What's in It for the Client?
For decades, legal departments have bought services in the way that they were sold by the law firms. There is nothing to say that the client shouldn’t or can’t dictate what services it needs and how to receive those services, within the limits of the current legal market of course.
In fact, now is precisely the time for clients to redirect the law firms and ask for more, and different services. It is time we get more for our money. Note that moving to a managed service is not necessarily done to save money. In fact, cost reduction should be secondary so that law firms don’t get scared away by the thought of lost revenues. The goal is to get more from the law firms for the same amounts spent. For example, there is arguably a body of work done today by junior associates that can be done at lower costs, and the savings can then be applied to delivering different skill-based professional services.Legal departments that have enough volume going to law firms can require that law firms provide additional services traditionally not thought to be within the expertise of legal professionals. For example, data analytics, associated with spreadsheets and “people good at math” is becoming a common request from clients. In-house teams are hungry to know more about their own companies’ business, and much of that knowledge sits with the law firms. The in-house lawyers know what legal work is being handled outside, but they lose sight of some of the business problems and issues that are associated with that legal work because the outside lawyers are working directly with the business owners. Over time, law firms who provide a significant amount of recurring work for companies begin to learn valuable insights about that company’s (aka, their client’s) business and legal needs. In fact, it is that unique insight that makes those law firms so valuable to the companies and why in-house legal departments become dependent on their outside counsel.
Truth is that there are many scenarios where the law firms know more about their clients’ business than the client’s in-house legal team.So, why not demand that knowledge to be shared back with the client? It is not enough to hope that the best partners will see the benefit in educating the client about the law firm’s learnings, it must be a requirement of the engagement. In-house legal teams can request that the law firms provide back some basic information about the work handled outside. For example, in a transactional practice, the law firms should, as standard practice, provide the following basic data points on a regular basis: how many transactions were handled, some breakdown on the types of transactions, feedback about the documents/templates used, common negotiation topics, etc.
This sort of information is already at the hands of the law firms, and it just needs to be gathered and collated in a consumable format. That is where the function of data analytics comes in. Once foreign to law firms, it is now being developed across the industry and nurtured, as more clients begin to request this insight. The client benefits immediately from such information because adjustments can be made to templates, and trainings can be delivered to internal business clients who are misusing/abusing the outside legal services.
A perhaps easily overlooked benefit in receiving this sort of data is that the in-house team discovers the gaps in knowledge within their own company. Often it is the outside legal team that becomes familiar with the business contacts within the client company and can relay back to the in-house legal team where there are gaps in experience where training or further education would help. Senior business leaders will be better informed by their legal counterparts about trends in the industry. In-house legal teams would no longer be paying law firms to spend their time educating the business clients on matters that they can be trained on by the in-house team.
This presumes that the in-house attorneys can consume such data, and act on it effectively.Training opportunities are just some of the many benefits of receiving data analytics information back from the law firm. A more tangible benefit is the learnings from repetitive work handled by law firms. In a transactional practice, law firms are often doing similar types of deals over and over again. Sure, each one is somehow unique, but all deals start from some sort of template, or sample used before. As law firms try to accommodate and please their corporate clients, they often fall into the trap of using the client's preferred forms and may shy away from telling the painful truth that the templates are outdated or they waste negotiation cycle time on the same issues regularly. Experienced and confident partners may raise these concerns, but it is not systematic in how law firms deliver services. So, corporate clients pay for the repeated use of basically “bad” templates. Once law firms get into the practice of proving this sort of feedback, as would be required in newly documented engagement letters and statements of work, in-house teams can update their documents more regularly, reducing cycle time of negotiations significantly, which results in savings.
If these benefits are not enough, then the one that is sure to convince even the biggest skeptic is the benefit of predictable fees. Later in the article, we examine the financial benefits of this managed service arrangement.
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