By in-house
in-house counsel,
counsel, for
for in-house
in-house counsel.
counsel.®®
By
InfoPAKSM Law Department Strategy:
Balancing Immediate Cost Savings
With Sustainable Results
Sponsored by:
Association of Corporate Counsel
Association of Corporate Counsel
1025 Connecticut Avenue, NW, Suite 200
1025 Connecticut Avenue, NW, Suite 200
Washington, DC 20036 USA
Washington, DC 20036 USA
tel +1 202.293.4103, fax +1 202.293.4701
tel +1 202.293.4103, fax +1 202.293.4701
www.acc.com
www.acc.com
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
2
Law Department Strategy: Balancing Immediate
Cost Savings With Sustainable Results
August 2009
Provided by the Association of Corporate Counsel
1025 Connecticut Avenue, NW, Suite 200
Washington, DC 20036 USA
tel +1 202.293.4103
fax +1 202.293.4107
www.acc.com
This InfoPAKSM provides a roadmap for developing a cost-savings strategy that delivers both
immediate and sustainable results. It has three main sections: (1) Identification of Cost Savings
Opportunities; (2) Implementing the Strategy; and (3) Sustaining Results.
The information in this InfoPAK should not be construed as legal advice or legal opinion on
specific facts, and should not be considered representative of the views of Huron Consulting
Group or of ACC or any of its lawyers, unless so stated. Further, this InfoPAK is not intended as a
definitive statement on the subject and should not be construed as legal advice. Rather, this
InfoPAK is intended to serve as a tool for readers, providing practical information to the in-house
practitioner.
This material was compiled by Huron Consulting Group, the 2009 Sponsor of the ACC Law
Department Management Committee. For more information on Huron Consulting Group,
please visit the About the Author section of this document or visit their website at
www.huronconsultinggroup.com.
ACC and Huron wish to thank the Law Department Management Committee’s Executive
Committee.
Contents
I.
Current Environment and Typical Efforts........................................................................................5
II.
Identification of Cost Savings.............................................................................................................5
III.
IV.
A.
Achieving Balance Through a Holistic Strategy.............................................................................................................. 5
B.
Foundational Question #1: What Services Are Provided to the Business by the Law Department?....................... 7
C.
Foundational Question #2: How is the Value of the Services Prioritized?.................................................................. 9
D.
Foundational Question #3: Who Should Be Doing the Work?..................................................................................... 11
E.
Foundational Question #4: What Can Be Done to Drive Costs Down?...................................................................... 14
F.
Results ................................................................................................................................................................................... 15
Implementing the Strategy: Maximizing Internal Resources.........................................................16
A.
Overview ............................................................................................................................................................................... 16
B.
Review of the Organizational Structure ........................................................................................................................... 16
C.
Defined Roles and Responsibilities ................................................................................................................................... 17
D.
Work Distribution Plan...................................................................................................................................................... 17
E.
Work Transition Plan ......................................................................................................................................................... 18
F.
Communication Plan.......................................................................................................................................................... 18
Implementing the Strategy: Getting More Bang for the Buck with Outside Counsel (and Other
Vendors) ...............................................................................................................................................19
A.
1.
Work Allocation................................................................................................................................................. 19
2.
Staffing................................................................................................................................................................. 21
3.
Hours ................................................................................................................................................................... 22
4.
Rates..................................................................................................................................................................... 23
5.
Expenses .............................................................................................................................................................. 23
6.
Tools .................................................................................................................................................................... 24
B.
Developing a Model for the Use of Outside Counsel ..................................................................................................... 25
C.
Developing an Outside Counsel Program ....................................................................................................................... 26
D.
Managing Outside Counsel Effectively ............................................................................................................................ 19
1.
Determining Program Approach..................................................................................................................... 27
2.
Conducting a Selection Process ....................................................................................................................... 28
Establishing Operational Guidelines ................................................................................................................................ 32
4
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
V.
Creating Sustainability: Managing and Measuring ....................................................................... …33
A.
Managing through Leverage of Process and Technology .............................................................................................. 33
B.
Measuring Performance ..................................................................................................................................................... 37
VI.
Conclusion……………………………………………………………………………………………………39
VII.
About Huron Consulting Group and the Authors…………………………………………………….40
VIII.
Sample Forms……………………………………………………………………………………………….42
A.
Workload Survey…………………………………………………………………………………………………….42
B.
Law Firm Data Request………………………………………………………………………………………..…….44
C.
Interview Questions…………………………………………………………………………………………………46
D.
Roles and Responsibilities Matrix (Litigation Sample) ………………………………………………………...…..48
E.
Work Distribution Plan……………………………………………………………………………………………..49
F.
Work Transition Plan……………………………………………………………………………………………….50
G.
Communication Plan………………………………….…………………………………………………………….51
H.
RFP Sample Questions………………………………………………………………………………………………52
I.
RFP Scorecard………………………………………………………………………………………………………..54
J.
Interview Evaluation Sheet…………………………………………………………………………………………..55
IX.
Additional Resources……………………………………………………………………………………….57
X.
Endnotes……………………………………………………………………………………………………...58
I.
5
Current Environment and Typical Efforts
In today’s economic environment, pressures to do more with less are increasingly present and
challenging. Adding to these pressures are heightened regulatory scrutiny, increased compliance
requirements, upswings in employment issues, and potential increases in litigation, making cost
reduction seem like an impossible goal. As the results of recent surveys confirm, the economy is
impacting the law department and the way in which it delivers services.
In the 2008 Association of Corporate Counsel Chief Legal Officer Survey (“CLO Survey”), 54% of CLOs
responded that the economic downturn has affected the work and operations of their law department.1
The survey confirms what Huron Consulting Group also observed from working with clients: law
departments are being required to cut costs. Yet how will the cost reduction goals be achieved?
Commonly used tactics include internal headcount cuts, outside counsel rate discounts, and elimination
of projects focused on operational improvement. A survey released in May 2009 showed that for the
first three months of the year, outside counsel spending dropped by an average of 6.7%.2
Employing tactics on a one-off basis may bring some short-term savings, but what happens next year?
Will more headcount cuts be required? Will outside counsel bring their rates back up again? What
additional work will the downturn in the economy bring? What other things will counteract any gains
made from reducing spending on outside counsel? Such questions must be considered so that law
departments can achieve cost reduction, while also managing demand and risk.
However, cost reduction tactics may result in fewer services or lower quality—and when this is coupled
with new risks and additional legal services requirements from the current environment—such tactics
simply may not be worth their toll. To accomplish the needed balance, in-house counsel should develop
a proactive strategic approach with clearly established accountabilities. By doing so, not only can costs
be managed, but law departments can also create sustainable savings and efficiencies without an undue
increase in risk for the company.
II. Identification of Cost Savings
A. Achieving Balance Through a Holistic Strategy
Prior to the development of a cost management strategy, the law department should have a clear
understanding of the company’s overall corporate strategy, business goals, and risk tolerance.
Frequently, the law department and the business leadership have not aligned their views regarding the
management of risk. Any strategy that is developed for the law department must balance the business
goals and risks with the legal work, risks, and the resources available to deliver the work.
A holistic approach encompasses all work and all resources. When defining the services delivered, both
current services and demand for future services should be considered. Understanding how the economy
is affecting the company and the mix of legal services required is necessary to get the full perspective of
the demand for legal services. For example, if the company is downsizing, will the demand for
employment-related legal services increase? Will there be an increase in the regulatory environment for
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
6
the industry? How will the sales process be affected? Will there be more contract negotiations, or fewer?
A holistic view of available resources is also necessary; both internal and external resources should be
assessed by evaluating who they are and what they do. Internal resources include both resources within
the law department and resources in supporting groups or among the business units. External resources
include not only law firms, but also other service providers such as e-discovery, immigration, document
review and compliance management vendors.
To develop a holistic strategy, four foundational questions must be asked:
1.
2.
3.
4.
What services are provided to the business by the law department?
How is the value of the services prioritized?
Who should be delivering the services?
What can be done to drive costs down while maintaining and perhaps even improving the
quality of services delivered?
Even with shrinking budgets and headcount, there is pressure to provide legal services more costeffectively, while improving quality and overall business risk management. At a strategic level,
emphasizing “doing the right work” and “doing the work right” will result in sustainable efficiencies and
cost savings. Develop a plan to reach these goals.
Figure 1: Foundational Questions
Question Analysis Needed Internal Focus External Focus 1. What services are
provided to the business
by the law department
Quantified baseline of the
number of Full Time
Equivalents (FTEs) and
dollars spent Type of work and staffing
Type of work, leverage
and cost
2. How is the value of the
services prioritized?
Qualitative value
assessment to determine
priorities Value the work based on risk and contribution to
achieving the company’s goals. 3. Who should be
delivering the services
Criteria for sourcing the
work Align internal resources to
highly valued work
4. What can be done to
drive costs down while
maintaining and perhaps
even improving the
quality of services
delivered?
Cost savings initiatives
for the short- and longterm Copyright© Huron Consulting Group & Association of Corporate Counsel
Align work to appropriate
price point
– Internal Resource Optimization
– Outside Counsel & Vendor Management
– Process and Technology Utilization
– Operational Performance Management B.
7
Foundational Question #1: What Services Are Provided to the Business
by the Law Department?
Understanding the law department’s ability to meet the needs of the business is crucial. It requires
taking a deep look at the department’s current resources to understand the workload to be
accomplished, the skills and capacity available internally, and the use of external resources. Most law
departments have existing information that will help answer the first foundational question: “What
services are provided to the business by the law department?”
Information sources include timekeeping system data, matter management system data, and e-billing
system data. All three of these sources will give the department insight into the work that is being
performed, internally and externally, and the number and types of resources performing the work. The
information should be used to establish a quantified baseline of resources used and dollars spent. While
these sources will provide a significant amount of information, additional proactive information
gathering will be required to develop the full picture. The means of information gathering will vary for
internal and external resources.
An efficient tool for gathering information is a survey of internal resources. Potential components of the
survey include:
■
Estimated annual hours worked;
■
Current workload distribution by matter type (time spent)3;
■
Complexity of the work (high, medium, low);
■
Value, as determined by level of risk and competitive advantage;
■
Estimated changes in future volume of workload by matter type;
■
Internal client for whom the work is performed;
■
Usage of outside counsel for the work (high, medium, low);
■
Estimated change in usage of outside counsel for the work.
The survey may be distributed to all members of the law department—attorneys, paralegals and staff—or
to just a subset. The completed surveys should be compiled and analyzed. Analysis should include:
■
Hours, by practice area and matter type;
■
Number of internal resources performing each type of work;
■
Number of internal Full Time Equivalents4 (“FTE”) for each type of work;
■
Volume of work, by client;
■
FTE, by practice area and by client;
■
Value of work, by level of risk and competitive advantage.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
8
The survey and analysis will provide a snapshot of the work performed within the law department and
by outside counsel, and the value the department members place on the work performed. The results of
the survey will be used to answer foundational questions 1, 2 and 3.
A survey of internal resources does not provide a full understanding of the work completed by external
resources. Information on external resources can be gathered from the department’s e-billing system. If
the department does not use e-billing or e-billing has not been implemented for a length of time
sufficient to collect significant data for analysis, then data from law firm billing systems can be used as a
source of information on external resource allocation. It is recommended that billing data be gathered
from a sample of the company’s law firms (10 – 20 firms) representing a cross-section of practice areas
and firm sizes (small to mid to large). Regardless of whether the information comes from the
department’s e-billing system or the law firms’ billing system, an analysis of rates, staffing, expenses, and,
if available, Uniform Task Based Management System (“UTBMS”) codes should be performed. Analysis
of the billing data, overall and by firm, should include:
■
Number of law firm FTE utilized;
■
Number of law firm timekeepers;
■
Hours worked by each level of resource (partner, associate, paralegal, etc.);
■
Number of timekeepers comprising 1 FTE;
■
Leverage models;
■
Matters with high partner-level staffing;
■
High billings by individual timekeepers;
■
Overall average blended rate;
■
Average cost of external FTE attorney resources;
■
Average blended rates by practice area;
■
Rate changes over relevant time period;
■
Hours / day billing in excess of guidelines;
■
Expenses (copies, faxes, research, etc.);
■
UTBMS task leverage models;
■
UTBMS task average blended rates.
The data collected will provide insight into how matters are being staffed, whether outside guidelines are
being followed, and where potential opportunities for improvement exist. Commonly found areas for
potential improvement include:
■
Ad-hoc sourcing strategies with undefined roles and responsibilities and duplication of work;
Copyright© Huron Consulting Group & Association of Corporate Counsel
■
■
■
■
9
Suboptimal internal or external staffing, i.e., a high number of timekeepers for a given type of
matter, limited staffing leverage, or inappropriate task staffing;
Inconsistent budgeting practices;
Inconsistent communication of and adherence to outside counsel guidelines, e.g., unmanaged
expenses, unauthorized timekeepers, unmanaged discovery costs; and
Inconsistent use and leverage of process and technology, e.g., lack of standard operating
procedures or minimal knowledge sharing within the law department and with outside law firms.
The data tells only part of the story. Once the initial survey and law firm billing analysis results have
been totaled and reviewed, interviews should be conducted with select internal resources and outside
counsel. The interviews will add more detail and nuance to the analysis results.
The law department’s clients should also be interviewed. These interviews will illuminate the strengths
and weaknesses of the department and will provide insight into the clients’ expectations, risk tolerance,
and the value they place on services. These interviews may uncover areas where additional legal services
may be needed; work that clients would like to see handled internally and work that the clients send to
outside counsel directly, without oversight or input from the law department.
The results of the various analyses should be combined to create an inventory of the legal services
delivered by practice area and matter type, which will drive the go-forward resource strategy. With the
analysis and inventory in hand, the law department can move forward with answering the second
foundational question, regarding prioritizing the work.
C.
Foundational Question #2: How Is the Value of the Services Prioritized?
Now that the results of Foundational Question #1 have provided an understanding of legal services
performed, the next step is to identify the work most highly valued by the business. The entire portfolio
of legal work should be prioritized based on the value of the work.
The prioritization process enables the law department to make more proactive decisions about the legal
services delivered and properly prioritize them based on business risk and rewards. For example, one
particular law department was using the “first in, first out” rule for all contracts that came in for review,
regardless of the nature of the contract or associated risk, whether a multi-million dollar contract or a
small routine procurement agreement. After the law department assessed the contracts function—
including the types of contracts, risk levels involved, and skills needed—the law department was able to
develop a new work allocation process that reflected the relative priorities and risks of the contracts,
ensuring the “right people” were doing the “right work.”
The inventory of legal services, which was created in answering Foundational Question #1, should be
reviewed and refined to make sure that work is organized appropriately by practice area and then by
matter type. The next step is defining the work, which requires thought and effort. It is common
practice to use a value matrix.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
10
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
In developing a value matrix, the recommended variables for determining value are “risk potential” and
“impact on competitive advantage.” These two variables seem to be the best predictors of value placed
on the work by business, and also support the law department’s functions of reducing legal risk and
supporting the company in its drive to be successful.5
“Risk Potential” is defined as the extent to which it is possible for specific types of legal work to
negatively impact the company, e.g., financially, regulatory, or reputation-wise. “Impact on Competitive
Advantage” is defined as the degree to which the type of legal work drives competitive advantage and
supports the corporate strategy.
Risk tolerance levels are a common area of misalignment between the business units and the law
department. While it is the law department’s responsibility to manage risk from a legal perspective,
often the department gets a reputation as the “department of no.” By taking the time to understand the
business goals and the legal services required to support them, the law department can move forward as
a “department of solutions” and have a positive impact on the competitive advantage of the company.
An example of the value matrix is seen in the figure below.
Figure 2: Value Matrix
VALUE is combination of: Risk Potential The extent to which it is possible for specific types of legal work to negatively impact the company, e.g., financially, regulatory, or reputation. Impact on Competitive Advantage The degree to which the type of legal work drives competitive advantage and supports the corporate strategy. An efficient method of ensuring that value is defined consistently is to calibrate the value assignments.
Conduct an initial workshop with the practice group to calibrate the value assigned to the work through
the surveys, interviews and analysis. During the workshop, the practice team should review the assigned
value by matter type. Within a practice area, the assigned value may vary by matter type; the values also
may vary within a matter type on a case-by-case basis. With this in mind, the practice team should
assign a value that represents the majority of the type of work.
The legal leadership team should further calibrate these value assignments (determined by practice area)
to develop a departmental perspective on resource allocation. Once the value of the legal services has
been calibrated fully, the department can move to the next phase: determining who should do the work.
Copyright© Huron Consulting Group & Association of Corporate Counsel
D.
11
Foundational Question #3: Who Should Be Doing the Work?
Once the work most highly valued by the department and the business has been identified and
prioritized, the next step is to develop a service delivery model that has the appropriate mix of internal
and external resources and required skills to execute the work. The model must fit with the culture of
the company and the law department. A good resource strategy balances the work to be done and
available resources against the value of the work, so as to “do the right work” and “do the work right.”
When looking at cost control initiatives, many law departments place primary emphasis on external
resources such as outside counsel and vendors. Because the law department’s internal resource
alignment impacts external costs, it is important to understand and align internal resources in order to
ensure the most efficient control of the department’s external costs.
Common examples of the suboptimal distribution of work include:
■
■
■
Attorneys reviewing routine and standard contracts;
Attorneys performing routine IP work, e.g., IP preliminary searches or opposition watch services;
and
Attorneys overly involved in routine personnel issues that could be handled by non-attorneys
within the Human Resources Department.
A resource strategy should be developed for each practice area. When sourcing the work, the following
factors should be considered:
■
■
■
■
■
Culture
•
What is the role of in-house attorneys: “managers,” “doers,” or a combination?
Business needs
• Is the work essential to achieving the company’s business goals?
• Does the work involve high risks that could affect the company as a whole?
Work
•
•
•
Is the work properly defined as legal services?
Should the department perform the work?
How has the work been valued and prioritized?
Complexity
• Is the work routine or commodity work?
• Does the work require an attorney? At what level of experience?
• Is the work complex, requiring a specialist?
• Can the work be leveraged to paralegals or law clerks?
Process/Technology
• How can process and technology be used to streamline and leverage the work?
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
12
■
Resources
• Is the work recurring or a one-off situation?
• Will it continue into the future or end soon?
• What is the expected go-forward volume?
• Is it best handled internally or externally?
• If externally, does it require a law firm or can a non-firm vendor perform all or part of
the work?
• If it requires a law firm, what are the necessary attributes of the appropriate firm, e.g.,
size, reputation, geographical presence, specialization?
Understanding the skills and capacity of internal resources is crucial to making decisions on how the
work will be sourced. Are the skills and capacity needed for the work available internally or should they
be acquired? Can the work be automated or eliminated?
When assessing internal resources, the following should be considered:
■
Culture of the company and department;
■
Existing business issues;
■
Work currently performed by the internal legal team;
■
Skills required for the work;
■
Estimated hours required to execute specific work;
■
Future variability of the need;
■
Current roles and responsibilities of the internal team;
■
Use of outside counsel;
■
Use of other vendors; and
■
Use of technology.
While there is not a single “right” sourcing strategy that applies to every company, the most highly
valued work—work strategically aligned with the company’s success—is typically aligned with internal
resources. This is the work that is core to the company’s success; it is where the business team needs a
partner who understands the ins and outs of the business. Through performing this work, the law
department elevates itself from a cost center to a value-add center. This is the work that has a
substantial impact on competitive advantage and can have a range of risk potential. It is typically
recurring work that requires experience, often industry-specific. For example, in a highly regulated
industry, regulatory legal services would be essential to supporting the company’s business.
Frequently, this work is performed by outside counsel. It could be realistic to expect this work to
increase in the current environment. The question to ask is: Should it be performed internally? Moving
to a model where the majority of regulatory work is performed internally, with strategic use of outside
Copyright© Huron Consulting Group & Association of Corporate Counsel
13
counsel for more unique issues, can lead to significant cost-savings.
In general, two strategies that can make the greatest difference in internal resource alignment and cost
containment are:
■
Consolidating work as appropriate, and
■
Ensuring the work is prioritized and leveraged to the correct resource level.
By consolidating work to fewer resources and leveraging the work appropriately, the law department can
generate additional capacity among current internal resources.
To illustrate, in Figure 3, work previously spread among four full-time employees (FTEs) is consolidated
to two FTEs, resulting in cost savings because of the increased efficiencies and elimination of
redundancy. Through prioritization, work previously shared among three attorneys is prioritized such
that routine work can be given to one less costly paralegal with oversight from two attorneys. The
cumulative result of consolidating and prioritizing work not only generates direct savings but also
ensures that resources are working to their full capacity. Thus, there is a positive impact on work quality,
consistency, and cost.
Figure 3: Consolidation and Prioritization
Consolidate Work + Prioritize Work Attorneys Attorneys Paralegals Even with consolidation and prioritization, there may still be work that the department would prefer to
handle internally, though it does not currently have the right resources or capacity to do so. In such
cases, internal resources often send overflow work to outside counsel. If overflow work occurs on a
consistent basis, analysis may show that adding an internal resource would be a more cost-effective
measure. Generally, if the work sent out consumes 1500 hours or more of outside counsel time on an
annual basis (approximately 85% FTE), a business case can be made for an increase in internal
headcount.
Work that will not be performed internally, by default, will be done externally. External resources are
best employed for work that is ad hoc or requires specialized skills. In the earlier example, while much
of the regulatory work could be performed in-house, areas requiring specialized expertise would support
the use of outside counsel. Also, certain practice areas, such as litigation and corporate securities,
generally use outside counsel for a majority of the work.
With the high-level resource plan defined, the next step is to review opportunities to create cost-savings.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
14
E.
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
Foundational Question #4: What Can Be Done to Drive Costs Down?
Developing a more detailed plan for the distribution of work for all practice areas can reveal more
opportunities to reduce costs. The diagram in Figure 4 below depicts one possible approach to assist in
making resource decisions. Final sourcing decisions may vary based on the culture, legal needs,
resources available, and budget of the department.
Figure 4: Sourcing Structure Guide
To determine how the work should be distributed, the detailed plan applies the additional layer of cost
variables to the required legal services. Cost variables include the volume and complexity of the work,
the frequency with which it occurs, the rates (internally and externally) for the required level of resource,
the estimated hours involved with performing the work, and the related expenses.
For each type of work to be performed externally, the law department should determine what type of
resource is needed, on both an organizational level (national firm vs. regional firm, firm vs. non-firm)
and an individual resource level (e.g., partner, associate, paralegal, patent agent, contract lawyer,
document review service provider, etc.).
Appropriate price points should be a factor in determining how to align work with external resources.
In today’s market, a number of services traditionally performed by law firms can now be outsourced to
other providers, typically with significant cost savings. A proven example is document review.
Document review was once the training ground for young litigation associates billing hourly.
Today, document review is often done by contract attorneys, and while they are still billed at an hourly
Copyright© Huron Consulting Group & Association of Corporate Counsel
15
rate, the rates are much lower. Additionally, some service providers in the market will provide these
services with a pricing structure that does not rely on hourly billing and provides for more predictability
of costs – and therefore more control. Other areas in which non-firm providers are commonly used are:
■
E-discovery;
■
Immigration;
■
IP services; and
■
Due diligence.
When developing the detailed service delivery model, conduct a review for opportunities to automate,
reduce or eliminate work. Work appropriate for automation, reduction or elimination is typically low
risk, and it may also have minimal impact on the competitive advantage of the company.
Below are some common opportunities to automate, reduce or eliminate:
■
■
■
Automate
• Contracts that can be completed on a self-service basis using pre-approved forms and
guidelines;
• Advertising content review;
• Compliance training.
Reduce
•
•
Outsource immigration work on a wholesale basis;
Leverage non-lawyers for contract review.
Eliminate
• Shift work that is not “legal services” back to the appropriate business unit.
Keep in mind the goal for optimizing the sourcing of the work: having the right resources performing
the right work. With an optimized service delivery model, the work will also be done in the right
manner. When updated processes are added to the mix and technology is appropriately utilized, the
overall efficiency and productivity of the department will improve even further.
F.
Results
Defining the legal services required and the sourcing strategy provides the platform for a service delivery
model that produces results. Proven results of this comprehensive effort include:
■
Skill sets required to meet business objectives are identified and acquired;
■
Skill sets of internal resources are fully utilized;
■
Outside services are used where needed to fill gaps or meet specialized needs;
■
Levels of effort required from outside resources are understood;
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
16
■
Proactive decisions are made regarding which outside resources are best suited for needed
services;
■
Value-based pricing can be negotiated with the external resources;
■
Financial predictability and the annual budgeting process are improved;
■
Focus can be shifted from reducing process costs to reducing liability payments.
III. Implementing the Strategy: Maximizing Internal
Resources
A.
Overview
No matter how thoughtful a strategy may be, it is not useful unless properly implemented. Executing an
“implementation plan” can be challenging. Departmental and individual buy-ins are essential to success.
To achieve maximum benefits, the implementation should be planned and communicated step-by-step.
Key parts of any implementation plan include:
B.
■
Review of the organizational structure;
■
Defined roles and responsibilities;
■
Work distribution plans;
■
Work transition plans; and
■
Communication strategy.
Review of the Organizational Structure
After defining the strategy, review the department’s current organizational structure to determine if it
will support the new work distribution. Changes are often necessary. While in a perfect world one
would be able to move from the old structure to the future structure with a single implementation, in
most cases, the changes occur over time. For this reason, a department must develop not only its future
organizational structure, but also a transitional organizational structure with journey maps that explain
the changes step by step. Experience has shown that transitional plans along with detailed journey maps
clarify the changes and the reasoning behind them. Additionally, they are a primary tool for
communicating the changes to the department and to its clients.
Considerations for changes to the department’s organizational structure include:
Copyright© Huron Consulting Group & Association of Corporate Counsel
■
■
■
17
Alignment with the company structure
• Geographical;
• Business unit;
• Practice area;
• Company culture.
Enhancement of client satisfaction
• Feedback from clients;
• Accessibility;
• Expectations.
Current internal resources
• Skills;
• Succession planning;
• Gaps in resources.
Keep in mind that the department’s organizational structure will continue to evolve as the company and
the department react to and manage change.
C.
Defined Roles and Responsibilities
Along with the changes in the organizational structure of the department, there will be changes in roles
and responsibilities. These changes can cause uncertainty and reduce productivity if they are not clearly
defined and communicated. A workshop is an effective method for developing the initial division of
labor internally and externally. It can also include definition of baseline responsibilities by resource level
(e.g., attorney, paralegal, administrative assistant).
A roles and responsibilities matrix is a useful tool. The matrix brings structure to the assignment of
work by setting clear expectations as to the work each resource will perform. The matrix should include:
■
Type of work;
■
Sourcing strategy, e.g., internal vs. external, national vs. regional firm; and
■
Role and responsibility by resource level, e.g., lead attorney, assisting attorney, paralegal,
administrative assistant.
Using the matrix as the starting point, job descriptions should be developed to further document the
roles and responsibilities within the department. This will provide additional clarity regarding changes
and a basis for improved work efficiency and productivity.
D.
Work Distribution Plan
After making changes to the organizational structure and roles and responsibilities, it is important to
develop and document a strategy for assigning work, both existing and future. If there will be more than
one resource performing a particular type of work, develop a plan for appropriate distribution among
the available resources, both internal and external. The plan should take into account expected volume
of the work and available capacity of the resources. Appropriate work distribution for internal
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
18
employees will be determined based on the established roles and responsibilities, while the work
distribution plan should account for what percentages of work will be handled internally and externally.
Further, the distribution plan should specify how work will be distributed among firms when more than
one firm will be providing service. For example, if a number of firms will be providing patent services
on a go-forward basis, determine how the work will be distributed -- perhaps based on the type of
patent, geography, or a simple rotation among firms. The structure of the department’s outside counsel
management program will influence the distribution to external resources.
E.
Work Transition Plan
Establishing a work distribution plan will create a need for work to be transitioned to support the desired
distribution. Work may be transitioned between internal resources, between internal and external
resources, or from one external resource to another. In all cases, a transition plan should be developed
and used to smoothly migrate the work.
For the transition of work between external resources, there are two approaches:
■
■
Leave existing matters with the current resource and apply a go-forward strategy to new matters;
or
Transfer existing matters to resources slotted for the work in the go-forward strategy.
• Optional: Limit this transfer to matters not substantially completed.
The plan should detail:
■
Work to be transitioned;
■
The timeframe for transition; and
■
Information expected to be provided by the transitioning resource.
The transition plan should include checkpoints to ensure that it is implemented and effective.
F.
Communication Plan
A detailed communication plan should be developed for each phase of the implementation. The
communication plan should include answers to the questions who, what, when and how, for each
communication, as follows:
■
■
To whom will it be communicated – department, clients, outside counsel, etc.;
What will be communicated – organizational changes, roles and responsibilities, work transition
and distribution plans, level of detail, etc.;
Copyright© Huron Consulting Group & Association of Corporate Counsel
19
■
When will it be communicated – specific timeframes;
■
How will it be communicated – in person, email, telephone, meeting, etc.
The importance of communication cannot be stressed too much. The most thoughtful, detailed strategy
can be ineffective if not communicated properly to all parties and stakeholders. Communication builds
buy-in; buy-in builds successful programs.
IV. Implementing the Strategy: Getting More Bang
for the Buck with Outside Counsel (and Other
Vendors)
A.
Managing Outside Counsel Effectively
It is rare for a law department not to use outside counsel in some manner. Thus, it is critical to have a
comprehensive plan in place for managing outside counsel and other vendor relationships in order to
control costs and realize the maximum value and benefit from these relationships. Many tactics exist, as
shown in the results of a 2008 Law Department Operations survey6 of responses to the question, “Which
of the following cost savings initiatives do you use?”
Figure 5: Usage of Cost-Savings Initiatives
When one thinks about the various tactics that could be employed, managing hourly rates is often the
first item that comes to mind. A comprehensive outside counsel management program, however,
incorporates more cost management tactics than simply managing rates. These tactics address work
allocation, staffing, hours, rates, expenses, and tools.
1.
Work Allocation
By developing a strategic sourcing plan, the law department makes conscious decisions about what work
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
20
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
will be performed externally. Proper work allocation is a concern with external resources, just as with
internal resources. By developing a detailed work allocation plan for external resources, the department
will ensure work is allocated to the appropriate type of firm or vendor and also to the appropriate
resource level within that firm or vendor, allowing the law department to get the most value for every
dollar spent externally.
There is no “one size fits all” model for assigning work externally, but there are a number of factors to
consider: value of the work, risks related to the work, expertise needed, and price point of appropriate
resources. As a general rule, work that is highly valuable to the company (potentially impacting the
bottom line) or that requires specialized expertise (e.g., complex litigation, SEC matters, M&A) will be
less price-sensitive. For these types of work, law departments typically seek to engage the firm with the
most subject matter expertise, as opposed to the firm with the most favorable rates. These types of
matters should represent only a small portion of the portfolio of work.
The level of risk may dictate the type of firm hired to serve as outside counsel, and consideration of the
level of risk should at least be a part of any outside counsel decision. For “bet the company” matters,
where the level of risk is extremely high, companies are often more than willing to hire a large, nationally
known law firm because of the firm’s reputation and level of expertise. Of course, hiring this type of
firm comes at a premium price, but typically companies are willing to pay higher rates to get “the best”
firm when the stakes for the company are high.
On the other hand, when the level of risk is lower, there may be no reason to pay a high premium on
rates to get “the best” counsel. For matters where risk is lower, it often makes more sense to find a highly
qualified regional or boutique firm to serve as outside counsel. In essence, money can be saved simply
by hiring the right firm for the work. A regional or boutique firm will still provide the appropriate level
of expertise for the level of risk involved, while the company is able to save money by paying rates
significantly less than those of top-tier firms.
Experiential work, work that is core to serving the company and requires a moderate level of experience
to execute, will typically be handled by a blend of internal and external resources. In this situation,
clearly defining roles and responsibilities is key. Both subject matter expertise and billing rates are
considerations when engaging outside counsel for experiential work. Availability of the subject matter
expertise will drive rates more so than specific knowledge of the subject matter. Typically, there is
substantial choice of experienced outside counsel in the market place for services that fit into this
category, which will allow for more competitive rates to be negotiated.
For commodity work, work that is lower in value and risk, such as immigration work, repetitive
litigation, or employee claims, there are typically several sourcing options that can be very cost-effective
for the volume of work. Often, this work is bundled and may be single-sourced to a low-cost outside
counsel firm or other vendor. By using a boutique or regional law firm or other vendor, the services
required may be obtained at a lower price point than with a large, national firm.7
A final category of work for allocation is “unbundled work.” Unbundled work has come to be defined as
specific tasks historically handled by law firms but that can be cost-effectively performed by non-firm
Copyright© Huron Consulting Group & Association of Corporate Counsel
21
vendors. Common examples include legal research, document review, trial consulting, and e-discovery
services. Vendors of these services frequently have developed methodologies and structures that allow
them to perform the work for typically much less than what law firms charge. Law departments who
rely solely on law firms for this work may be leaving significant cost savings on the table.
One other consideration for work allocation is geography. When considering which outside counsel
firm is best able to handle matters on your behalf, geography will undoubtedly play a role in matters
where there are local or state issues involved, especially if the law department is unfamiliar with the
jurisdiction. For example, a company may encounter a matter that it could typically handle internally,
but the matter occurred in a jurisdiction with which the in-house attorneys are not familiar. In
situations like this, local counsel with the appropriate level of expertise in the specific jurisdiction should
be retained.
Additionally, geography can be a consideration when working with large, national firms. It is not
uncommon for these firms to offer lower rates in offices that are located in smaller metropolitan areas.
When assigning work to these firms, the option of using these lower-priced resources should be
weighed.
2.
Staffing
After allocating work to the appropriate firm or vendor at the organizational level for each matter type,
the next focus is on managing the staffing structure used by the firms and vendors to ensure that the
work is staffed properly at the individual resource level. Work should be assigned to the lowest level
possible based on the expertise needed, to ensure that the value and price are aligned.
Before engaging outside counsel, it is important to establish a realistic staffing strategy for each practice
area. The strategy should set expectations for how matters within the given practice area will be staffed.
Establishing staffing expectations for each practice area at the outset will ensure that everyone is in
agreement regarding staffing and will ultimately keep costs down by leveraging appropriate work to
more junior resources. Across phases and over the life of a matter, the staffing model should and will
change, driving different blended rates at different points in the life of the matter. In Figure 6, sample
staffing models are presented for several litigation tasks. As these examples reflect, the mix of resources
will change to align with the value of the task being performed.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
22
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
Figure 6: Sample Task Staffing Models
Case Processing and Administration Fact Investigation Partner 10% Partner 30% Sr. Assoc. 10% Mid Assoc. 35% Sr. Assoc. 10% Mid Assoc. 20% Jr. Assoc. 20% Leg. Asst. 20% 20% Document Management 20% Administrative Clerk Sr. Assoc. 1% Mid Assoc. 4% 0% Clerk Partner 5% Clerk 60% 0% Partner, 0% Jr. Assoc. Jr. Assoc. 15% Leg. Asst. 10% Pleadings Leg. Asst. 35% Sr. Assoc. 15% Mid Assoc. 25% Jr. Assoc. 40% Leg. Asst. 15% 0% Clerk 0% Clerk Work requiring a high degree of subject matter expertise or strategic experience will inherently incur
more partner time than less complex matters. Conversely, there are tasks that can be leveraged and
should not require
a partner-level resource. For example, in a merger, basic due diligence review should
not incur partner time other than for strategy and oversight. Additionally, this may be work that can be
outsourced at a lower price point than the use of associates. Other more routine or commodity work,
including certain
phases of litigation, can be leveraged to associates, paralegals, or even non-firm
0% Partner, Junior Assoc. vendors who work at lower billing rates.
3.
Hours
Traditionally, legal work is performed on an hourly basis. In recent years, more law departments have
been requiring outside counsel to set and manage budgets for the work they are performing. Requiring
firms to set and adhere to detailed matter budgets brings focus to the number of hours billed. Although
no budget will be perfect, working collaboratively with the firms to set budgets at the beginning of
significant matters will help both parties establish realistic expectations for the number of hours a given
matter will require. Budgeting for the number of hours anticipated (either by timekeeper or by level)
will ensure that staffing is not more partner- or associate-heavy than the work requires. Typically,
budgets are adjusted periodically to account for unanticipated events; however, they help establish
baseline expectations for the level of effort required over the life of a matter.
Another method of managing hours is to “cap” them. Some law departments opt to cap the number of
Copyright© Huron Consulting Group & Association of Corporate Counsel
23
hours or fees that can be incurred on a certain matter. This should be agreed upon in advance with
outside counsel.
One tactic used to deter excessive billing on a matter is to establish rules within the context of the
Outside Counsel Guidelines that specify how many hours any given timekeeper can bill in a day. Many
companies restrict any timekeeper from billing more than ten to twelve hours per day. Restricting the
number of billable hours is effective in managing outside counsel spend only if the number of hours
billed by timekeepers across matters is closely monitored. Without an electronic billing system in place
that can automatically monitor or restrict the aggregate number of hours billed, this can turn into a
time-intensive, manual process.
4.
Rates
The most common tactic for managing outside counsel spend is monitoring and managing billing rates.
Managing rates should be part of the strategy, but should not be the sole or even the primary
component. Work allocation and staffing models are equally relevant, if not more so. In light of the
current economic climate, it is becoming more common for law departments to ask outside counsel for
additional reductions in rates. The realities of today’s market have the law firms agreeing. Deeper
reductions may be available if the law department can demonstrate and commit to the firm a
considerable slate of work.
Typically, law departments and their outside counsel will discuss and agree to billing rates at the outset
of an engagement or a matter. Often, agreed rates have already been established through a formal
outside counsel program. To increase predictability and certainty of costs, many law departments also
require that the agreed upon billing rates be held constant for a defined period8 or the life of the matter,
whichever is longer. If outside counsel wants to increase rates during this period, they must submit a
request to the law department specifying the business reason for the rate increase and obtain written
approval before raising rates. Before approval is given, the department should understand the impact of
the increase by reviewing the staffing model and matter budget. Like managing hours billed, this
technique is only effective if billing rates are closely monitored to ensure outside counsel is adhering to
the agreed upon rates. This is most easily done through the use of an electronic billing system.
5.
Expenses
Actively managing and monitoring outside counsel expense reimbursements is another common way to
reduce costs. Law departments are taking a more aggressive view of what truly is a reimbursable expense
versus overhead and cost of doing business. As technology changes and is adopted, certain items
previously considered as expenses become part of the normal course of business, or, possibly, obsolete.
In the 1980s, fax technology was introduced to the legal market and with it came fax charges by firms
upwards of $1 per page for both incoming and outgoing faxes. Now, with the adoption of email and
other technologies, faxing is becoming obsolete and clients are refusing to pay for it. Similarly, clients
are now often refusing to pay for electronic research as an additional expense, instead viewing it as
standard firm overhead.
In order to keep expenses down effectively, comprehensive Outside Counsel Guidelines that set clear
expectations for reimbursable versus non-reimbursable expenses should be adopted and communicated.
Without specific guidelines, firms may pass off a wide variety of costs for reimbursement, including true
overhead costs that should already be accounted for in billing rates. The Guidelines should also state
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
24
that all expenses should be passed through at cost, eliminating any potential mark-up by the firms.
Even with guidelines in place, invoices must consistently be monitored to ensure compliance with the
guidelines. Again, the most efficient way to monitor compliance is through the use of an electronic
billing system, which can automatically evaluate expense line items against a pre-set list of rules to reject
or flag any non-complying submissions.
6.
Tools
An important part of any outside counsel management plan is ensuring that the appropriate tools are in
place to promote collaboration with and management of outside counsel. Tools to consider include
billing systems, budgeting, collaboration tools, and performance metrics.
As already mentioned, an electronic billing system is one of the most useful tools for managing outside
counsel. Electronic billing systems are effective because they require that law firms submit invoices
electronically, with all tasks, activities and expenses coded using standard UTBMS codes. In most
electronic billing systems, standard invoice “rules” can be established to coincide with the law
department’s billing guidelines. Once these rules have been established, any invoice submitted by law
firms will be evaluated against the established rules and any line items that may violate the rules can be
identified. This makes managing compliance with billing guidelines a much more automated process.
Electronic billing systems also provide a great deal of reporting functionality, which allows monitoring
of trends on billing rates, staffing ratios, timekeeper turnover, and other metrics.
Budgeting is an excellent management and cost-control tool for the law department. Managing hours,
rates, and expenses requires a mental shift by both internal resources and outside counsel. In-house
counsel should work collaboratively with outside counsel to assess the matter and develop a budget.
With open communication about the budget and its components, outside counsel will have a clearer
understanding of the department’s expectations and can better represent the company’s interests. Both
the law department and outside counsel should be comfortable with the final budget for any given
matter. Subsequent review and management of the budget, when reinforced by internal accountability,
continues the cost management process. With time and experience, the team’s ability to predict and
control costs will improve, and they’ll be able to develop and manage more accurate budgets.
In order for outside counsel to collaborate most effectively with in-house counsel there must be tools in
place to promote easy collaboration. Collaboration tools can take many shapes, including extranets,
portals, and granting outside counsel limited access to a matter management system. Having these tools
in place will not only allow outside counsel to work more effectively with in-house counsel, but it can
also eliminate the phenomenon of re-creating work product that already exists, through more open
sharing of information and existing documents.
In addition to gleaning information that can be monitored and measured with an electronic billing
system, it is important to put performance metrics in place that allow for a holistic assessment of outside
counsel performance. Holistic performance metrics may include quantitative data pulled from an
electronic billing system or other tracking tool, but could also include more qualitative metrics, like
Copyright© Huron Consulting Group & Association of Corporate Counsel
25
response time, matter success rate, successful resolution of key matters, collaboration with in-house
counsel, and training provided to in-house resources.
B.
Developing a Model for the Use of Outside Counsel
Management tactics are most effective if they are part of a comprehensive program. Therefore, it is
important to establish a model for how and when outside counsel should be used. Developing a model
for how the law department can best use outside counsel is a critical step toward realizing the most value
from outside counsel, because it requires one to gather empirical spend data and think through how
resources can best be used. The model will form the basis for selecting law firms to complement internal
resources.
Outside counsel models are typically based on practice areas. Most law departments are organized into
two or more practice areas. It is common for the various practice areas within a given law department to
have very different outside counsel needs. However, through the development of an outside counsel
model, the differences can be reconciled to a common set of requirements, enabling greater cost savings
and consistency.
Building an outside counsel model by practice area requires an understanding of the specific needs of
each practice group. The work previously done in the initial assessment of resources and legal services
provides the starting point for developing the model requirements. Some practice areas will require
heavy reliance on outside counsel to supplement internal resources, whereas other practice areas have a
workload that can be primarily handled in house. For example, in most law departments, the litigation
practice typically requires more use of outside counsel. Within the litigation practice, various types of
litigation needs may exist, such as commercial, environmental, personal injury, or intellectual property.
These different types of litigation likely will require different expertise and firms.
The sourcing strategy developed for each practice area considers the number of internal resources and
their level of expertise compared to the typical workload. By identifying the gaps between resources and
needs, the requirements for external resources will become clear. The identification of the work to be
performed externally by practice area will help clarify the type of firm and level of external resources
needed (partners, associates) to most efficiently fill the gaps.
The model should also reflect trends gleaned from the analysis of the historical spend on outside counsel
to understand the drivers of the legal spend and anticipate the estimated volume of work. It is difficult
to accurately predict or estimate the future volume of work without a concrete understanding of
historical spend and the business’s go-forward goals and plans. For the most part, future spend will
trend off of historical spend. However, even with a sound understanding of historical spend, it is
important to think critically about future spend when developing an outside counsel model.
Estimates for future spend may diverge from historical spend data based on knowledge of specific issues
or matters that the law department will resolve or face in the near future. For example, a law department
at a utility may have a low historical spend on state regulatory matters, but know that in the next year
they will be filing a rate case at the state level that will require significant supplementation of in-house
counsel by outside counsel over the next twelve to eighteen months. In this case, although historical
spend may be low, demonstrating a probable need for significant outside counsel time will serve as a
suitable negotiating factor. Identifying the primary areas where the law department utilizes outside
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
26
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
counsel and quantifying the historical spend will improve the department’s position during firm
selection and negotiation processes.
In Figure 7, a sample outside counsel model is shown. It is constructed of four major types of law firms
representing the foundation of the company’s outside counsel program and is intended to cover 80% of
the company’s use of outside counsel. This model reflects anticipated supplementation as needed for
local representation or other specialty needs. The numbers of firms are directional estimates that will be
evaluated and validated during the selection process.
Figure 7: Sample Outside Counsel Model
Full Service Counsel ~2 – 5 Firms 80
% •
•
~1‐2 Regional firm(s) for TX and OK •
•
Manage and help select local counsel •
Have extensive knowledge of Company’s business •
~1‐2 full service firm(s) to supplement geographic needs on a national basis 1 Product Liability National Counsel Goal is to handle most commercial and general litigation matters Contribute value beyond individual cases •
Coordinate strategy and ensure consistency of approach •
Acts as local counsel in specific geography •
Contribute value beyond individual cases •
Have extensive knowledge of Company’s business and legacy issues •
Provide local representation and expertise in key jurisdictions •
•
Report to In‐house Counsel Firm Specialty Counsel •
Work assigned by specialty –
–
–
Intellectual Property boutique firm Environmental boutique firm Employment boutique firm Product Liability Local Counsel Coordinate with National and In‐
House Counsel ~4 – 7 ~3 – 6 Firms Firms 20%: Local representation or Specialty needs (e.g., High‐end Corporate and Litigation firms) C.
Developing an Outside Counsel Program
Once the department has established the outside counsel model, many law departments establish a
formal outside counsel program to implement the model. Implementation should approach the use of
law firms strategically, including how and when the department uses outside counsel, which firms it
engages, the quality of the work it receives and how much it pays. Having a formal outside counsel
program in place establishes the framework for managing outside counsel in a more effective manner by
setting consistent expectations for internal and outside counsel attorneys about how firms should be
Copyright© Huron Consulting Group & Association of Corporate Counsel
27
used.
A common objective of outside counsel programs is to consolidate or streamline the number of firms
used. That said, the size and approach of the program may vary based on the size and culture of the
company and the law department. Some companies may be comfortable with existing firms; their
program may focus on changing the distribution of work among the firms. Other companies with
diverse portfolios of work may use many outside counsel firms and may be seeking to consolidate the
work to fewer firms with a mix of currently used and new firms. Companies with some type of outside
counsel program in place may be seeking simply to refresh it. For the most part, the goal of
consolidating and streamlining the number of firms remains constant.
There are several different methods for establishing an outside counsel program, so the approach used
will differ from company to company. Common approaches are the preferred provider approach, the
vendor consolidation approach, and the hybrid approach. The differences between the methods are
nuanced, and it is not uncommon for the terms to be interchanged in use. The method a law
department decides to employ will typically depend on the end goals of the program. Companies that
simply desire to consolidate the number of firms they use will typically choose the vendor consolidation
approach. On the other hand, companies that want to select specific firms to work in specific practice
areas will typically use a preferred provider approach. When companies are not prepared to commit to
either a preferred provider approach or a vendor consolidation approach, a hybrid approach can be
used.
1.
Determining Program Approach
The first step in developing an outside counsel program is determining the approach that will be used.
The preferred provider approach is commonly used to streamline the number of firms but still provide a
choice to the members of the law department as to which firm to use. In some companies, there is no
guarantee that a firm will receive work under a preferred provider program. The vendor consolidation
approach is used when the ultimate goal is to consolidate the work among a smaller number of firms and
specifically limit use to those firms. While vendor consolidation limits choice, it allows the firms to
become intimately familiar with the company and develop deep experience with its particular set of
challenges and legal issues. Both approaches maximize buying power by establishing a relatively small
number of firms to handle the majority of all legal work.
During the process to develop the outside counsel model, decisions should have been made as to the type
of firm best suited for the work in each practice area and combined for a full picture of the types of firms
needed. Companies typically select a few firms to act as “full-service” firms, meaning that they can
provide service across a variety of practice areas. Additionally, firms will select “specialty” firms who
handle work in one or two specific practice areas. Specialty firms do not necessarily equate to small or
boutique firms. It may be a full service firm selected as a specialty firm to handle only a specific area,
such as environmental work. (See Figure 7)
Frequently, a regional overlay may also be needed. When this is the case, firms are selected to handle
work for a specified geographic region, such as the southwest, northeast, or a particular state.
Establishing a regional dimension allows law departments to select firms with the appropriate local
expertise for handling matters in regions where they have significant business operations. If a company
has operations in a variety of regions, their outside counsel program will typically have some sort of
regional component, whether it is for litigation, state regulatory work or some other jurisdiction-driven
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
28
work.
An approach is defined as “hybrid” when it combines tactics from the preferred provider and vendor
consolidation approaches. For example, companies may not want to commit to a full vendor
consolidation program because there are certain types of work that need more flexibility in staffing. In
these situations, a hybrid approach can be used where a firm list is established, but a plan is made for a
certain percentage of work or for specific matter types to be handled by firms outside the program.
Hybrid approaches allow companies to tailor their program to better meet their external legal needs. In
reality, many outside counsel programs are hybrid.
2.
Conducting a Selection Process
Whether a preferred provider, vendor consolidation or hybrid approach is used, there is a standard
process that is commonly used to establish a formal outside counsel program. The steps in this process
typically include determining candidates, distributing a request for proposal or request for information,
evaluating the responses, conducting interviews, and selecting final firms for inclusion in the program.
When conducting a selection process, a project team should be established, consisting of a cross-section
of trusted in-house attorneys from various practice areas, to conduct the process under the guidance of
departmental leadership.9
a)
Determining Firms to Include in the Process
When determining which outside counsel firms to include in the selection process, consider firms
currently used along with new firms. Including firms now in use ensures that the firms who currently
provide excellent service and value can participate in the selection process. However, by including new
firms in the process, fresh ideas and cost savings measures may be brought to the table.
To increase buy-in for the end result, many companies choose to survey internal attorneys and selected
business clients to solicit recommendations on which firms should be included in the selection process.
Even when limiting the number of firms each person can submit, the survey will likely produce a large
list. To narrow down the list to a manageable number, it is important to evaluate the recommended
firms on the following variables:
■
Historical performance (if existing relationship);
■
Expertise;
■
Reputation for value;
■
Size;
■
Geographic locations;
■
Potential conflicts.
The end mix of candidates between current and new firms will vary, depending on the focus and goals of
the program. It is not unusual for the candidate list to be heavily weighted towards firms that have
previously worked with the company.
Copyright© Huron Consulting Group & Association of Corporate Counsel
29
b)
Requesting Proposals
Once the list of candidates has been finalized, the next step in the process is conducting a Request for
Proposal (RFP) or Request for Information (RFI) process. The nature of these two processes is very
similar; an RFP is simply a more extensive information gathering process than an RFI and will typically
include more information regarding bids for specific work.
When developing either an RFP or RFI, it is important to draft the content so it is clear what specific
information is being requested. Keep in mind that the project team will have to read all responses, so
consideration should be given to setting word limits on the response length. Typically, the document
will include the following sections:
■
Firm Overview;
■
Legal Experience and Expertise; and
■
Financial Management/Rate Proposals.
The firm overview section will typically pose questions that allow the firm to provide general
information about itself. Topics in this section could include firm size, firm revenues, percentage of
revenue generated from top client, office locations, ratio of partners to associates, and diversity statistics.
The goal of this section is to collect the background information necessary to “level” the playing field
when evaluating responses. For example, when evaluating the rate proposals received in RFP responses,
it is important to ensure that the firms being compared are of similar size and in similar states or
regions.
When asking for legal expertise or experience, it is important to provide specific definitions of the
practice areas and types of work for which you are requesting information. Law firms and law
departments can each have slightly different definitions of the same practice area, so it is important to
clearly define what is expected to be included in a response. RFPs and RFIs requesting information on
legal experience and expertise usually require the firms to provide examples of key successes they have
had with other clients. The law firms will see this as their chance to shine and set themselves apart from
the competition, so unless specific word limits are provided for each question, the responses received
will often be very lengthy.
Whether the request is an RFP or an RFI, some level of financial information should be gathered in the
initial response. Information regarding the firm’s standard billing rates and its experience with
budgeting and alternative fee arrangements is commonly included. In addition, an RFP may ask for
price or rate proposals for specific types of work.
The RFP or RFI should be distributed in a way that conveys it is a legitimate and serious request. Most
companies send out the RFP or RFI either electronically or in hard copy with a signed letter attached
from the General Counsel. This conveys a level of seriousness to the recipient. The request is generally
sent to the managing partner or another senior partner within the firm, to encourage a more complete
firm response.
A specific time frame should be set for when responses are due. Typically, requests allow the firms two
to four weeks to respond, depending on the overall timeframe for selecting the final group of firms.
Always follow up with firms that do not respond by the deadline. It is, of course, at the team’s discretion
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
30
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
whether to allow the firm additional time to respond or whether to eliminate them from the process.
However, it is always beneficial to understand why firms did not respond in a timely manner. For firms
that are granted additional time, it is appropriate to take the lateness of their responses under
consideration when evaluating the proposals.
c)
Evaluating the Firms: Responses and Interviews
Once responses have been received, the internal team should read and evaluate all responses. While it
can be a time-consuming process, it is important that multiple people read and evaluate each response to
ensure that the responses are being evaluated fairly and comprehensively. Before responses arrive,
develop a standardized scoring tool so that all team members use the same method to evaluate the
responses. Each team member should enter his or her own scores in the provided scoring tool to
enhance consolidation and comparison of the scores of each team member.10
After all responses have been scored by individual team members, the team should conduct a meeting to
review the results of the scoring process and reach a consensus on which firms will move forward to the
interview process. The inputs for this decision-making process typically include the firm’s response to
the RFP or RFI, as well as any previous experience with the firm. While it is important to maintain
objectivity when scoring the responses, it is naïve to think that prior experience with a given firm will
not impact the ultimate decision on whether the firm moves forward. If a fast-track selection process is
desired, firms that have a strong historical relationship with the company may be moved forward to the
interview process with minimal evaluation, allowing more time for evaluating potential new firms.
Interviews are the next step in the process. Interviews are used to delve deeper into the firms’ responses
and to gauge the cultural fit. Interviews typically take place at the company’s primary office, with law
firm representatives traveling to participate. Ideally, the interview process will be conducted during a
compressed period of time. While this can be a tiring process, it allows the evaluating team to better
compare the firms when the interviews are conducted back-to-back. Interviews should also be scored
using a standardized form. It is valuable for the interview team to discuss the firm immediately after the
interview if possible, to capture initial impressions. Once all interviews are complete, a team meeting
should be held to reach a consensus about each firm’s outcome and how they fit into the outside counsel
model. After the interviews, selected firms will move to the negotiation process.
d)
Conducting Negotiations
Negotiations with selected firms should cover three general areas: proposed work and rates, proposed
staffing, and proposed team. Depending on the law department, negotiations could also include
alternative fee arrangements. Some law departments elect to conduct negotiations directly, while others
choose to engage a third party in the negotiating process. Engaging a third party can sometimes be
beneficial, to eliminate any contentiousness between the department and selected firms.
The first consideration in the negotiating process will be the work proposed to be handled by the firms.
The work that any given firm receives will likely be dictated by the type of program that is being put in
place. If a regional-based program is being established, the proposed work could cover a variety of
practice areas in a given state or region. If a practice area-based program is set up, the proposed work
Copyright© Huron Consulting Group & Association of Corporate Counsel
31
may be for a specific practice area or for several practice areas on a more “full-service” basis.
As previously discussed, staffing is very important in managing costs. Discussing the issue during
negotiations gives the firms the opportunity to propose a team, with full information regarding leverage
expectations. The law department will have established proposed staffing models for each type of work;
therefore, there should be minimal negotiations on the staffing models. While it may be difficult to set a
hard line on partner time versus associate time versus paralegal time in a general context, it is important
to set expectations during the negotiating process on how work will be leveraged.
Negotiations regarding the proposed team will center on who the firm’s core team members will be and
their rates. A common frustration among in-house counsel is a firm’s use of any available partner or
associate for the work. In one example, a firm had billed 70 different associates over the life of a matter.
This churning of associates undermined the goal of building a deep base of knowledge about the
company at the firm. The goal behind a core team is to build knowledge within the firm about the
company and its legal issues, thus minimizing learning curves, creating efficiencies, and ultimately
reducing billings by the firm. The core team may consist of partners, associates, and paralegals, and its
makeup should be driven by the agreed staffing models. Negotiations give the law department the
opportunity to strike team members with whom they may have had negative experiences, and possibly to
request others.
For each core team member, the rates proposed by the firm during the RFP/RFI process or the interview
process should also be negotiated. Given the current economic climate, most law firms are willing to
negotiate on rates. Current trends support rate reductions, discounts or rate freezes. The rates
negotiated will vary by practice area and region. Some clients have frozen rates at the 2008 level, on top
of additional discounts in specific practice areas. Often, when rate negotiations are part of the formation
of an outside counsel program, the parties will agree to freeze the rates for a specific period. Typically,
the agreed to rates will be frozen for eighteen months to two years from the effective date of the formal
agreement between the law department and the law firm.
The negotiation process also provides a prime opportunity to discuss with outside counsel the use of
alternative fee arrangements. Generally, the goals of alternative fee arrangements include predictability,
cost control and risk sharing. A survey reported in late 2008 reflects that historically, substantial use of
alternative fee arrangements has not been widespread, with alternative fee arrangements accounting for
less than 10% of outside counsel spend for approximately 82% of respondents.11
Figure 8: Use of Alternative Fee Arrangements as a Percentage of Outside Counsel Spend
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
32
In the same survey, 50% of respondents said they would be using alternative fee arrangements as a
means of cost control in 2009.12 In the 2008 CLO Survey, 60% of respondents said that outside counsel
could improve relationships by offering more alternative fee arrangements.13 Examples of alternative fee
arrangements include variations on hourly billing (percentage discounts, blended rates, reduced hourly
rates), fixed fee arrangements (unit pricing, capped fee arrangements, annual or monthly flat costs), and
contingency or partial contingency arrangements (pure contingency, holdbacks, success fees). During
the development of the outside counsel model, the law department would have uncovered the legal
needs that are suited for consideration for an alternative arrangement. The best type of arrangement will
vary based on company culture, the firm’s tolerance for risk and the nature of the work.
D. Establishing Operational Guidelines
To effectively implement the outside counsel program, clear operational guidelines should be developed
and communicated internally and externally. The guidelines should set expectations as to the law
department’s policies and procedures regarding:
■
Staffing;
■
Matter management (including early case assessments);
■
Budgeting;
■
Time billing;
■
Expenses;
■
Invoices;
■
Relevant company policies.
Clear communication of the guidelines to outside counsel is essential. Creating a forum for open
dialogue regarding the guidelines and the department’s expectations on their execution will foster
greater adherence. The forum can be a formal meeting with all counsel, individual meetings, or use of
knowledge-sharing technology to receive and answer questions.
The concept of managing outside counsel is a constant process and can be time-consuming, but
guidelines are only as effective as their enforcement. Complementary internal guidelines can be used to
establish in-house expectations for the management of outside counsel. The law department members
should be trained on the implementation of the guidelines. Training should encompass the process and
procedures for case assessments, matter staffing, budgeting, bill review,14 and monitoring adherence to
company policies. It is becoming more common to tie management of outside counsel to performance
goals, and thus to compensation.
Copyright© Huron Consulting Group & Association of Corporate Counsel
33
V. Creating Sustainability: Managing and
Measuring
A.
Managing through Leverage of Process and Technology
As the law department develops its cost management strategies, it should consider how process
management and technology improvements can support these plans. Well-managed processes and
supporting technology will improve efficiency and productivity, and can also generate savings.
Operational and resource savings are achieved as efficiency improves and redundancy is eliminated.
Improved processes also can generate indirect sustained savings through better risk management and
compliance control. Improved processes may even lead to increased revenues, because control of and
access to information often leads to better revenue identification and tracking.
In most departments, some level of defined processes already exists. Opportunities for process
improvement can be identified by examining the existing processes and the routinely done tasks. In
reviewing processes, look specifically for commonalities and redundancies with the current use of
resources. During the review, key information to gather includes:
■
Do defined processes exist?
■
Are they clearly understood?
■
Are they used consistently?
■
How could they be more efficient?
■
Are there any redundancies?
■
What is the current workflow?
■
What administrative tasks and repetitive tasks could or should be automated?
■
Who has or needs access to information in various applications?
■
■
What collaboration and knowledge-sharing is there or should there be among in-house counsel,
business units, and outside counsel?
What changes are needed to support the new strategy?
With this assessment information, the law department can develop common and standard processes to
improve productivity and efficiency. These processes should initially be developed independent of
technology. Once efficient processes are in place and understood, the department then can make the
best use of technology to facilitate them. The best processes embrace a “lifecycle” approach; i.e., they
addresses the entire function from beginning to end, to make the best use of common information and
actions. Characteristics of effective processes include:
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
34
■
Alignment with the company’s and department’s business interests;
■
Clear definition;
■
Use of the right resources for each step;
■
Assignment of specific responsibility and timing for each step;
■
Elimination of redundant actions;
■
Use of standardized methods for capturing and reporting data; and
■
Response to user needs.
Some common areas of opportunity where processes can improve efficiency (and thereby reduce costs)
include the following:
■
Matter management, from initiation of the matter to management to closing to capturing lessons
learned;
■
E-billing, from budgeting to invoice receipt to review to process to payment;
■
Financial management, from budgeting to reserves to accruals to invoicing to payables;
■
■
■
■
■
Document and records management, from creation to naming and indexing to sharing to storage
to archiving or destruction (electronic and hard copy files);
Discovery management, from collection to processing and review to production;
Contract management, from initiation to execution and approval to compliance to termination
or renewal;
Intellectual property management, from identification of the asset to research to filing to
prosecution and enforcement; and
Reporting, from management to attorney to law firm to matter to financial reporting.
Many processes can be aided by technology. When used strategically, technology is an effective tool for
leveraging work and sharing knowledge in a cost-effective manner. A survey of in-house legal
departments shows that technology usage within corporate legal functions is common, and steadily
rising, but not universal. Matter management software is the most common application.15
Copyright© Huron Consulting Group & Association of Corporate Counsel
35
Figure 9: Technology Usage by Corporate Legal Departments
Prior to putting in place any new technology, the law department should assess business and end-user
requirements, and evaluate existing technology. This information can be gathered through interviews or
surveys. Questions that need to be answered include:
■
What systems are in use?
■
What is their purpose?
■
How are they used?
■
Who uses them?
■
What are the limitations?
■
How much IT support is needed?
■
What changes are needed to support the new strategy?
Once the information is gathered, an inventory of systems can be created. Additionally, an analysis of
the feedback will provide an understanding of who is using the existing systems and how they are
actually being used. It is not uncommon to find that only a small portion of the functionality of a system
is actually used.
Changes will be needed. Armed with the results of the assessment, the law department can evaluate
vendors and internal technology resources to select the best technology solution(s) for the department’s
needs. Keep in mind that process should be the driver, not the technology. The technology should
enforce the process and not vice versa. A long-term goal would be to establish a comprehensive
technology strategy with minimal platforms to maximize return on investment. Because technology
selection and implementation can be time consuming or labor intensive, the technology strategy and
plan should address immediate, short-term, and long-term needs in a phased approach.
Some law departments form an internal group to help manage the operations of the department.16 This
group plays an integral role in implementing cost savings initiatives by bringing both business and legal
knowledge together, focusing the department on not just departmental savings, but also how these
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
36
savings affect the corporate bottom line.
Law departments with legal operations groups tend to have a higher use of technology, especially matter
management and e-billing systems. A recent survey on technology use in law departments that have
legal operations managers shows the following systems usage:17
■
96% Matter Management
■
85% E-Billing
■
81% Corporate Secretary or Subsidiary Management
■
64% Document Management
■
50% Records Management
■
50% Legal Holds
Legal operations groups also increase attorney efficiency and productivity by taking on certain
administrative responsibilities, freeing the attorneys to focus on substantive work.18 These groups are
typically composed of non-lawyers, and perform tasks related to:
■
Data analysis;
■
Process management;
■
Acquisition and implementation of technology;
■
Financial management of outside counsel relationships;
■
Budget management;
■
Resource management;
■
E-Discovery management;
■
Document and records management.
Most people find change to be threatening, and for many, learning a new process or technology can be
intimidating. The key to successful change is preparation and communication. Some of the principles of
change management to keep in mind include:
■
■
Communicate early and often.
• The vision will take time to digest: the earlier the communications begin, the better;
• Reduced uncertainty leads to reduced resistance;
• Consistent messaging throughout the project helps to reduce cynicism.
Use multiple communication methods.
• Email, newsletters, town hall presentations and video clips.
Copyright© Huron Consulting Group & Association of Corporate Counsel
■
■
B.
37
Emphasize that change is a process not an event.
• It starts long before “go live” and continues long after;
• Focus on the process changes, not just the technology;
• Clearly document the new processes so they become the new status quo.
Build commitment, not just compliance.
• Connect the new process and systems to the improvement and cost savings goals;
• Set expectations for continuous improvement;
• Make sure that senior management “walks the talk”;
• Balance the need for short-term economic results with long-term organizational
capability.
Measuring Performance
An effective strategy is one that, once implemented, delivers the desired results. It is virtually axiomatic
that “what gets measured gets managed.” Over the last few years, law departments have put more focus
on accountability through performance management, and as a result, performance has grown. Metrics
are an effective tool for measuring results. Metrics should support the strategy of the law department
and enable better decisions and lead to action. They should consider the ultimate results, along with the
cost efficiency, to reach the results. Not everything can or should be measured; however, the law
department should recognize that it may not be able to document success or tweak initiatives whose
results are not measured. For those initiatives the department elects to measure, it is important to
establish key success metrics against which results and performance will be judged on an ongoing basis.
Metrics are initially used to document the current environment and needed improvement.
Subsequently, metrics are used to show progress on achieving planned objectives. Fact-based
performance metrics that are measurable, actionable, relevant, and timely can be used both to reward
success and to determine where further improvements are needed. The law department’s metrics may
address financial issues, operating efficiencies, employee performance, outside counsel performance, and
client satisfaction, among other things.
Periodic evaluations within the department and among outside vendors should occur on a consistent
basis. Each law department’s measurement requirements will differ, but following are examples of useful
metrics:
■
Average hours per matter by matter type;
■
Average cost by task;
■
Matter budget to actual variance;
■
Total matter resolution cost;
■
Days to resolution of matter;
■
Percent of total outside counsel fees paid to primary law firms;
■
Ratio of matters handled by in-house vs. outside counsel;
■
Sourcing strategy (cost vs. headcount);
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
38
■
Average response time to client inquiries by matter type;
■
Achievement of business goals vs. risk/reward balance;
■
Overall client satisfaction rating.
One avenue that is not as common is tying cost-management goals and performance to law department
compensation. While it can be controversial, it prioritizes cost control for the members of the
department.
Data from matter management and e-billing systems can provide invaluable information on outside
counsel’s performance. Similar to the analysis performed during the development of the department’s
strategy, an annual analysis should be conducted to assess and measure outside counsel. Common
metrics used to evaluate outside counsel include:
■
Average billing rates;
■
Compliance with outside counsel guidelines;
■
Staffing ratios;
■
Billing requirements;
■
Quality of work product;
■
Responsiveness;
■
Efficiency;
■
Cycle time per matter by matter type;
■
Use of technology;
■
Use of standard processes;
■
Alternative billing arrangements;
■
Track record.
Additional tools that can be used to gather information include post-matter evaluations of firms and
satisfaction surveys distributed among department members and business clients. Common areas for
feedback include:
■
Development as a legal advisor and business partner;
■
Legal skills and business understanding;
■
Proactive involvement;
Copyright© Huron Consulting Group & Association of Corporate Counsel
39
■
Articulation of options to achieve business goals;
■
Quality of legal work.
This subjective information provides insight into individual performance and the more objective data
regarding rates, staffing and billing.
Metrics should be reported on a scheduled basis, typically quarterly or semi-annually with annual totals.
It is recommended that metrics be shared with outside counsel as part of a formal evaluation process. By
tracking and measuring performance, the department will be in a better position to discuss any work or
rate changes with the firm for the upcoming year.
VI. Conclusion
The keys to successfully controlling costs are: developing an understanding of the current state and
identifying opportunities for improvement, balancing these opportunities against the work’s value and
risk, developing and implementing an appropriate strategy and plan, and managing the implemented
improvements using metrics to control and ensure compliance. Executing a well thought-out, planned
strategy will yield the greatest results because they will be based on the knowledge of the cost impact, and
implemented in a manner that best serves the company’s risk/value parameters.
Figure 10: Law Department Strategy Savings
A law department that takes a proactive, strategic approach to controlling costs will be able to achieve
not only short-term savings but also sustainable efficiencies. As part of a larger, comprehensive plan,
cost-cutting measures designed and implemented properly are not simply reactions with short-term
results, but rather actions that address the true underlying issues and position the department for the
future.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
40
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
VII. About Huron Consulting Group and the
Authors
A. About Huron Consulting Group
Huron Consulting Group is a leading provider of business consulting services. Founded in 2002, Huron
redefines the traditional consulting experience by offering the highest quality services from top industry
professionals in the business, legal, healthcare and education sectors. With a deep understanding of the
complex challenges that companies face in the overall business landscape and in a specific industry,
Huron provides clients relevant, measurable and sustainable solutions to address their business issues.
Huron helps clients in diverse industries improve performance, comply with complex regulations,
resolve disputes, recover from distress, leverage technology, and stimulate growth. Huron’s range of
services includes: Legal Consulting, Accounting & Financial Consulting, Corporate Consulting, and
Health & Education Consulting. In addition to the corporate headquarters in Chicago, Huron has
offices located in Amman, Atlanta, Boston, Dallas, Detroit, Dubai, Houston, Jeddah, London, Los
Angeles, New York City, Portland, Riyadh, San Francisco, Singapore, Tokyo and Washington, D.C., and
employs over 2,100 individuals, including over 1,500 full-time billable consultants.
Huron’s Legal Consulting practice is a leader in working with the Offices of the General Counsel to
provide specialized consulting with a focused approach towards helping law departments become more
efficient and cost effective. The Legal Consulting practice’s vision is to understand, anticipate and
respond to our client’s needs related to the business of law with high quality strategy, process,
technology, operational and information management consulting services. Huron’s professionals have
worked on engagements with the 50 largest U.S. law firms listed in The American Lawyer 2008 Am Law
100 and more than 275 General Counsel.
B. About the Authors
Nancy Jessen is a Managing Director in Huron’s Legal Consulting group. Ms. Jessen has more than 20
years of experience working with legal organizations on a variety of strategic and operational issues. Her
focus has included the areas of organizational structure, cost containment, outside counsel management,
process improvement and strategic technology utilization. In addition to her experience as a consultant,
Ms. Jessen has worked for a private law firm and a software development company focused on billing,
accounting and financial management software for the legal community. Ms. Jessen received her B.A. in
Management Information Systems from Iowa State University.
Laura Hajovsky is a Director in Huron’s Legal Consulting group. She has more than 20 years of
experience practicing law and working with corporate law departments and law firms. She assists
Copyright© Huron Consulting Group & Association of Corporate Counsel
corporate legal departments in maximizing the value-add of the legal function through the application
of business principles, best practices and the development of cost-reducing process improvement and
technology initiatives. Ms. Hajovsky received her B.B.A. in Accounting from the University of Texas at
Austin, and her J.D. from the University of Texas School of Law.
Rachael Luthy is an Associate in Huron’s Legal Consulting group. Ms. Luthy assists law departments
with business performance improvement through strategy development, value creation, technology
solutions and process improvement. Ms. Luthy received her B.S. in Human and Organizational
Development from Vanderbilt University, and her M.Ed. in Organizational Leadership from Peabody
College at Vanderbilt University.
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
41
42
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
VIII. Sample Forms
A.
Workload Survey
Copyright© Huron Consulting Group & Association of Corporate Counsel
43
Continued from previous page
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
44
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
B.
Law Firm Data Request
The following describes the electronic file format for the invoices and other information we will require to
complete the data analysis. It is important that we receive this information in the format described below
so that we can use the data in the most expedient manner.
I. MATTERS FOR INCLUSION
All matters with timekeeper and/or expense activity during the dates listed below shall be included
whether engaged directly by [Company Name]’s Law Department or one of its agents. Further, all
matters should include the actual time records for hourly work as well as fixed fee.
II. DATE RANGE FOR INVOICE DETAIL
We will be analyzing all matters with timekeeper activity between [Date] and [Date]. In the submission,
please include any invoices billed at a later date that include fees and/or expenses incurred during the time
period requested.
III. DATA FORMAT - INVOICE DETAIL
In order to expedite the delivery, we are requesting that the data be provided in the standard LEDES
1998B format. We prefer all invoices for the period in question to be included in one extract file, rather
than a different file per invoice or matter. If the file is greater than 10MB, please use a zip utility to
compact it.
If you are not familiar with the LEDES 1998B format, please visit the web site below for the file format
and fields requested: http://www.ledes.org/FormatSpec.asp#1998BSpec.
Note: If your firm uses UTBMS codes during timekeeping, please include that information in the LEDES
formatted data submission. If you have not been entering UTMBS codes for [Company Name] matters,
you may leave the fields blank.
IV. DATA FORMAT - SUPPLEMENTAL MATTER DATA
In addition to the data included in the Invoice Detail, please include the following data elements, if
available:
•
Matter Name
Copyright© Huron Consulting Group & Association of Corporate Counsel
45
[Company Name] Law Department Contact
[Company Name] Matter Number
•
Law Firm Practice Group
•
Law Firm Area of Law
•
Law Firm Department
•
Law Firm Matter Open Date
•
Law Firm Matter Closed Date
If possible, please include these additional fields at the end of the LEDES file format. If necessary, you
can send these supplemental fields in a separate file (text or Excel) along with the Law Firm Matter ID to
permit us to relate the information to the Invoice Detail.
•
•
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
46
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
C.
Interview Questions
Law Department Interview Questions
•
•
•
•
•
•
•
•
•
•
•
•
•
Who are your clients?
How would you describe the culture of the Law Department?
What percent of the work is Proactive/Preventative vs. Reactive? Please provide examples.
What changes would you recommend to move toward doing more proactive work?
How do you determine when to use outside counsel?
How would you describe the relationship with outside counsel?
What types of internal resources are available to you? To your team? (e.g., Administrative staff,
dedicated Project, IT, HR staff)
How do you use Paralegals/Administrative Staff in your work?
How is your performance measured? How do you measure the performance of your reports?
How would you rate your client’s satisfaction levels (using a scale of 1-5, with 1 as lowest and 5 as
highest)? Please explain.
Are there departmental processes and/or use of technology with regard to:
– Matter Management
– Document Management
– Records Management
– Contracts Management
– Corporate Entity Management
– Time Management
– Financial Management
What additional processes and/or technology could improve the productivity and effectiveness of
the Department?
What is the Law Department doing right? What should the Law Department do different
Copyright© Huron Consulting Group & Association of Corporate Counsel
47
Business Client Interview Questions
•
•
•
•
•
•
•
•
What is your role/scope at [Company]?
What are your legal needs/challenges?
Who do you work with in the Law Department?
What is your decision-making process in determining when to get the Law Department involved?
Are there any challenges in this process? If so, what are they?
What is the Law Department doing right? What should the Law Department do differently?
What, if any, interaction do you have with outside counsel? Do you hire outside counsel directly?
How would you rate your satisfaction with the delivery of legal services? (Scale of 1-10, 1 is poor
10 is exceptional)
How would you recommend that the Law Department ensure quality and accountability with
regard to attorney work-product? For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
48
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
D.
Roles and Responsibilities Matrix (Litigation Sample)
Copyright© Huron Consulting Group & Association of Corporate Counsel
E.
49
Work Distribution Plan
External Work Distribution
Matter Type
Internal/External
Unique
Experiential
Commodity
Corporate
20% / 80%
Firm A
Firm B
N/A
Commercial
70% / 30%
Firm A
Firm C
N/A
Environmental
60% / 40%
Firm A
Firm C
Firm C
Regulatory
25% / 75%
Firm D
Firm E
N/A
Litigation
30% / 70%
Firm A
Firm C
Firm C
Labor &
Employment
80% / 20%
Firm B
Firm B
Firm B
Real Estate
65% / 35%
Firm A
Firm B
Firm C
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
50
F.
Work Transition Plan
Matter Type: Contracts
Number of Matters: 54
In-House Counsel: Jane Smith, Michael Wilson
All* existing Contracts matters currently being handled by one of the existing firms listed below must
be transitioned to Firm C. The target date for transitioning all matters is June 30th.
Existing Firms
Firm A (18 matters)
Firm B (8 matters)
Selected Preferred Firm
Firm C (12 matters)
Firm C
Firm D (10 matters)
Firm E (2 matters)
Firm F (4 matters)
*Exceptions: The matters listed below will continue to be handled by the existing outside counsel
firm and should not be transitioned.
•
•
•
Matter # 09-11732 (Firm A)
Matter # 07-02405 (Firm A)
Matter # 07-01364 (Firm D)
Copyright© Huron Consulting Group & Association of Corporate Counsel
51
G.
Communication Plan
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
52
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
H.
RFP Sample Questions
Firm Overview
1. Please provide information on your firm’s overall size (including the number of partners, associates,
paralegals, and non-attorneys) and the size and geographic location of offices which are relevant to
[Company]’s business operations.
2. Diversity is important to [Company]. Please provide statistics on your firm’s diversity at the partner,
associate and paralegal level for both women and minorities.
3. Please provide your firm’s annual revenue for each of the last three years, along with your total
revenue from [Company] in each of the three years.
Legal Expertise/Experience
4. Discuss your expertise with companies in the [Industry Name] industry. Please indicate the
percentage of revenue your firm receives from the [Industry Name] industry relative to other
industries. (800 word limit)
5. Indicate your firm’s ability to provide services in each of the areas listed below. For each of the
areas where your firm provides services, please discuss your firm's work on behalf of other
companies in these areas. (Please limit your response to 2,400 words for each area)
Area of Law
Corporate
Commercial
Environmental
Regulatory
Litigation
Labor and Employment
Real Estate
Copyright© Huron Consulting Group & Association of Corporate Counsel
Firm Provides Services?
(Yes/No)
53
6. Please provide a detailed discussion of your specific experience in [Practice Area]. (1000 word limit)
Financial Management
7. What type of alternative and result-oriented billing arrangements have you participated in with
clients in the past? (800 word limit)
8. Please describe how you would propose to set and effectively manage budgets. (400 word limit)
9. Please provide your firm’s standard billing rates for all types of professionals (i.e., Partner, Of
Counsel, Associate, Paralegal, Non-Attorney), including a breakdown of rates by the different levels
for each type (e.g., Senior Partner, Junior Partner, 1-5 Year Associate, 6-10 Year Associate).
10. Are you willing to freeze your rates for any given matter from the inception of that matter until its
conclusion? (200 word limit)
Partnering Approach
11. How do you educate your team and firm about a new client, including businesses, culture,
competitors and key legal challenges it may be facing? What is your philosophy on charges to your
clients for your team’s education? (800 word limit)
12. Please propose two (2) members of your firm who could fill the role of the [Company] Relationship
Manager. This person would be responsible for managing and coordinating the firm's operations
across all [Company] matters. (800 word limit)
For more ACC InfoPAKs, please visit http://www.acc.com/infopaks
54
Law Department Strategy: Balancing Immediate Cost Savings with Sustainable Results
I.
RFP Scorecard
Copyright© Huron Consulting Group & Association of Corporate Counsel
55
J.
Interview Evaluation Sheet
Date:
Firm Name:
Firm Representatives:
Topic
Score
Firm Overview



Firm Overview
Relationship
Manager
Diversity
0: Does Not
Meet
1: Meets Some
2: Meets All
3: Exceptional
Legal Expertise and
Experience


Skills/
Competencies
Previous
Experience
Partnering Approach


Staffing
Collaboration
Across Practice
Areas
0: Does Not
Meet
1: Meets Some
2: Meets All
3: Exceptional
0: Does Not
Meet
1: Meets Some
2: Meets All
3: Exceptional
Financial Management



Rate Freezes
Rate Concessions
Budgeting
0: Does Not
Meet
1: Meets Some
2: Meets All
3: Exceptional
Comments
56
Technology/e-Billing



0: Does Not
Meet
Electronic Billing
Task-Based Billing 1: Meets Some
Other
2: Meets All
Technologies
3: Exceptional
Summary
Recommendation
Team Consensus
Recommendation
57
IX. Additional Resources
“How Can General Counsel Cut Costs in
Today’s Economic Environment?,” For the
Legal Eye, Huron Consulting Group, Volume 3,
Issue 1, January 2009, available at
http://www.huronconsultinggroup.com/service
Articles.aspx?serviceCatId=21
“Law Department Cost Management: A
Comprehensive Strategy,” Huron Consulting
Group, May 2009, available at
http://www.huronconsultinggroup.com/service
Articles.aspx?serviceCatId=21
“Cost Control in the Current Economic
Environment,” ACC Webcast, ACC Law
Department Management Committee and
Huron Consulting Group, April 29, 2009,
available at
http://webcastarchive.acc.com/detail.php?id=26
6924&go=2
58
X. Endnotes
1
Association of Corporate Counsel, ACC Chief Legal
Officer Survey Results 13 (April 2009), available at
http://www.acc.com/aboutacc/newsroom/2008-closurvey-results.cfm.
2
BTI Consulting, Inc., BTI’s Mid-Year Legal Spending
Update and Outlook for 2009 (May 2009), available at
http://www.bticonsulting.com.
3
Matter types should be drafted to align with the work of
the law department. As the starting point for creating the
matter types for the survey, a list of the matter types from
the matter management system should be reviewed.
Group matter types as appropriate to streamline the list
for the survey.
4
An FTE is the volume of work performed by one fulltime resource. The number of hours defined as an FTE
can vary among companies. Variables include the culture
of the company, the role of the in-house counsel, and
vacation and overtime policies. The range for an FTE is
1600 to 2000 hours. Historically, 1650 hours was
considered the norm, but with the changing role and
expectations of the law department, a higher number may
be more appropriate.
5
“Complexity” becomes useful in later efforts to
determine the proper level of resources.
6
Amy I. Stickel, A Position – and a Survey – 20 Years in
the Making: Operations Directors Earn the Right to Sit at
the Table 8 (InsideCounsel Supplement, November 2008),
available at
http://blicksteingroup.com/pdfs/LDO2008Supplement.pdf
7
In some instances, large firms will perform the work at
rates or with lower fee structures appropriate to the work.
8
Eighteen months and two years are commonly used
timeframes.
9
Depending on the culture of the company, a member of
the procurement department may also be part of the
selection team.
10
Scoring may be developed using a spreadsheet with
built-in tabulations to determine the overall score for each
response based on scores entered for each individual
section.
11
Altman Weil, Inc., Law Department Cost Control: An
Altman Weil Flash Survey of General Counsel, 8
(December 2008), available at
http://www.altmanweil.com/index.cfm/fa/r.resource_detai
l/oid/d664b2c6-9978-4327a66e757972ebd091/resource/Altman_Weil_Flash_Survey
_Law_Department_Cost_Control.cfm
12
Id. at 5.
13
Association of Corporate Counsel, supra note 1, at 19.
14
Some departments find that using non-attorney
professionals to manage the financial aspects with outside
counsel is cost-effective and allows attorneys to focus on
the substantive matter management.
15
General Counsel Roundtable, Evaluating Law
Department Technology, Report on Member Usage,
Satisfaction, and Recommendations (2006).
16
The size of the legal operations group may vary. In
smaller organizations, it may be just one or two people,
whereas in bigger companies it is not uncommon to have
upwards of ten people.
17
18
Stickel, supra note 6, at 10.
David Cambria, Coming of Age: The Changing Role of
the Law Department Operations Director 2
(InsideCounsel Supplement, November 2008), available
at
http://blicksteingroup.com/pdfs/LDO2008Supplement.pdf