BLOGS: Custom Client Service Solutions

Friday, May 29, 2009, 8:44 AM

Alternative Pricing of Legal Services - another benefit of companies moving to Mid-Atlantic and Southeast U.S.

There's a reason I lift, in toto, the Hugh Hewitt townhall.com blog below: All of the companies listed below (and others not listed)found a progressive, mid-sized law firm willing to deliver superlative legal expertise on an alternative pricing basis, namely Womble Carlyle Sandridge & Rice PLLC, www.wcsr.com. In helping such companies discover the pro-business Southeast and Mid-Atlantic, we truly are delivering Custom Client Service Solutions.

Steve Bell

The blog post and link to which I refer:

"Wednesday, May 27, 2009
The Future of California Is Moving To North Carolina
Posted by: Hugh Hewitt at 8:52 AM

This story should be placed on every legislator's desk in Sacramento, and a stack of copies carried around Arnold's office. Key graphs:

North Carolina lawmakers are pushing to give Apple Inc. a multi-million dollar tax break should the company bring an East Coast computer server farm to the state — an estimated $1 billion investment, according to a state official with knowledge of the recruitment efforts.

State and local governments offered Google an incentive package worth up to $260 million over 30 years, one of the largest incentives packages in state history, to land the data complex. If the Apple project also remained active for 30 years, its server farm could save more than $300 million on its corporate taxes, based on legislative staffers' estimates that the tax break would mean a savings of $3 million from 2011 to 2018, and then $12.5 million each year after that.

Google, Microsoft and other technology giants have responded to booming Internet use by building server farms: huge, climate-controlled computer warehouses that can store enormous amounts of information and process vast flows of data. They are heavy users of power and water and are usually spread over large spaces.

Though the Apple site is initially expected to employ fewer than 100 full-time workers, legislators said the potential prize was so juicy it justified changing the state's corporate tax formula to benefit a single company. North Carolina's unemployment rate remained at 10.8 percent in April, marking a third-straight month it was in the double-digits, the state Employment Security Commission reported Friday. Four non-urban counties have unemployment rates of more than 16 percent.

I have long wondered why northeastern Ohio with its well-developed industrial infrastructure and low-cost-but-high-quality standard of living with regards to housing, education and recreation (except having to watch Cleveland sports, oh Cavs) hasn't adopted North Carolina's strategy, but the Tar Heel State clearly gets it. California is bleeding out, and unless the sky-high tax rates come down quickly, the loss of economic vitality will accelerate."

http://hughhewitt.townhall.com/blog/g/81361459-607c-4dc9-a0a8-a25ecccefd5e

Tuesday, May 26, 2009, 12:19 PM

Strangers in a Strange Land: Law Firms and Web 2.0

The steady emergence of a new class of legal-services buyers may drag the profession into the 21st century more rapidly than change-averse lawyers would arrive on their own.

At the American Lawyer's Law Firm Business Development Forum May 20-21 in New York City (http://tinyurl.com/cexnmu), some of the topics -- client teams, marketing department operations, even sales -- covered familiar territory.

For those listening carefully, however, two panels gave us a look into where we REALLY are as we near the end of the first decade of the new millenium.

The panel discussion -- The Promise of Web 2.0 and Social Networking -- was notable for two reasons. First, the backgrounds of two of the panelists: Fred Paulman is Managing Director of Law Firm and Legal Vendor Management at Pfizer, and Lynn Easterling is Senior Director of Worldwide Legal Operations Legal Services at Cisco. Their bios list skills such as "negotiation," "knowledge management," "evaluating outside counsel performance." We first encountered these types of skills in Judi Trail, who is a currently nonpracticing attorney and an executive in the highly advanced purchasing department at JPMorgan Chase. She has for a number of years overseen the purchase of legal, tax and advisory services there and who utilizes JMPC's incredibly well-tuned knowledge management system to identify outside counsel carefully matched to the facts and circumstances of any particular matter. The ascendance of this new class of sophisticated buyers and technologies is a very important, if not directly stated, message from the Forum. A second lesson is the fact that these very sophisticated buyers are adept and conversant in Web 2.0 tools and techniques, some of which -- including www.legalonramp.com, Martindale-Hubbard's Connected product, and Cisco's proprietary version of Legal OnRamp -- were on display. Suffice to say that for the most part the buying community is still years ahed of the selling one.

Also at the conference and on another panel -- Art of Pricing: The Connection Between Value & Cost -- was another sophisticated buyer, Mark Wolf, Assistant General Counsel at FMC Technologies, a company that is utilizing Legal OnRamp and other online tools to invite law firms to communicate value propositions to FMC Technologies, as explained in Rees Morrison's Law Department Management Blog: http://tinyurl.com/pz278k. Even as we listened to presentations at the Forum, a vigorous conversation about FMC Technologies' Value Challenge was being waged on the blogosphere. Wolf's presentation concluded with an hilarious WSJ cartoon, with a patient in earnest conference with his physician at the end of a medical exam. "Give it to me straight, Doc," the patient begs. "How many billable hours do I have left?"

A shameless plug: Many years ago, at a time when BigLaw saw 10% rate increases extending to and beyond the horizon, Womble Carlyle noted the increasing sophistication of buyers of legal services, and we understood then that the future of the law firm model was destined for a big shakeup, now hastened by the economic meltdown of the last 18 months. As a result of our scouting, more than 5 years ago, we took action by creating a program name Custom Client Service Solutions (http://tinyurl.com/owtd8q). Our program, including our own Client Compact, emerged just as the innovators at the Association of Corporate Counsel were unveiling the Value Challenge, www.acc.com/valuechallenge. The timing was perfect, and because of our innovation, we have become known as early adopter of, contributor to, and advocate for that program, which is defining the future of the inside counsel-outside counsel relationship.

It's not as though the world has completely changed....yet. Based on questions and comments from the audience, many law firms do not yet understand that the buyers not only are in control as they have been for a number of years, but also they now KNOW they are in control. They will dictate the actionin the days ahead. Thus, to me at this conference, the true innovations were somewhat buried like diamonds amidst more-traditional conversations. But for those with future-attuned eyes and ears, they were clearly on display at New York's Harvard Club last week.

Steve Bell

Monday, May 18, 2009, 9:00 AM

The Hourly Rate Trap

The article, below, was written by Womble Carlyle litigator Press Millen and published in Incisive Media's law.com: http://tinyurl.com/pc6fg6


The Hourly Rate Trap
by Press Millen


Ask a lawyer what her hourly rate is and she’ll probably give you a dollar figure. Ask a client about his lawyer’s hourly rate and you may get a scowl. In fact, if you ask a client to describe his biggest complaint about his lawyer, don’t be surprised if he says it’s that hourly rate which is presumptively too high.

The imminent demise of the billable hour has been confidently predicted during the entirety of my nearly 25-year legal career. And yet, like Rasputin, no matter whether you try to stab it, shoot it, or poison it, the billable hour somehow manages to survive. This article deals with the hourly rate, one of the knottiest aspects of what appears to be an undying feature of the relationship between lawyers and their clients.

Bear with me while I recount a cautionary tale: In 2005, the Board of Directors of Hewlett-Packard was concerned about confidential board information leaking like a sieve to the media. H.P.’s “solution” to the problem was to hire private investigators who set about using a number of questionable techniques to investigate certain board members, employees, and even reporters. When the dust cleared, H.P’s Chairman had resigned, lawyers and others were indicted, a number of the principals were hauled before a Congressional committee, the SEC investigated, and the company paid a $14.5 million fine.

The real scandal, however, is that the plan was hatched with lawyers in the room.

How much would it have been worth to H.P. for one of its lawyers to say something like “Hey, before we do this, let’s make sure these investigators proceed in a lawful manner, because if they won’t (or can’t), we probably shouldn’t do it all?” Would that 30 seconds of advice have been worth it, even at $750 an hour? In retrospect, the lack of that advice ended up costing H.P. millions of dollars and even more in shattered lives, careers, and public opprobrium. H.P., no doubt, would have paid dearly for the counsel it never got.

That story is a microcosm of the fundamental problem with the billable hour: how do you measure the value of a lawyer’s time? And how do you measure the value of something bad that doesn’t happen? It’s also a stark example of why clients shouldn’t fall into the Hourly Rate Trap, i.e. allowing retention decisions to be guided principally by hourly rates. Here are five reasons why it’s a Trap:

1. It Ignores Arithmetic – at the most basic level, the hourly rate is just one factor in the complicated equation of how much a client ultimately pays. Until the rate is multiplied by some amount of time, it’s just an abstract number.

Here’s a concrete example: Lawyer A charges $500 an hour. Lawyer B is equally experienced, but charges 20% less, $400. The solution seems simple, hire Lawyer B and save 20% in legal fees. Lawyer B, though, has a problem. He can’t go anywhere or do anything without his associate, Lawyer C, carrying his bag. And Lawyer C charges $300 an hour. The client’s 20% savings just became a 40% change in the wrong direction.

Staffing, in other words, is likely to be a much larger factor in total cost than any lawyer’s hourly rate. Complaints from clients about “strangers” on bills are rife. “Who,” they ask, “is this lawyer and why is he working on my matter?”

Here, budgets are a necessary, but not sufficient, cure. In many industries, vendors bid low to get the work and then immediately set out to undermine or tear up the budget. That attitude has no place in the legal profession. A budget is something lawyers need to stand behind, quarter-by-quarter, not just use to obtain work.

2. It Ignores Knowledge – The arithmetic issue becomes more nuanced when the matter of knowledge is factored in. Imagine this issue: if your company files for an extension of time to answer a complaint, does it waive its right to seek dismissal for lack of personal jurisdiction? Associate A researches the issue and writes up the answer – “no waiver” – in an efficient half-hour charging your company $150. I charge $530 an hour, but I already know the answer to the question. My five seconds of time costs 74 cents.

Dozens, even hundreds, of similar examples could be provided. At some level, the lawyer charging $500 an hour should be more knowledgeable than the lawyer charging $250. Not only that, but the lawyer learned what he knows on someone else’s dime. That knowledge, as in the simple example of the extension, should benefit the client in a way that tangibly translates into a smaller bill.

Those savings (or additional costs) can be multiplied when the issue of “firm knowledge” is considered. Ideally, retention of a law firm entitles the client to the storehouse of knowledge of all of the firm’s lawyers. In practice, we all know that it doesn’t happen seamlessly. Nevertheless, a client should ask its law firm what it’s doing to facilitate the 74 cent answer in place of the $150 one.

The trendy name for this is “Knowledge Management.” In 1985, it meant hollering down the hallway to a colleague who might know the answer off the top of his head. That died out as law firms expanded to multiple floors (and then multiple cities). By 2000, it meant an email blasted out to the whole firm: “does anyone know anything about the FTC’s guidelines on therapeutic medical equipment joint ventures?” Yet a system that relies on volunteerism and lawyers paying attention to sporadic emails simply isn’t systematic enough.

In 2009, law firms need to demonstrate to clients that they have an accessible Knowledge Management system that allows lawyers to search the firm’s work product without relying on voluntary responses from possibly knowledgeable lawyers. As a practical matter, this means that a lawyer should almost never begin work for a client with a blank sheet of paper.

Here’s a simple example from my own practice. In 2007, the U.S. Supreme Court issued a decision, Bell Atlantic Corp. v. Twombly, which overruled a 50 year-old precedent and tightened up pleading standards on motions to dismiss. At my firm, if a client needs to file a brief on a motion to dismiss, I can run a standard computer search on Twombly in Westlaw which, in addition to retrieving the usual Westlaw materials, will also allow me to access all of my firm’s work product citing the case. As a result, I can pick and choose from among other briefs already written and then edit according to the needs of my client’s particular case. Needless to say, that process is at least five times more efficient than having an associate start from scratch. Assuming my numbers are correct, the $500 an hour lawyer is one-third the cost of the $300 lawyer.

3. It Ignores Experience – This may be the dirty little secret of litigation in the 21st Century. Because of the limited number of trials, especially long-form trials of major business disputes, many lawyers have simply never had the bracing experience of standing up in front of a jury and saying “let me tell you about my client’s case.”

The problem is not that those inexperienced lawyers are incapable of trying a case. Instead, their lack of experience makes it difficult for them to foresee – during the lengthy course of litigation – how the case will culminate at trial.

This is where the additional costs come in. As a result of lack of experience with the thing itself – the jury trial – many lawyers are prone to engage in pre-trial tasks that have little bearing on that ultimate event. The costs are found in witnesses who are deposed but never testify, experts whose opinions are never provided to the court, and categories of documents reviewed – documents and documents – that never see the light of day in court.

To put it simply, there is a significant cost difference between the $300 an hour lawyer who takes 16 hours to prepare for and take a deposition that the $500 lawyer recognizes from experience doesn’t need to be taken at all: it’s $4,800 vs. zero.

Another problem in this area is found in what one of our client’s calls “science projects.” These are costly forays into largely academic questions that have little or no bearing on the outcome of a case. Experience allows a lawyer to separate the real issues from the academic ones.

Inexperienced lawyers, moreover, often fail to understand the client’s business objective. Clients just hate to hear a lawyer say he spent $100,000 defending a $50,000 case. Other times, however, a client would have preferred an intricately negotiated license agreement to an off-the-shelf one that doesn’t accomplish all of the client’s objectives. The experienced lawyer seeks to understand the client’s business objective and then knows how to accomplish it with the appropriate amount of legal resources. He also makes sure he knows when his client’s objectives change.

The ways experience – even at a higher hourly rate – can ultimately save a client money are nearly limitless. A lawyer who fails to properly supervise, for example, an e-discovery vendor can cost a client six figures in no time. An expert engaging in a “science project” can do the same. What does it profit a client if he gains a 10% hourly rate discount, only to lose $150,000 to an inefficient vendor?

4. It Ignores “Magic” – In this context, “magic” is shorthand for those small but critical things that sometimes happen in the course of a representation. A deal is about to crater, but a lawyer who knows a top executive makes a five minute call and puts things back on track. A lawyer whose credibility with the court is irreproachable stands up and successfully vouches for her client’s position. Everything is stalled until a lawyer who knows the right person in a bureaucracy reaches out and obtains the comfort necessary to proceed.

In every case, these magic moments are just that, moments. As such, they don’t lend themselves to being measured according to an hourly rate. That being said, though, clients want to maximize magic moments, and lawyers who can make magic moments, it stands to reason, tend to have higher hourly rates.

The question becomes, is the client willing to forgo the possibility of a magic moment in order to save some on the incremental hourly rate?

5. It Ignores Wisdom – The difference between wisdom, on the one hand, and knowledge and experience, on the other is not always so clear. A lawyer may have an encyclopedic knowledge of, say, the federal precedent on taxpayer standing, but have no idea how to present that knowledge to a judge in a way that doesn’t offend that judge’s deep feelings about access to courts and fundamental fairness. Another lawyer may have the experience of having tried 50 cases to verdict, but refuse to accept that the case he’s facing now can’t be handled just like those others.

And this is where wisdom comes in. A lawyer sitting in a Board meeting may have little knowledge of the specifics of the California law on surreptitious surveillance, and no experience of engaging private investigators, yet still be wise enough to say “let’s think this through before we do it.” That wisdom can’t be measured in hourly increments, but it’s almost priceless.

Press Millen is a trial lawyer with Womble Carlyle Sandridge & Rice, PLLC in Raleigh, North Carolina.

Copyright 2009, Pressly M. Millen

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Friday, May 15, 2009, 4:03 PM

Thanks for "No" thing

James Srodes's book review of 52 TRUTHS FOR WINNING AT BUSINESS WITHOUT LOSING YOUR SELF by Alan M. Webber (of Fast Company fame)contains the following statement, which is enough to make me want to read the entire book:

"Perhaps," the reviewer writes, "the most important rule for these perilous times is, 'Learn to take No as a question.' As he (Webber) says, 'The correct response to a no is 'thank you.' (Webber) adds, 'Take notes. If the person telling you no offers an explanation, listen carefully, listen respectfully, listen to everything he or she says - without agreeing or arguing. ... You may have come for money, but these words can be precious gold. You're getting something rare: honest feedback.'

"No" is not easy to hear for those of us with fragile egos who nonetheless provide professional services and who earn the opportunity to do so by "doing sales." While it's not easy to hear, "no" represents crystal clear communication between buyer and seller. Too often, buyers and sellers dance around the issues and just aren't straight with one another. Consequently, our worlds get wrapped up in "maybe's," which occupy our emotions and brain cells, and very often preclude us moving on to the next opportunity. As I have grown, ahem, more mature, I have come to appreciate a good solid "no" almost as much as a good solid "yes."

Here's a link to the review, found in today's Washington Times: http://tinyurl.com/pfhtz8

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Thursday, May 14, 2009, 10:39 AM

Drucker 1974 Quote Defines 2009 in Law firms

This Drucker quote reminds me of today in the legal profession:

“It is the customer who determines what a business is…

What a business thinks it produces is not of first importance—especially not to the future of the business and to its success…What the customer thinks he or she is buying, what he or she considers value is decisive—it determines what a business is, what it produces, and whether it will prosper.

And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him. And what is value for the customer is…anything but obvious. The customer is the foundation of a business and keeps it in existence.”

MANAGEMENT
TASKS RESPONSIBILITIES PRACTICES
Peter Drucker, 1974

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Monday, May 11, 2009, 3:20 PM

Yes or No. Short and Sweet. FMC RFP.

Had a chance over the weekend to study the most recent information from FMC Technologies, asking law firms who might wish to become part of FMCTI's outside counsel network to submit a questionnaire. Check a few boxes and complete a short statement about the differentiation of the firm. Gotta love this approach. The Chief Legal Officer can say "tell us more" or "no thanks" quickly, as opposed to subjecting the law firm to a painful, time-consuming proposal exercise. Hope more inside counsel take this pathway. In sales, "no" is not a pleasant answer. But it is the second best answer (next to "yes") and it is vastly superior to the "maybe's" that occupy our brain cells and emotions and paralyze us. Following the Value Challenge clarion call, Jeff Carr and his team including Mark Wolf are to be applauded for their efforts to make the RFP exercise as efficient as they ask outside providers to be.

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Thursday, May 7, 2009, 1:56 PM

Clients Need To Win On Every Fee!

Been absent from the blog for awhile -- accommodating all the changes in the legal profession resulting from the meltdown, which I track to September 15, 2008 or so.

Whatever else it has done, the meltdown seems to me to have made buyers of legal services more serious than they have been to date about evaluating the possibility of engaging firms other than CYA ones. We are more active than ever in discussing the array of possibilities with inside counsel and other legal buyers. I am proud of my partner Rob Fields, who, during a LegalBizDev - West LegalEdCenter webinar phrased it about as well as I have seen it phrased. This Fields' quote from the webinar, as reported by Jim Hackett (CEO of LegalBizDev): "....Some large firms are beginning to embrace this philosophy. According to Rob Fields from Womble Carlyle (over 500 lawyers), “The client needs to win on every fee, every time, even though at larger law firms, it’s difficult to wrap our minds around this.” He described a large project Womble Carlyle recently started in which the client can choose whether to pay by the hour or to pay one of several predetermined fixed fees. At the end of each matter, the client gets to pick the lowest price. Of course clients love this, but it imposes significant demands on the firm. “We have to manage our staff closely and focus our resources on what the client values.... It gives you incentive to focus.”

Read Jim Hasslett's Commentary here:
http://adverselling.typepad.com/how_law_firms_sell/2009/05/alternative-fees-part-12-whats-different-for-big-law.html

Steve Bell

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