Legal Issues, Business Solutions

Clients are taking back the power

This reminds me of recent innovations by the the Emanuel administration here in Chicago.  He is trying to introduce competiton into the marketplace for government services by having government workers compete with private contractors to see who can provide services at a better value.  A similar idea is going on here.  Sure, outside counsel are not competing with competitor's in-house deparments per se.  However by "insourcing" more work, companies are introducing more competition into the marketplace for legal services, and they know that these new"competitors" will squarely align their services with the clients' business goals/budget/concept of value.  The challenge for outside counsel is how to provide a better value proposition than these new in-house "competitors".  Great move on the client side because it will spur more innovation and greater focus on what value means to clients.  Hat tip to Patrick Lamb.

A holistic take on legal project management

I was at a dinner with friends this weekend and had a fascinating conversation with a friend who does project management work in the architecture and construction fields.  Not only does he create virtual models to guide construction, along with virtual models of the as-built building, but he works with the building owners to integrate his as-built models into their facilities management software.  Therefore, when the facilities staff is replacing a part they know exactly what part is needed and they know how repairs to any part of the building will affect other systems in the building.  This got me thinking about how outside counsel should strive to integrate their services into their clients' overall business.  First, integrating outside counsel's project management techniques with the overall business operations will provide invaluable information and expertise to draw upon in any given case.  Also, it will clarify the impact of a given legal strategy in one case in one business unit on other business operations.  This is just one of the extra-value propositions that outside counsel should look to offer to their clients and that clients should request from their outside counsel.

Valorem Law: There's an App for That

The smartphone and table computers are changing the world of mobile connectivity.  Not a novel or shocking statement I know, but during my last trip to an airport I was surprised at just how many people like me were just carrying around their smartphone and their iPad.  Once customized for your habits, these devices can save you a lot of space in your carry-on, while allowing you to stay productive during trips and layovers (plus they save you from lugging around the extra weight of a laptop). There are a lot of productivity (or just plain cool) apps out there but I wanted to direct you to Valorem’s new app.  The welcome screen contains five menu buttons: Tip of the day, News, About Us, Attorneys, and Beat the Clock.

The Valorem app was the brainchild of founding member Nicole Auerbach and it encapsulates her approach of being cutting-edge and fun while practicing law.  Just a note, Valorem is focused on providing value in legal services, and the app reflects that.  It has value tips for in-house counsel and today’s tip “Do We Have To?” discusses the decision to forego motions to dismiss and the factors to weigh in that decision, not the least of which is legal spend.  So go ahead and download the app and share with us your feedback and suggestions on making the app even more valuable.

Driving toward goals and value through fee arrangements

Last week I had the chance to speak at a webinar about the use of value-based fee arrangments as a way to create a win-win partnership between law firms and their clients.  The webinar was hosted by Law Practice Strategy, a company founded and run by Donna Seyle to provide practice management solutions to law firms.  It was an engaging hour of conversation, and the attendees asked some great questions.  Many thanks to Donna for arranging a great discussion.

Here is the link to the recording of the webinar: http://www.instantpresenter.com/WebConference/RecordingDefault.aspx?c_psrid=E157DF8783

And here is the link to the slides from the presentation:  http://www.slideshare.net/donnaseyle/alternative-fee-arrangements-pricing-for-a-winwin-relationship

I encourage everyone to take a listen.

Let's Do the Math: A Call for A Data-Driven Model for Legal Efficiency

I just read an interesting Washington Post op-ed by Steve Rattner, President Obama's former lead auto advisor, regarding the administration’s role in job creation.  Now, I know that on its face this article has nothing to do with “Legal Issues” or “Business Solutions” but a few of Mr. Rattner’s points are squarely applicable to improving the way businesses approach their legal issues:

 1.     Confronting Hard Truths:  Our elected officials have taken Medicare, Social Security, and defense off the table while paying lip service to attacking the budget deficit.  As Rattner implies, politicians neglect to confront this hard truth with specific plans because it’s really tough, if not political suicide.  Similarly, confronting the hard truths about legal spend is really tough.  It will require both clients and their outside counsel to have difficult conversations about not just budgets but risk tolerance, past performance, and expectations.  Nothing can be off the table.

 2.     Efficiency:  Rattner rightfully praises the American economy’s ability to be flexible and still productive in the face of the last recession.  These two factors are key to being efficient when addressing companies’ legal issues.  In order to produce efficient results within a budget, both outside counsel and their clients must be flexible enough to try new approaches to solving legal issues.  As one of my mentors Patrick Lamb always says, outside counsel must be flexible enough not to boil the ocean to make a cup of tea.  At the same time, clients must be flexible enough to decide that the risk of not boiling the ocean is acceptable when faced with budget constraints.  This doesn’t mean that clients deserve or should demand less than their desired results.  It just means that clients must demand increased productivity, and lawyers have to figure out ways to give it to them.

Both addressing hard truths and increasing efficiency will require lawyers and their clients to bring their intellect and experience to the table.  But, just as importantly, it will call for data-driven plans.  In the litigation context, these data sets at a minimum will require the following inputs:  (a) actual costs; (b) projected costs; (c) historical performance against budget; (d) actual results; (e) desired result; (f) # of settlements within prescribed parameters; (e) # of settlement outside original paramaters; (f) average settlement by type of case and jurisdiction; (g) average cycle time for type of case and jurisiction; and (h) actual cycle time.  For you M.I.T. math wizards, this could be a great topic to create a financial model that would be deeply appreciated by many companies (and their more innovative outside counsel).  And if you turn this into the next Super Sucessful Startup, I only want a few shares for the idea …

"Why do we fall down? ..."

A team I was on recently had a trial continued after starting pre-trial motion argument.  Mundane legal stuff I know, but something really interesting came out of entering and suddenly exiting the cauldron of trial.  The trial team had an opportunity to truly analyze its performance while knowing they had a second bite at the apple.  This led to a series of informal reviews of our work and a formal “Hot Wash” to not only map out next steps but truly learn from what had just transpired.  I’m not too proud to admit that your humble author ate a little humble pie as part of these reviews, but it gave me a chance to learn a few key things that apply well to any business organization and its members:

1.      We all know that ego can get in the way of future success by making one complacent or unable to see new strategies and tactics.  Just as importantly, however, letting a shot to one’s ego send you into a cocoon of lack of confidence can be just as damaging.  To quote a line from Batman Begins, “Why do we fall down?  So that we can learn how to pick ourselves up.”  Simple advice, but one worth re-visiting after any mistake.

2.      No one likes receiving criticism and many don’t like giving direct criticism.  However, constructive criticism is essential to not only correcting mistakes but developing winning strategies for future projects.  For managers, providing blunt criticism with specific solutions that fit into a clear strategy is key to improving product and maintaining employee respect.  On the flip side, employees/direct reports should take such criticism personally but only to the extent that it helps you perform better in the future.  Further, as an employee it’s more key to come up with and directly communicate your proposed solutions than it is just to good-naturedly take the criticism.

3.      Finally, constructive 360 degree criticism should happen on a regular basis and not just during yearly reviews or even at the end of a project.  Think about it like a blacksmith making a sword.  The blacksmith doesn’t decide if there are problems with a sword after it cools, she decides to hammer out imperfections or create a better a form during the forging process.  The same benefits come with frequent reviews.

Be All That They Can Be: Law Departments As Informed Consumer

I encourage everyone to take a moment and read about the ACC's new online initiative to allow law departments to compare their internal performance metrics to other companies', as reported by the ABA Journal and Corporate Counsel.  The online tool will probably kick start the process to creating more useful metrics.  More importantly, by being able to compare metrics to their peers, law departments will be able to better effectuate change based on their metrics; tracking numbers is only as good as the efficiencies gained by the use of the information.  All in all, this is a really exciting development toward making law departments better-informed consumers.

Like all improvements in consumers’ knowledge, this new development is both a challenge and an opportunity for service providers, be they law firms, outsourcing services, or others.  As an attorney with a law firm using almost exclusively value fee arrangements, I think the ACC’s online initiative is great.  More informed consumers will have better knowledge to challenge their law firms, and are likely to turn more and more to true value fees, i.e., NOT hourly rates merely dressed up.  Additionally, truly informed consumers can better work with law firms in developing the goals for a given piece of legal work, including the value fee arrangement for that work.

Further the better informed the consumer is, the greater pressure is on we service providers to produce a solid value for their legal spend.  This increased pressure will force law firms to develop better internal metrics and demonstrate performance against those metrics.  Like forming a diamond out of rock, this internal pressure in law firms will create better efficiencies to allow law firms to profitably provide better and more valuable results for their clients.

 

 

 

Good Lawyering Means Managing -- Not Avoiding -- Risk

As reported in today's ABA Journal, HP has decided to hire new lawyers for its Legal Department directly from the universe of law grads. ("HP Decided to Hire New Law Grads Rather than Law Firm Associates" via www.abajournal.com).

I want to applaud HP, and its GC, Michael Holston, for this move, and I have the utmost confidence that it will work out well for HP.  Lawyers are no good to companies if they simply lay out the risks and encourage companies to take every step (and pay lots of money) to avoid all risk.  Businesses constantly make decisions based on acceptable risks.  A myriad of complex decisions may go behind determining acceptable risk, but companies do not let this complexity hinder making business decisions. 

Litigation and complex transactions involve risks.  Clients pay lawyers to give them solutions to business problems that account for these risks.  They don't pay them to present a "solution" that is "Pay as much as possible to avoid every risk we can think of."  Training lawyers early in a culture that values making sound decisions based on acceptable risks creates lawyers that better serve their companies, whether they are in-house or outside counsel. 

It may seem strange for outside counsel to support an in-house legal department that, as the linked article notes, "has increased workload requirements [for in-house lawyers] and trimmed spending on outside counsel," but as a lawyer with a firm focusing on results-oriented fees I welcome the greater change accomplished by these moves.  If lawyers are going to be the best business advisors than they have to be comfortable (and trained to be comfortable) managing risks, and recognizing and balancing the costs of risk management.  My firm's profits are directly tied into producing the results prescribed by clients under a predictable and prescribed budget.  That arrangement requires us to be comfortable speaking to clients about the risks of decisions while always being cognizant of the costs of avoiding or accepting certain risks.  The more legal departments like HP that are comfortable making these type of business decisions the better, because as in-house counsel focus on training their new hires to manage risks and costs they will emphasize a culture that demands that outside counsel properly analyze acceptable levels of risk.

 

Fallout of Textron: In-House Lawyers Must Be Wary of Wearing Dual Hats

As reported in the ABA Journal and the SCOTUSblog ( via www.abajournal.com), the Supreme Court has declined to hear the appeal of the case of Textron v. U.S., a clear signal that the federal courts will more closely scrutinize assertions of work product privilege by inside counsel.  In the Textron lower court case, the First Circuit narrowly applied the work product doctrine to hold that an in-house lawyer's analysis of potential tax liabilities was not work product even though the documents at issue served the dual purpose of (1) analyzing the business issues surrounding financial statements and (2) assessing liability in potential tax-related litigation.  The First Circuit opinion can be read here:  http://www.ca1.uscourts.gov/pdf.opinions/07-2631EB-01A.pdf. 

In-house lawyers necessarily must serve dual functions in a company but they must rightly be wary of exposing their analysis of potential liabilities to the world.  The First Circuit's opinion, and by extension the Supreme Court's refusal to hear the case, has set the precedent that when in-house lawyers give advice that has a intertwined business/litigation purposes, they must keep in mind that the work-product privilege may only attach to documents that are directly focused on ongoing or likely-anticipated litigation.  While this is is a difficult line for in-house lawyers to toe, the cases suggest two broad best practices:

1. At a minimum, when giving advice relative to compulsory financial filings, in-house lawyers must keep in mind that their work product may be subject to discovery.  Thus, it may be best to couch a discussion of potential liabilities in language that the company would be comfortable being subject to scrutiny by more than just the company's auditors.
2. When analyzing issues from both the business and litigation perspectives, it may be wise to segregate the work product related to each issue or, at least, clearly delineate why there is a present risk of litigation that necessitates the in-house lawyer's analysis.  This segregation will be difficult because (a) lawyers must consider the business impact of decisions to properly develop litigation strategy, and (b) humans are just not wired to naturally segregate their analysis in this way.

Much more will litigation will stem from today's SC decision, and the courts have clearly not understood the necessary dual analysis that all in-house lawyers must undertake.  Whatever evolution in the law that comes from today's decision, it's vital for all in-house lawyers to review the Textron litigation and analyze their own best practices as it related to creating work product.

Lessons from Budget-Busting

I came across this interesting post in the NY Times' small businesses' section.  via boss.blogs.nytimes.com  It's a post by Jennifer Walzer, the CEO of NY-based data protection company.  She recounts her horror at being charged nearly $6500 by a law firm for the review of a standard sublease agreement.  Beyond the details of her bad customer experience, the post raises several "life lessons" for businesses and law firms:

1. Properly manage customer expectations:  Ms. Walzer's bad experience was magnified because the law firm led her to believe that the $2500 retainer they charged was essentially the fixed budget for the project.  Whether this was true or not, it shows that it's imperative for businesses, including law firms, to be open with their customers and to consistently inquire and communicate regarding each side's shared expectations.  A discussion regarding a change order is always better than an invoice at the end of a project that is wildly different than the expected project spend. 
2. Don't create promises you can't (or don't intend to compete):  If the service provider doesn't intend to stick to a budget, don't create even the implied promise of one.  That's not to say don't create fixed budgets; service providers and other businesses should leverage their experience, internal performance metrics, and efficiencies to provide quality service at a predictable cost.  However, if a provider cannot provide predictable costs than don't even suggest that you will.  The damage from failing to live up to expectations will always exceed the loss of profit margin on a given project.
3. Reputational damage must always be weighed into every billing decision:  It is possible that the law firm deserved every penny they charged.  It is also possible, that any modification in their billing practices was deemed not necessary for a perceived one-off customer.  However, businesses, particularly service providers, must realize that there is no such things as a one-off customer.  First, the practices developed in any customer service experience can be applied to other experiences, which creates efficiencies that will allow provides to offer competitively-priced products while maintaining profit margins.  Second, in any era, and especially in the era of social media, the reputational risk of a bad customer experience can be just as damning to the bottom-line as a poorly developed budget.  Even if the law firm did not expect to work with Ms. Walzer again, they certainly may want to work with someone in her network.  Moreover, they certainly did not want a bad impression of their services to be posted all over the internet.  In this case, the reputational risk outweighed the profit they made on a routine document analysis.
4. The customer is always right:  Goes without saying.