A Strategic Approach to Purchasing Legal Services, Pt. I

If a law department is spending six figures or more with the same law firm year after year, the two are in a de facto strategic partnership. Whether or not the law department takes advantages of the attendant leverage to improve its supply base, rather than seek illusory discounts, is a separate question. A strategic-sourcing approach to purchasing legal services is predicated on deep, collaborative relationships between law departments and law firms where both sides have incentives to invest in improving the delivery of legal services. While I am happy to send readers an annotated copy of my Service Delivery Review, below are two illustrative approaches to getting started.* Both demonstrate how exploring a single question can lead to a more comprehensive, structured dialogue.

Inductively. Begin with an identified area of concern, map it, discuss it, and improve it. If there is an identified problem, the collaborative, disciplined pursuit of better is far likelier to improve the situation than doing nothing and hoping the situation will correct itself.

Using legal research as an example – because it is a constant source of complaints – the law department should investigate on the front end how legal research is done rather than just complain on the back end that the legal research costs too much. Supported by actual time recording, research service (e.g., Westlaw usage), and knowledge management data, mapping the legal research workflow will bring to light who is doing the legal research and what tools they are using. The map should be the starting point for a structured dialogue about the firm’s approach to legal research on the client’s matters. Together, the two sides should be able to fashion a measurably better approach. “Measurably” because metrics should be embedded in the process as part of the improvement.

The law firm can create the initial map. But it is the responsibility of the law department to question it. Is the map representative of the workflow (i.e., based on data) or is it an idealized version of the workflow that bears little relationship to actual practice? If the map is accurate, is it really the best approach to legal research? Some partners may, for example, rely on whichever associate happens to be light on work, and some associates may consider legal research to be a war of attrition, equating quantity with quality. Whether this is optimal and, if not, what should replace it will be the subject of the structured dialogue.

Dialogue participants should include nontraditional stakeholders. The firm’s head of research services might make a proposal about using research attorneys or law librarians. The firm’s lead on knowledge management might have insight into how leveraging existing tools could cut down on duplicative research. The firm’s pricing director might introduce ideas about alternative pricing for legal research that would better align incentives and apportion risk. Or some combination thereof. Or something else entirely. What began as a discussion of legal research becomes a dialogue on staffing, technology, and pricing.

Deductively. Start with the general sense that the labor-intensive, low-value-added work just takes too long. That is, the common feeling that, while the firm’s abstract legal insights are why the department hired them, the mechanism by which those insights are subsequently turned into concrete deliverable (e.g., contracts, motions) is more expensive than it should be. There are many things we all ‘know’ are wrong with legal service delivery. But that knowledge is often too abstract and general to be actionable.

In creating the Service Delivery Review, I had to come up with ways to objectively measure that which I already knew. For example, I knew my billing data was a mess because many timekeepers waited until the end of the month to reconstruct their timesheets. But it took measurement to determine who was waiting, how long, and what impact it had.

[Self-promotion alert] Similarly, I knew that lawyers and staff struggled mightily to take advantage of the labor-saving features available in common desktop software. But translating that abstract knowledge into concrete measurements of who struggled, how much, and on which applications was dependent on me creating and administering an actual test. The results, as you might expect, were not pretty. The results, however, were also not final. Test results identified who needed training on what (training I’ve now integrated directly into the assessment). And the results, like the map described above, served as the departure point for a structured dialogue.

I believe law departments should ask their law firms for microcertifications on the most common technology tools of our trade (i.e., Word, PDF, and Excel). This ask will engender some pushback. The most common attempt at evasion is the assertion that the kind of labor-intensive work where the software is most useful is delegated to non-billable staff. This is a perfectly reasonable statement that is a bit too broad and ignores many of the realities of modern legal practice. Yet, accepting that not everyone has to be proficient on every piece of software leads to the empirical, rather than theoretical, question of who is doing what work in which applications.

The law firm should have timekeeping and document management system data on exactly which personnel are spending how much time in which applications on the client’s work. Based on the evidence of who is doing what work, the discussion can turn to who should be doing what work and, based on the assessment scores, what training they need to complete it cost effectively. What began as a discussion about tech competence turns into a dialogue about staffing, delegation, and training.

Some concluding thoughts will follow in Part II.

* Appropriate Fee Arrangements (AFA) – which a number of people in the industry, including myself, are trying to turn away from the use of “alternative” in the abbreviation – are also an obvious place to start. Like all my articles, this article presumes that the billable hour is being used because the billable hour remains dominant. Continued dominance is not an argument in favor of the billable hour, just a fact about the market. I strongly encourage law departments to move to AFAs. I don’t make the case for AFAs above because others having been doing it so well for so long and focusing on AFAs often results in the discussion being hijacked by a debate that has been raging for more than 30 years. From a strategic-sourcing perspective, AFAs drive change on their own. AFAs are also excellent for rebalancing incentives and bringing clarity to structured dialogue.

This post was written by Casey Flaherty, founder of Procertas and former outside and inside counsel who first rose to prominence when he created the Service Delivery Review (“SDR”) to change the way he communicated with his outside counsel. Instead of generic complaints about inefficiency and arbitrary reductions in invoices, Flaherty sought to use metrics and benchmarking to foster structured dialogue, drive continuous improvement, and deepen the integration between his law department and his outside counsel. Follow Flaherty on Twitter at @DCaseyF.

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Alex Cook

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