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November 12, 2008

ACC’s Value Challenge (Part 1)

With nearly 25,000 members in 75 countries, the Association of Corporate Counsel (ACC) is the largest organization in the world for corporate inside counsel.

So when ACC says that “Many traditional law firm business models... are not aligned with what corporate clients want and need: value-driven, high-quality legal services that deliver solutions for a reasonable cost,” law firms would be wise to listen.   

The quote comes from the ACC Value Challenge, a new initiative with an ambitious goal “to reconnect value and costs for legal services.”

The effort began over the summer with regional meetings in Chicago, Houston, San Francisco and New York.  On September 25, there was an official launch meeting in Washington.  (A recording of that meeting can be viewed on the web.)

The “desired outputs/outcomes” of the ACC Value Challenge include, among other things “a national dialog... A client community that supports law firm efforts to implement change [and]... Tool kits for use by in-house and outside counsel that contain leading practices, [and] management tools.”

The effort is just getting started, but they have already posted many useful tools on the Value Challenge website, including a sample survey to assess legal risk, an explanation of “Seven levels to control litigation costs” and a 95 page summary of Wal-Mart’s “outside counsel guidelines.”

The question is: how soon will law firms embrace these practices and guidelines?  My guess is that for many firms, the answer is simple: when they have no other choice.

When the Washington Post reported on the Value Challenge, they described it as “an initiative aimed at spurring corporate lawyers and outside law firms to develop alternative pricing plans, including fixed rates, volume discounts and lower rates in exchange for performance bonuses.” 

That article quoted Susan Hackett, the general counsel of ACC:  “When we started looking at this project, we were thinking, ‘How do we make people realize now is the time’ [to stop charging by the hour?]... Then the economic crisis happened. There's going to be a heck of a lot of directives for folks at the firms to lower their costs.”

Moving away from hourly billing isn’t the only way to increase perceived value, but it is certainly one important way, and lowering hourly rates is another.  But if the key to success for this program is reducing cost, you’d have to think there won’t be a lot of firms volunteering to go first.  Unless they believe that it will give them a competitive advantage.  Which some firms clearly do.  As Pam Rothenberg, managing member of Womble Carlyle’s D.C. office, said in that same Washington Post article:  “I think the financial crisis will exacerbate everybody's pain point.  There will still be firms resistant to change.  But those that embrace change will likely gain more market share.”

I agree.  In fact, I believe that in the current economy, providing more value is the single most important thing any firm can do to bring in new business. 

But what sounds good in theory can be hard to work out in a real world of conflicting priorities and demands.  As ACC’s Susan Hackett put it in an email:  “In-house counsel are going to have to define exactly what they want law firms to do, and then drive that change.  This means three things: they will need to develop the skills to figure out how to value work in a manner that’s not dependent on simply adding up time... then they will need to manage all work to the new budgets... and finally, they will have to reward firms with more work when they deliver better value and leave firms that don’t change.”

It will be extremely interesting to see how this particular initiative plays out.  As soon as I hear of any results, I’ll let you know.

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