Achieve Success with Partnering
Lori Brazier - Lexpert (April 2007 at p. 103)
Our firm recently assisted several organizations with the review of partnering arrangements between law departments and outside counsel. Agreements with the firms were characterized as having delivered some value and relationships with firms and teams within firms have become more solid. Savings were achieved, but more often than not they fell short of target. Both sides continue to struggle with some of the aspects of the arrangements.
Case budgeting and staffing are notable examples of poor performance. There is a sense on the part of the client that “we could have done better” and more often than not, the law firms are not fully satisfied. Invariably, when renewal time rolls around, the law department faces pressure to achieve even better financial results. An analysis of the financial results achieved with various partnering arrangements indicates that the partnering relationship has not been carefully managed. Partnering implies a departure from traditional ways of retaining and managing legal services and several things need to change once the ink on the agreement has dried.
Most law departments underestimate the time and effort required to manage these innovative arrangements. The same goes for their preferred law firms. The commitment to project management and task-based budgets is typically the first practice to be dismissed because it is perceived as being too difficult. The result is a feeling of unease on the part of the client that matters are being overworked.
Investing time in developing case budgets, which are reviewed and updated as a matter evolves, gives both the firm and the client a good sense of control – and also provides in-house counsel and others who manage legal budgets with justification for their spending. Firms that invest time in reviewing budgets prepared by younger lawyers and in making good data available can alleviate the discomfort of providing an estimate of anticipated costs. Case budgeting cannot be viewed as optional and organizations that do not adopt a rigorous approach are not doing enough to manage legal spending.
Commitments to an agreed staffing mix also fall by the wayside. Some will argue that this is not important if the firm is being paid a blended rate for all hours, or is on a fixed-fee arrangement. But there may be a risk of inefficiencies if partner-level hours are significantly lower than the agreed target, or if many paralegal tasks are assigned to less-experienced associates and students. Pay attention to internal processes. Most organizations and law firms underestimate the need to update practices. The objective is to streamline so there is enough time for the firm to focus on getting good results for the client.
The importance of leadership is sometimes undervalued. There are circumstances where some or all of the accountability for these innovative arrangements is handed to an individual who was not involved in the process leading up to the negotiation and signing of the agreement. Ensure that everyone who is accountable for managing partnering agreements clearly understands and supports the targeted objectives. Those who championed the agreements in the first place will find that the time devoted to communicating the value of the arrangements will be a worthwhile investment.
Leadership at the executive level is also crucial. This is key in decentralized organizations (like banks) where responsibility for assigning matters to outside counsel lies primarily with the business units, and not the law department. The importance of adhering to the program must be emphasized, and repeated at regular intervals. Allowing too many exceptions or exemptions comes at a cost. The law department can help by maintaining a regular dialogue with business units and communicating what the numbers reveal.
Dialogue and collaboration make or break partnering. Most organizations are not taking the time to meet with the firms on a regular basis for conversations that are not matter-specific. Not doing so is a missed opportunity to share ideas for improvements.