Corporate Legal Department Operations Forum: Pressures and Cost Factors Impact Client/Law Firm Relationships

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2018 Corporate Law Departments report

NEW YORK — Corporate Legal Departments can control costs by adopting new work processes, outsourcing models, technology and methods for stratifying the elements of legal matters, according to participants at the Thomson Reuters Corporate Legal Department Operations Forum, held last week in New York City.

Panelists and presenters described the challenges facing companies’ legal teams — growing workloads, pressure to adhere to budgets, and a traditional operating model that makes it difficult to accurately predict costs.

Robert Gitell, a senior director at Thomson Reuters, cited a study that concluded that common cost-control measures — such as fixed or flat fees, procurement policies and volume discounts — are only moderately effective at delivering real cost savings.

A more successful approach for law firms, said Nancy Jessen, senior vice president of legal business solutions at UnitedLex, is a detailed “intake process” that assesses the nature of the legal matter, its relative importance and risk. She suggested firms reward the creation of processes that efficiently complete routine tasks — whether they use internal resources, external services or technology.

David Cambria, global director of operations for law, compliance and government relations at Archer Daniels Midland, similarly called for stratifying the tasks that make up a matter so they can be managed efficiently and priced appropriately and consistently. It’s critical, he said, to understand the various options for using alternative legal service providers.

Jessen and Cambria participated in a panel titled, “Budgets, Bandwidth & Business Process: A General Counsel’s Guide to Strategic Initiatives”, which examined the pressures GCs are under to become less a cost center and more a valued business partner to their corporation, and how that pressure in turn impacts their relationships with third-party providers around issues of efficiency and pricing.

[One panelist] cited a study that concluded that common cost-control measures — such as fixed or flat fees, procurement policies and volume discounts — are only moderately effective at delivering real cost savings.

Jon Hoak, co-founder and general partner of UpLevel Ops, which co-hosted the conference, agreed. “More and more work is leaving law firms and going to these alternative legal service providers,” Hoak noted.

This type of analysis is the foundation of successful matter pricing models, panelists said. Pricing can be impacted by the type of matter, the type of firm employed, jurisdiction and risk-sharing agreements, said Ken Callender, founder of Value Strategies. He recommended negotiating lower costs for work output and providing incentives for reaching key milestones and successful outcomes.

Law firms that can reliably price matters and deliver work on budget are highly valued by their corporate clients, Callender said. Budget certainty, in fact, is often more important than price. “There’s value just in the predictability… because it enables (legal departments) to know they can meet their budget,” he said.

Law firms, however, often lack the staff and expertise to conduct sophisticated matter analyses and deliver reliable pricing, said Joshua Kubicki, chief strategy officer for Seyfarth Shaw. “I think it’s the Holy Grail,” he said.

Both Callender and Kubicki were part of a panel titled, “Examining Innovation in the Law Firm-Client Relationship” that focused on the changing tenor of the client/law firm relationship around areas of billing and pricing, technological adoption, and the need for further innovation in the delivery of legal services.

For example, a key piece of the puzzle, conference-goers said, is the ability to collect and review time and billing records daily so projects can be tightly managed and clients apprised when — and why — costs are rising. The common practice of collecting time and billing information on a monthly basis makes that type of real-time monitoring and transparency impossible.

Kubicki noted that Seyfarth Shaw has moved to a daily reporting model. “Now our project management and budgeting tools are much more accurate,” he explained.