On Monday, my partner Nicole Auerbach and I announced the launch of ElevateNext, which will work alongside Elevate Services, a best-in-class law company. And with Elevate, we announced our collaboration with Univar, a Fortune 500 chemical and ingredient distribution company, to reduce its legal spend by 50%. Many have followed our time with Valorem. I am grateful for the sustained interest in our work at Valorem, and so I wanted to share the thinking that went into the creation of ElevateNext.
According to a survey of corporate counsel at large U.S. corporations reported by Law.com, nearly 70% of law departments expect their annual operating budget to be flat or decrease in 2017.
Let me say that again—nearly 70% of law departments expect that annual operating budget to be flat or decrease in 2017. And we know that, in the face of this challenge, law firms will respond by….wait for it….raising their hourly billing rates. Because that’s what firms do. Every year. Of course, it does not take an advanced degree to see the incongruity between the clients’ needs and firms’ response.
To make this statistic even more sobering, consider this: the amount of work that must be done by law departments with static or shrinking budgets likely has increased, not decreased. Why? Because the world is smaller, businesses expand their offerings and operating geography. Because that’s what businesses do. And when they do, the work for the law department increases. So demand for legal services increases while the budget to purchase legal services does not not. This is not good for law firms, especially large ones. Nor is it good for law departments.
Faced with this, 43% of law departments expect to decrease their overall use of outside counsel. This work will be redirected to law department attorneys. And, to be sure, there will continue to be efforts to shift work from higher priced lawyers to less expensive ones. Law departments will employ legal operations professionals to help improve operating efficiency within the law department.
The broad range of tools to reduce costs so more work can be done for the same amount is laudable. But it is not enough, because it it not sustainable. Once an efficiency is obtained, more work will still require more resources. After some point in time, the issue will not be efficiency, but the amount of work.
Because of this, leading General Counsel are focusing on prevention, how they can work with the parts of their enterprise that generate legal work to operate in a manner that requires less involvement of the law department or produces less work for the law department. A simple example is that improved contracting can reduce the number of contract diputes that the law department must handle. Prevention is the key for long-term sustainable success—instead of having to do more with less year in and year out, law departments would have to do less and therefore be able to invest the less they get more wisely, on issues that better serve the corporation’s interests.
How many law departments have a structured preventive law program? For those that don’t, what are the reasons they don’t? For those with a structured preventive law program, what metrics on effectiveness are tracked?
These are interesting questions, and I am not aware of any generally available data. Jeff Carr, Nicole Auerbach and I are conducting a preventive law survey for inhouse counsel. We encourage all in-house lawyers to participate. The results will be shared publicly.
We created ValoremNext, in part, because we believe that prevention has to become the next focus for law departments. More with less is now the New Normal, but there are finite limits on the ability to do more without more. But if legal problems can be avoided in the first place, the amount of more that must be done becomes less.
Even though prevention is an essential tool, there is scant data on whether law departments actually focus on prevention, and if they are, how so. So, we’ve created a short survey we are asking people inside companies (not limited to just lawyers) to take to enlighten us. We know your time is valuable – it should not take more than 3-5 minutes to complete. We will blog about the responses every few weeks.
Since more data will provide greater insights, please forward the link to the survey —www.surveymonkey.com/r/ValoremNextPreventiveLaw-HTB95DX to your social media followers/LinkedIn groups or directly to those you know who are in-house at other companies.
Something interesting happened recently. Jeff Carr, Nicole Auerbach and I consulted with a client about how to improve the law department’s performance and save money. Shortly afterwards, Nicole and I consulted with a law firm about moving to alternative fee arrangements. The interesting thing was that we found ourselves enjoying being consultants. We found, in these two experiences, that we have a lot to offer.
This should not have been a surprise: Valorem has been a classroom of sorts since we formed the firm in 2008. We learned from trial and error how to do alternative fees when there was no roadmap to guide us. We also figured out how to frame the national discussion about AFAs when no one was talking about anything but the billable hour. We learned how to divorce hours from pricing when most people to this day still use hours as the basis for calculating an alternative fee. We learned that AFAs are just one of several tools necessary for a successful representation and delivery of exceptional client service. You learn a lot in 9 years, and believe me, we’ve been drinking through a fire hose.
We are grateful that clients have responded so favorably. In 2016, Valorem was recognized as one of 22 law firms “Best At Delivering Alternative Fee Arrangements,” and has been recognized for the past four years as a member of the BTI Client Service A-Team. For the past two years, we have been recognized as one of the “Most Recommended (by clients) Law Firms.” And I have been humbled to have been named a BTI Client Service All-Star MVP for the past four years. We’ve learned a lot, but we also have put what we’ve learned into action.
We haven’t exactly kept most of the lessons we have learned a secret. I have shared my thinking on alternative fees in two books, and shared my thoughts on customer service and the delivery of value in this blog, which I started back in 2004. And I have written extensively (with my friend Paul Lippe) about what we affectionately refer to as “the New Normal” in a column for the ABA Journal. These columns are soon to be released in book form. Jeff just started a blog, Life at the Speed of Prevention, that focuses on the enormous untapped value of preventing legal problems from occurring. Nicole, Jeff and I also speak regularly at various industry events across the country to share the lessons we’ve learned and our (often outspoken) views of the legal market.
In the past, though we’ve willingly helped others with their AFA programs or customer service initiatives, we drew the line at formal “consulting.” But as we found ourselves enjoying the consulting experience, and as more people are asking us to devote more time to this aspect, we realized that maybe the line we had drawn in our minds was a bit artificial. And one of the many good things about being in a small firm is the absence of rigid rules, or objection to changing them. So we’ve erased the line, and have officially launched a consulting practice for both companies and law firms on these broad topics (and anything in between):
For Law Departments:
- Analyzing processes to identify and eliminate waste
- Analyzing workflow to identify prevention opportunities—reducing work coming into the department at the front end
- Alternative Fee Arrangements (training and structuring fees, making AFAs profitable)
- Deploying tools to reduce total fees even if they are billed by the hour
- After Action Assessments and programs to embed continuous improvement into the Department’s culture
- Developing RFPs for AFA engagements
- Deploying an low-cost arbitration program to address small cases that, in the aggregate, can add up
- Designing prevention programs and helping departments see around the corner to know what’s coming
For Law Firms
- Alternative Fee Arrangements (training and structuring fees, making AFAs profitable)
- Firm culture audits to determine if the firm is customer-focused
- After Action Assessments and programs to embed continuous improvement into the Firm’s culture
- Responding to RFPs that address AFAs
Our goal is to help others go through the learning curve we experienced, but at an accelerated rate and without having to learn the hard lessons through actual experience.
So as they say in the consulting biz, if you have interest in any of these topics, please give us a call. We will customize the right program for you.
September 8, 2015 FOR IMMEDIATE RELEASE
Iconic General Counsel Jeffrey Carr to Join Valorem Law Group
Chicago, IL – Jeffrey W. Carr, former General Counsel of Fortune Top 500 FMC Technologies, Inc. has joined the Valorem Law Group to lead ValoremNext, a platform designed to diminish the need for legal services by preventing problems before they occur. This concept builds on the approach Carr utilized with legendary success at FMC Technologies.
Carr is widely hailed as a preeminent thought leader and forward thinking General Counsel, having been a vocal advocate of the ACC Value Challenge and catalyst to reform the practice of law.
ValoremNext will be a key component of Valorem, a New Model law firm honored by BTI Consulting as a Client Service A-Team member for Valorem’s relentless focus on client service.
“I am very excited about joining Valorem,” said Carr. “The firm is one of the most forward-thinking firms I have encountered. They understand that the need to prevent a problem is critical to providing real value to clients,” he added. Drawing on his experience as a Fortune 500 General Counsel, Carr noted that “as businesses expand their geographic base, the demands on law departments to do more with less becomes acute, and the savings available from doing the same things better are not sustainable. The only sustainable savings can come from a program that prevents the demand for legal services in the first place.”
“This is a huge opportunity for Valorem,” said Patrick Lamb, one of the firm’s founders. “Jeff was a great client. He taught us that in-house counsel are most effective when they prevent fires rather than when they are trying to put them out. We’ve been committed to providing value to our clients since the firm was founded, and the opportunity to move toward the prevention platform was a natural step for us in providing greater value to our clients,” Lamb added.
In addition to developing the prevention platform and serving as the voice of the client, Carr will be instrumental in helping Valorem continue to innovate to bring value to the client. “We have developed a national reputation for client service and the use of alternative fee arrangements,” said Nicole Auerbach, another Valorem founding member. “The opportunity to work with Jeff to make even greater strides towards innovation and client service is an exciting one,” she added.
To introduce Jeff and the prevention practice to the in-house community, Valorem plans to offer one hour programs to in-house lawyers in Houston (October 28), Chicago (November 12), and Silicon Valley (November 17). Details will be posted on the firm’s website, www.valoremlaw.com before the end of September.
Valorem Law Group, which is comprised of big firm refugees, was created in 2008 to provide exceptional trial and litigation service to corporate clients, with a focus on fee arrangements that are not based on the hours billed, but the results achieved. Valorem has a special focus on client service and has repeatedly been named to the Client Service A-Team by BTI Consulting. With offices in Chicago and Silicon Valley, the firm maintains a national trial and litigation practice.
ValoremNext is a consulting practice that focuses on the “what next?” phase of corporate legal strategy — how to diminish legal spend by preventing the issues that traditionally have caused an impact on all phases of corporate life, including the bottom line. Spearheaded by former FMC Technologies General Counsel, Jeff Carr, ValoremNext focuses on prevention and best practices for legal departments globally.
For further information, please contact:
In the beginning, we solved problems but did so inefficiently and unpredictably. That was Old Law. Most clients don’t like Old Law because they are under budget and performance pressure.
Then we learned to be efficient and predict the cost of solving a problem. This was New Law. Most clients embraced New Law because it helped them with their budget and performance pressure.
The problem with solving problems efficiently and predictably is that there are diminishing returns. While there is always room for improvement, you get to a point where sustainable improvements are marginal at best. Herbert Stein famously said, “If something cannot go on forever, it will stop.” This truth is often stated as “Trends that can’t continue, won’t.” The trend of increasingly efficient handling of problems can’t continue.
Even as efficiency improvement wanes, law departments face growing demand on their resources. Businesses continue to grow, but law department budgets don’t. Businesses expand to new geographies and markets, but law departments don’t.
To do more with less, law departments must eliminate demands on their time, attention and resources. Ignoring problems is not an option.
It seems an intractable problem, but there is solution, and it is found in a lesson of aging.
When I was a child, there were childhood fights and I wanted to win those fights. As a person of age, I don’t want to win fights, I want to avoid them. Don’t get me wrong, some fights have to be fought. But fights should be fought because doing so furthers a strategic objective. Problems are just like fights: some can’t be avoided, but those that can be avoided, should be.
The answer to the growing problems law departments face is prevention. If we learn to prevent problems, we will be able to say”
Then we learned to prevent problems from starting in the first place. This is Next Law. It allows law departments to be strategic assets in the growth of the business, adding value instead of simply being a cost center.
What does Next Law entail? More on that soon.