They Say They Want a Revolution: Reconnecting Legal Costs to Value Delivered

 By Amy Spach

Ms. Spach is a principal of AS Written Communications. She creates articles, Web content and marketing materials for law firms and other professional services firms. This article was originally published in Originate!, the attorney business development newsletter. Please see http://www.pbdi.org/originate.   She can be reached at www.aswrittencom.com  or 323.876.6374.


For many corporate counsel, the $160K new associate was the step too far.

General counsel’s frustration with outside law firms was festering for awhile.  There was The Wall Street Journal front page report on thousand-dollar-per-hour lawyers. Add to that AmLaw’s centerfold heralding this year’s record profits per partner.

GCs say that they valiantly tried to justify eye-popping attorney rates and partner compensation to sticker-shocked CEOs.  But when soaring associate pay went public, corporate counsel immediately knew they’d be footing that bill.  The gap between cost and perceived value of services became an abyss. And with it, frustration deepened to anger. 

That ire has fired up a collective call for wide-scale change in the way law firms conduct business and a direct challenge spearheaded by the Association of Corporate Counsel (ACC). “Individual conversations about a 10 percent discount for a matter when fees go up 15 percent a year just don’t make sense,” according to Susan Hackett, ACC’s senior vice president and general counsel.

 


Preparing Yourself to Originate!

  • How you manage the delivery of your service can be just as strong a force for satisfaction as the right result. That means finding out how the client wants to be treated in such areas as communication, billing or decision making. And it means ensuring your team is a good fit.

  • Use your team as your client relationship agent.  Assign them responsibilities for monitoring client satisfaction and the attitudes of various client personnel. Let them be your eyes and ears for additional opportunities.

  • Don’t adopt a “let them eat cake” attitude. Uncover what your clients are thinking about the quality of service you deliver, and the value you provide them relative to costs.

  • Too small for a big company? Too regional? Watch for opportunities where you can add value with those corporate counsel resisting big fees and unresponsive attorneys.

  • Don’t let the bill be the last thing your client gets from you. Aim to connect personally so you can review the value you’ve delivered. Now’s the time to find out what worked and didn’t work in the course of the matter.

During her presentation at the Los Angeles Chapter of the Legal Marketing Association’s   January program, Hackett invited legal marketers to involve their firms in formulating the new relationship between in-house and outside counsel.

Revolution Rising: Leave the Memos Behind

The ACC initiative, scheduled for launch in October, has a relatively moderate working title of “Re-Connecting Costs to Value.”  But its leaders refer to the desired change as a revolution.  

In it, ACC focuses on increasing efficiencies and aligning law firms’ competitive business practices with their clients’ operational models. “The rules of business do apply to law firms,” says former chairman of the ACC board and program co-presenter Michael Roster. 

Buoyed by the success of its previous shakeup of diversity hiring and minority counsel,   ACC members don’t want ad hoc pushbacks and dictates – they seek institutional and meaningful changes.

ACC’s Roster says that the steady rise of attorney fees, despite disappointing performance, just does not make business sense; “We do not want hand wringing and memos.  We want solutions and outcomes.”    

Value pricing and expense-conscious approaches are what Roster calls the “Wal-Mart model.”  Not coincidentally perhaps, Wal-Mart’s legal department was also the powerhouse behind ACC’s diversity campaign.

Kill the Billable Hour, But Then What?

The call for value pricing is itself not a radical proposition.  

The billable hour’s fading allure is a mainstream, oft-mentioned concept, most recently covered in The New York Times Style Section under the headline Who's Cuddly Now? Law Firms.

While a transformation to warm and fuzzy law firms is not explicitly on ACC’s wish list, they are seeking healthier and happier ways to conduct business through systemic change.  And they know that a myopic stance will undermine their chances of success. 

Hackett assured the audience that no one is saying that law firms should turn unprofitable.  But her co-presenter Roster later warned there are business signs that law firms should heed.  These include Tyco’s profligate spending, the current climate of CEO compensation scrutiny, and the rise of alternatives to legal services, such as e-discovery providers.

Among the areas where ACC does hope to instigate transformations and invite discussion are:

Roster suggests that corporate counsel bluntly demand that associates be assigned to them, albeit in reasonable numbers, be mentored and managed by partners, and valued by the firm. The goal is for associates to grow and remain with the client as well as the firm.

The consequence is a greater interest in hiring regional law firms. Members of both the audience and panel extolled the value and quality of the smaller, highly capable firms.  For GCs, though, handling a larger roster of outside firms requires that they improve their management skills in order to reap the benefits that hiring more non-mega firms can offer. 

Bringing the Revolution to Market

When launched, ACC’s challenge will spark reactions of Bastille-storming intensity.  Generating passionate discourse was indeed one purpose of the program. And reaction has already emerged on blogs here and abroad.

Hackett and Roster are reaching out to marketers, thought leaders, judges and the wider legal community in order to develop effective tools for ACC’s membership to change the corporate legal landscape.

ACC’s plan is in its early stages. Hackett reports that when she ran these ideas up the flagpole at a global law firm’s retreat, the room applauded in approval.

The local LA community’s reaction was more reserved. There is cautious concern over the practicality of overthrowing the billable hour and curiosity over the role marketers can play in the process.  “We are active in client loyalty and service programs but I am not sure how influential we can be at the level of compensation and billing,” says Jonathan Fitzgarrald, Greenberg Glusker’s director of marketing. 

Attorney Jeffrey Kramer, a partner at business law firm Troy Gould, questioned the applicability of the Wal-Mart model, “It’s not price points that sell legal services, it’s competency and professionalism,” he remarked while recognizing an increased opportunity for smaller firms in ACC’s proposed scheme.

Agreeing with the ascent of smaller firms is Mark Miller, marketing manager of accounting firm Stonefield Josephson.  He reports that major clients are already selecting his firm over the globals to realize substantial savings.

While change may not always be fun, the ACC’s “revolutionary” plans certainly promise to engage the legal community.  And that kind of conversation is an opportunity for legal professionals, as Rex T. Fontenot , Holland + Knight’s LA marketing manager observed, “Any time we hear back from clients, it’s a good thing.”  

© 2008 PBDI/SAGE PDI. This article comes from the February 2008 Issue of ORIGINATE!, a new online monthly newsletter (with ongoing support resources) dedicated to helping individual lawyers develop business successfully in order to build their careers. Our September 2007 issue is complimentary; otherwise articles are usually available to subscribers only. Find out more about subscribing at www.pbdi.org/originate