After lunch on the first day of the P3 Conference, we had the opportunity to listen to a client discussion – which, if you read Zen regularly, you know is a favorite of mine! Moderator Vince Cordo (@vcordo), the Global Director of Client Value at Reed Smith led a panel that included Nick Bagiatis, the COO of Reed Smith, Lesley Garafola (@plgarafola) of Duke Energy, Gonzalo Frias of Duke Energy, and Kimberly Levinson of PNC.
The delegate packet told us:
Tracking and reporting on the value and the cost of legal services had become top priority. Value promotes the adoption of management practices that allow all participants to achieve their key objectives. This session is a discussion on how clients are working with firms to track spend by a law department with a focus [on] measuring value. Until you can get that data, you[r] best option is to keep pushing for lower costs. Comprehensive performance management programs are being introduced by corporations in ever economic sector. Most include key performance indicators (KPIs). These indicators and the programs they support are comprehensive because they are much more far-ranging than budget and other financial indicators. Clients want programs which reduce waste and which encourage all resources to be dedicated to the top priorities set by executive leadership. It reflects the transition of the legal function from a classic position of support to one which is likelier to add value."
As the session kicked off, the panelists were talking about things like "partnering" with outside counsel and "reducing spend" – phrases we’ve often heard from clients.
Ms. Garafola told us that Duke Energy had recently hired Mr. Friazs, who brought the unique experience of having been an outside litigator first before becoming in-house counsel. She noted that for Duke, their GC is really a counselor for the CEO and Board. Their legal department doesn’t want to dictate to their lawyers as to which firms they can use, but they do want to help educate them to make the choice.
It was here she made a VERY important point:
Duke Energy considers their outside counsel as being another arm of their business.
We view outside counsel as an extension of ourselves." Lesley Garafola
If law firms can embrace that, they’ll be streaks ahead of their competitors.
In terms of pricing teams, it’s important to get buy-in from senior partners and management early on. Both the energy and banking industries are looking to achieve a savings in legal spend (I’d be so bold as to assume that’s true for *most* industries these days).
The panelists also highlighted ebilling as something that’s important to them, along with understanding their business and document management.
Changes in the legal industry haven’t been easy for in-house counsel either though – Ms. Garafola said that she faced skepticism as well, so it was helpful for her to listen to them and their needs. It’s important for their to be an operations team behind the practicing lawyers in-house at Duke Energy for them to be successful. Ms. Garafola added that Mr. Frias has an "incredible litigation background, but he also ‘gets’ the business." That’s another point we often hear – not only should outside counsel be great at what they do, they also need to understand what their clients do (and not just pay lip service to it, but actually understand it).
Ms. Levinson said that the legal team at PNC used to be excepted from the business processes of the overall company, but that’s no longer the case – it’s a change for them. Because of the focus on business, there’s a need to turn legalese into plain English, so that firms can find out what the clients’ goals are, and what are their desired outcomes.
Mr. Cordo agreed and made another important point from this session:
Rather than using terms YOU’RE comfortable with, use the terms that matter to the people you’re talking to.
Ms. Levinson mentioned that at PNC Legal, the attorneys aren’t allowed to negotiate AFAs anymore – they have to go through her, so that she can run some metrics first.
So, what are some of the things that inside counsel want?
- "Relationships matter" – Nick Bagiatis
- Collaboration and flexibility with outside firms
- To cut costs
- Increased service quality, both internally to their clients and in terms of service from firms
- Risk alignment – if a law firm is a true partner, they should be sharing some risk as well
- Increased efficiency
- Plans that can help them to make data-driven (and not gut-level) decisions
Here’s another essential point:
Clients want their outside attorneys to understand how to make the business case, using data, and not to just go by what they believe is right.
One of the panelists offered an example. She said that a firm told them they would give them a 20% discount on a matter. The metrics showed, however, that because the firm had recently raised their rates, the savings amounted to only $7.
Ms. Levinson noted that in the past, no one used to check that these "deals" were the best arrangements for both sides. But now they do. And that means honest and relationship-building are more important than ever.
When measuring the results of a deal, clients want firms to audit how they client did out of that deal. Because if something matters to your clients, it should matter to your law firm.
Since that’s another excellent point, I’ll say it again:
If something matters to your clients, it should matter to your law firm.
Mr. Cordo said that obviously, you can quantify costs, but it’s more difficult to quantify quality and value. And cost savings can come in different ways – not only in bills, but also in the results that lawyers get for their clients. From the law firm perspective, we need to get better at measuring what’s important to our clients (and those things aren’t always easy to measure).
It means that follow up with clients after each engagement is critical. Clients are using programs like TyMetrics to pick outside firms to add value – in terms of savings, results, and quality. Mr. Bagiatis commented that Reed Smith has done a training course (which was mandated) that brings in KPI from clients, and is tied to compensation.
He added that it shouldn’t be an "us versus them" between lawyers an other professionals (Hallelujah!). Instead, help them understand the choices. Internal business clients look to legal departments to manage risk, and to be the voice for their legal work.
Ms. Garafola observed that you can’t have everyone connected until at some point it’s tied back to performance. Even if doing good work is subjective, if they can get quantitative feedback from the lawyers, that is helpful. Getting that information helps the clients to create a "scorecard" for their attorneys. Although there are ways that someone might game the system in one instance, metrics will ultimately show if one of the client attorneys are playing favorites, or if the outside counsel is really good.
There has to be subjectivity on the part of in-house lawyers in identifying outside counsel. But metrics help to support that.
One of the panelists asked for a show of hands of how many of us in the room were familiar with Viewabill – there were not many. It provides real-time billing on a matter, and the benefits of this include accuracy, and reduced lag between work and billing. The cost of Viewabill is to a law firm, and it gives the client access to a firm’s time system, as opposed to their billing system.
Ms. Levinson said that they require it from their outside counsel, noting that they’ve had varying degrees of cooperation. But if a firm doesn’t cooperate, they fire them. It might sound harsh, but it’s actually answering the question of whether a firm wants to partner with them, or just do business with them.
And that’s yet another important point:
Do you want to partner with your clients, or just do business with them?
Viewabill provides the transparency that Ms. Levinson is looking for.
We were nearing the end of our session, so the panelists shared some final thoughts with us:
- Lesley Garafola: Making something successful has to come from the top down.
- Gonzalo Frias: Incorporate flexibility into your plan so that you can be nimble and adjust accordingly.
- Vince Cordo: It’s the job of legal marketers to get our clients together to discuss LPM and learn from each other.
- Nick Bagiatis: The knowledge management behind the investments that firms make touches all of the KPIs that we talk about.
And a final note – clients are reluctant to point out to outside counsel where correction is needed (they’re much more likely to just walk away). So more regular communication and evaluations are necessary.
So to recap, let’s just cover all of those essential points one more time!
- Clients consider outside counsel to be another arm of their business.
- Rather than using terms YOU’RE comfortable with, use the terms that matter to the people you’re talking to.
- Clients want their outside attorneys to understand how to make the business case, using data, and not to just go by what they believe is right.
- If something matters to your clients, it should matter to your law firm.
- Clients want firms to partner with them, not just do business with them.
We’ll be back next week with more recaps from the P3 conference, so stay tuned!