Process. Very simply, general counsel are being held accountable by their management, and their management is being held accountable by shareholders. In this type of environment, it is professional suicide to award business to people simply because they take you to Giants games.
In the 2007 LMA panel, Norm Rubenstein talked about the pressures inside counsel are feeling for both accountability and transparency. Among other things, he recommended that law firms help inside counsel “measure and communicate the value that the inhouse legal department provides the rest of the company.”
“[Another] thing that’s different these days,” according to Iris Jones, Chief Business Development and Marketing Officer at Chadbourne & Parke, “is that clients demand to be much more involved in decision making. There was a time when clients expected lawyers to handle matters for them, and were not as involved in the details. The client’s role was simply to pay the bills. Now clients are looking for efficiency, cost savings, and value added.”
Price. Sooner or later, this discussion must turn to price, since that is so often at the heart of the matter. In a recent survey of large law firms and their clients, Inside Counsel magazine reported that “Most of the friction between law firms and their in-house clients can be traced back to costs.” Just 7% of lawyers think law firms make too much money, but 43% of clients do. 74% of lawyers say that law firms are actively seeking out ways to reduce legal costs. They’re not doing very well, because only 11% of their clients agree. Worst of all, 42% of clients (and 6% of lawyers) agree with the statement “most law firms pad their bills.”
In its 2008 Client Advisory, Hildebrandt notes that clients are increasingly pushing back on firm rates and billing practices, as seen in “the widespread use of RFPs for legal services, the growing client perception that some types of legal work previously thought to be highly complex (like project finance) have now become routine and should be priced accordingly, the involvement of corporate procurement departments in outside counsel selection, client insistence on multiple year rates or other kinds of rate freezes or discounts, and the ongoing patterns of ‘convergence.’ (page 6).”
What should law firms do to control costs and meet client needs? One thing is to manage budgets to assure that there are no surprises. In the 2007 LMA panel, Mary K. Young noted that in-house counsel are increasingly expecting:
• “Projects to be assigned in segments
• Bills that match the projected segments
• Early consultation when circumstances warrant a change from a forecast.”
Then there are the matters of rates, and of hourly billing, which could easily lead to an article many times longer than this one. In this context, we will limit the discussion to one quote from the DuPont legal model web page: “DuPont is interested in results, not effort. Our long-range goal is to move away from hourly billing where feasible. We believe hourly billing is a disincentive to efficient service, and we welcome opportunities to structure fee agreements that provide for incentives and that reward results rather than time devoted to a matter.”
To date, there’s been a lot more talk than action along these lines. However, the Hildebrandt 2008 Client Advisory (p. 17) does note that “project pricing...has become a growing trend in Europe and Asia even for complex transactional matters such as M&A work.” The billable hour isn’t going away any time soon, but any firm that can offer alternatives is likely to benefit in the long run.
Next week, this series concludes with a discussion of value, and the future of the legal profession.
This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development." To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.
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