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It is great to see growing momentum in the area of data analytics to increase productivity and savings in Legal. Congrats to all the 2019 Association of Corporate Counsel Value Champions, and especially our great client team at Toyota! It’s a pleasure to work with such a high quality group – especially on a multi-year project like this. Seeing the sustained results year-over-year is very powerful. It’s a great example of how savvy clients and law firms are harnessing their data to empirically answer the question “how are we doing?” Look out for much more of this in the years ahead – not just on the cost side, but in analyzing and measuring quality of outcomes produced as well. Fascinating stuff . . . and very grateful to be part of team that won this award two years in a row.

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2019 ACC Value Champion Award

2018 ACC Value Champion Award

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REPUBLISHED FROM ASSOCIATION OF CORPORATE COUNSEL

Written by Fred Paulmann

Excellent Legal Operations Managers are using data in powerful ways to help their teams achieve savings (often 15-20%), increase cost predictability, and show how Legal is aligned with the rest of the business in terms of continuous improvement. Your team can achieve these benefits, too, if you lay out a sound approach according to the five key steps below. And now is the perfect time to focus on this. Whether it be matters trending over budget halfway through the year, or law firms fresh in mind from closing out last year with questionable efficiency practices – you have a great chance to show real improvement in areas that matter.

So what are the steps?

1) Understand context. You know your Department and its Legal Operations needs better than anyone. So the first key step is to determine, in context, what type of success here will make the greatest impact. Is the goal savings? Cost predictability? Improved processes to relieve administrative burdens? Better use of technology and data to increase productivity? Better score-carding of law firm performance to assign future work more effectively?

Ideally, the goals and benefits you select will address not just high-profile Law Department goals, but also broader company-wide initiatives as well. From there, think about the best audience and practice groups for your initial efforts. Who “gets it” and would be a willing partner for a pilot project? Or who has significant pain points with certain law firms or matters, and would benefit greatly? These are important real-world considerations that drive momentum.

 

2) Select the right data. Nothing tells a story as powerfully as your own invoice data. While portfolio-wide views of staffing and discounts can be interesting, far more often the greatest success comes from matter-specific and law firm-specific comparisons. Ask your colleagues who are closest to these matters: Which ones would enable good “apples to apples” comparisons? Characteristics include: overall matter type, complexity, law firms assigned, efficiency, cost structure, and outcomes.

Beyond historical data, you’ll want to look at the current year budget projections to see if similar phases and components of work are priced similarly. (This should be pretty straight forward if you have uniform, component-based budget templates to enable these comparisons. If you don’t, then implementing these would be another quick win going forward.)

3) Analyze skillfully. The goal here is to identify the right cost structure from the client’s perspective, based on value. Not hourly rates or discounts, per se, but rather, which law firms produce the right quality work at the optimal “all in” cost structure, factoring in staffing, efficiency, costs, etc? What should we expect to pay by phase or by key component, recognizing that more specialized work should cost more, and vice-versa? Dive in to answer the following questions:

a) How accurately do our law firms code entries within invoices? How do we adjust for this?

b) Generally, what is our cost per phase? What is our cost per key deliverable? Examples include: cost per summary judgment motion (in Litigation), cost per witness interview (in Compliance) and cost per license agreement (in Transactions).

c) How wide are the disparities in our cost per phase and cost per key deliverable? What drives those? How do we account for unforeseen, material changes going forward?

d) To what extent is there slack in the invoices? That is, inefficiencies that we would seek to trim because they don’t add value? Examples include: inefficient staffing, paying for administrative work, and untrimmed violations of billing guidelines.

e) What is the slack factor by law firm? Which law firms are producing quality work at a lower all-in cost? (Slack factor by firm is an extremely powerful metric.)

4) Present findings cogently. In your report, you are seeking to tell a persuasive story to solve a specific problem. It is important to pick the right level of detail. Too much information loses the audience, and too little might be dismissed as a “coincidence” or non-issue because “this is a unique matter.” You are looking for the patterns that will compel action. So leverage the power of the unexpected (“Look at how this firm with higher rates produces the work at a 15% lower all-in cost because it is more efficient,”) and the practical (“If we use this data to price out our Summary Judgment and Motion to Dismiss work, we can reduce fees by 17% while increasing cost predictability.”).

5) Follow-up and expand effectively. Share your findings and team successes with your various stakeholders. This includes the practice groups who own the matters in the pilot, Law Department Leadership, and related groups like Finance and/or Procurement who may also work with Legal and benefit from this work. There is also a data slice, often blinded or aggregated, to share back with the law firms involved to help them see where they stand and how they can improve. This is often a powerful incentive to improve going forward.

Following these five steps not only aligns the law department with the rest of your business in the ongoing quest for efficiency and cost-savings, but also demonstrates the power of careful evaluation of data and harnessing it as the engine of continuous improvement at all levels.

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A man rides an arrow upward over a hole, symbolizing the avoidance of a challengeBy Liam Brown (Elevate Services Inc.) and Fred Paulmann (CMG)

As the year draws to a close, we’re reminded of how nice some surprises are to receive and how unwelcome others can be.  For many of us who are working to close the books on 2015, some of the most difficult surprises come from law firms who, without enough notice or explanation, have gone significantly over budget on their matters.  This makes for difficult conversations internally, and often brings promises from outside counsel to improve in the future.  Sometimes that works, but often the pattern repeats again next year.  And the stakes, of course, are high — Legal Department credibility, performance reviews and bonuses are often on the line.  If any of this sounds familiar, here are five helpful lessons to avoid law firm budget pitfalls in 2016.

1) Improve your budgeting process. It’s not enough to simply ask the firms what they anticipate spending next year.  More and more, companies are focusing on more effective, data-informed approaches to scoping legal matters and building budgets based on the value of the work from the client’s perspective (as opposed to just the number of hours the law firm suggests).  Doing this correctly leads to greater cost predictability because it is based on actual historical experience, not just some law firm “guesstimate.”

2) Verify efficiency to ensure the price is right for the matter. Yes, rates are important.  But at the end of the day the data analytics increasingly show that outside counsel’s efficiency factor is the prime determinant driving cost.  This efficiency factor comes from: inherent attorney efficiency (experienced outside counsel simply doing the work to the right level of quality, faster); strategic work planning (avoiding unnecessary work); staffing (having fewer people involved where it makes sense to); seniority (assigning the right work to the right people, especially work to lower levels as warranted); and automation (using technology and processes more effectively to streamline work).  A data-informed approach to budgeting will highlight these things up front, and identify opportunities to save.

3) Master your data to track budget performance. Clients are increasingly analyzing their data and developing early warning systems to better identify why a matter is going off-track from a budgeting perspective before it’s too late.  (Often it’s because the initial budget was not a reliable, sufficiently detailed budget to begin with.)  These early warning systems can help identify issues earlier on and — more importantly — help get spending back on track to be within or close to the original parameters.  Clients are also evaluating law firm performance year-over-year to see which firms habitually go over budget, why, and whether they are actually improving – or just talking a good game. 

4) Enforce your billing guidelines. When you truly enforce your guidelines, you send a message about how closely you manage your matters and spending.  When you don’t, you also send a message.  In our experience, you are better off having fewer guidelines, but truly enforcing them, versus having more guidelines that exist on paper but not in practice.  Law firms take note of these things.

5) Integrate Project Managers. An increasing number of law departments and law firms are integrating legal project managers into the matter management process to facilitate  adequate planning, monitoring, communication and issue resolution between matter teams.  The consistent practice and execution of practical “just enough” project management on legal matters can yield significantly better accuracy on budgets and outcomes.

6) Scorecard law firm performance and give your firms feedback. There is truth to the old adage — you can only manage that which you measure.  Increasingly, clients are devising useful, balanced law firm scorecards to: track performance (quantitative and qualitative), share feedback at the end of the year, and agree on what they would like to see improved in the coming year.

Avoiding budget pitfalls starts with applying one or a few of the above methods in a consistent fashion, in collaboration with your trusted counsel, and refining them together to fit your style and needs.  If your organization is struggling with budget management, we hope that your teams decide to explore a few of these methods.  If you need assistance or guidance, please feel free to contact us.

Meanwhile, we hope you have many of the nice kinds of surprises waiting for you this holiday season, and in 2016.

***

Liam Brown can be reached at liam.brown@elevateservices.com

Fred Paulmann can be reached at fpaulmann@counselmgmtgroup.com

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change2A few weeks ago, I attended a big industry-wide conference called LegalTech. You’re probably familiar with the scene — lots of people, exhibit booths, and glossy handouts promising to solve all problems. The sameness of it all is what struck me. Though some were snazzier than others, the booths and handouts all blurred together after a while. But the real redundancy — the true Groundhog Day movie moment– was in recognizing that every year the pattern repeats. The masses gather, talking about the “new solutions” to the entrenched problems everyone has been grappling with for years. But few people stop to ask, what happened to the past “solutions” that were supposed to fix this? Or, even more to the point, why should we believe you this time? And that got me to thinking, of course, that the real issues so many of us face professionally are not really about technology, but more about change management. And that got me to thinking about Snoop Dogg and Ice Cube.

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nyWith January winding down, there’s still time for one last New Year’s Resolution in our industry. This one comes from a recent survey of in-house counsel, conducted weeks ago, co-sponsored by the Association of Corporate Counsel and The Counsel Management Group. It asked, among other things, “How confident are you in your outside counsels’ ability to help achieve your 2015 budget and financial goals on the matters they handle?”