A Strategic Approach to Purchasing Legal Services, Pt. II
The strategic-sourcing approach to legal service delivery is meant to be systematic, continuous, and collaborative.
Whether you start with one of the illustrative examples in Part I or not, start somewhere. But recognize that there is no finish line. Having a single conversation is not enough. Rather, the objective is to systematize regular periods of focused analysis and improvement (similar to a kaizen event) followed by monitoring (of the embedded metrics) and adjustment. As one aspect of legal service delivery is improved, the team can shift focus to other areas (e.g., document automation, billing hygiene) thereby weaving continuous improvement into the fabric of the relationship.
Like the relationship itself, structured dialogue is not intended to be adversarial. The collaborative solutions should be mutually beneficial. The two sides are not locked into a zero-sum game. There are many ways to lower client costs and improve quality while also increasing firm profitability. The fact that the two sides are discussing a problem may make the conversation uncomfortable. But we’re adults and professionals. Solving the problem is preferable to letting it fester. And the client is often part of the problem and essential to the solution (e.g., from Part I, authorizing the use of research specialists).
The fact that strategic sourcing is concerned with both cost and quality also is counter to the most common source of reflexive resistance. This is not why the firm was hired. The firm was hired for their substantive expertise, treating them like strategic suppliers digs into their delivery process. True enough. Legal acumen is the threshold question. If the firm falters in their area of substantive expertise, it is time for the department to consider getting a new firm. If the firm is maintaining substantive excellence, then attention should be paid to improving service delivery. As I opened this series, “My central contention is that with people and price in place, process offers the most levers to drive continuous improvement.”
The primary source of resistance is more passive. Most everyone agrees that legal service delivery should be improved in the same way that most people are proponents of eating healthier and getting more exercise. But what may be obvious at the theoretical level is neither simple nor easy at the practical level. It takes real work. Everyone is already busy. The attitude that I have more urgent/important things to do pervades both law departments and law firms. The law department is passively waiting for the firm to improve. The law firm is passively waiting for the department to make them.
A good example of the same dynamic can be found in cybersecurity. Everyone agreed for years that it was important for law firms to keep client files secure. Indeed, it was the law firms telling their clients they needed to perform third-party audits. But securing client files was neither the firm’s nor the department’s primary concern – both were focused on the substantive legal work. When clients finally started auditing the law firms, the results were not pretty. While still troubling, the results are getting better. Client attention has caused a seismic shift in firm attention.
As with cybersecurity, I think both sides are duty bound to pursue process improvement. But I put slightly more responsibility on the law departments. Not because they are more culpable but because they are more powerful. Legal is a buyer’s market. And, ultimately, clients determine whether a firm will realize a return on its investment in process improvement. Law firms are still businesses. It is hard to justify a capital investment with no indication that it will result in higher revenue or improved margins. Strong strategic partnerships provide clarity and help identify priorities.
The law department, too, needs to consider ROI. The kind of investment in time and attention I am advocating should be reserved for firms with whom there is a fair volume of repeat spend. And while supporting the right business outcomes remain the primary purpose of the law department, sophisticated departments should be able to pursue multiple objectives simultaneously. At a certain level of maturity and spend, resources expended on process improvement should show a healthy ROI. Doing more with less means doing things differently.
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 @.