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This publication contains my personal views and not necessarily those of my clients. Since I am a lawyer, I do need to tell you that this publication is not intended as legal advice or as an advertisement for legal services.
  • Alternative Fees and Value [LegalTech 2011]

    Leveraging Technology to Achieve Quality and Competitive Excellence. This session is focused on how lawyers provide “value” to their clients. The presenters are Brad Blickstein (Principal, Blickstein Group, Inc,) and Kimberly Townsan (Senior Manager, Legal Administration, United Technology Corporation).

    [These are my notes from LegalTech NY 2011.  Since I'm publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I've made any editorial comments, I've shown those in brackets.]

    NOTES:

    • Value, Like Beauty is in the Eye of the Beholder — The ONLY beholder that matters is the client. The key for outside counsel is to focus on delivering to the client the outcome desired by the client. Don’t focus on the means of production. The panelists quoted David Cambria of Aon who once said that when you hire a gunslinger, you don’t pay by the bullet.
    • ACC Value Challenge — Every firm that is interested in providing value to clients should study the ACC Value Challenge. The panelist recommended the blog post exchange on the ACC website between Seyfarth Shaw and Wolverine.
    • Leveraging Data — How can we use data to more effectively price and bill for legal services and manage outside counsel? These are the challenges that clients and their lawyers face. Seyfarth Shaw, as a preferred provider to United Technologies Corporation (UTC), spent considerable partner time and effort to review their matters and accurately price the work they were proposing to provide to UTC. (As part of this effort, they examined and revised their work processes.) UTC believes that each provider needs to determine its own costs and margins and then make a proposal; this is preferable to the client dictating the AFA.
    • UTC’s Experience with AFAs — UTC started requiring alternative fee arrangements (AFAs) with intellectual property work, but are now asking for it for more types of matters. At this time, approximately 50% of their matters are priced on an AFA basis. They are trying to reach a balance whereby both UTC and its law firms prosper. Their experience is that firms tend to start the AFA conversation by proposing a price based on a historical average. However, these prices often prove to be unreliable. UTC prefers to set a banded price. This sets a cap on the ultimate price, plus it gives outside counsel an incentive to improve efficiency and thereby improve margins. UTC has coupled these AFAs with detailed arrangements concerning what UTC will or will not pay for and which preferred providers UTC wants their outside counsel to use.
    • How Do Clients Evaluate Outside Counsel? — AON has a series of detailed lawyer dashboards that show how outside counsel have performed with respect to a number of criteria determined by AON that cover everything from efficiency to quality of advice received. UTC analyzes several areas of outside counsel performance including the extent to which counsel provide sufficient review and comment time to UTC lawyers, and whether outside counsel treat senior UTC personnel differently than junior UTC personnel.
    • Process and Efficiency — How can we leverage technology and process to improve efficiency and get more “bank for the buck”? UTC works with its preferred legal providers to ensure both eBilling by outside counsel and the efficient payment of bills by UTC.
    • Knowledge Transfer Inefficiencies and Matter Management — UTC has 270 lawyers in-house posted around the world. These lawyers supervise thousands of matters. UTC implemented matter management in the late 1990s, but it was initially for housing information on legal costs rather than a means for actually managing their various matters. Since then, UTC has been looking for ways to integrate outside counsel in the matter management system (LT Online) rather than making the UTC lawyers work with different extranets provided by every outside firm. UTC tried to minimize “rework,” which involves taking information from outside counsel and reworking it so it can be added it to UTC’s matter management and knowledge repositories. They have 30 US firms that access their matter management system directly. This accounts for about 85% of UTC’s US docket. UTC provides training to their outside counsel to ensure they can use the system efficiently. The system includes staffing information, legal documents, matter updates, etc. The matter management system is not intended to capture all matter information, just critical information about each matter. UTC’s experience is that providing matter management system access to outside counsel has greatly diminished the need to rework data from these lawyers. In Townsan’s view, this is one of the best efficiency enhancers they have.
    • How Legal Project Management and Quality Programs Help — applying quality improvement techniques (e.g., lean six sigma) may involve significant investment of time, money and effort on the part of a firm and may not always be absolutely necessary. However, every firm can benefit from creating project plans or doing after action reviews. (Interestingly, very few members of the audience said that their firms did either.) Consider using a battery of tools to cut your costs, and then price matters so that the law firm improves its effective hourly rate (its margin), while reducing the client’s overall expenditure.
    • Is the Recent Focus on AFAs a Fad or the New Normal? — In Townsan’s view, the AFAs introduce reliability and predictability into their budgeting process. This keeps the legal department and finance department happy since both of them hate surprises (especially unpleasant financial surprises). Further, during times of corporate belt-tightening, companies remain contractually bound to comply with their AFA arrangements. By contrast, they can always trim the number of hours they are willing to pay for. As a result, she thinks that AFAs are here to stay. Blickstein, on the other hand, is a bit more cynical about this. He believes that once the economic pressure is off, firms (and inside counsel) will revert to the familiarity and relative comfort of hourly billing. He noted that we’ve been talking about the importance for AFAs for decades, but they haven’t yet become the norm. Nonetheless, he observed that any firm that finds ways to provide its work product more efficiently at a thoughtful price will always flourish.
    Published on February 1, 2011 · Filed under: Conference, Law Firms; Tagged as: ,
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