Tag Archives: Big Law

Optimizing Procurement – The Process That Selects Suppliers and Deals, and Just Makes Sense…Cents, Too

Intelligent procurement is not just about saving the firm monies; it’s also about properly evaluating the ins-and-outs of deals, so you end up with savings, yes, but also better quality service and improved vendor relationships in the long run.  
 
This is especially important in Big Law, as these firms tend to engage in transactions across the globe.  Vendors benefit by having one go-to person.  As per Law.com’s Large Law Firm column from a few years back, which explained procurement beautifully, “Vendors can benefit…by having more centralized points of contact who are able to discuss…expanded strategic services that the vendor may be able to provide.”  
 
Procurement is not only in charge of vendor management and relationship development.  It works to help your firm, “as a whole, work more efficiently, to achieve your business objectives.”   
 
If you asked a few colleagues exactly what procurement is, chances are they’d be a little lost. “The role of procurement is often misunderstood,” explains the author, White & Case’s Karen Asner (pictured here), commercial litigator and the global Administrative Partner from 2004 to 2007.  “The procurement team is not a group of ‘spend cops’,” says Asner. Instead, she explains, they are concerned with achieving quality by “leveraging…spending to create strategic partnerships and pricing agreements with vendors that will deliver high-quality goods and services…” 
 
And it does this while seeking competitive pricing and maintaining a high-level of customer service.   By including the procurement team early on in the sourcing cycle—discussing requirements and needs—you’ll allow the team to adequately conduct RFP’s, perform necessary vendor and/or product due diligence, manage the negotiation process and arrive at all-around better prices on your behalf.  As an example of what can be accomplished with fully-utilized procurement, in 2007, White & Case achieved $12 million to $15 million in annual recurring savings, reports, Asner.  
 
What do you need to provide to your procurement team to get them to work most effectively?  Again, do this early on. Give them background information and a history of the project.  Are you interested in purchasing a commodity or a strategic service?  What’s the budget? Are you looking to buy at “the best” possible price, and how do you plan to sustain competitive pricing?   
 
And, as Asner explains, procurement’s job doesn’t end after a service/goods provider is selected. There’s still compliance to monitor.  “[They check]…correct invoicing and [ensure that] payment for…services delivered is in line with the terms outlined in the contract.”   And because procurement can help the firm trouble-shoot before the fact, they’ll “mitigate risk, [ensure that the firm] avoid[s] paying any unnecessary expenses and limit[s] duplication of services across groups or functional areas that otherwise might not communicate.”  
 
When you add up all the administrative tasks being performed across the board by the procurement team, it’s easy to see why they can, without a doubt, affect your firm’s bottom line.  For more, go to: http://www.law.com/jsp/llf/PubArticleLLF.jsp?id=1182243947655&rss=newswire

-EM

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Rethinking the Billable Hour – I of II – Flat Fees, Anyone?

This is the second in a two-part series on the billable hour  It should give you an idea of some of  the viewpoints which are being bandied about, as well as what other forms of billing are being utilized.  

Today we’ll cover a few alternative fee arrangements, and why they’re being considered.

Recently, The New York Times Business Section described how, despite a long-held affinity for the billable hour, newer forms of billing have–out of necessity–been creeping into the accounts receivables offices of Big Law.  It’s not that the wheel had to be re-invented; these “other” forms of fee arrangements have been around since the first deal was brokered. But the billable hour, first used by law firms in the 1960’s, is firmly entrenched.  Lawyers are still circling the wagons around the billable hour concept.  “Lawyers are having trouble defending the most basic yardstick of the legal profession…the billable hour,” reads the first line in the NYT piece.  

What is it that’s made push come to shove on the issue?  

“Clients have complained for years that the practice of billing for each hour worked can encourage law firms to prolong a client’s problem….”  Urderstandably, the current economic climate has made these same clients much more demanding. 

Evan R. Chesler, presiding partner at Cravath, Swaine & Moore in New York (where most senior partners bill around $800 per hour) has taken on the cause of trying to push the billable hour aside.  “This is the time to get rid of the billable hour,” he says.  “Clients are concerned…more so than perhaps a year or two ago.”   Mr. Chesler (pictured here) says that more clients are paying flat fees. 

There are few surveys on the subject, but partners at half-a-dozen other “big bellwether firms…say they are more often seeing different pay arrangements.”

The Times piece reflected on the possibility that the attorneys might be “talking a good game” while secretly awaiting the return of all things to their proper place (including the widespread reinstatement of the billable hour). After all, that is what has, up until now, set an exceptionally successful lawyer apart from the rest.  “[T]he best …the busiest and most costly” lawyers have always billed the most hours. 

“[L]awyers will talk about charging clients for 3,000 or more hours in a year—a figure that means that lawyers spend about 12 hours a day of every weekday drafting motions or contracts and reviewing other lawyer’s [work]…”. 

Another reason that alternative fee structures are being looked at is that firms, having almost reached the limit of how hard they can ask lawyers to work, need another way to keep the momentum going, explains Scott F. Turow, the acclaimed author (and partner at Sonnenschein Nath & Rosenthal in Chicago).  “Without alternative billing schemes, lawyers will not be able to maintain the rapid escalation in incomes…”  

Smaller firms and solo practitioners have long been amenable to flat fees, especially for mortgage closings.  Plaintiff lawyers have often billed on a contingency basis.  Some business litigation lawyers charge a monthly retainer and then credit that against the recovery.

According to ABA Now, “….counsel hates the billable hour. It hurts relationships.” Fixed fees, flat fees and success fees are other structures being considered across the board.  “So-called value billing, which can mean a flat rate for work for the year, frees lawyers and firms from recording billable hours.”  This doesn’t mean that lawyers engaged in such billing would lose track of what they were spending their time on.   Keeping tabs on actual work conducted would provide a record of overall efficiency—only not for purposes of charging the client.   

To read more go here: http://www.nytimes.com/2009/01/30/business/30hours.html?pagewanted=2&_r=1 and here: http://www.abanow.org/2011/02/is-the-billable-hour-past/

-EM

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Success in Law—Sometimes It Means Making Partner, Sometimes It Doesn’t

When a young lawyer joins a large law firm fresh out of law school, that’s when they find out if there’s a “fit”. He or she may have heard anecdotes of what Big Law is like but, until they partake of the day-in and day-out activities, they will have no idea if it’s for them. 

Once the young attorney rolls up his or her shirtsleeves and gets busy, that lawyer does stand a chance of being one of the relatively few associates that find ultimate success in law…becoming a partner.    

It’s a success metric that everyone seems to agree on, says a Law Pundit blog of a few months ago (December 08, 2010).  In Big Law, becoming a partner is the zenith.  Although some elements of such a success may be chance-related, there are elements that are predictable.   

“Anyone who becomes competent in a given field of law, who interacts successfully in the human world of law around him, and whose personal life is a source of stability is going to be pretty successful anywhere. And if one can bring in clients (be a rainmaker), the path to glory is a straight one.”  

However, not everyone will aim for that high point. “Many young lawyers work as associates…and then leave those law firms—before “making” or “not making” partner,” says Andis Kaulins, the author of the blog.  

Of course, there are other paths that lead to law success. One such path is in the world of academia, which is as different from Big Law as night is from day.  

Big Law is “nuts and bolts”…they don’t have the time to do as academic law does: discuss problems and issues–often quite apart from any “workable solutions”.  “In Big Law, the solutions MUST work and the realities of the economic and legal world set demanding timelines.” 

A senior partner once asked the author to turn a “brilliant” (but “useless”) 25-page memo into a concise two-pager that, point-blank, told the partner what the law said he could do, as he “HAD to do something.”  That, says the author, is Big Law. 


 

Of course, associates can also spin off into their own firm, or enter other legally-related branches. Some take positions in government, join social causes…or become part of a family business, and leave law altogether.  Then there are those who travel abroad, or join a law school faculty—both of which Kaulins eventually did. 

Although the author was, in his skills-set and temperament, well suited to Big Law, he focused not on making partner, but on deciding what he wanted to do with his life.  Along the way, he detoured into an academic post in Kiel, Germany. “Professors have time; lawyers seldom do.”

Back in the realm of law firms, the author mentions one outstanding characteristic of law partners that struck him during his stint with Big Law: they have “equanimity”, what he calls “a special type of coolness approaching delight under pressure…[c]ompetent people visibly enjoy what they do.”    

And yes, we are all, basically, affiliated with some sort of winning strategy, no matter where we end up.

“We are all ultimately partners in the human endeavor,” says Kaulins. 

To read more, go here: http://lawpundit.blogspot.com/2010/12/biglaw-big-lawyers-big-law-firms-and.html

 

 -EM  

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How In House Litigation Can Help Big Law

From the perspective of an attorney who’s been there, done that, overall efficiency and the “work/life balance” of both a large corporation’s legal department and Big Law can be influenced in quite a few ways by an in-house attorney.

Jason Mark Anderman (pictured here) recently posted in Corporate Counsel about his experiences in a Fortune 500 corporation, handling contracts.  His biggest concern was that the workload wouldn’t be as challenging as when he had been practicing law at a firm.  That wasn’t the case at all.  “I still received work in my…areas of expertise but also handled… commercial leases, construction deals, life sciences sales, manufacturing arrangements, capital equipment matters and supply agreements.”  

If just reading that list makes the reader wince, that’s what life was like as in-house counsel for a large medical technology corporation.  His skill set improved considerably, most notably his drafting quality.   But along the way, he found room for a few improvements within the structure of the company. 

Although he realized that compromise is crucial in all arenas, he came to see that well-placed changes might offer solutions which would increase efficiency. 

For instance, law departments, he said, tend to be “flat places”.  By that, he means that “it’s routine for a newly-hired lawyer to be doing the exact same work as an associate general counsel.”  He would prefer to see someone who’s familiar with the ins-and-outs of a company to provide a different role within the infrastructure.      

Anderman also likens the legal resources to one big pool of money…some going to outside counsel, some to in-house attorneys.  He supports the concept that monies and brain power can be better allocated by taking the in-house attorney’s workload, outsourcing it to a third-party legal provider, and having that provider product “higher-quality work in a timely manner for a lower price”. 

That, Anderman believes, would leave “transactional attorneys” [who are hired to write contracts that protect clients when things go wrong; see resource, below] to “develop the best knowledge management systems” they can.  Anderman would also have this in-house attorney deploying these systems with law firms and legal process outsourcing companies. They would do this using document assembly and workflow software.  

For more on Anderman’s efficiency-promoting ideas, go to: http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202486606028&Whats_Wrong_InHouse_Lawyers__Falling_Out_of_Love_With_Your_Career

And if you’d like to read a thought-provoking definition of a transactional attorney, go here: http://civpro.blogs.com/civil_procedure/2004/03/we_imagine_the_.html   http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202486606028&Whats_Wrong_InHouse_Lawyers__Falling_Out_of_Love_With_Your_Career

 

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Restructuring Big Law To Make It Viable

By now, everyone in the industry has heard of “The Death of Big Law”, by Larry E. Ribstein.  Ribstein is the MIldred Van Voorhis Jones Chair, Associate Dean for Research, University of Illinois College of Law.  The paper achieved renown not only because, at first blush, it appeared to sound the death knell for the large law firm as we know it, but because his protocol for wiping the slate clean and starting anew struck a chord with many.  Indeed, Ribstein’s outlook, although he claimed it was pessimistic, was more practical than dismal, more bent on reformation than on being rambunctious.   

“The real problem with Big Law is non-viability of its particular mode of delivering legal services,” Ribstein says in the article, which is available on the Social Science Research Network.  In previous papers, he had mentioned how law firms are set up in such a manner that its members are more heavily invested in furthering the reputation of the firm than of tending to its business books…that a firm should be run more like a profitable company.  (In essence, he believes that Big Law firms currently charge clients for the value of their firm’s reputation.)  The author also opines that professional ethics rules–limited liability, non-lawyer ownership and non-competition agreements—impede a firm’s growth.    

What exactly did Ribstein’s analysis predict and, importantly, how will a successful Big Law firm of the future look under the lens of Ribstein’s learned scrutiny? In a nutshell, he wants to wipe the slate clean and start all over.  

“The large law firm’s business model…requires fundamental restructuring,” he says.  Ribstein proposes new models which purport to replace Big Law; new models which might push through regulatory barriers.  

At one point, he theorizes that even these steps might not be enough.  One reason: other forums might vie with lawyers. “In the future,” he says, “the sale of legal expertise may move beyond client advice [solely] by law firms to include completely different types of businesses.”  

Ribstein (pictured here) explains that owning firm-specific property will be a big help in attracting financing.  This will be necessary as clients become more informed and as global competition in the legal services market intensifies.  (In other words, as times get even tougher.)  

In addition to owning intellectual and other property, firms will have to concentrate on selling products, rather than on providing personalized advice. An interesting point that Ribstein brings up has to do with the legal version of what in Corporate America is referred to as the “corporate veil”.  Here, Ribstein concludes that there is an “asymmetry” of information in a lawyer-client relationship and that the value of a large law firm is derived from somehow letting the client in on the mysterious ins-and-outs of law as the client understands it to pertain to his or her needs.   

“It is hard for clients to shop for the most skilled or trustworthy lawyers because, as non-experts, they may not be able to accurately judge” even long after the services are rendered. This results on a reliance on credence and stresses the importance of individual lawyers’ reputations (as well as the firm’s reputation).  “Law firms can help clients by monitoring and screening potentially untrustworthy clients,” the professor says.  Clients will pay extra for a large firm since they know that what Ribstein calls “a cheating firm” pays with its reputation, as well as with lowered fees.   

Although he sees a reason to inject a bit of business into firms’ apparatus, Ribstein is the first to admit that the hierarchal formula won’t work here, as non-experts simply can’t oversee professionals. Neither will high fees for routine matters. He cautions that consumers should never be forced to hire “only those with costly, broad-based…training” when the advice is completely predictable.   

 

With these and other challenges at stake, Ribstein concludes that addressing incentive issues like the need to encourage members to build the firm’s assets, versus just building their own clientele, is a great place to start the restructuring process.  For more on these fascinating and complex opinions, go to: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=47251                       

                                                                                                  -EM    

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