Legal Operations: How to Develop a Win/Win Relationship Between In-house Counsel and Law Firms
Originally published by Thomson Reuters
One of the most significant developments going on today in the legal industry is how the rise of legal operations has pushed in-house law departments to work more closely with the legal ops professionals at law firms to get better value from their legal services providers.
During the past six months, I have led panel discussions on legal ops at the Legal Marketing Association Eastern Canada conference and The Ark Group.
Corporate legal departments with legal ops professionals whose jobs include process improvement, procurement, and pricing are now interacting with law firms that are staffing their own version of legal ops — legal process managers (LPMs) and pricing specialists. Legal ops professionals are being hired to create better value for their companies and clients. The increase in discussion of this topic, both in the legal media and at conference panels demonstrates that this is not just a passing fad but rather, that legal ops is becoming woven into the fabric of client service.
But with legal ops professionals at in-house departments and law firms each focusing on improving and demonstrating their own value, how can this new relationship build trust?
Recently, I had discussions with more than 150 legal procurement professionals about what they want, need, and expect when hiring outside counsel. And while there is still a disconnect, it is getting better. The good news is that it seems as though a win/win relationship is a top priority for both sides.
But with legal ops professionals at in-house departments and law firms each focusing on improving and demonstrating their own value, how can this new relationship build trust? To get to this answer, I sought perspectives from in-house legal ops and law firm pricing and LPM managers, allowing them to shed some light on how they are working together to create value and stronger relationships based on trust and a deeper understanding of the business of law.
Pricing and AFAs
First, I asked panelists what in-house legal departments are looking for in alternative fee agreements (AFAs) and pricing from law firms, and how some law firms are rising to the challenge.
Richard Brzakala, director of Global External Legal Services at CIBC, says “most sophisticated in-house legal departments are looking to their law firms to present pricing proposals that are realistic and supported by a law firm’s historical experience” adding that “they don’t want data that is based on ‘gut’ feelings.”
“Firms have to understand that buyers of legal services are empowered with a plethora of billing data that they leverage when purchasing legal services,” Brzakala explained. “Any proposals that look unrealistic or unaffordable to the client run the risk of being declined.” “Further, clients are increasingly asking themselves if they have received value for what has been delivered and are ultimately looking for transparent value at transparent prices — not just lower rates or discounts that may not sustainable over a long term,” he added.
Dwight Floyd, director of Pricing & Value at Eversheds Sutherland, clarified his role, stating that his job is not just about the numbers and setting rates. “It’s about working toward a value-based solution together — whether communicating with the GC’s office, legal ops, procurement, or my internal clients,” Floyd said. “Identifying, creating, and delivering value is what drives price, not how many hours it might take or what kind of discount might apply.”
Indeed, as legal ops grows in sophistication, it is important for law firms to show their clients the math that went into calculating their fee proposal. For example, some law firms are providing fee quotes with detailed scope.
Legal Project Management
In-house legal departments have certain expectations from their counterparts in a law firm’s legal project management department. In-house departments need to hear how law firms plan to add value to an engagement, how they will staff matters, and how they will determine who will work a matter. Increasingly, in-house departments also will want to see a law firm’s pricing specialist, project manager, and lead relationship partner in the meetings with them. These client-facing trends are considered a positive step by corporate legal ops in building stronger relationships.
“Firms have to understand that buyers of legal services are empowered with a plethora of billing data that they leverage when purchasing legal services.”
On the law firm side, their LPM professionals can keep the focus on costs and client expectations. For example, LPMs can see immediately if the scope of the project was correctly understood by the law firm when it was priced, avoiding uncomfortable discussions with the client about fees later.
LPMs also use historical data to their advantage when scoping projects to assign the appropriate number of lawyers and staffing levels to a matter. They track the matter through to completion, and along the way educate partners on the scope of the engagement, explain the math behind the pricing, and identify where efficiencies are integrated to make the entire process more client-centric.
“Legal project management, particularly with respect to complex matters, has become an expectation for our clients,” said panelist Christy Bentz, Chief Practice Services Officer at Norton Rose Fulbright. “It is one of the most effective ways to communicate with them, throughout a matter’s lifecycle, to ensure we understand their needs and to help them succeed.”
Bentz explains that clients want predictability, transparency and the confidence that their law firms deliver. “They already expect the very best legal advice and service, and it has been our experience that legal project management is a critical component of building immediate and lasting trust,” she observed.
Overall, the field of legal ops is growing not just in size, but in importance for the practice of law. The field has opened up whole new career paths for new entrants into to the marketplace, and has sparked both in-house legal departments and law firms to utilize these professionals to improve efficiency, effectiveness and to drive and demonstrate value to their clients.