$2,000 per hour? What Legal Procurement Should Do Now

The time to tighten one’s belt seems to be over – at least for some lawyers.

Starting salaries for lawyers right out of law school have just been raised at some firms. According to a Wall Street Journal article, New York firm Cravath Swaine & Moore increased its starting salary to $180,000, effective July 1. It was reported that the (unusual) midyear pay raise has immediately been matched by at least nine other law firms.

After breaking through the $1,000 per hour rate limit in 2011, the highest paid partners in New York have just broken through the $2,000 per hour limit. Similarly, top London lawyers now command more than £1,000 per hour.

All the more reason for Legal Procurement to stay on top of things! So what can you do to manage spend?

Insist on Business Process Management: 

No business of any size can work without using some version of Business Process Management. The idea of structuring activities or tasks that produce a certain outcome dates back to 1776 when Adam Smith described the processes in a pin factory. It’s about time we’re applying the principles to the legal category: Understanding and documenting key processes leads to better matter management through better scoping, planning, and budgeting. 

Here is how you can distinguish firms that are best in class: 

  • In your next RFP, ask firms how they will manage your work. Look for examples of business process maps that the firm has used to optimize and manage their work.
  • Ask how their work on business processes has contributed to an improved customer experience and higher quality of service (and more efficiency!).

To learn more about Using Business Processes for the Legal Category, become a member and read Ian Stockley’s “Cheat Sheet” in the Members-Only area of our website.

Insist on Alternative/Appropriate Fee Arrangements (AFAs):

Firms often say that clients don’t want AFAs. Why wouldn’t you? AFAs generally aim to align legal cost with the value of the services rendered rather than how long it took outside counsel to deliver the service. However, to successfully embrace AFAs, you need to know whether you’re getting a good deal from your firms.

Here is how you go about it:

  • Build your own data set of comparable matters. Know the market and understand how much different aspects cost. What are the price drivers? Introduce competition.
  • Survey the market and when bidding out matters, make assumptions so firms can properly price their services. It needs to be clear to both parties how the firm should deliver its services. Who will be working on the matter? How many documents will be reviewed? How many weeks or days of trial do you anticipate?
  • Define success. Are both you and the firm clear about what counts as a “win”?

To learn more about Success with AFAs, become a member and read Justin Ergler’s “Cheat Sheet” in the Members-Only area of our website.

If you are not (yet) a member, sign up today. (At currently $500, Buying Legal Council Corporate Annual Membership costs less than one hour of a partner and our Individual Annual Membership of $185 is like an hour of a paralegal. Prices are valid through August 31.)

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5 things you should do to succeed in buying legal services:

  1. Look beyond Discounts: In the legal category, value gains come through process improvements, service unbundling, innovation, risk reduction, and incentive alignment, and not via discounts. The real opportunity lies in identifying the ways in which firms & suppliers can help you better meet your organization’s business objectives, consume less, and become less expensive to serve. To read Gerard Chick’s LinkedIn post, click here. Firms create value by reducing costs, reducing waste, and improving process controls.
  2. Focus on their Strengths: What are different firms and suppliers best at? Use “requirement segmentation” as your key cost reduction driver. Which matters or phases require local knowledge? What could be offshored? To read Anupam Razdan’s and Vincent Gautheron’s slides from the Buying Legal Council Legal Procurement conference in London, click here: http://www.buyinglegal.com/formembers
  3. Phase your Goals: Divide your goals into smaller, phased outputs. Establish an agenda of recurring topics you discuss with your colleagues in Legal: e.g. in February, prepare a synopsis of what happened in the past year. In April, review Q1 and take a fresh look at your Billing Guidelines. In July, review Q2 and examine selection and evaluation processes. To read Magen McClintock’s Cheat Sheet on “How to Make Yourself Indispensible”, click here: http://www.buyinglegal.com/formembers
  4. Establish Reference Points: Develop/get access to a fully maintained rates database. Use reference points that cannot be argued (such as location and work type). Understand where the market is going, and what pressure the law firms are under at the time you are agreeing the terms of the contract. To read Nick Mirabella-Williams’ slides from the Buying Legal Council Legal Procurement conference in London, click here: http://www.buyinglegal.com/formembers
  5. Use the Right Metrics: “It’s becoming harder and harder for legal departments and law firms to ignore the useful data that modern technology can extract from the outputs that everyday operations provide. (…) Lincoln Financial Group has gone so far as to use metrics to calculate win rates. The company measured ‘wins’ by combining settlement costs with legal costs on similar high-volume matters. It discovered that the results combined with the legal costs varied markedly among external counsel. Consequently, it has started moving business to the firms with the best ‘win’ record.” To read the article “Using data to select external counsel” and other articles on legal procurement, access our article log on Legal Procurement. Click here: http://www.buyinglegal.com/articles If you have written an article on legal procurement or have read an interesting article on legal procurement we haven’t listed yet, please let me know! 



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Winning over your colleagues in the legal department

In-house lawyers are often not fans of Procurement and procurement processes, at least from the start. Many of them don’t think like business people, savings often don’t matter to them as much as they typically matter to you, and relationships to outside counsel are of utmost importance for them. Former general counsel Leah Cooper of Leah Cooper Consulting recommends ways for Procurement to win in-house lawyers over and drive improvements:

Build the relationship: If possible, sit with your colleagues in Legal and/or schedule regular meetings. Ask questions, understand their issues, learn lawyer-speak and avoid Procurement lingo. Relate and engage. Come with different options or scenarios. Lawyers are trained to argue and find fault. By showing them different scenarios they can reason about the most fitting solution and are hence more likely to embrace it. Also come to an agreement as to what is a “win”.

Be useful: In RFPs, show your skills and usefulness and do the “leg work” for the legal team. Learn what is important to them and research alternatives. Show that you are aware of their concerns and know what keeps them up at night. Use this in your approach when making suggestions for different processes, analyses or firm choices.

What else you should do:

Understand what keeps your colleagues in the legal department up at night and connect with your peers in other companies. See what path they have taken, learn from their successes and mistakes, and adopt legal procurement best practices.

Attend the next legal procurement conference in London on 9 May. Click here for the programme!

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