At the recent Law Firm Leaders Forum, Microsoft Assistant General Counsel Lucy Endel Bassli participated in a panel discussion entitled, “An Examination of Change Underway in Major Law Firms Today”. Legal Executive Institute caught up with Ms. Bassli afterward and asked about this unprecedented change going on at large law firms today and how in-house legal departments can play a role in that change. Her response follows:
The good news is that legal departments are in a unique position when it comes to driving changes within law firms. There is lots of good work going on at the firms independently — with focus on legal project management and alternative fee arrangements — but at the end of the day, if legal departments are willing to continue to pay in the same way for the same types of services, then it’s likely that change will be slow to happen if at all.
The reality is that we are hoping for change in an industry that was created by law firm lawyers for law firm lawyers with a business model based entirely on time. If the goal of a business is to make more money and the way that the business makes money is to charge for the time its professionals spend to deliver a service, then there is never any reason to become more efficient, to automate or to simply stop doing less valuable work.
Legal departments have the completely opposite business model, however. In-house, we have to do an unending amount of work, where arguably the time spent on a matter has an opposite correlation to the perceived success of our legal department. Meaning, if we spend too much on something in-house, then usually our internal “clients” are unhappy and we are perceived as “slowing down” their business… or simply put, we’re viewed as “unsuccessful”. Our clients are the business people in a corporation who are working at lightning speed and can’t afford to wait for or even read a lengthy memo on every possible risk that a transaction or venture may present. So, we are at a disconnect with what in-house attorneys need and what law firms are trained to deliver. We need to change the expectations and the incentives.
If the goal of a business is to make more money and the way that the business makes money is to charge for the time its professionals spend to deliver a service, then there is never any reason to become more efficient, to automate or to simply stop doing less valuable work.
Legal departments also need to collaborate with their law firms to deliver services in a different way. Being in-house departments, we have the duty to educate our law firms on the risks we are comfortable assuming, so that they don’t waste their time and our money identifying theoretical risks. Law firm lawyers need to be liberated from the days of memo-writing when a simple bullet-point list would suffice. Of course, this means less time spent, which means less profit for the firms. If firms will look at this strategically though, it may mean less revenue on certain projects, but there will be a trust built that will lead to more projects.
Legal departments are always looking to reduce the number of firms they use and to source services more effectively. Law firms can use the fact that they are willing to make a little less on some deals to earn the relationship and trust of their clients, so the work done will naturally expand over time. This is no different than time spent on non-billable “business development” activities. Historically, trust was built because the work product was thorough and spotted issues in a variety of hypothetical scenarios. Or law firms would provide some extra legal services at no cost, or write-off time to show a gesture of good-will. Now trust can be built by law firms asking their in-house contacts what types of risks may be assumable and identifying opportunities for improvements in the way in-house conducts negotiations, or in the templates we use, or updating us on relevant changes in the industry the firm has learned from other clients (aka benchmarking).
I will always trust a law firm that looks for ways to make me more efficient. I love hearing from my outside lawyers “I have a crazy idea.” or “Have you ever thought about trying…” Sadly, I still don’t hear it enough.
Also, legal departments should expect more than just the delivery of the legal service. I want to know more about my business that my outside firms see because of the work they do day-in and day-out. What are they learning from the work they do for me? What patterns are they seeing in the work I send them, in how our internal business partners are acting, or in what the other side is seeking, etc.?
There is a ton of business intelligence that law firms routinely gather that legal departments are not benefiting from. The law firms have this info, but it is probably not in a consumable format. So the legal departments have to specifically ask for what we want to see, and to push law firms beyond just delivering legal services. This is where the conversation about fixed/flat fees becomes fascinating. Law firms are getting accustomed to these different billing models that are not based on hourly rates. That is GREAT progress. Now we need to push them to deliver more than just their slate of traditional legal services within that fixed fee, so I can benefit from all they’ve learned about my own business. This is valuable business intelligence that is often going unharvested — and we have done just that.
There is a ton of business intelligence that law firms routinely gather that legal departments are not benefiting from. The law firms have this info, but it is probably not in a consumable format.
Through extensive collaboration and continued interaction, Microsoft’s legal department has launched its first managed services delivery model with a pair of firms that have joined forces to deliver not just great contract negotiation services, but a complete global view that includes such data as the number of contracts, what types, their turn-around times and key issues, which business division or country it came from, etc. We are also learning what parts of which templates are not optimal and what changes we should consider for our fallback provisions.
I think that in any practice area where there is enough volume of similar types of legal work, this sort of model should be used. I’m excited to see where else in our department we will try this approach!
Ms. Bassli invited comments or feedback to her blog post at firstname.lastname@example.org.