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Today’s large corporate legal and insurance claims departments are learning from their peers in purchasing and HR how to leverage technology. And they are training a new category of professionals to better manage the business of law. These legal operations professionals are under intense pressure to drive efficiencies and keep costs down while maintaining valuable relationships with outside firms.
Billing is one area that’s ripe for improvement. Many large corporate legal departments process millions of dollars in monthly legal expenses. Despite sharing robust billing guidelines with their law firms, some departments still have little influence and even less transparency when it comes to how their funds are spent — or the value of the services received. With dozens of outside firms to manage, billing discipline is often inconsistent across and even within law firms. Using in-house lawyers to review and manage the charges reflected in hundreds of monthly invoices and thousands of line items drains and misuses in-house resources and expertise.
In 2015, CEB (now Gartner) and ELM Solutions conducted an outside counsel performance assessment survey. In the survey, 37 percent of legal departments reported that they paid law firms more than they expected. Part of the problem is that many legal departments still rely on informal, undocumented expectations for lawyers regarding project scope and budget, as opposed to detailed and complete written guidelines. As a result, there is unnecessary haggling over bills rather than engaging in discussions that clarify expectations and strengthen relationships.
Additionally, when manually reviewing law firm invoices, it is difficult to extract subtle, but real, inappropriate billing practices, which are often intermittent and spread over hundreds or thousands of invoice line items.
Over time, this can create an unhealthy wedge between clients and their firms.
According to the ACC Chief Legal Officers 2017 Survey, 43 percent of respondents reported having at least one legal operations professional on their team. That’s up from 20 percent in 2015. Along with the rise of legal operations, technology is playing a role in aiding corporate clients’ focus on increasing efficiencies and value. Legal departments, for example, can leverage artificial intelligence and machine learning to rapidly identify questionable billing practices and even identify the timekeepers who engage in costly behaviors.
Lawyers looking to build on their relationships with corporate counsel need to understand that all clients have access to these tools — and more of them are developing the sophistication and retaining the resources to harvest this information. Now is the time to define and set expectations, especially when it comes to billing and compliance issues.
1. Never unexpectedly exceed budget. Discussing cost parameters and establishing a budget from the start of a matter or project will save unwanted surprises later. Often, firms have leeway in discretionary spending and can make decisions about the time they invest in a project for their clients. But, while you may want to deliver in-depth and completely thorough work, your client may just need a cursory review. Always understand the scope of the project and the client’s work-product expectations so that you never bill more than necessary for unanticipated and unneeded work.
Make sure you immediately contact your client should the project begin to look as if it may cost more than initially discussed. Before you go over budget, get your client’s approval.
2. Communicate, communicate and communicate. Any good business relationship begins by defining success. Legal operations professionals have access to ever greater amounts of data. You need to understand the metrics clients are using and, ultimately, how you compare with competing firms relative to those metrics. Relevant performance discussions are essential. While they may be tough discussions, in the end they can lead to more transparent and more rewarding partnerships.
Be proactive about setting up performance reviews with your clients. Otherwise, you may find that your clients have established closer relations with other firms — without letting you know why you are falling out of favor.
3. Are you adding value? Most important, take a hard look at the work you do for the corporations you support and ask, “How do I add value to this client?” Finding the answer to that question can transform your law firm into a favorite provider and, of course, lead to more billable work.
Bill Sowinski is director of decision support services at ELM Solutions (@WKELMSolutions). With more than 35 years of legal operations experience, He leads an expert team in the design of client legal spend analyses and benchmarking disciplines based on each organization’s specific needs. Bill earned his JD from Marquette University Law School.
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