerations and challenges we are working through as we develop our pricing structure:

As Ken has pointed out, some part of the value we deliver must be understood in terms of what we can contribute to asset development and enhancement, starting with what it costs to create the asset in the first place -- a specific trademark, for example. This work is the “industrial” activity that Ken has described. It is the core blocking and tackling that has been the mainstay of outside providers in recent years. 

From our perspective, the development of the pricing model for this “industrial component” offers deep potential for innovation. It is one of the places where we have a real chance to advance the model from the traditional "hours times rate approach" -- with its inherent inefficiencies -- to a strategy that rewards both quality service and efficiency minded delivery. Early examples of innovation in this area involved moving away from straight billable hours to applying simple flat fees for a menu of individual tasks associated with trademark prosecution. A more advanced, qualitative model would charge a flat fee for a trademark registration, all-in, from filing to registration, thereby having the law firm bear some of the risk for issues that might arise in the registration process. More recently, fee structures have evolved into a single flat annual fee for the management of all activities for an entire trademark portfolio. And to this model can be added a gainsharing feature whereby the law firm and the client both participate in the benefits of reduced costs that result from greater and greater efficiencies.

By taking this kind of an approach, we are creating rich opportunities for ourselves (1) to develop a pricing alliance with our clients, (2) to build efficient workstream processes and effective project management capabilities, and (3) to enable us to then turn around and share the benefits with our clients. As our discussions with Ken on pricing advance, we expect and look forward to the development of a model centered on these principles.

We will focus on driving efficiency through the volume of 'industrial' work we will do on trademarks, so that we can focus on adding greater value to the strategic use of those marks. This is the 'artisanal' level of value that Ken has mentioned. We will be proposing strategies that will create value for the business through better deployment of intangible assets -- trademarks, patents and other forms of IP -- that are chiefly a creature of the law. One way we can do this for Ken is to through the better management and communication of data about his trademark portfolio -- his active matters, his registration coverage, his enforcement activities, his risks, etc. -- to enable him, his business units, and us to rise above the fray of day-to-day trademark issues and make strategic decisions about the global direction and objectives for his brands.

This type of value may be measured with additional tools that fall more into the kit of the financial analyst than the accountant, using metrics like discounted cash flow, or comparators, or whatever. Although efficiencies are also important in this context, this may be more the place for discussions about the client’s subjective, gut level, sense of contribution by the outside provider. In this context, our pricing model may need to build in metrics or drivers beyond cost-efficiency -- such as strategic contribution and trademark value improvement -- that appropriately measure success and value.

To be successful at the 'artisan' and strategic levels relies on a strong relationship between client and outside provider, so our fee and metrics package also to measure the level of trust and confidence between client and firm. We have metrics in place to both measure the success of our efforts as a relationship. These come from our initial 'voice of the client' discussions, as well as scoreboard metrics, derived from the ACC's Value Index. We think that’s why Ken started with relationship in the first place.

Next: Delivering on first-year efficiency gains

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Balancing strategic roles and tactical delivery

Week 8. 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. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

Lisa and I have been talking about the role of outside counsel as we discuss this burgeoning relationship. I suspect this discussion is controversial, because to some in-house counsel it sounds like a threat. It has taken decades for in-house GC’s to evolve into their current role as valued senior executives. Not long ago, the GC’s role was to channel work from inside to outside. Why should GCs now invite outside counsel to sit at the table and potentially drain away that power? In the context of these posts, why should I invite Seyfarth to sit at our table?

The answer is more complex than a 500-word blog post will allow, but here is my quick take on it. A good GC, and increasingly a good global GC, should emulate many of the same behaviors as good global CEOs. Good CEOs consistently recognize that their companies benefit by having many minds at the table. Their personalities help them channel those minds to achieve goals more effectively than each CEO could do through his or her own efforts. With an ever-expanding regulatory environment, business models increasing in complexity, and black swans circling just out of sight, even GCs of relatively simple businesses need that collective power working through the risks their clients face. 

I think some GCs feel threatened that having outside counsel at the table will result in the CEO seeing the outside counsel as the true advisor. More effective GCs will overcome this hesitation and have confidence in their own abilities, in their relationships with their internal team and with outside counsel. Outside counsel who have a weak relationship with the GC or who have interests that are poorly aligned with the company’s interests won’t be good partners and may show that the GC’s fears were well-founded. That, to me, is another reason why I want to spend the time building a strong relationship with outside counsel and why I want a fee relationship that aligns interests.

Another way to think about the goal of a value fee relationship is to compare it to the compensation structure for senior executives (beware the metaphor). In simple terms, a well-constructed compensation structure should, among other things, (1) align the interests of the senior executives; (2) align the senior executives’ interests with corporate goals; and (3) provide clear rewards for achieving well-defined goals. Since my outside counsel are an extension of the in-house team, I would like to see our interests aligned, I’d like to have our outside counsel’s interests aligned with our corporate goals, and I’d like to provide them with clear rewards for achieving well-defined goals.

So, Seyfarth and I are talking about Seyfarth’s role at the table. This means drawing them into the strategic discussions with our internal business partners, but it also means understanding that their fee drives off that strategic work. In linkage terms – our portfolio is a risk management tool and a strategic tool. We tend to understand the risk management piece, so now we are working on the strategic piece – how do we tie Seyfarth’s role to the in-house team’s role to our corporate strategic objectives.

Next: Tying in some of the messy accounting stuff.

The firm view

From Lisa:

As Ken notes, one of the roles of outside counsel in delivering value must be that of strategic business advisor. Done right, we know that this advisory role can both complement and strengthen the GC’s position with his or her executive leadership. While Ken, or his GC counterpart at another company, will always know the organizational issues, context and culture better than we as outside providers, our very exposure to a host of different clients, with a range of risks and risk management strategies, may put us in a very good position to round out the GC’s and legal team’s analysis. We can bring a depth and diversity of perspective to the GC’s table, fully participate as a team member, and add value at the highest level.

While these strategic role discussions continue, we also have to manage the other half of the value equation -- the ‘industrial role’ that Ken referenced last week -- and get things done quickly and efficiently.

For our weekly readers, you may be wondering what we have been up to on the ground? Well, a lot. To date, we’ve transitioned six of the Wolverine brands, or about one sixth of the company’s portfolio (roughly 600 of a total 3,500 marks). And, working with Ken and his team, we’ve done this rapidly and efficiently in less than 60 days.  

Because Wolverine’s trademark assets are central to the company’s business, we knew the transition process had to be delivered on-time, on-budget and on expectation. We have been using project management resources to help us get the job done. As we have adapted lean six sigma to the world of a law firm and its clients, project management has been a key component of what we have implemented. We combine it with a set of Lean tools and disciplines but we rely on our client-facing project management office to help drive our internal and external teams.

There are a number of successful ways to apply project management skills and tools to legal work, such as those identified by LegalBizDev blogger Steve Barrett (link to: How Should Law Firms “Gear Up” to Manage Projects Better? – A 50,000-foot View (Part 2 of 2). For our work with Wolverine, we wanted our project management role to play an integral and strategic role in delivering client value and help drive the success of our relationship:

·       Program Management: To begin the transfer process, Wolverine provided us with an initial schedule, which served as our foundation for development of a high-level timeline and accompanying detailed project plan. To ensure we stay on track, our internal team meets weekly to obtain status, discuss issues and share lessons learned to improve processes for the transition of the remaining brands. 

·       Collaboration: An essential element to this partnership is collaboration with Wolverine's former trademark firm. To facilitate an aligned effort, we developed a process map, checklist and protocols for the intake processes of these files to ensure data accuracy and to procure knowledge of Wolverine's trademark portfolio.

·       Knowledge Management: In our ‘Voice of Client’ interview, Wolverine emphasized the importance of transparency and real time knowledge management capabilities. In response, we created a shared knowledge platform, using our Firm's extranet capabilities. The tool is designed to improve knowledge transfer, minimize risk and provide full transparency of status and priorities including key documents, metrics, etc. 

·       Process Management: We have scheduled the first of several joint process mapping sessions to be facilitated by Seyfarth's Project Management Office. We will conduct virtual sessions with key stakeholders to develop an improved process for handling various aspects of the trademark portfolio. We will also use these sessions to identify and/or develop template documents, checklists and guidelines to further enhance and promote best practices for the newly defined streamlined processes.

The effort to define the ‘rules of the road’, our relationship needs to move ahead on multiple fronts. So far, we’ve used several Lean tools and a healthy dose of project management to ensure a successful transition, and it will be vital to our ongoing strategic partnership with Wolverine--both from the industrial and artisinal perspectives. All of this though, is just the tip of the iceberg. We haven’t thought of everything and as they say, ‘more minds are better than one.’ 

That said, how have you used legal project management and how has it contributed to your client-firm relationships?

Next: Next stage of the fee discussions and more reports from the ground.

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Someone tell me I’m having a bad dream and will awake soon.

The greatest gift offered to law firms in the recent economic downturn was the first realistic opportunity in decades to break their own cycle of shame/pain to rebuild their compensation structures. They had the economic justification to cut back on some of their more extravagant hiring practices (like hiring 100 associates each year when they only intend that 20 will make it to partner). As a result of the client-led (r)evolution, firms started to push forward a focus on “value” rather than “prestige” pricing based on top-level comp and regularly rising rates. But now it seems that law firms are turning up their noses and are returning the gift they were given: maybe it wasn’t exactly what they wanted.  

I’ve been hearing rumbles, now confirmed in articles such as this one that firms are proudly announcing that they’re returning to pre-2008 salary levels and upping their starting associate comp back to $160,000+ (and therefore the salaries of everyone up the ladder in firms that still use lockstep comp systems also goes up). Seems that firms are doing gangbuster business “selling” their entry associates’ work to clients — they can’t get enough! Or maybe it’s just that there aren’t enough entry-level lawyers for all the first year jobs that firms have to fill? Not.

Let’s just pretend that this is truly a necessary step for firms (which I’m not buying for a minute); the optics of this are so awful that I’m shocked anyone would want to announce their intentions to raise salaries where clients will read about it. Set aside the issue of whether increases like this will really attract the best associate candidates or only the ones most interested in the money.   Do firms think that raising entry-level salaries and then raising rates to pay for it actually impresses clients? Is this how law firms flex their muscles so we can see how strooooong they are, even if it does nothing to promote their intelligence or value? We at ACC know that too many clients are still too beholden to the “prestige” or legacy factors inherent in hiring the most expensive firms. Sometimes those firms truly do provide great service; but an increasing number of other firms are capable of delivering similar results without the higher costs and clients are more and more likely to try them out. And the latter firms are getting more and more attention — firms that ignore this, do so at their own peril.

Many large firms have been caught for decades in a ridiculous and self-fueled cycle of “Keeping Up With the Joneses”, wherein firm management bitterly complains that while they know their comp systems are not based on sound business principles, they claim to be victims of a marketplace in which they can’t hire anyone worthy of their firm if they aren’t paying more than the other firms in town. Since we see no shortage of smart talent graduating from law school each year, many of us had a sneaking suspicion that the reason the firms kept raising starting salaries was more connected to a decision about what the partners in the firm were making or wanted to make.

In general, I have no problem with firms paying whatever they want for talent, especially lateral talent. Frankly, clients shouldn’t have to be worried about what firms set as their standards for comp if the firm is pricing its services in a manner that the client finds reasonable and valuable. But most firms are about to approach their clients and suggest they need an increase in fees, dictated by rising costs, that they’ve just invented. 

Wouldn’t it be wonderful if more firms adopted a different approach that might include:

1) a commitment to hire new entry lawyers at whatever they believe those lawyers are worth, and they plan to invest in them and train them so that they will succeed;

2) offering new lawyers promotions and higher compensation as they master certain competencies, and that clients thus will not be charged for their services in a manner that is not commensurate with the value of the work they can provide; and

3) a commitment not to raise salaries and therefore costs and thereby request an increase in fees, but rather a commitment to take a page from the client’s business management book, and look for ways to lower client costs by increasing the firm’s efficiency or productivity, or structuring their staffing or costs based on what the client wishes to afford.  

There are a lot of firms out there doing this, and their efforts are far too often not noticed — visit ACC Value Challenge to read about firms that are working hard to do better: And let me shout out a few here that are putting their money where their mouths are in terms of deploying new comp systems that incent value: Howrey, Drinker Biddle, McKenna Long, Valorem, Morgan Lewis, Sutherland, and many more. Have they figured it all out? Probably not and they’ll continue to struggle to get it right. But they’re positioning themselves not just for profitable relationships with their own lawyers and clients, but for long-term success as firms.

To leaders in firms considering whether to return us to the madness of ever-upward-spiraling salaries: Please stop. Your clients know that the emperor has no clothes. Are you really going to tell them you can’t hire talent unless you increase the rates of starting associates in your firm? Clients are watching to see what you do. So I’d suggest this is your chance to lead, rather than claim you have no choice but to follow.

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Linking metrics, fees and value

Week 5. 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:

Last time I talked about some easier metrics, so now I’ll address a more challenging one.  Remember, we measure where we are today and then we measure periodically.  We set goals for improvement and then we use “lean” to find ways to meet or beat the goals.  For this metric, the lower the value the better.  Here it is:

Trademark Services Value Rate equals:

(Licensing Revenue + Recoveries) – (Trademark Expenses + Payouts)

the result of which is divided by the total number of marks in the portfolio.

What am I getting at?  On the revenue side, we have licensing fees and recoveries from things like infringement and counterfeit claims.  On the expense side, we have the costs to acquire and maintain the trademarks, and we have payouts due to infringement claims.  Spread across all 3,600 of our marks, this equation captures most of the inputs and outputs and yields a service value per mark. 

It has flaws.  For example, it doesn’t capture our internal time and those fixed costs (office rent, etc.) associated with providing those internal services.  Since those costs remain relatively constant for us from year to year, I decided to make the equation simpler by leaving them out.  It also doesn’t capture mix.  Each year, we add and drop trademarks.  New marks are more expensive given the acquisition costs.  We should probably have a mix metric to see if the proportion of new to old marks changes significant from year-to-year as that could affect the portfolio value equation.  The metric probably can’t be used to benchmark against other portfolios (a company using all in-house lawyers would have a different value profile than a company doing everything externally).  That problem doesn’t bother me as I am using this as an internal comparison from period-to-period to measure whether we are improving compared to our past performance (though I could argue that it is still a valid comparison – a company with lower expenses to manage its portfolio generates higher service value per mark). 

The next question is:  should this metric (or any of the other metrics) be tied to the fee arrangement?  Does Seyfarth have enough control over the equation inputs to make this work?  Is it okay to make that connection as long as Seyfarth has an out clause (and what should that out clause be)?

Here are some of the “pros” for making the connection.  The most meaningful driver is outside legal fees (a part of trademark expenses), so incenting Seyfarth to drive those fees down gives them a big lever to drive value to the firm.  For counterfeiting, low costs and high recoveries (creative strategies from Seyfarth) also have high value. 

Using metrics like these raises another question:  is it the law firm’s role to raise the portfolio value or to provide high quality services at acceptable cost for those things the firm is asked to handle?  If you believe it is the latter, then the metric I showed above may be fine for measuring portfolio improvement, but not for setting the law firm’s fees.

Next:  Continuing the fees discussion.

The firm view

From Lisa:

As I hope comes through in these posts, we have been on a mission to understand and participate in the development of a different (and we hope better) relationship between client and law firm. Ken's post hits at one of the core elements of that mission - the fee structure. I would like to talk a little bit about Ken's last point, the role of the Firm in delivering value.

Our experience has been that most discussions revolve around the ability to deliver high quality legal services at an acceptable cost. That is, of course, the principal driving premise of our Lean program. An output of that system, we hope, is an enhanced ability to define the scope of services, find efficiencies and develop a fee structure which reflects those results. That means things like flat fee pricing, per case pricing, portfolio or task-based pricing etc., etc., etc.

What excites us, however, is Ken's first point: the role of the law firm in the value proposition to the client’s business. How can Seyfarth be tied to the business and incented not as a vendor but as a business partner? Certainly, there may be tranches of legal services where the core goal cannot really be much more that the point made in Ken’s first paragraph. The value to the enterprise is, in fact, handling the matter at high quality and acceptable cost. At the same time, there are many areas, like the trademark area, where - based on the right relationship between client and firm - the opportunity ought to be there for the firm to participate in and it (the firm), should be charged with the goal of adding economic value to the enterprise. I say "right relationship" because this requires a collaborative relationship that goes beyond the traditional role of the law firm and has to be one embraced by both sides of the equation. In turn, making that success (or failure) a component of the fee structure validates that relationship and creates the right incentives.

In a sense, Ken’s model takes the sometimes “cloudy” concept of value and adds substance to it. He is asking us as an outside provider to do more that simply meet the threshold requirement of delivering quality services at compelling prices. He wants more, a business partner that will help strategically deliver value to the enterprise. Although Ken’s focus in his post is on the trademark portfolio specifically, we read his meaning to extend to many other disciplines. At our best, we should be helping to build enterprise value across many different areas of service by supporting productivity, appropriate risk management and higher level development of strategic planning. Bottom line, we believe that Ken is on to something by helping to really define the concept of “value” to mean something more than cost for services rendered.

Next: Getting to “yes”

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I was recently reminded that in 2007, when ACC was still creating a vision of what we’d try to do with the ACC Value Challenge, the emerging Steering Committee leaders all agreed that if we could simply make the word “value” a dominant concept, regardless of whether folks associated their value conversation with the ACC Value Challenge, we’d have succeeded in some part.   I’m happy to report that by that standard, we’re doing well.  

Perhaps too well.

Value has become a word that is so popular in the legal service conversation today that it is ubiquitous with quality, efficiency, productivity, innovation, and results. And lots of talk. By any standard, we’ve succeeded in moving folks to talk the value talk.  But for many, that’s still all they’re prepared to do. Talk.  

So I’ve made it my mission in 2010 to roll out the next steps: how to help folks walk the value walk.  Everybody embraces value theory and enjoys reading or hearing about value success practices implemented by others; and for many, it’s easy to discount the applicability of some of the most touted success stories by saying:  “that’s fine for DuPont and Pfizer and Cisco and others: but not for my lower leverage, bread-and-butter, work-a-day legal stuff.” 

Don’t cop-out on value. What that says to me is that folks are afraid to admit that they don’t have experience or comfort or skill in actually implementing “value-based” changes in our own practices. We need to re-build our toolkit and develop the confidence that we can get value done, regardless of department size or legal matter or subject expertise.   We need to figure out what value means to us (not to Pfizer and DuPont), and how we get there from here, since it’s Summertime and the talkin’ is easy but the livin’ ain’t free.

So ACC is pleased to raise the curtain tonight onLegal Services Management 3.0 – the Core Curriculum. This pilot initiative has been in the works for months, and is being delivered for the first time in Washington, DC on July 13-14 to about 50 top-level in-house legal managers; if you’re not one of the lucky few who got a seat for the pilot program, no worries – you’re going to see it repeated and re-tooled or customized in the coming months into a series of executive/business education offerings for managing lawyers in departments and firms across the spectrum. 

In ACC’s LSM 3.0 we’re not telling participants what others did so they can nod their heads and murmur appreciation; we’re teaching registrants how to apply these concepts in their law departments, large and small, in every industry and in every kind of legal work done. Our registrants want to learn HOW to save money, drive efficiencies, create better and stronger relationships with firms and vendors supporting their work, and improve results for their clients.

What are we offering/what are registrants becoming expert in?

-Fee and staffing structures that drive value;

-Metrics and evaluation strategies to assure that improvement is quantifiable and sustainable;

-Knowledge management concepts that avoid “re-inventing the wheel”;

-Process management, including concepts such as lean six sigma in legal services;

-Mining technology and data to drive better results;

-Project management to assure that complex matters deploying diverse teams succeed; and

-Change strategies and incentives, since the hardest part of all is getting lawyers to try something new.

This two day session, taught by an all-star faculty including in-house counsel, outside firm leaders, and consultants/vendors offers a rare opportunity to sample the broad set of skills that lawyers are going to need to develop to succeed in the next decade and beyond. We hope you’ll watch our homepage for snippets of the video from the sessions (we’re taping them) and information on the resources and upcoming classes that might benefit you and your client that will be available to you online.

Time to stop talking about value and just get it done. Time to become value-able.

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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’

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Determining the metrics of ‘value’

Week 3. 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:

We built a relationship and chose the law firm, and we haven't talked about fees. To discuss fees, we also should discuss metrics. This will probably take a few posts, so bear with us. I'm going to start by stepping back and getting philosophical. When I talk about value fee relationships, part of what I'm talking about is a way for the company to lower its costs, and the other part is for the firm (and the company) to become more efficient. I want the firms to be profitable, and I think they can be just as profitable working efficiently as working inefficiently. The following example might help: 

Suppose a firm will bill for 12 hours at $300 per hour, for a total of $3,600. Let's assume the firm could do the same quality work, but do it in 6 hours rather than 12 hours. If the firm charged $2,400 for 6 hours, I would have saved $1,200. The firm would have been paid $2,400 for 6 hours, versus $1,800 for 6 hours under the old arrangement. The firm also “saved” 6 hours and can use those hours as it wants: work for another client and be paid another $2,400 for 6 hours (a total of $4,800 for 12 hours versus the previous $3,600 for 12 hours), or maybe work the associates less and only use 3 hours (putting it at $3,600 for 9 hours versus the prior $3,600 for 12 hours).

This all makes sense except for one thing:  How does the firm do the same quality job in 6 hours instead of 12 hours? The answer is to tackle the efficiency issue.  In my opinion, law firms are extremely inefficient (okay, airlines are much more inefficient, but that is a separate story).  Throwing that statement out usually creates some heated discussion.  Many partners tell me about how they work very efficiently.  But, I don't see that lawyers (private practice or in-house) have anything to brag about.

So how do lawyers become efficient?  There are many ways to improve, but the one I find the most sensible and I think works well with the legal world is "Lean" or its hybrid cousin, "Lean Six Sigma."  In simple form, Lean is about removing everything that doesn't add value, leaving only value added steps.  It sounds simple, but Toyota (which has been doing this for almost 70 years) would tell you they are still in the early stages of learning about Lean.  So, how does Lean work in a law firm?  I'm going to let Lisa tell you the story. Lean is important to metrics in our story, because that is how we have chosen to find ways to make ourselves more efficient internally and externally, yet make sure this isn’t something where we benefit at Seyfarth’s expense – we want Seyfarth to benefit from helping us become efficient.  Put another way, efficiency has value to us, and we are willing to pay for that value.

Next:  The metrics story continued.

The firm view

From Lisa:

So how DOES Lean work in a law firm? In many ways, the cards are stacked against it. Lean requires the discipline to step back, look at data, talk to clients, examine root cause and then design a way to work more efficiently -- cutting out steps that don't add value, adding steps that do and re-aligning what remains to deliver superb service that meets the client's definition of value. Read: Do a better job in less time. 

Law firm economics, however, taken to their logical end, incentivize inefficiency. Historically, law firm reward systems relate to more time -- more minutes, more hours, more billings, more money. So, the first paradigm shift you need to make is: Believe that doing a better job in less time makes the clients more delighted (Kano Model for those of you doing Lean-speak), and that more delighted clients means more great work. Lucky for us -- the formula actually works. And any firm can do it -- it just takes investment, discipline and some knowledge.

Second paradigm shift is Lean itself. Cue the eye rolling. We have heard it all -- that’s for cars, not lawyers; process discipline has no place in the art of law; only good for commodity work; too hard; too complex; too simple; too much jargon; just marketing; and, the current favorite, "Look where it got Toyota." There have been times along our journey-in-progress when we have thought each of those things. But, what we are doing is working, and we believe there is a lot that can be relatively easily implemented by all -- large and small firms and legal departments.

Take any project. Let's take a complex litigation. We have invested our lawyer and staff time to study the way we approach different types of litigation -- so we have process maps, technology tools, resource banks, and data we have collected and analyzed from our own work. Doable for any Firm whose partners have a core concept of investment time. So now, a client comes and asks for us to work with them on a piece of complex litigation.

If we were approaching this with a Lean frame, we would spend much more time up front with the client, understanding what they wanted, customizing our process maps (for both the client and the matter), putting a plan into place to execute according to the client's definition of value. We then set metrics to ensure we were satisfying their needs and driving the result.

For instance, we might measure a variety of things . . . Some clients value "cycle time" -- how quickly we can move the case through mediation or to trial; some value results -- a trial win under a certain price or within a certain time frame; others may value a thorough early case assessment or budget predictability. The "voice of the client" provides us with the information we need to decide what Lean tools we will use and how we will measure our performance.

In educating lawyers about Lean, we find it is sometimes better to talk about what it is not -- it is not rigid and inflexible; not about commodity work; not about statistics; and, not confined to an area of practice. For us, the simplest way to approach Lean is to remember that Lean is a way to think, a way to break out of the way we have done things and to look at a problem -- very complex to very routine - differently - and then work to deliver the highest quality, directly in synch with the client's value, at a lower cost.

Being a lean bunch, metrics are a big deal for us -- we love to measure things and look at data (amazing what it often tells you). So we often start by sticking to a few basic measures --lowering cost and increasing satisfaction. When we started talking metrics with Wolverine, we knew they were also a metrics-loving group, but we had no idea what was next. We started by proposing a set of metrics that related to client satisfaction, cost and cycle time.

Next: Ken comes back with a set of metrics far more finely tuned to what he valued. Just wait…math is required.

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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.

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The Challenge: Building a new (or even improving upon an existing) client-firm relationship is never easy, especially in the fast-paced, high pressure world of sophisticated corporate legal practice. Add to that the weight felt by so many firms and departments to evolve to a higher form of practice and cost management, and companies’ increasing attention on measuring results associated with the legal spend, and you’ve got a lot of people involved who are grappling with all kinds of problems -- from establishing metrics, to choosing appropriate staffing and outsourcers, to change management problems with your staff, to managing up and doing more with less. 

Setting the Stage: So what should you do? And more importantly, how do you do it? Do the risks of changing outweigh the potential rewards? ACC and our Value Challenge steering committee believe that maybe the ability to literally “see” how it’s done will help you reassess whether or not value-based change really is too risky. So we’re offering a real-time case study for everyone out there struggling to find a path that works; kind of like “legal reality TV.”

A Forum to Learn, Benchmark & Comment: Below is the inaugural post of an in-motion case study that allows you to judge the promise and pitfalls of forming a new value-based client-firm relationship . . . one that isn’t built along traditional lines. And the best part is this project will be done in the bright light of day via our In-House ACCess blog, rather than behind the curtain. While it’s the parties in this relationship who have skin in the game to get it right, we’ll be looking for you to comment as well as observe, by sharing your questions, reactions, sidebars, relevant experiences and more. But no, you won’t be able to vote them off the Island and there is no elimination round: this is TRUE reality relationship building. The gripping tension here is that the stakes are real and the parties don’t just get to walk away with a consolation prize if it doesn’t work; they have to make it work. What we’ll watch unfold is what we all have to do: figure out how to drive the right results for the right price with the right staffing and succeed based on whatever expectations are established at the outset.

The Show Will Go On: This project will be openly chronicled on this blog over the coming weeks and months, so stay tuned and join the community by engaging in this first and in future posts.

The Leads: Our “players” are not Thespians, but real folks who are actually crafting this relationship and trying out their ideas for new value-based models of working together. ACC owes its thanks to the open and visionary nature of ACC Value Challenge steering committee member Ken Grady, who offered to profile his selection and start-up process of working as General Counsel and Secretary at Wolverine World Wide with law firm Seyfarth Shaw. We owe our gratitude to Seyfarth, as well: not many firms would be “out there” – exposed in the transparent fashion. We’ll all be watching as both Ken and Seyfarth figure out how to make it work. The project they’ve selected is a new approach to managing a large trademark portfolio. Each week or so, you’ll see twin posts from both Ken and Seyfarth, chronicling the progress and challenges of their evolving relationship. And we’ll be linking in lots of relevant content and other experiences from the ACC Value Challenge and our resource pages at www.acc.com/valuechallenge.

Lifting the Curtain: The goal of this effort, as one of the bloggers notes below, is to ‘lift the curtain’ in order to help you assess how you can earn from this example and apply value-based practical solutions.

Join in: Please be sure to join in the conversation with your comments and observations, and enjoy.

Susan Hackett, Senior VP and General Counsel, Association of Corporate Counsel and the ACC Value Challenge (hackett@acc.com)

The Client’s Situation

Blogger Ken Grady is general counsel at Wolverine World Wide, Inc.

Over 3,600 trademarks, 800 domain names, 180 countries and territories, and 10 major footwear and apparel brands, Wolverine World Wide, Inc. is the company you may not know with the brands (we hope) you love: Hush Puppies, Merrell, Sebago, Wolverine, Cushe, Chaco, and so on. Midwest born and bred for 127 years, today we have a global, publicly held, $1.2 billion, very complex business model. Handling the legal side is our small Legal Department: four attorneys (including me, Ken Grady, the General Counsel and Secretary) and four paralegals.

Eighteen months ago, we (the Legal Department) set a goal of moving our trademark portfolio from a traditional service and management structure to something better. About 30% of our annual outside counsel spend goes toward trademarks. To make life interesting, we threw on the constraints: no dedicated in-house trademark attorney or paralegal, an efficient operation that keeps our costs low as our portfolio grows, a strong culture fit between the company and our outside firm, and a dynamic and constantly improving portfolio services and management model.

A key question was the law firm. Moving from our existing outside counsel would put a heavy burden on our team and introduce some risks. Staying with the current firm eased the burden, but also had risks and potential downsides. We decided to start by satisfying the Greek aphorism "know thyself." Twelve months later, we were talking to law firms. 

Actually, it wasn’t quite that straightforward. We started by drafting an RFP. The more we gathered information about ourselves and potential law firm partners for the RFP, the more we realized that our keys to success were really understanding what we wanted and being very open when talking to potential firms. We decided the RFP process was a good way to learn about ourselves and what we wanted, but probably not the best way to evaluate potential law firm partners.

While 12 months may seem like a long time, we are small and had a few other things to handle (there was this global economic crisis thing). Much of the information had not been gathered before and there were two of us working on this very part-time, but this was a major project so it was worth investing the time.

We pulled together quantitative and qualitative information. We focused on understanding what our client needed from the portfolio, and what we needed as the Legal Department to meet our client's needs. What became clear over the 12 months was that we needed something other than just a solid trademark practice. We needed a firm that would bring a new approach, an open mind, willingness to experiment, and a value orientation to structuring the financial side of the deal.

In the next post: How do you choose a law firm without talking about fees (and are you out of your mind)?

The Firm’s Story

Blogger Lisa Damon is a member of the Executive Committee at Seyfarth Shaw, and has been leading the firm’s efforts to incorporate Lean Six Sigma into its business.

Our story starts back in 2005, when things were good in the law firm world. Years of history across the industry allowed firms across the country to raise rates every year, pay associates in lock step and increase revenues. But there were signs of change, even in 2005 when we started – change that has only escalated with time.

But, I’m getting ahead of myself. First, a word of introduction: Seyfarth (we say “Si - farth,” but answer to most anything) is a large, full-service firm, with 10 offices nationally. We have about 750 lawyers and are known for our culture and client service. That is important as you get to know us, and provides a context that will help you understand how some of the things you’ll read about in this blog came to be. We are a “metal desk” culture -- low on frills and high on value. Turns out that our cultural underpinnings were (and are) vital to where we are now . More on that later.

At the time we started down the road that eventually lead us to Lean Six Sigma, our biggest clients were increasingly talking of flat fees and alternative billing. We provided numbers, but realized that the numbers were really based on assumptions and the little historical data that we could put together. Seyfarth made a decision to take a different route. We wanted to understand our own internal processes – to figure out how we actually practiced law and then make it better and more efficient. Said simply, we knew we had to learn how we could work differently to increase value and quality to clients and provide lower, predictable cost.

Since then, we have been on a journey to better understand and consistently deliver real client value: to learn the art of putting our own interest as a law firm aside and concentrating first on our client’s interest -- knowing that the firm would benefit in the end, if we did it right and true.

As we will talk about in later posts, we adapted the principles of Lean Six Sigma (which we call SeyfarthLean) and began the journey. That road led us many places – from the ACC Value Challenge to many client relationships and now to Ken Grady and Wolverine.

This blog will trace our new and evolving relationship with Wolverine – through thick and thin; establishing project management teams, setting rates, transitioning files, grappling with joys and problems – everything that is part of a client/law firm relationship. We hope by lifting up our curtain, we will help others to grapple with the “how” and “why” of changing the way we work together to serve our collective clients. None of us have it all right and at Seyfarth we are firmly in the midst of the journey but we thought sharing might help. Please post your thoughts and comments as we go forward.

In the next post:

•                Lean Six Sigma in three painless sentences; and,

•                What do you mean you agreed to represent Wolverine and never talked      about fees (are you out of your mind)?

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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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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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