Articles Posted in Outside Counsel

The difference between a rebate and a discount surfaced in a previous post (See my post of April 23, 2006 on the economic point of the distinction.). What I didn’t write about then was the sheer administrative hassle of rebates. Here is a comment to that point from a British bank’s law department: “Barclays gave up asking for rebates, say at above a million pounds. It was too hard to calculate when the rebates kicked; how to get money back to the client; how to give rebates back to a bank customer. One firm was unwilling to give up rebates, because they had higher rates than the other firms and would reach the rebate points more quickly!”

The quote comes from Morrison, Rees W. (ed.), Lessons from Leaders (Law Department Administrators) (Hildebrandt Inst. 2005) at 99, and were the comments of Barclay’s quondam legal administrator, Bjarnie Anderson. Rebates from law firms create administrative nightmares.

In the future, an efficient method to locate counsel for some specialty might be an internet search. With the advanced capabilities now available on various search engines, and with the advent of law-focused portals (See my post of April 1, 2007 on general law portals.), a general counsel might by-pass such alternatives as directories (See my post of Jan. 25, 2008 on four Martindale-Hubble capabilities.), rating systems (See my post of Feb. 7, 2007 on several of these.), associations (See my posts of May 30, 2005; and Dec. 19, 2005 about associations and networks of law firms), and referrals (See my post of Aug. 5, 2007 as to international firms.). Not yet, however. The chaff overwhelms the wheat.

To prove the point, I tried “Des Moines environmental lawyer with more than 15 years experience.” I ran that search on Jan. 26th and had 214,000 hits on Yahoo!; 92,600 on MSN; and 35,900 on Google. We have a long way to go before internet searching helps us find lawyers at that level of specificity.

A downside of any competitive bid process is that several firms lose. They are all disappointed and crave some explanation or lesson to be learned – other than the evident fact they may conclude that the selection was wired (See my posts of Sept. 3, 2006 about sham competitions; Oct. 29, 2006 about the unfounded belief; and Feb. 15, 2006 about the incumbent advantage.) Let me offer seven actions that will slightly appease the spurned partners.

1. Treat them during the process just the same as every other firm is treated.

2. Assure them after they are cut that the process was objective.

A small item in Atlantic, Vol. 301 Jan./Feb. 2008, at 26, suggests a technique that both law departments and law firms should be aware of. When houses are priced in specific dollar amounts, rather than in prices that end with one or more zeros, buyers will pay more. To wit, a house on the market for $459,050 will sell for more than if it were listed at $450,000. People think that a round number is a manufactured number, but precise numbers are grounded and honest.

If this phenomenon holds for law firms, a proposal to handle legal services for $451,362 stands a better chance of being selected than a competitor’s proposal for $450,000. The calculating heart has reasons the mind cannot know.

CounseltoCounsel, Oct. 2007 at 12, describes four online tools from Martindale-Hubble that allow in-house lawyers to find out more about law firms they retain or might retain (See my post of Dec. 10, 2007 with its tips for selection of foreign counsel.).

Client reviews, on an objective third-party site, is one of the tools. A second one is the collection of peer review ratings. As the third tool described, a user can simultaneously compare up to four law firms or lawyers based upon various criteria. The final set of data, from LexisNexis atVantage, compiles information about litigation and M&A activities of firms. All this is available at www.martindale.com and all it of gives insights to inside counsel who want to retain an external law firm.

Since I published my recent article on core teams for matters handled by law firms (Download rees_morrison_core_teams_in_law_firms.pdf), I have come back repeatedly to the fundamental point: law departments should push their firms to limit the number of timekeepers who work on a matter (See my post of Dec. 8, 2006 about core teams in law firms.). A draconian method to enforce such a limit would be to discount heavily the billing rate of any non-core timekeepers who work on the matter, or even write off non-core time. I think, however, that such ham-fisted fiats would be wrong.

Other posts after my article have covered various aspects of the core-team technique (See my posts of May 23, 2007 on a blended rate for the team; June 27, 2007 about Pareto’s Law and team billings; July 19, 2007 on core teams and practice-group management; Dec. 17, 2007 on the effects on team size of rate freezes; Nov. 22, 2007 on data about the opposite of core teams; Aug. 4, 2007 on presentations by the team during the selection process; and Nov. 11, 2007 and Sept. 17, 2006 on the different role of a client-service team.).

Whether your legal department receives invoices from law firms in hard copy or “soft copy” (e-billing formats or PDFs), you are probably not extracting as much insight from them as you could. My recent article on how to analyze law firm bills covers a number of techniques that will deepen what you can glean from invoices.Download rees_morrison_analyzing_invoices_from_law_firms.pdf

The more e-billing systems there are in action (See my posts of July 27, 2007 on DataCert; and Nov. 4, 2007about their penetration into large law firms in the United States.), the more precise and meaningful these kinds of analytic efforts will become.

An item in Managing Ptr. Advocate, Vol. 14, Dec. 2007, at 7, lays out the results from managing partners from 70 law firms who selected the “most pressing issue facing your law firm today.”

Outstripping the other six choices was “Maintaining and enhancing profitability,” which got 57 percent of the choices. How else can a general counsel read that issue than one of making lots of money, on a profits per partner basis? If making lots of money is the winning the big pot, law departments are the suckers at the table.

Next come two related issues, “Recruiting and retaining young lawyers” (17%) and ”Succession plan” (10%). A cynic, or merely a realist, could read these two items as worries about the ability of the firm after the managing partner retires to return capital or make retirement payments. Again, bundles of money drive the issue.

We pay careful attention to what sellers – law firms – ought to do for buyers – law departments. An article in MIT Sloan Mgt. Rev., Vol. 49, Winter 2008 at 77, flips the normal view and discusses the obligations of buyers in a relationship. It introduces a two-way balanced scorecard, a technique a law department could adopt with its two or three principle law firms.

What basic obligations do law departments have to their law firms?

1. Clear communication of what needs to be done.

An article in MIT Sloan Mgt. Rev., Vol. 49, Winter 2008 at 19 defines a brand as a “customer centric” attribute, a perception by customers, say of a law firm, as to the qualities of that law firm (See my post of Nov. 28, 2007 on law-firm brands and references cited.). A reputation, by contrast, the article defines as “company centric.” I am not convinced of this distinction, since reputation connotes more of a self-image, but it may be useful for in-house counsel who select outside firms to distinguish between brand and reputation.

Moreover, it occurs to me that some law departments have reputations (See my post of Nov. 19, 2007 on the ten largest companies and references to them on this blog.). None of the law departments I know have a brand.