By Firoz Dattu & Dan Currell, AdvanceLaw
This article originally appeared in The American Lawyer. Reprinted with permission.
Isn’t it great when a law firm hustles for a new client? The client is happy, the firm’s lawyers are excited. We’ve all experienced it – a rush of energy at the start of a new relationship.
But honeymoons don’t last forever. Eventually the hustle becomes a shuffle, the excitement of a new relationship goes away, and in many cases firm and client are on a path to an unhappy end. When it does end, the law firm often doesn’t see it coming.
But is that fade inevitable? Whether we’re talking lawyers or married couples, some relationships manage to stay strong over the long run. What’s the secret?
The GC Thought Leaders Experiment tackles that question. Starting in early 2017, general counsel from over 25 major companies began working with AdvanceLaw staff to measure, across several thousand legal matters, which in-house and law firm practices yield better outcomes and relationships. It’s a real-time experiment to test industry assumptions and hypotheses.
Participating are general counsel from Panasonic, Mastercard, Molson Coors, Nike, Pernod Ricard, Avaya, Keurig Green Mountain, Becton Dickinson, PayPal, Peabody Energy, TriMas, Flex, DXC, Rockwell Automation, Levi Strauss & Co., Petco, SPX Corporation, PulteGroup, Upwork, Sony Electronics, and several others. The complete list is found here.
Overall, this is a grassroots movement of GCs interested in re-shaping the legal market to make it work better for all – law firms and clients alike. “There are different management approaches – but how do we know if they’re real or a fad? We’re keen to test things like law firm convergence, flat fees, value billing, competitive tenders, firm size and reach, and legal project management,” said Jonathan Pearl, Sony Electronics’ General Counsel. “We want to know what works and why.”
Damien Atkins, General Counsel of Panasonic North America, puts it this way: “There is a lot of guesswork by clients and firms as to what drives better outcomes, and we’re all shooting from the hip. Across the companies involved in this experiment, we’ll have a vast amount of data that can answer these questions. If we get this right, we’ll help reinvent an industry in need of reform.”
While AdvanceLaw staff will collect and analyze real-time performance data across this 18-month experiment (testing which in-house and law firm behaviors produce the best results), the general counsel will, themselves, share and discuss the insights through a forthcoming series of articles.
One of the first questions to be answered is whether law firm performance indeed drops off after an early honeymoon period. Related inquiries will examine which client practices can prevent this, and what firms can do to keep clients engaged and happy over the long run. Josh Sherbin, General Counsel of TriMas Corporation remarks, “I’ve noticed a honeymoon period, and that’s why I think it’s important to evaluate firms at least annually. But this is anecdotal – I’d like to see how significant the issue is, and most importantly, the best ways to fix it.”
The early analysis, based on several hundred law firm-client relationships, suggests a U-shaped curve of performance – a client’s firms start out strong, deliver worse performance after the honeymoon period, and then recover over the course of subsequent years. A more complete analysis of this finding, with a discussion of implications, will be written about by one of the participating GCs next month.
Another common question is whether to use flat fees. Some general counsel fear that while flat fees manage costs better, they may attract the firm’s “B Team.” But preliminary analysis of data from the Thought Leaders Experiment shows no loss in quality. This comports with the experience of Rebecca House, General Counsel of Rockwell Automation: “I’ve found firms on fixed fee relationships are more successful and responsive, especially when we can send a large bucket of work under the flat fee. The possibility of losing a big chunk of work creates accountability.”
This finding also meshes with performance data AdvanceLaw has collected over the past several years while helping 180 in-house legal teams evaluate and select counsel: law firm partners with the highest scores on quality, responsiveness, and expertise often earn the best scores on efficiency.
Other questions to be addressed in the Thought Leaders Experiment are: Do law firms perform better when they know they’re being evaluated? What impact does consolidating legal spend in fewer firms have on outcomes and satisfaction with outside counsel? Do firms that invest more in legal project management produce better efficiency and results? Do relationship partners who are part of firm management drive better client outcomes? How do the most pedigreed global firms perform, relative to others? Do competitive bids negatively impact quality? Do more expensive partners tend to receive higher performance scores than lower-priced peers? Through a large data set, this project will provide answers to these and other questions.
These are important questions to ask: large clients spend substantial time, money, and energy working with their law firms. And firms are investing in service innovation without adequate information or assurance around what clients will pay for. Without knowing which management practices are effective, law firm leaders and general counsel are driving in opposing lanes without headlights. Managing partners often note to us that large clients will espouse a service innovation or interesting fee arrangement, but talk themselves out of it at the last moment, because clients don’t know if the innovation will help or hurt.
“I think we all agree that the legal market, as it works now, creates a bit of frustration,” notes AdvanceLaw’s general manager, Michael Williams. “The GCs undertaking this experiment would like to improve the situation for clients and law firms through careful analysis, and by kick starting an industry-wide conversation.”
The general counsel will take turns writing about the most salient findings, with the first article to be released next month. Further information about the GC Thought Leaders Experiment can be found here. Related, 25 of these general counsel have just penned this Open Letter to the legal community.