Changing Client Outlook & Purchasing Behaviors – Law Firm Leaders Forum
Clients continue to change their expectations for law firms, including how and from whom they purchase legal services. Beyond the latest use of panels and convergence programs, clients are making statements to the marketplace by moving work to firms that best respond to their requirements and guidelines. Jami Wintz McKeon, Firm Chair, Morgan, Lewis & Bockius LLP, moderated a panel at the Thomson Reuters Law Firm Leaders Forum discussing current client outlooks and purchasing behaviors.
McKeon opened by asking Marcy Hingst, Assistant General Counsel, Bank of America, as a purchaser of legal services, what are the changes she has seen and that continue to happen. Hingst commented that significant changes have occurred over the last few years, especially in litigation. She said their legal department has great collaboration with outside counsel and together, they are pushing joint or shared approaches to legal services that deliver a value proposition that meets the needs of both the firms and the corporation.
David Cambria, Global Director of Operations, Archer Daniels Midland Company, said that their purchasing behavior is a reflection of what is happening internally. It is often about how the law department wants to deliver their services to the business partners. He stated they look at how they strive to find the right balance of internal resources and outside counsel to deliver to the best results to their clients within the business.
Related to purchasing behaviors, the panel noted that it is important for alternative fee arrangements to be established in a way that benefit both firms and corporations. Patrick J. Lamb, Founding Partner, Valorem Law Group LLP, stated that some clients are more open to alternative fees while others are more reluctant to change and continue to rely on the hourly model.
One frustration regarding AFAs, Cambria noted, it is that it is challenging when his department has agreed to a cost for a matter and the firm comes back and says that while they had agreed to the number but then actually expended more effort than anticipated. Cambria’s position is that the effort involved is not necessarily directly correlated to the value that the parties agreed to. In addition, in instances where the corporation may have paid more for a matter that not require as much effort as anticipated, he did not necessarily go back to the firm to revisit.
William Henderson, Professor of Law and Val Nolan Faculty Fellow; Indiana University Maurer School of Law, added that the panel’s conversation, and what is being said throughout the industry, clearly shows that the legal dollar needs to be stretched to create more value. He added that we are in the very early stages of a new era in the buying and providing legal services.
And Cambria quickly added that the solutions are coming from many directions: in-house, law firms and vendors that provide services to the industry. As these solutions are being employed and use of AFAs increase, Lamb noted that fees are simply one of a number of tools that need to be deployed together to benefit both the firm and client.
Cambria noted that some corporations are, in essence, “firing” their outside counsel but not telling them they’ve been fired, instead simply not assigning work to them. He said that he evaluates the team from a firm’s stable and how well his in-house team collaborates with them, trusts the firm, and the total client service they typically receive from the firm – a formula that he shorthands as: “how many calories am I going to expend working with you?”