hourly rates

RECAP: Nimble Legal Industry Pressures Forum

RECAP: Nimble Legal Industry Pressures Forum

On September 26th at TalentLaunch in suburban Clevelad, we gathered 9 legal industry thought leaders (in-house counsel, law firm partners, law firm CFOs, and Plante Moran’s law firm practice partner) to discuss the pressures law departments and law firms face and how they can work together better. In attendance were various General Counsels, in-house counsels, Managing Partners of law firms, law firm pricing analysts, and members of various alternative legal service providers and legal technology companies.

Here are the highlights:

Nimble Trends - 27 December 2017

Nimble Trends - 27 December 2017

From more work for employment lawyers, tax lawyers, and M&A lawyers to prior "in-house experience" possibly required to a bankrupt company owing major law firms close to $3.5 million in legal fees to tips on starting a virtual law firm to law departments thinking outside counsel fees are too high and wanting law firms to embrace technology these are the major legal industry trends we've been reading about this week.

8 Key Legal Industry Trends.  Change is Here.  Resistance is Futile.

If your law department or law firm is still delivering legal services the same way it was doing it 10 years ago, you’re behind.  Change is happening because purchasers of legal service are demanding it and innovative legal service delivery models have entered the marketplace. 

On October 25, 2017, we convened our 2017 Nimble Forum on Legal Industry Pressures, Operation Efficiency, and Pricing Strategies.  Our first panel had a thought-provoking discussion on Legal Industry Pressures and identified 8 Key Trends in the Legal Industry. The idea of this Nimble Forum was spawned by our 2017 Legal Market Outlook Survey.   You can get a complimentary copy of those results here.

Our great panelists for this topic were:

  • Teresan Gilbert-Chief Intellectual Property Counsel at Lubrizol
  • Nancy Berardinelli-Krantz-VP and Chief Counsel, Litigation at Eaton
  • Bill Garcia-Chief Practice Innovation Officer at Thompson Hine LLP
  • Rebecca Grunick-Senior Director at Black Letter Discovery

 

The 8 Key Trends identified in the discussion are:

1.     Law Department Budget Cuts.  Law Departments are expected to “Do More With Less.”  Law Department Budget is not coming back.  The law department is expected to act like every other department and create efficiencies and help provide some return on investment.  Sometimes this means creating self-help tools to enable non-lawyers to do some of the work that the law department used to do.  Other times it means finding ways to use technology to automate tasks.  Law departments and law firms are sitting on a lot of unmined data.  By gathering the data and interpreting it, law departments and law firms can make many more strategic and prioritization legal spend decisions, which transitions nicely to #2.

2.     Legal Operations.  Law departments and law firms are sitting on a mountain of data.  Lawyers need to adapt how they work and start to see some of what they do as a repeatable process.  Every litigation has similar steps, a similar process.  Each acquisition transaction is different in some way but, in general, the overall process is the same.  There are organizations like CLOC (the Corporate Legal Operations Consortium), that are pushing for standardization of legal processes.   

3.     Innovation.  From alternative legal service providers to legal technology to CLOC there is a ton of innovation going on in the legal industry.  Each is innovating legal service delivery.  The widespread adoption of these innovators has been slower than in other industries because lawyers are typically risk adverse.  Law firms that partner with alternative legal service providers are seen as innovative and progressive by purchasers of legal service. 

4.     Talent Development and Management.  It is not enough to be a “good lawyer.”  Within law departments, the lawyers also have to be legal operations specialists.  Business acumen is critical.  You have to be able to provide strategic data and metrics to your business partners.  Many senior lawyers are aiming to avoid change because they think they’ll be gone before they are forced to.  Many younger lawyers are hungry for change and innovation.  What does the role of a lawyer look like in 5 to 10 years?  Will law firms hire a non-lawyer sales force?  How are law departments and law firms developing their talent pools?  What is the succession planning for baby boomers?

5.     Diversity and Inclusion.  Purchasers of legal service are serious about their commitment to diversity and inclusion and are ceasing to do work with law firms that are not showing a similar commitment.  Eaton has a goal of one-third of their North American outside legal spend going to diverse firms. 

6.     Feedback and Continuous Improvement.  More and more law departments are conducting a formal annual review process of their legal service providers.  Law departments want their law firms to reciprocate with client satisfaction surveys and performance review meetings.  Law departments are looking for true business partners that add value, continuously get better, and provide business intelligence.  This is the type of relationship building they are looking for and not tickets to basketball games and concerts. 

7.     Convergence/Consolidation.  Tied to #7 and the annual review process is the consolidation of legal service providers.  This is an ongoing trend and the law departments represented on our panel talked about how they removed up to 10 law firms last year due to performance issues whether that be efficiency or what was viewed as a lack of commitment to diversity.  Consolidation of legal service providers allows the law department to wield more pricing power soliciting larger volume discounts. 

8.     Cost Certainty.  Purchasers of legal service are looking for cost certainty.  That is not going to change.  Law firms continue to struggle with budgets.  “I need a number not a range.”  Law firms are failing to proactively offer alternative fee arrangements.  Meanwhile, law departments are getting more sophisticated with their data.  They know what most types of matters should cost because they’ve mined that data.  Law departments are looking for cost certainty and creativity when it comes to pricing.  Proposing hourly rate structures in RFP responses is viewed negatively. 

If you thought this discussion was great, come to our next Nimble Forum on Hiring & Culture: Best Practices.  We have another great group of panelists.  Click Here for more information.

If you looking to improve your legal service provider selection process, take a look at the Nimble Guide to the Legal Service Provider Selection Process by clicking here.

 

4 Reasons Why Legal Project Management Works

Legal project management is the application of project management concepts to the control and management of legal cases or transactional matters.  These principles have been used by multiple other professional service providers for many years.  For decades, lawyers have loosely sketched out plans for matters but rarely put together detailed plans for end-to-end delivery of legal service on matters.  As corporate clients have adopted project management to most, if not all, of their internal projects they are increasingly demanding legal project management from their law departments and external legal service providers. 

Quite simply, legal project management is the formal and deliberate integration of planning, budgeting, and communication.  It results in transparency for both the client and the legal service provider from the outset of the legal matter.  Communication between and expectations of both parties is clear and written down in the Project Plan.

The typical Project Plan will be agreed to between the parties and will contain:

1. Summary of the Project

2. Goals of the Project

3. Scope of the Project

4. Out of Scope - As can often happen on legal matters out of scope tasks can be undertaken either because the client requests it or the legal service providers in their quest to provide a thorough analysis or work product think certain tasks should be undertaken. 

5. Key Assumptions - These are assumptions the parties made when putting together the plan.  Things could change in the future and those could impact the deliverables, the timeline, the staffing, or even the scope.  But this is a great example of how expectations are managed at the outset.

6.  Risks - what are possible obstacles to accomplishing the Project Goals?

7. Deliverables - what is the legal service provider going to deliver?

8. Timeline - what are the key dates for deliverables and communications/updates?

9. Participants - Resource Planning.  Who are all of the people necessary to accomplish the Project Goals?  How often are they needed?  Who will manage the project?  Who will do the work for each task?  Who will be consulted and who will be informed?

10. Costs - Here's where the planning and assumptions of the above help legal service providers arrive at the costs of the project.  It could be fixed fee.  It could be part fixed fee and part hourly rate.  It could be just hourly rates. 

Legal project management is a great tool to deliver efficient legal services and it will only continue to grow as more corporate clients demand it and more legal service providers understand and see the value it provides to their clients.

Legal project management can appear to be a daunting task at the outset of a legal matter but don't OVERTHINK it.  You can keep it simple as you try it out and improve upon your own process as you apply these concepts to additional matters. 

Here are the 4 reasons why legal project management works:

1. Improved communication, transparency and, ultimately, trust between the parties.  This all leads to improved client satisfaction.

2. Better expectation management - fewer surprises (hopefully, none!)

3. Cost certainty and cost containment for law departments.  The transparent process allows for significant improvement in budgeting for legal costs.

4. Profitable fixed cost legal services for law firms.  The more frequently legal project management is used by law firms the easier and easier it becomes for law firms to profitability price their legal services with precision.  Fewer write-offs, better staffing and knowledge management to perform the work repeatedly with less effort.

 

4 Reasons Why U.S. Legal Costs are Significantly Higher Than the Rest of the World

U.S. Companies spend 166% more on legal services per dollar of revenue than companies outside of the U.S., according to research by Acritas and as reported by Jennifer Williams-Alvarez of Corporate Counsel.  See http://www.corpcounsel.com/home/id=1202787039745/US-Companies-Are-Biggest-Spenders-on-Legal-Services-Globally?mcode=1202617073467&curindex=2

 

In addition, Acritas provided some key legal spend benchmarks:

  • Median legal spend at U.S. Companies is 0.40% of revenue.

  • Median legal spend at Companies in the rest of the world is 0.15% of revenue.

  • Median legal spend in the real estate industry is 0.89% of revenue.

  • Median legal spend in the banking industry is 0.60% of revenue.

  • Median legal spend in the tech industry is 0.45% of revenue.

Why is Legal Spend in the U.S. so much higher than the Rest of the World?  Here are 4 leading reasons why:

  1. In general, U.S. law firms charge higher hourly rates than law firms outside the U.S.

  2. The compensation for both in-house and external lawyers are generally higher in the U.S.

  3. There is more widespread use of the hourly rate in the U.S. than in the rest of the world.

  4. The U.S. is much more litigious market and there is greater regulatory oversight.

What can companies and law departments do to drive more value from their legal spend?

  • Because it can be difficult to find sufficient time to step back and look at this, more and more companies and law departments are using legal consultants to review and recommend new approaches, or creating legal operations roles, or both.

  • Work with your key legal service providers to develop cost certainty for higher repeatable legal work provided and move away from the billable hour for those types of services.

  • Use a legal consultant to review the management of your litigation portfolio.  Can it be bundled and offered to 1 law firm for more cost certain pricing?  Can there be bonus fees for law firms if certain types of litigation matters if a motion to dismiss or motion for summary judgment is awarded in your favor?  Can discovery costs be managed better?

  • Revise all of your form contracts with suppliers and customers to include mandatory mediation to try to resolve disputes.  In our experience, many contract related disputes can be resolved through mediation - saving both parties significant legal costs.  

Much more value can be derived from spending on preventative pro-active legal services.  Once you are reacting to a legal issue that arises, you are "chasing your tail" and will likely end up spending significantly more on legal services.

Interesting Data Points from 2017 Counsellink Trends Report

There are quite a few interesting nuggets of information contained in the recently released 2017 Counsellink Enterprise Legal Management Trends Report.   Here are the pieces of information that stood out to us:

  • The blended hourly rate for matters - by practice area is a quick and easy benchmarking tool for both law departments and law firms to gut check hourly rates.  This, however, is not useful in determining whether you are receiving or providing value.
  • The largest 50 firms have billable rates that are 40% higher than the next tier of firms.  You have to wonder what the realization rates are for those firms with that kind of gap.
  • Law firms with over 750 lawyers had median hourly rates of $625 per hour.  Law firms with 50 or less lawyers had median hourly rates of $250 per hour.  Cost structure plays a large role in the divide.
  • For law firms looking to enter new markets, 6 cities had over 3.5% of year over year growth: Seattle, Los Angeles, Phoenix, New York, Boston, and Washington, D.C.  And 5 states had over 6.5% year over year growth: Massachusetts, North Dakota, Utah, Washington, and Indiana.
  • The highest partner hourly rates were Mergers & Acquisitions at $634.
  • The lowest partner hourly rates were Insurance at $190.
  • Law firm consolidation by companies continues to increase via convergence programs.  62% of companies have 10 firms or fewer.  But does convergence lead to lasting results or do fees start to creep up after year 1 or do service levels suffer after year 1?

We continue to be skeptical of the value that convergence for convergence sake provides.  We'd love to hear from you about your experiences with convergence programs or consolidation of law firms.  Please email us at contact@nimbleconsultingservices.com