The Pilot Study
Welcome from Global Leaders in Law
For global businesses, understanding the combined impact of political, social, regulatory, economic, and technological trends is paramount. This fast-changing, global environment means that those organizations which put innovative plans in place will be the ones to benefit most from this new future.
As the innovation pressure builds on the business, legal teams must adapt quickly to changing client and employee demands brought on by our new environments. This in turn will develop a growing need to get more value from legal services, and those teams that succeed will be more innovative, knowledgeable and adaptable to future challenges the environment presents. To get more value, the general counsel must go back to the foundation of the relationship with the outside partner and have an open and transparent understanding of what has and has not worked.
ALM, has spent the last 4 months digging deep into the complex relationship of the buyers and sellers of legal services. The ultimate goal has been to create a product that can move the needle for the way GCs are provided with legal services, but in turn deliver a platform that allows for openness and transparency to ensure a strong working relationship, set up and ready to take any future challenges.
The leadership team for the two-sided market strategy focused on four core values that initial research found as areas of concern; Knowing the Business, ESG and Diversity, Service Delivery and Collaboration.
Over the course of the research, over 40 interviews were conducted with GLL members, we then conducted a survey asking the GCs to rate their top 3 firms. This was followed by the chosen firms being asked to rate themselves.
This report invites you to assess the results and discrepancies identified in our research, as well as a brief insight into a new product launch that we believe will help both markets succeed in being more innovative, knowledgeable and adaptable to our new future.
We thank you for your participation in the pilot program and hope your find the report engaging and informative. Please don’t hesitate to reach out with any questions.
Rhiannon Van Ross
VP, Global Memberships, ALM
Welcome from LegalBillReview.com
The relationship between a company and its law firm is a lot like a marriage. Two entities join forces, serve each other’s needs, pull in the same direction, and yield some really good results – a win-win. But like a marriage, it also needs constant maintenance to work the way it should. Plans, expectations, and priorities must be clearly expressed, each side should listen and be heard, grow to know each other deeply, and build mutual trust over time.
It takes clear communication, which doesn’t always come easily. The events of the last year have made it all the more crucial to work as one team, even when we’re physically apart. The new realities of the pandemic have blurred the line between in-house colleagues and outside partners – they’re all faces and voices on the other end of the Zoom call. So how can we make sure we’re “together” in spirit, if not in fact?
The research in this report sheds a lot of light on what’s working and what’s not in these relationships between companies and their firms. We’ve sought feedback from both sides of the equation: legal departments and the outside firms that serve them, to see where the disconnects are and how to bridge those gaps in understanding.
I started LegalBillReview.com because it was clear that these gaps existed, and that there was a need to introduce more clarity and consistency. Our research showed that seven out of ten GCs would welcome a third party handling these functions as long as it could do so effectively – a relationship counselor of sorts.
If there are lingering issues causing mistrust and resentment – often about billing – many legal departments think it’s going to turn the relationship adversarial to bring those issues to the fore. Instead it’s the opposite. We think relationships are paramount, and they improve with transparency, fairness, and clear mutual expectations. The common denominator is effective communication.
There is a better way. I hope this report will help business leaders recognize opportunities to improve their relationships and mutual understanding with the legal professionals who serve them.
Ryan Loro
President, LegalBillReview.com
General Counsel - Results
General Counsel reported varying levels of satisfaction across the four core values that formed the cornerstone of this pilot program – Knowing Your Business, Diversity & ESG, Service Delivery, and Collaboration. The results, while confirming areas where firms appear to be performing well at meeting client needs, identified others where GCs appeared less satisfied. This included with their outside counsel’s horizon scanning skills, approach to aspects of service delivery, and ensuring diverse staffing on pitch teams and high-value matters.
Knowing Your Business:
• Over 80% of GCs reported satisfaction with law firm understanding of their company's risk appetite and skills in providing legal advice with a business focus. However, over half of respondents were dissatisfied with the horizon scanning skills of law firms and their ability to provide proactive solutions
Diversity & ESG:
• GCs reported a high level of satisfaction with their law firms’ ESG initiatives but appeared less satisfied with the approach of firms to promoting diversity at the granular level. This included ensuring diverse staffing on pitch teams and high-value matters alongside the advancement of diverse individuals to leadership positions
Service Delivery
• Just under 70% of GCs reported dissatisfaction with technology utilization by law firms while 50% or more reported dissatisfaction with the law firm approach to alternative billing arrangements, billing hygiene and workflow and staffing efficiency
Collaboration
• Three-quarters of GCs were satisfied with the ability of law firms to actively listen to concerns and develop responsive solutions as well as the ability to work well with other business units. However, 38% expressed dissatisfaction with the ability of firms to provide timely and clear communication of material changes to matter budget, outcome, or risk
“[Firms] need to guide the client down a myriad of routes, adopt a holistic approach, and advise the client on what channel to go down based on the client’s company culture.”
“I would hope that law firms would appreciate that taking the time to have [unbilled] conversations will ensure they get to the nub of our problems and solutions quicker."
Knowing Your Business
“Often the default when describing the GC is risk-averse, but this is a myth. It is a myth that we need to squash risks as we are always willing to take risks in the context of our risk appetite."
"For me, ‘plug and play’ horizon scanning is very helpful. From a practical level, the more they [firms] understand their clients’ organization and their controlled frameworks the better placed they will be to serve clients information about mitigating risks.”
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
Diversity & ESG
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
"To some extent, I sympathize with law firms who are managing the complexity of serving 50 clients that all want something slightly different whilst trying to slot that into their own unique system.”
"Perhaps, we need to flip the question and say ‘these are our expectations, can you meet them?’ rather than assuming they understand our expectations and then being disappointed when they don’t meet them.”
Service Delivery
“Technology would need to come with a price incentive for the client; if a law firm is going to use technology to increase efficiencies and outputs then I would want to see a price decrease in my fee.”
“You need to provide them [law firms] with the ground rules around billing, allow them to digest the information, and then have a 30-minute conversation to discuss. Once, you have had the initial expectations conversation, the feedback should ‘run on the rails’ thereafter.”
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
Collaboration
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
“Collaboration has not been a success when you have two law firms competing instead of cooperating. It is very unprofessional and is commercial suicide for them [law firms].”
“Some firms are missing a trick in the market, they should be referring us to other vendors to collaborate on a problem, and by doing this they would all receive work from one another.”
Managing Partners - Results
Law firm leaders expected GCs to be largely satisfied with their firm’s performance across several core values. Areas where respondents anticipated less satisfaction included horizon scanning, ensuring diverse staffing on high-value matters, and the ability to provide timely and clear communication. There were areas of clear alignment when compared with the responses of GCs both in regard to satisfaction and dissatisfaction. However, there were also areas of disconnect, most notably in relation to service delivery.
Knowing Your Business:
• The majority of law firm leaders expected GCs to be largely satisfied with their firm’s approach to knowing their business although a minority anticipated GCs to be dissatisfied with their firm’s approach to horizon scanning
Diversity & ESG:
• Over half of law firm leaders expected GCs to be dissatisfied with their firm’s approach to diverse staffing on high-value matters. 44% also anticipated GCs to be dissatisfied with their firm’s approach to ensuring the advancement of diverse individuals to leadership positions
Service Delivery:
• Despite GCs reporting varying levels of dissatisfaction, law firms leaders expected GCs to be largely satisfied with their firm’s approach to service delivery. This included their willingness to negotiate alternative fee arrangements, utilize technology, and ensure billing hygiene and workflow and staffing efficiency
Collaboration:
• The majority of law firm leaders expected GCs to be largely satisfied with their firm’s approach to collaboration. However, in a similar vein to GCs, respondents appeared more skeptical with anticipated satisfaction levels around the ability to provide timely and clear communication of material changes to matter budget, outcome, or risk
“The best client relationships [are] where the clients are consistent and communicative about expectations and where they have a professional approach to the relationship."
"One of the frustrations is when we [law firms] are stuck behind a legal department that does not allow us to speak directly with the business and where they are not giving us the straight feedback on what the business goals are.”
Knowing Your Business
“It’s the firm’s responsibility to figure what their client’s risk appetite is. Clients can help us by being transparent with their risk appetite as an organization and on particular issues and matters and whether this changes."
"If you look at who your most successful partners are, they are the ones that are very good at understanding their client’s risk appetite and the horizon in the industry in which they are in.”
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
Diversity & ESG
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
"Diversity is a source of frustration. Some clients say it and mean it. Others, while the policy is clear at the top of the organization, once you are working on a day-to-day basis, where you work with different clients on different matters within an organization, your experience and expectations become different.”
Service Delivery
“You want to know what is important to them [the client] and unless they feed in that information they are not going to appreciate the advantage they can get from technology. It’s important to make them understand that their initial investment is going to make a huge difference in where we go forward with them”
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
Collaboration
Consider your top three outside law firms by matter volume. How satisfied are you with their ...
“Clients are asking us to cooperate with anybody we think necessary to provide the advice they want. You have to be willing to work with a lot of people but also willing to tell your clients when you think that whatever construct they put in place is not workable for some reason other than you don’t feel like sharing the limelight.”
Summary - Areas of Alignment and Discount
Areas of alignment
Knowing your Business:
• GCs were largely satisfied with the approach of law firms to knowing their business. This satisfaction was also anticipated by firm leaders
• Across both sides, dissatisfaction centered on the horizon scanning skills of firms and their ability to provide proactive solutions
Diversity:
• GCs and firm leaders express high levels of satisfaction with the approach by law firms to ESG initiatives
• Both sides expressed less satisfaction with the approach by firms to ensuring diverse staffing on high-value matters, and the advancement of diverse individuals to leadership positions
Collaboration:
• GCs reported being largely satisfied with the approach of law firms towards collaboration. This satisfaction was also anticipated by firm leaders.
• Across both sides, dissatisfaction centered on the ability of firms to provide timely and clear communication of material changes to matter budget, outcome, or risk
Areas of disconnect
Service Delivery:
• A high number of GCs reported dissatisfaction across several metrics relating to service delivery. However, law firm leaders largely anticipated high levels of satisfaction from their outside counsel. This included all aspects of service delivery comprising:
The effective use of technology to advance their client's goals
The willingness to negotiate alternative fee arrangements
Billing hygiene
Workflow and staffing efficiency
Most important metrics when awarding work
Three of the five metrics selected across both sides derive from the core value ‘Knowing your Business,’ demonstrating the increasing importance of being closely aligned with the strategy and wider objectives of a client’s organization
Just under 80% of law firm leaders believed that skills in providing legal advice with a business focus was the most important to clients. However, this was reciprocated by only 44% of GCs
Both GCs and law firms ranked workflow and staffing efficiency as the fifth most important metric. However, as considered elsewhere in this report, a high number of GCs expressed dissatisfaction with the ability of firms to execute this
Insight from
Practical Strategies to Improve Communication and Collaboration with External Counsel and Add-Value In-House
Below, Ryan Loro, President of LegalBillReview.com, shares a selection of practical strategies that general counsel can implement to enhance the value of the legal department. He also discusses the importance of communication and collaboration with outside counsel, and the impact that the coronavirus pandemic will have on the legal industry.
Q: What practical strategies can general counsel implement to ensure they are providing the best value to their employer?
Ryan Loro: The overall theme I want to emphasize is that communication is key. Firms should know exactly what’s expected of them. So in terms of practical steps, one of the most beneficial things GCs can do is to adopt a formal set of outside counsel guidelines (OCG’s). It’s striking to me how many companies don’t have them in place. And if they do already have them, they may want to revisit those guidelines and see what’s working and what’s not. It never hurts to revise, refine, and reassess. For the companies who don’t yet have their own OCG’s, my sense is that it’s one of those “some day…” projects that’s been hanging out there for a while but they just never find the time to tackle it. It’s an intimidating project to take on when you’re starting from scratch; many OCG’s are 50+ pages long, requiring endless drafts and sign-off from multiple stakeholders before they can be finalized. It’s a big lift for a legal department.
The other factor is that companies worry about how their firms will react - will this offend anyone or open a can of worms? But the truth is that many firms like OCG’s because of the clarity they provide. It’s important to remember that all but the smallest and most specialized boutique law firms are already accommodating multiple clients’ OCG’s and billing rules, so they have the capacity and willingness to accommodate yours too. As for the document itself, it doesn’t have to be a behemoth – even a 5-page list with bullet points on billing rules alone is more than half the battle. OCG’s serve a variety of purposes, but deterring questionable billing practices is, in my view, the primary benefit. Something is always better than nothing.
Q: Generally speaking, how would you rate law firms’ compliance with their outside counsel guidelines?
Ryan Loro: There’s a lot of variation, and I’ve spent a lot of time thinking about why. My basic impression is that firms break down into two categories: those who pay attention to their clients’ OCG’s and make sincere efforts to comply with them, and those who basically ignore them from the beginning and let the chips fall where they may.
The firms that fall into that first category of firms are generally pretty clean with their billing. There are always a few lapses and judgment calls where they might be charging a little too much time for certain tasks, and those charges need to get revisited, but they mostly play it straight.
In the second category, those who don’t make an effort to comply, it may be because they simply have too many clients who each have their own slightly different set of guidelines, so the administrative burden of keeping up with a hundred different sets of rules just isn’t practical. Or others may have the attitude that issuing a set of OCG’s is a formality that certain clients do to have in their back pocket if they ever need to cite them later for some specific reason, but they don’t intend to regularly enforce them to the letter, so the firms feel free to disregard them.
I think that concept is such a key that legal departments need to understand – their guidelines are only as good as their willingness to enforce them, thoroughly and consistently. Except in the case of the few good angels among their firms who take special efforts to comply, they generally won’t see benefits from setting clear billing guidelines and rules unless they’re prepared to scrutinize those bills carefully and go back to their firms demanding changes if the standards aren’t being met.
Q: When you push back on law firms’ billing practices, how is that received? Does it get contentious?
Ryan Loro: It’s actually surprisingly cordial. It’s important that the standards we are upholding are communicated upfront, so there are no surprises. But as long as that’s the case, often it’s simply a case of pointing to the rules when there’s any discrepancy. Firms will readily agree to reduce or remove charges if they’re genuinely excessive or non-compliant.
It’s also important to keep that line of communication open and give your firm a fair hearing. Often we’ll spot a big charge on an invoice that doesn’t seem to be justified, so we’ll question it, but if the attorney can provide a convincing explanation of what they did and why it was of good value to the client, it’s important to hear them out and consider everything fairly. It’s a helpful exercise because lawyers can get careless in their billing but it actually benefits them to show in detail exactly what they accomplished for their client with each new month’s invoice. The bottom line is that clients can be very deferential to the firms, but they should remember that they’re the customer and it’s the firm’s job to serve them and keep them happy. Firms care about these relationships as much if not more than their clients do, so they’re always willing to make things right if the client has a good faith objection to the way they’ve handled something.
Q: Aside from billing, where else do you see a disconnect between clients and their firms that better communication could solve?
Ryan Loro: This is an area where I’ve learned a lot from the research conducted with GLL. I think one of the most striking insights was the gap between law firms’ own perceptions of their performance and their abilities, versus the perceptions of general counsel about their outside firms.
When asked if they have a good understanding of their clients’ business and the industry they’re in, literally every firm surveyed thought their clients were satisfied, but in fact one out of four GC’s disagreed – they feel like their business is not sufficiently understood by their own counsel. That’s going to lead to problems.
Firms can develop tunnel vision, when they focus too narrowly on the week-to-week legal work they’re doing rather than the big-picture concerns their client may have. What’s their risk tolerance? What are the business issues implicated in a given matter? What’s on the horizon that needs to be considered?
Law firms can assume they already have all the information they need, when in fact they would benefit a lot from some periodic check-ins with their clients to keep perspective on the full picture. GCs are the bridge between their clients’ business priorities and their legal needs, so they should make sure these conversations are happening.
Q: Looking ahead, what changes do you think will be made to the legal industry as a result of COVID-19 and how will they impact in-house legal departments?
Ryan Loro: The big thing will be changes in the way people communicate and collaborate.
The pandemic will gradually subside and there will be some degree of return to the normal office environment, but this past year has been a huge test-of-concept for remote working, and it’s here to stay. Teams and departments are getting much more decentralized as more people live where they want and work from home a greater percentage of the time. That applies to white-collar professional services such as legal work as much as anything.
There are pros and cons. On the negative side, it means that team coordination will lose some of that in-person synergy and get clunky, with colleagues sometimes out of step with each other as they try to take on large projects as a team. But on the positive side, it opens up a lot of possibilities and lowers a lot of barriers to change. I think legal departments will feel freer to shop around and consider working with more firms outside the metro areas of their operations, and to mix-and-match a greater number of firms allowing for increased specialization, since the mode of working with these people is a lot different now: fewer in-person meetings, more phone calls and virtual meetings. It’s an interesting time. It’s hard to say whether the trend is positive or negative on balance, but whenever things get shaken up there’s opportunity for change, and savvy operators will find ways to benefit in the long run.
Reducing Legal Spending: A Survey of In-House Attorneys Takeaways
LegalBillReview.com recently carried out a survey to understand how in-house counsel currently manage outside counsel spending, their understanding of the tools and services now available for legal spending management, and their plans for the future. Below is an extract from the report that highlights the key findings.
1. Nearly three-quarters of in-house counsel are “concerned” about overspending on outside counsel. And more than a quarter of all in-house counsel surveyed are “very” concerned or “extremely concerned” about overspending.
2. Over one-half of legal departments prioritized reducing legal spending as a 2020 initiative.
3. Nearly three-quarters of in-house counsel would like to track outside counsel spending metrics, but most currently lack tools to do so.
4. Among in-house counsel who do use legal billing software, four-fifths find the tools at least somewhat effective in reducing legal spending – though significant caveats and concerns remain.
5. Seven out of ten in-house counsel would welcome a third-party legal bill review solution.
Concluding Remarks
Expectancy, Transparency, and Partnerships
Findings from the survey were used to facilitate separate roundtable discussions comprising General Counsel and law firm leaders. These roundtables, while delving deeper into areas of alignment as well as disconnect, also identified other pain points and areas of requisite improvement in the firm-client relationship.
Expectation:
• GCs discussed the importance of setting clear expectations for their outside counsel. This included the use of fireside chats as a means to quickly bring outside counsel up to speed and build long term relationships
• Law firm leaders acknowledged that firms often don’t stop and ask the question of what it is exactly that their clients want. However, difficulties were raised at synthesizing different touch points within an organization which possess their own requirements and agendas
Transparency:
• Both sides discussed the importance of transparency in the firm-client relationship. Fundamental to law firm leaders was the need for clients to be open on what they really care about. Difficulty was raised in distinguishing between a client’s desire or intention versus what a client is saying and not acting on
• GCs expressed the need for open dialogue between the client and the firm while pointing to the dangers of assuming firms understand their expectations but then being disappointed when they don’t meet them
Feedback:
• GCs expressed dissatisfaction with the lack of outside counsel that proactively ask to be reviewed post engagement. One GC identified the best firms as being those "that take conversation dialogue away and come back to me with the things that should be on my radar”
• Law firm leaders raised the concern that not all GCs want to take the time to engage in feedback while also pointing to large client and matter portfolios which can lead to difficulties in implementing client feedback programs in a systematic way
Partnerships:
• GCs acknowledged the need to understand the pressures of what it is like to work in private practice, but as part of a partnership, firms also need to understand the pressures of working in-house
• Law firm leaders discussed the importance of recognizing that both sides are ultimately in the same situation as well as the need to be open with clients about where a firm is behind and what steps the firm is taking to remedy this
"When clients ask us what they can do to make us better a good response would be to say to make sure that everybody on their team is going in the same direction and recognizing the value that legal departments can provide in being the liaison with the business.”
"The law firm is an extension of the in-house team, we are all in this together and this initiative should be about how we build a conversation.”
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