July 1, 2009
There continues to be a large gap between what Chief Legal Officers want and what they see their law firms delivering. According to a new study by consulting firm Altman Weil (as reported in the American Lawyer),
…25 percent of CLOs surveyed said they were putting a ‘high’ amount of pressure on their outside panel firms to change “the value proposition in legal service delivery,” as opposed to simply cutting costs…
…only five percent of CLOs surveyed said firms are serious about changing their structure. Another 20 percent gave firms some credit for implementing efforts towards change, but an overwhelming 75 percent rated firms as having “little or no interest in change.”
To me, this translates into a huge marketing opportunity for firms that are willing to get out of their comfort zone. Firms that embrace alternative billing and learn to work with more offshore vendors ( i.e. those who can deliver quality services at a much lower price point) are going to find a very receptive pool of potential clients who are looking for change.
June 12, 2009
As part of the movement towards increasing efficiency and controlling outside legal expenses, more corporate law departments are adopting a Six Sigma approach. Simply defined, Six Sigma is a method of improving processes (or in plain English, it represents a commitment to continuing to find ways to do things better). Read the rest of this entry »
June 2, 2009
Ron Friedmann, a veteran of the legal industry, asks whether there is any evidence that GC’s are really committed to cost savings (see comments on his post as well). His answer is a resounding “no”. GC’s have toyed with pushing for lower billing rates and requiring litigation budgets. But these are simply minor tweaks to a system which fundamentally rewards inefficiency. Furthermore, GC’s don’t really want to go out on a limb to adopt cost savings because they fear they will be blamed when things go wrong. One way to prevent this is for GCs to get up front support from CEOs and CFOs about the cost saving measures that are adopted
A more significant change would be to adopt alternative billing systems including incentives for either getting a good result or getting the work done in a short amount of time. I discussed some of the problems with adopting these alternative billing methods but suggested that consulting firms offer good models to follow.
Perhaps an even more effective way that GC’s could control legal expenses is by looking for ways to unbundle legal work. If document review can be conducted more cheaply (but with no loss of quality) in an overseas facility, then some of the higher level analysis can still be done by high caliber on-shore counsel.
Until GC’s are able to start thinking very critically about how to separate work into its component parts (so that in some instances, a portion of the work can be outsourced), fundamental cost savings can not occur.
May 6, 2009
The pressure to cut outside counsel fees continues unabated in corporate America. Some GC’s are even being incentivised to cut legal expenses (i.e. bonuses are being tied to these cuts).
This certainly bodes well for firms that can undercut large firm billing rates; but it also creates more incentives for offshoring (which interestingly enough is not mentioned in the article).
April 30, 2009
Michael Ross, a consultant at Altman Weil, argues that relationship management is the key to cost savings for in-house counsel. In order to achieve cost savings (which most in-house law departments are trying to do right now), in-house counsel need to foster good communication with outside counsel.
Ross notes that fee reductions alone may not produce necessary savings (i.e. because in the end, costs are determined not only by legal fees paid but also by outcomes; and good communication is essential in getting the “right” outcome). Read the rest of this entry »
April 23, 2009
GC’s, Chief IP Counsel and other in-house lawyers who hire outside firms are in a bind. While the message from above is “cut legal expenses without cutting quality”, every GC knows that hiring a less expensive firm and getting a bad result is not a good recipe for job tenure.
In the world of IP, the stakes are particularly high. A strong portfolio of patents effectively limits entry into the marketplace. A weak portfolio opens a company up to ruinous competition.
So how do GC’s and Chief Patent counsel talk to their superiors in a way that moves the ball forward? Reading this open letter to GC’s is a good place to start. In this letter, a consultant from Altman Weil provides some good tips on how to discuss cost savings with senior management.
What is not stated in the letter is that the same strategy can be employed in trying to get corporate buy-in for unbundling of legal services and using off shore providers.
April 13, 2009
HCA, one of the largest healthcare providers in the country, has an enormous budget for outside counsel ; but those fees are clearly in the crosshairs of the General Counsel. In order to create incentives to reign in this expense, HCA’s GC ties bonuses to cuts in legal fees (according to Rees Morrison, 60% of each individual attorney’s bonus is based on that individual’s ability to cut outside legal spending.)
Sounds like LPO’s should be getting on the phone and calling HCA lawyers.
April 13, 2009
According to Rees Morrison, in-house counsel devote 37% of their outside law firm budget to litigation. IP and labor/employment account for 11% each (reporting on a study conducted by Martindale-Hubbell which was presented by the COO of LexisNexis at the 5th Annual IP Counsel Forum).
April 10, 2009
Rees Morrison, consultant to hundreds of law departments, is not a big advocate of turning the legal operation into a revenue center. But he makes an exception when it comes to IP. He considers it good practice to help monetize fallow patents that might have value to another company.