Law Firm Access to ACC Value Index

Posted on February 3, 2010 by Fred Krebs, President

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

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

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

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

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

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

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

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

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

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Sorry I Had Writer's Block

Posted on November 5, 2009 by Larry Salibra

I have been a bit delinquent in my blogs because I had writer’s block, but not the ordinary kind. Mine had very distinct causes - the installation of a new HVAC system and re-decking and re-roofing my garage. I may be a lawyer, but I still have some useful skills.

As you know, I have been promoting the idea that the legal educational paradigm needs to be radically changed and there are some, such as David Van Zandt, the Dean of Northwestern Law School, who have been making real efforts at change.

This last week I attended a North Eastern Ohio Chapter ACCA Program and heard David Galbenski and his colleagues explain how Entrepreneurship is going to dramatically change the legal profession. David is the CEO of Lumen Legal and in addition to sharing ideas David gave me a copy of his book, UNBOUND, and asked for my comments. In the next few blogs I will share some of my reactions with you as well.

David discusses seven trends which he identifies as transformation factors for the legal services industry. Number one is the demise of the pivotal role of the billable hour. Although I agree that something transformational does appear to be changing the legal services industry, I do not think the billable hour has a pivotal role to play. As I suggested in my blogs on the billable hour and alternative billing, the billable hour is predicated on a basic need of the buyer of legal services. Change the need of the buyer of legal services and the billable need not diminish or disappear; it merely becomes irrelevant to determining fees.

As many of you know, my claim to fame during my active days of practice was doing the work myself, including arguing before the United States Supreme Court. I had little need for billing arrangements and retention letters. Lawyers who worked for me got specific assignments and the key to whether they got the assignment was whether they could do it faster and cheaper than I could. 

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This is Value Billing

Posted on August 19, 2009 by Larry Salibra

Enormous effort has gone into attempts to construct billing arrangements that reflect a law firm’s contribution to a case because of the belief that hours spent was not necessarily a relevant indicator of that contribution and may actually create an incentive to distort billings. In-house lawyers have often had to argue about the value of their contribution to a company’s business objectives, often hiring firms like Altman-Weil and others to create some measureable criteria to support the value of their contribution.

Recently, I vicariously experienced that real way value billing should be done, and perhaps was done when the legal community was more closely connected to their clients. Yes, constructs of value billing it appears are necessary when the value of a lawyer’s contribution is not obvious to his or her clients. Hourly billing is a necessary construct when the need to support the law firm predominates over the objective of providing valuable services.

These facts became clear to me when a former colleague, now out on her own, called with a great deal of excitement to tell me about a recent experience with her client. Her client called to say he had not received a bill. She responded that she had just sent one out billing at a certain hourly rate. His response is that it was his intention to pay a larger amount, not based on the hours spent, but on the value she contributed to the business transaction. Both pleased and surprised, she called to share this experience with me.

I am sharing it with you because that is the objective to which we should all strive. Our contribution should be obvious to our clients as our outside counsel’s contribution should be obvious to us. When there is a sense of disparity with our in-house expenses or the bill from our outside counsel and the payers’ sense of the value that it represents, we have to think about why my colleague was able to obtain higher fees without even asking for them. What was she doing that we are not doing or our outside counsel is not doing?

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ACC's Value Challenge Overtaken By The Bailout Of The Hourly Rate

Posted on May 14, 2009 by Larry Salibra

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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An Act of Altruism or a Cry of Pain

Posted on April 21, 2009 by Larry Salibra

Recently, a colleague sent me an article from Forbes entitled “Kill the Billable Hour”. The author was a self proclaimed trial lawyer from a large law firm began by telling his readers how he was able to charge a lot for each of his hours and he could bill as many hours as he wanted for him and his associates. However, he and his wife had new kitchen installed and they agreed on a turn-key price with a contractor. Apparently, this experience resulted in something akin to rebirth in which in the spirit of altruism he wanted to inform his clients and all clients of lawyers that they should treat their lawyers like a construction contractor. Kill that billable hour he argued; get that fixed price he urged—well, not really a fixed price because he tried complicated cases which were highly unpredictable so he could only sort of fix the price.


The problem with this analysis is that I would not put in a kitchen the way he did. I have a heavy duty Delta shaper and a Delta Unisaw, as well as an 8” jointer and a 13” thickness planer among other tools so I built and installed my own raised panel cherry cabinets. Similarly, with plumbing, electrical and plaster board—I can do it all. So, how did I deal with the billable hour decades ago—I told my outside lawyers they could bill whatever they wanted as long as it was less than I could do it for, or learn to do it .


Needless to say I tried a lot of my own cases.


I know you cannot do that—trust me I have heard every explanation as to why, so don’t try to explain. But don’t worry the altruism of the lawyer in the article is a sign that there is a lot less litigation—in fact chances are really good that there is so much less litigation that this lawyer is not being altruistic at all—he is looking for business and his discovery of flat rate billing version 10.2 is simply a ploy to attract clients who he believes will be lured by his new found generosity.


Why am I so cynical? First, if he really had the license to steal he claims he has, which presumably he developed his career on, he would be reluctant to part with it for the good of mankind. Second, although the present attack on the billable hour seems new and creative; those of us with a few years tend to look at it and moan; “Here we go again.” Finally, for those of you who read this blog regularly you would have seen my blogs on flat rate billing and the difficulty firms have in selling this concept to the very customers who claim they want it.


The article is about the economic state of the legal profession—not the billable hour and perhaps the fact that lawyers’ ability to pay for new kitchens might not be as easy as it has been in the past.

 

Check out ACC's Value Challenge on the changing landscape of working with outside counsel and the billable hour.
 

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Who Supports The Billable Hour?

Posted on October 7, 2008 by Larry Salibra

I attended a NEO ACCA conference on alternatives to the billable hour a few days ago. In the next few blogs I will share some impressions, observations and thoughts.

First, let me make an observation: it was fortunate I went because I contributed to making the audience slightly larger than the presenters. You would have thought there would have been far more interest. There appeared to be a number of people who signed up for the program from the names at the welcome table, and the room was clearly prepared to accommodate many more participants, not mention the array of free food for breakfast.

I found the program quite interesting; and I tend to be skeptical of various schemes designed to reduce legal costs. So why was there no more interest? I have no idea, but I would like to hear from others who might have an explanation.

There was one explanation that arose from comments from the firm that was the focal point of the presentation--consumer resistance to change. The forum was not the typical situation where a series of in-house attorneys complained about the absence of alternative billing formats and representatives from firms resisted change or reluctantly expressed a willingness to consider alternatives after listing all the obstacles to change. It was a presentation where the law firm was actively promoting its willingness to participate in alternatives to the billable hour legal market. What they noted was the resistance of the market place to accept it. The lackluster attendance at the presentation certainly suggests market apathy.

So why was this law firm who is enthusiastically marketing alternatives to the billable hour struggling to sell the idea? Why aren’t clients lined up outside their door to take advantage of this new billing? Where were the participants in the NEO ACCA conference on the topic?

Of course, one might be able to offer explanations for each of these circumstances that do suggest that in-house counsel as a group favor alternatives to hourly rates. However, it just may be that notwithstanding all the protests by in-house counsel they really prefer hourly billing. It might be that protests against hourly rates are simply a disguise.

Robert Banks, the former General Counsel of Xerox and father of ACCA, spent an unsuccessful year with a law firm after he retired from Xerox attempting to sell services directed at helping in-house counsel control outside legal fees. After that year in which he was not particularly successful he shared his views that “in-house counsel did not want to manage outside counsel, they wanted to look like they were managing outside counsel.”

The hourly rate serves that objective in a couple of respects. First, the review of these fees creates the impression that the in-house counsel is intimately involved in the outside attorney’s detailed efforts. There is little doubt that in-house attorneys feel a need to be involved in the activities of the attorneys they hire as expressed in the description that they wanted outside counsel to work with them in a “partnership.” The debate between Steve Bokat and me in prior blogs explored that issue. Flat rate billing and contingent fees appear to diminish, at the very least, the apparent role of the in-house attorney in the daily decisions of the outside firm. Where the firm is providing both the time and fees associated with discovery, a major role for in-house counsel, controlling those expenses, would be largely eliminated.

A consequence of these billing practices may well result in less need for as much in-house staff. The firm at the NEO ACCA event noted that an advantage of the fixed fee arrangement was that it eliminated the need for paralegal staff to review the bill (or was paralegal a euphemism for lawyer).

Those of us who have been in-house know that there are huge pressures to grow the size of a law department. Both prestige and salary are associated with size of the department you manage; lawyers like to hire other lawyers if for no other reason than to demonstrate how much work they have. It is not unique to lawyers for sure. But the reality is that bigger is generally better for the employees, whether or not it may be good for the shareholder or owner.

If the in-house job description is to manage some aspect of the legal function, be it litigation or acquisitions, the lawyer might well be reluctant to forego the hourly rate, and the actual or apparent control that goes with long-term fixed-term agreement, where his real attention is only required once every couple of years.

Similar characteristics exist for contingency fees.

The effort to control costs using these techniques is not new. It remains to be seen whether the present effort has anymore staying power than prior attempts.

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