This session is entitled “How corporate legal departments are using analytics to measure the value of the products and services they buy.” The panelists are Bob Ingato (Executive Vice President, General Counsel & Secretary, CIT Group); James Partridge (Chief Counsel, Outside Counsel Relations, Ally Financial (formerly GMAC)); and Anne Sonnen (Deputy General Counsel & Chief Amdinistrative Officer, Legal, Corporate & Compliance Goup, BMO Financial Group). Timothy B. Corcoran (Corcoran Consulting Group), was the moderator.
[These are my notes from the 2013 Ark Group Conference: Business Intelligence and Analytics in the Legal Profession. 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.]
- CIT’s Story. Pre-2000, they were working with 1000 different law firms. Firms were hired on a matter-by-matter basis, and fees were negotiated on the same basis as well. To make matters worse, they collected very little data regarding outside counsel performance other than basic fee information. Bob Ingato reduced the number of firms substantially and shifted them away from negotiating hourly rates with discounts. In his view, it’s a waste of time to negotiate discounts. At the end of the day, the only thing that matters is what actually was paid for the services obtained. In addition, they have broadened the range of providers they use. Besides traditional law firms, they are using outsourcers and alternative providers such as Axiom. In Ingato’s view, creatively designed alternative fee arrangements are critical to a corporate legal department’s success. However, an AFA won’t work well UNLESS it represents a win-win for the client AND the law firm. Once the fee arrangements are in place, CIT focuses on performance and predictability. For example, a law firm must submit a budget for each of its matters. If they fail to submit a budget for a matter, then they can’t submit a bill for that matter.
- Ally Financial’s Story. Ally Financial was formerly GMAC. They have done a great deal of work to collect and make sense of the data they need to manage their outside counsel relationships. They began with eBilling — particularly to manage rate increase requests. Because they did not initially have a systematic way to handle these requests, it resulted in automatic (almost magical) wealth creation for the law firms, but at the expense of the client. By putting a system into place, they were able to respond to the requests more rationally and consistently. Another huge benefit of collecting and analyzing data was that they were able to evaluate outside counsel claims regarding unexpected cost increases. (In this case, the data showed that the outside counsel’s theory explaining the cost increases was wrong.)
- BMO Financial Group’s Story. They began by building an analytical model that reflected their values and what they wanted to see in their law firms. Then they recruited firms based on that model using data provided via RFPs. Some data they collected: the length of relationship between a firm and BMO, fee information over 25 matters, was it commoditized work or complex work, what firms were innovative (were they using hourly rates, AFAs, alternative outside providers, etc.), diversity, etc. They also use these data to inform their very forthright annual review conversations with their outside counsel. Where firms are falling short, BMO uses the data to help outside counsel understand what can and should change in outside counsel’s behavior and processes. BMO, like any client, gets to define what constitutes value. For example, BMO values more highly outside counsel that help BMO solve specific problems (e.g., providing CLE or consulting services). BMO does not value as much the money spent taking the client out for a meal. Ultimately, they use the data to change behavior internally within BMO’s legal department and externally within outside law firms.