Creating an environment for change requires legal departments and law firms to make the business case for value-focused initiatives. In today’s current climate, that means working together across the so-called divide between corporate legal and outside counsel.
For example, rather than assuming the billing partner is communicating the client’s values to the law firm’s stakeholders, legal operations may be best positioned to have the value discussion directly with the outside counsel’s pricing director. The more understanding a pricing director has regarding a legal department’s long-term goals and strategies, the better the law firm will be able to provide a value-based pricing scheme. Of course, such direct communication also empowers the pricing director to help enforce the client’s policies.
Creating an environment for change goes beyond a one-time conversation between legal operations and the pricing director. It requires real-time communication and collaboration to monitor and adjust expectations based on actual progress. Sharing data and analytics on an ongoing basis is the best way to accomplish this.
In many situations, a client and outside counsel firm will agree to high-level matter budgets, but will fail to perform any meaningful analysis on such budgets. Legal departments will leverage eBilling guidelines to “reject” certain work before allocating and categorizing billed activity in various buckets.
However, due to a lack of a meaningful feedback loop between legal department and outside counsel, the law firm often lacks any insight into how the work is being allocated and, ultimately, whether or not the services fall within the client’s expectations. Alternatively, the law firm might hold invoices for 60-90 days before submitting to a client, at which point the legal department is left trying to allocate work into budgets without any actual understanding of what has been taking place. It amounts to guesswork on both sides.
The key, of course, is data. Neither law firm nor legal departments can implement a value-oriented scheme without data. Historically, law firms have been hesitant to share any data beyond financial invoices with their clients because billing partners need an opportunity to “scrub” invoices prior to submission. This practice is widespread within the legal industry and is a major obstacle preventing the gathering of meaningful data.
It is also damaging to both the law firm and the legal department. If the pricing director lacks real-time, actionable insights into billable activity, there is no way to ensure the firm is operating efficiently and profitably. Likewise, the legal department is blind to the true billing cycle and lacks an opportunity to perform analysis and provide feedback to the law firm.
This lack of insight and effective communication almost feels like watching legal departments and their outside counsel communicate through two cans and a string while the rest of the world uses an iPhone. Especially when there’s a better, more efficient and more modern way to bridge this divide.
One route legal departments and law firms can take to address this chasm is to implement technology that helps them communicate with each other more effectively. The proper technology can break down the barriers that prevent collaboration between legal departments and law firms.
With the right solution, corporate legal departments can understand billable activity as it happens, law firms can understand how clients allocate such billable activity, and both sides Corporate legal departments can understand billable activity as it happens, the law firms can understand how the client allocates such billable activity, and both sides can continually work toward joint solutions that prevent problems from occurring ahead of time.
The truth is, law firms need their corporate clients to drive change. By demanding meaningful insight — contemporaneously — a client also provides the law firm the needed impetus to implement procedures for better data tracking. Pricing directors can then merge client expectations with actual data to ensure attorneys are delivering value. In previous years, this could be seen as collusion; today, it should be viewed merely as collaboration with a strong partner.
Value can be an amorphous concept, but it always involves a shared vision. In order to work towards the same goal, legal departments and law firms should collaborate on a set of metrics that can be measured and tracked jointly. They should be willing and open to real-time communication to drive better value for both parties.
For more information on fostering better relationships with outside counsel, download our eBook, “Common Ground: A Guide to Better Relationships Between Corporate Legal and Outside Counsel”