Why It's Hard For Executives to Manage Outside Counsel

05/22/2012

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This blog post asks a simple question:  Can you effectively manage your outside counsel?

Law.com published a great article today entitled, Why Do General Counsel Fire Law Firms?  The article quoted two GC's who both had the same story:  they fired the law firm for not properly staffing their legal work; the work was performed by more costly senior attorneys who should not have been assigned to the projects.  

This article highlights two stories, which we summarize here:

Shannon Pierce, a senior counsel at natural gas distributor AGL Resources Inc., recounted an instance where she asked one of her law firms to use an associate instead of a $600-an-hour partner to write a memo. But when she got the bill, it was for the partner.  "It was a $25,000 memo that should have been a $5,000 memo," Ms. Pierce said. After making several other staffing requests that went unheeded by the firm, she stopped using it.

A similar story was told by Stephen Kaplan, general counsel of Orlando-based Connextions. Mr. Kaplan hired a large Washington firm to handle a regulatory compliance matter, and  he thought the law firm irm was using partners to do work that could be done by less costly second- or third-year associates. He asked the firm to assign the work to asso­ciates, but they simply refused to do so.  "They said this was the way they'd always done things," Kaplan explained. Maybe for others, but not for him: "I dropped the firm."

This helps explain why it is hard for non-lawyers to manage outside counsel.  

Many non-lawyer executives lack the experience to know what seniority level should be assigned to their legal work, and there is an incentive for many law firms to assign more costly senior attorneys to work that could be performed by less costly junior attorneys, or senior attorneys at a steeply discounted rate. 

We wish it were not the case, but some attorneys and law firms put their economic interests ahead of the client's economic interests when staffing and billing for their work.   Unless you've seen and managed a lot of legal work, it will be difficult for you to know your legal project can and should be done by a less costly lawyer.  Making matters more complicated, many executives find it difficult if not impossible to challenge their law firms on legal bills.  

This is just a few more reasons why most businesses should work with a part-time General Counsel to help hire and manage outside counsel. 

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Happy Leap Year, Thanks for the Extra Billable Hours

02/29/2012

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Bill by the hour law partners, associate attorneys and paralegals woke up this morning and breathed a small sigh of relieft.  

Today, February 29, 2012, provides an extra 24 hours of billable time, and it's landing on a weekday instead of the weekend.  Extra billable hours and no need to work over the weekend for them.  That's a double bonus.

Non-parter timekeepers--the associates and the paralegals--will huddle around the coffee station and quietly joke about how they hope "the firm" does not raise the billable hour target by an extra 8 hours.   Firm owners will joke that they should, and that the firms they worked for when they were associates always raised the billable hour target on Leap Years.

According to timeanddate.com, Leap Years are required to keep our calendar in alignment with the earth's revolutions around the sun. 

To billable hour professionals, the science is interesting, but not inspiring. 

What is inspiring to billable hour professionals is that today, the Leap Year Day, gives them an extra 24 hour opportunity to bill clients and to meet their billable hour annual targets.  

This year, things got just a little bit easier.

Happy Leap Year Day!   
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Be Wary of the Lawsuit Selling Lawyer

01/28/2012

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Some lawyers, especially lawyers who exclusively bill by the hour,  sell their clients on filing a lawsuit.  It's not hard to do.  The client is upset because they have been wronged in someway, and the attorney  can direct the client's frustration and anger into filing a lawsuit.  Not all attorneys do this, but many do.  After all, what could be better for the lawyer than a client who will pay the lawyer on an hourly basis to battle it out in court?  And remember this - when it comes to most commercial litigation and pay by the hour lawyers, the lawyers take no risk because they get paid win, lose or draw.     

Before filing suit, ask the hard questions and demand hard answers:  How can a lawsuit benefit us?   What will we accomplish with this lawsuit, what will the ROI likely be, and is there a better way to go?   In addition, in many cases the business should consider hiring an independent and experienced litigator to coach them through the litigation decision-making process.  Having an experienced lawyer who does not stand to gain from filing the lawsuit will often help you make a better decision.

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Legal Value - Are You Funding Your Lawyer's Second Home?

01/26/2012

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From time-to-time, I present a seminar called, How to Hire and Work With Attorneys the Smart Way (and not their way). It's  been a hit within the non-lawyer community, but I've taken a few shots on the chin from my lawyer friends and colleagues.

What follows is a bit of insight on how some lawyers bill their clients, and it derives  from a recent lunch meeting I had with the Managing Partner  of a small firm in the Greater Seattle area.   This senior attorney told me the secret for how he was able to afford to purchase a second home.

Did he use a financial planner?  He might have, but this was not the secret.

His secret:  Perform one extra hour of chargeable work for one client each day.   Assuming his hourly rate is $300 per hour, this results in $1,500 in  gross revenue each week, and $6,000 in gross revenue each month.

It's easy to see how you can fund a second home purchase under this revenue model.

This is how some lawyers think about the value of their legal services  and billing.    Too often lawyers give no thought to the question, "" Does this billable hour of work deliver value to my client  equal to my hourly rate?" This is especially true for attorneys who work for firms where performance is measured and rewarded by the number of hours billed.   In fact, in many law firms, the attorneys are only eligible for a bonus if they meet or exceed their billable hour quota.

So, how can clients use this inside information to their advantage?   When you are hiring a law firm, ask how the firm measures and rewards attorney productivity.   The "attorney productivity" phrase will likely sound like a foreign language to many attorneys you talk to because most law firms, especially most of BigLaw, only measure and reward billable hours.  But, if you want to try to make sure the "billable hours" your attorney charges you are not designed to fund his or her second home purchase, ask the question:  "How do you measure and reward attorney productivity at this firm?"

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