Support for the Part-Time General Counsel Model: BigLaw DLA Piper to Fire Smaller Clients

03/14/2012

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The ABA Journal reported on March 14, 2012, that global BigLaw DLA Piper, has adopted a strategic plan that calls for the firm's partners to focus on providing more services to larger clients.  The ABA Journal reports that this means, "some smaller clients will be jettisoned."   

The ABA Journal quotes DLA Piper global chairman, Tony Angel, "Some of our clients are too small to fit that model, so continuing to [represent] them doesn't make sense for them or us—even if the work is profitable."

On the one hand, this is somewhat offensive:  DLA Piper intends to fire its smaller profitable clients.  But, on the other hand, this decision makes sense for smaller clients who elected to hire a large firm like DLA Piper.  There is very little chance that a large firm can cost effectively provide high quality legal services to smaller clients when the law firm also targets much larger businesses as clients.   Yes, the large firm can provide high quality legal services, but they cannot do so cost effectively to the small to mid sized business because the large firm is organized to work with much larger businesses as clients.  They have too much overhead to support, and this can often lead to chargeable work that does not deliver high value to clients.  

DLA Piper's decision to fire small clients makes business sense for these clients, and Mr. Angel's comment is refreshingly candid.  In most cases, businesses should not hire law firms that are larger than the business to perform their legal work.  Every business must manage cash flow to exceed overhead, and law firms are no different.  

I believe that most small to mid sized businesses ($5M to $50M annual gross revenue) are best served by working with a part time general counsel, who can handle the business, transactional, and employment law legal needs of the business, rather than a law firm, or multiple law firms.  This outsourced general counsel, trusted advisor, model allows the attorney to become deeply acquainted with the client's business and goals, and this model works best if provided on a fixed fee monthly retainer model so the client can manage its legal services expense line item.   

Small to mid sized businesses should take notice of DLA Piper’s decision and Mr. Angel’s candid remark:  working with a law firm that targets larger businesses as clients does not make sense for either the client or the law firm.  The part time general counsel model makes the most sense for the small to mid sized business, and is far more cost effective than small to mid sized businesses working with large law firms who target large business clients.  
 
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Ten Ways You Might Be Able to Tell if You're Paying Your Law Firm Too Much

02/24/2012

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  1. Your law firm has a better view from its office lobby than you do from your office lobby.
  2. More people come to your law firm's employee picnic than your company picnic.
  3. Your law firm's holiday party is more grand than your company's holiday party.
  4. Your law firm offers paid sabbaticals to its partners. 
  5. Your law firm has a full time Director of Marketing on staff and you don't.
  6. Your law firm has more partners than you have employees.  
  7. Your law firm has more offices than your company does.
  8. When you call your law firm with an issue that is non-standard for your main lawyer contact, he or she refers you to "my partner" or "my associate" who handles that kind of an issue. 
  9. You are not spending your own money.  You spend investor money.  
  10. You do not have a part-time general counsel that hires and manages your company's outside law firm.
  11. Bonus - Your law firm's business model is to bill by the hour and to never offer guaranteed price quotes.
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What? You Settled the Case!

01/30/2012

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We believe that most small to mid-sized businesses should work with a part-time general counsel, and should use their part-time general counsel to help manage outside litigation counsel.  Here is a story that may make your blood boil.

It's a fairly common practice amongst bill by the hour litigators to jokingly express outrage within the firm for settling cases short of trial.  After all, early resolution results in a lost hourly billing opportunity for the law firm.   I've heard this from senior attorneys in firms where I worked, and I've heard this from other attorneys I know.

Pretty offensive, but it illustrates a point about reactive legal services.   Richard Susskind, in his book, The End of Lawyers?   Rethinking the Nature of Legal Services, notes that there is a fundamental tension between law firms and clients.  "The client will generally hope their legal requirements are routine and can be disposed of quickly and painlessly, while the law firm will generally hanker after more challenging instructions that will occupy them for more time."   (pg. 149).

Most reactive legal problems lead to longer and more costly legal assignments.   This is usually hard to avoid.  However, proactive legal work and training can help  avoid costly legal problems and businesses and executives are wise to embark on a proactive legal strategy with attorneys such as our program.

As part-time general counsel to our clients, we share their legitimate interest in minimizing our involvement and the cost of legal services.  We also understand that sharing this goal may lead our clients to seek our assistance on more complex and high value legal work.   Through proactive training and legal coaching, we align our interests with our clients' interests, we deliver a high ROI,  and everyone wins.

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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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