Trends and Innovations

In December, I ran a post about outsourcing the legal function or at least parts of it (here).  My thesis was (and remains) that certain inside functions could be handled better by outside counsel on a fixed fee that would be competitive with or less than the cost of the inside lawyer).   The Wired GC has written a very interesting critique of this idea.  The first noteworthy comment is about benefits from the process of considering whether work could be outsourced:

Nevertheless, this process can have the effect of forcing the GC to take a hard look at what work is being done. Some may be outsourced to law firms. Some may be redistributed internally to lawyers, given to non-legal staff, or restructured using appropriate technology. And-possibly best of all-some work may no longer be done at all.

Frankly, these collateral benefits were ones I had not even considered.

Wired GC goes on to find some potential problems with the example I used, including the again increasing salaries for new associates and the fact that most lawyers would not like to “oversee” litigation being handled on an hourly rate by others. 

It is, quite obviously, impossible in short posts such as those in our blogs to provide a detailed proposal and analysis of the benefits of any significant idea, particularly those such as this one which are so very fact-specific.  But let me say this.  My use of the term “oversee” (as in “overseeing litigation”) was a poor choice of words used to summarize the many responsibilities an inside lawyer has with respect to a lawsuit.  Issues such as budgets, settlements, insurance coverage, keeping business units apprised, setting reserves and so forth all are significant factors.  But I continue to believe my hypothesis is true–not for all but for many.  The functions I described above could be performed as well or better by a senior litigator whose salary prices her out of the marketplace for many inside counsel positions.  Why would a firm perform such work on a fixed fee akin to her what it would cost to handle these functions in-house?  Many firms (and I know this from my own experience) would be thrilled to do so to get a foot in the door.

I am thrilled that the Wired GC found my post worthy of comment.  I hope he and other inside lawyers find the idea worthy of consideration.

From time to time, I have the opportunity to provide examples of great client service or innovative thinking in the area.  Today, I want to highlight the work of Ralph Palumbo of the The Summit Law Group in Seattle.  The firm has a great story to tell:

 We formed Summit Law Group to revolutionize the way legal services are provided to law firm customers. Most law firms provide legal services in the same way that they did 25 years ago. Those firms focus on lawyers, not customers. Their practice model relies on large numbers of people billing large numbers of hours, often without regard for the value of the work to the customer.

We reject that model. We believe that the market for legal services has dramatically changed in the last decade. Our mission is to think creatively and proactively in formulating the most effective and efficient solutions to your legal needs.

Here’s the example of focusing on the client that I really like:

 Summit Law Group’s value adjustment line is a cornerstone of our billing approach. We empower each of our customers with the right to adjust our billing, upward or downward, based on our customer’s perception of the value received, not ours.

How many of us trust our clients enough to give them this discretion?  Ralph is a leading thinker in the area of client service.  To my knowledge, he is not an active blogger.  But we all would benefit it he were.  Ralph, consider this an invitation.

About I month ago, I wrote about “Outsourcing The Legal Function.”  Today, I was reading this article at law.com about five questions law firms face for 2006.  The fifth question is whether client relationships are more critical than ever.  The author observes that “according to a recent law firm study by BTI, the vast majority of companies are shrinking their in-house counsel team, in part because they believe this will cut costs.”  I attended the seminar where BTI first presented this data, which is very strong.  The reason, BTI believes, for this phenomenon is that reducing inhouse body count cuts inhouse costs, and that these numbers are more important for General Counsel than outside counsel spend. 

Whether the reasoning reflects the truth of the situation, it is inescapable the General Counsel should be thinking about outsourcing parts of the legal function.  Certainly the work can be handled by outside counsel.  For example, if a company has a lawyer overseeing litigation, any work she is doing likely could be done as an outside lawyer.  In terms of the value of the work, that value is fixed–what was the all-in cost for the inside lawyer?  Might the law firm be able to provide superior service?  Possibly, especially if the outside firm has the breadth of talent to manage (not necessarily handle) litigation with greater expertise brought to bear.  And quite possibly, someone more senior to the inside lawyer will make better judgments about tactical and strategic matters.  Experience does count for something after all.

With this said, I wonder why more General Counsel are not considering outsourcing as a solution.

Altman Weil did a survey of the Amlaw 200.  Sixty three firms responded.  The survey is available from Altman Weil and it is discussed in the January 2006 issue of American Lawyer.  The survey covers many areas and I will be discussing it in other posts, but one topic addressed was use of Six Sigma by these firms.

Three firms, 5.1%, had utilized Six Sigma.  Five firms, 8.5%, have not used Six Sigma but plan to in the future.  Fifty one firms, or 86.4%, have not used Six Sigma and have no plans to do so.  Given the success achieved by many companies who have implemented Six Sigma, I was inclined to be surprised that more had not tried it.  Then I remembered that these were law firms.  Populated by lawyers.  The people most resistant to change assembled in a single profession.  Oh well.

For what its worth, of the three firms that had tried Six Sigma, one found its experience “very successful,” another found its experience “successful,” and the third found its experience “neutral.”

I am very happy to see the number of posts commenting favorably on the launching of the Law Department Purchasing Consortium.   Highly respected blogs and bloggers and greeted the lauch with enthusiasm.  Gerry RiskinLarry BodineGeoffrey Gussis,  and The Wired GC all have taken note of the launch.

I need to acknowledge upfront that I am part of the Consortium and am on its Advisory Board.  Having said that, it is a great concept.  The Consortium is designed to help law department leaders gain more value for their legal spend, improve operational efficiencies and reduce costs. These objectives are achieved: (a) by pooling the purchasing power of participating law departments; (b) by providing technology and specific legal management tools to law departments on a turnkey, cost-free basis; and (c) by introducing law department leaders to a select group of best-in-class, partnering-savvy attorneys and legal suppliers  who are committed to helping their clients achieve their business goals.   The Consortium was conceived by Gary Cohen, EVP and GC of Finish Line, Inc. (and ACC Board member), but it was given birth through the perseverance and hard work of Peter Jenkins.

Its a great concept.  I hope it works.  And I strongly encourage inhouse readers to take a look at the idea, let Peter know what you think, and envision how the Consortium could work for you.

I was having a discussion with a General Counsel a few months ago.  He was thinking of hiring a lawyer to oversee the company’s litigation.  He was thinking of hiring a lawyer with 3 to 4 years experience.  It got me thinking.  Will this young lawyer be able to make better decisions or even recommendations than I would?  Boy, I sure hope not.  Otherwise those 20 years of additional experience under my belt wouldn’t count for much.  But what would this young lawyer bring to the table that I wouldn’t-the only thing is lower compensation.  He could be hired for less than I could.  But would I undertake the management assignment for the net cost of hiring this young lawyer (salary and benefits)?  Probably.  Would the company gain by having someone with greater experience making decisions and recommendations?  Almost certainly.

This same analysis works for general counsel who are not litigators by training or trade, but suddenly (or not so suddenly) have a significant litigation docket to oversee.  Indeed, the same analysis works for any area of the law where the in-house team does not have equal or greater expertise than the lawyers being hired.  And it certainly makes sense for smaller law departments which do not have the resources to hire top talent in all substantive areas in which legal work is done.

Lots of projects and job functions are being outsourced these days.  Maybe outsourcing part of the legal function is an idea whose time has come.

I have long been intrigued by the concept of Six Sigma.  Ever since reading “Jack Welch and the GE Way,” I’ve wondered how law firms could use the concept to improve their service. In this vein, I’ve also spent time with Lean Six Sigma For Service.  I’ve always thought myself somewhat the loner in my thinking on this, however.  For that reason, I was delighted to see this post in More Partner Income. Some of the wisdom of the post:

Can Six Sigma work in a law firm? The answer is, of course.  But a Six Sigma vision can only come from the firm’s recognized “leader”.  It can only thrive in an environment of constant change-recognition that excellence can only be achieved through change. It must place the client’s wants and desires first. It must believe to its very core that when the firm improves the success of their customer, it improves the law firm’s success as well. It must be willing to honestly determine what its clients want and be prepared to deliver it. Those wants may be at odds with the law firm’s traditions but if you break those traditions in favor of the client-you will have a superior competitive advantage.  If you do so while eliminating deviations from client expectations, your competitive position will be unassailable.

I love The Common Scold.  Yes, Scold, not cold.  (Who could ever love the common cold?)  Why?  Because Monica Bay always makes really good points  in a very compelling way.  Take her post telling the story of Jane Smith and her encounter with a vendor.  Read it.  Learn.

The first point, not using a woman’s first name until invited to do so, is a sound and often overlooked piece of advice.  Its most often overlooked by men.

The second piece of advice, to LISTEN, is of such universal importance that it applies well beyond the vendor-vendee relationship.  It applies to every relationship!  At least ones you want to be successful relationships.  Answer this one question:  How many times have you be involved in telephone conversations with your clients when you have been doing something else at the same time, like  reading email or searching through the file to find the document you know the client wants to discuss?  Listening is an active exercise.  It requires concentration, focus, attention.  Of all the attributes of the most successful client relationships, I’ll wager my house that effective listening is on everyone’s Top Five list. 

Even though its that important, how many of us are really good at it?  How many take it for granted?  How many are trained or practice listening?  That’s why the importance of Monica’s lesson can’t be understated.

Everyone, it seems, has realized that clients want good service.  Most have responded by saying they provide great service.  Only a few, however, really do provide it.  How is a client to distinguish between those who talk the talk from the few who actually walk the walk?

The separation really starts with expectations.  Last week, I was having dinner with a friend (also a lawyer) who was complaining that a client had become upset when it took them a bit over a day to return a phone call.  Quite frankly, I was dumb struck.  I feel guilty if the time to return a call is measured in hours rather than minutes.  Measuring in days is just not acceptable.  Its easy to understand why my friend and I view this differently.  He was born and raised in a big firm, and grew up working on huge lawsuits.  He probably did not have to return a call to a client for years, and when he first did, it was the kind of call where the discussion would entail a huge document production.  In other words, not a time sensitive issue.  I was fortunate enough to grow up in a firm where our matters were smaller, and where we were dealing directly with CEOs and other senior officers early on.  My former partners drilled the message into everyone’s head that these senior officers were busy and it was our obligation to get back to them while they still remembered why they had called us.  As time goes by, the need for immediate call backs becomes even more apparent.  The worst thing that can happen to a client relationship is for the client to ask the next lawyer she speaks to the question she had called to ask you. 

So, for my friend, good service is same day call backs.  For others, good service is same hour call backs.  How does a client learn which kind of person she is dealing with?  Its hard to ask how fast you return calls, because no one will every respond with a precise number.  I’ve come up with a list of surrogate questions, however, that should provide information that will allow a client to meaningfully assess whether the lawyer or firm at issue really walks the client service walk.

1.  How many times every year do the firm’s lawyers gather to listen to clients or prospects discuss client service?  If client service is truly a firm priority, an annual meeting or retreat to focus on this issue, to renew, to fortify, seems the least that should be expected.

2.  How does a firm identify what it means to provide “exceptional service,” and how is that information communicated to everyone in the firm?  Knowledge of exceptional client service is not innate.  It must be learned.  If a firm is truly committed to providing exceptional client service, there must be both a systematic means of learning what great service is, and an equally systematic means of communicating it to everyone in the firm.  If a firm doesn’t have such systems, it is just stumbling around hoping that whatever they provide as service actually measures up.

3.  What type of client service training is provided to the firm’s non-lawyer staff?  There are, to be sure, lawyers who provide great service in firms that don’t care about it.  But to test whether a firm is institutionally committed to service, to determine whether it will be more than serendipity whether you receive it from their lawyers, ask about how non-lawyers are trained.  Anyone truly committed to providing exceptional client service will know that everyone must be committed to it, from receptionist, to managing partner.  And there will be a training program in place.

In my next entry, I will continue with a list of questions clients can ask to find out if the firm they are speaking with really cares about client service, or whether those lines in the brochure promising “client-focused service” are just empty rhetoric.

Providing yet more fodder for this blawg, the May issue of Corporate Counsel contains a short article entitled “Conflict Avoidance,” which discusses Citigroup’s new policy on conflicts, which makes it difficult to impossible to get a waiver to sue the company.  My vantage point as a partner in a 30 plus lawyer firm makes it easier to discuss contflicts since it seems to follow that the number of conflict problems increases with the size of the firm.  But having spent a long time at a big firm, after reading a number of stories in various media, and more recently having observed closely the negotiation a client endured with another of its firms (a big one, needless to say), it seems fair to say that many firms take off their client service hats and put on their adversary hats when they negotiate for waivers.  I think that, over time, more companies will follow the Citigroup course and refuse waivers when litigation is involved.  If there are any firms with a real client service focus, they might consider adopting such a rule too-not asking for waivers to litigate against a client.  Sure, it might cost them a case, but I believe the loyalty generated will be recognized and rewarded. 

What do you think?