Today a look at a key agenda item in this new year: cost control. I know it sometimes sounds like a bromide, but I really think it is only at the start of the beginning. I promise to try to do this without using the phrase with the initials “BH.”
When I defined the scope of this State of Legal yesterday, I clearly focused on delivering law to the enterprise. If one thing was clear in 2011, it was the ongoing need to control costs. Even the most intransigent players in the corporate law industry saw the cost control imperative written on the wall.
See, here it is, from the “Occupy Law Street” crowd, right outside your office:
True, many talked about “value.” That’s fine although it is not some magic pixie dust that puts a GC in a trance and causes her to suspend fiscal prudence. Certain law firms see it as a tactic to stay upmarket where they think the higher margins will continue to reside. Maybe. More on that later in this series.
The base case for 2012 is this: costs really matter to clients. This is a safe premise for anyone serious about understanding the logic of corporate legal going forward.
We have to acknowledge a big part of the debate in the last few years: unending discussions on tactics like Alternate Fee Arrangements in their many varieties. This is fine, and it was needed. I submit, however, it’s not enough anymore. AFAs involve law firms, and often incumbent law firms. That focus leaves a lot of tools unused in the GC toolbox.
It also does something else: it makes the invoice the key target in cost control.
This is appropriate if a company is in its early stages of the cost control journey. And it will always be part of the process. General Counsel will need a consistent way to know whether what they are spending on outside lawyers is “in the market.” Both in the aggregate, and with individual firms. Maybe someday even with individual lawyers.
However, it’s just a start. Experts will tell you that an invoice is a lagging indicator: that many things happened to get to that point, and if you are looking mostly at how outside counsel get paid, you are missing an opportunity for more structural improvement.
So what is Cost Control 2.0? Going forward, it is a move backward. Backward, that is, in time. It means taking an earlier look at what the enterprise really needs legal-wise. Here are some of the questions I hear in-house bar asking:
1. Do we really need to do this?
2. Could it be done by a client?
3. How about by using a computer or software?
4. Can it be done in-house rather than by a law firm?
5. Can it be done by non-lawyers instead of me?
6. Could it be outsourced entirely?
7. Or maybe by a less expensive firm?
Note that it we didn’t get to law firms until number 7. And we know from experience that an AFA with a law firm that is too expensive for the task will typically be much more expensive than choosing a firm with a better cost structure and delivery model in the first place.
There is a lot more to this, and it will be covered here later this quarter.
And to be perfectly clear: while the reality of Cost Control 2.0 involves the entire corporate legal industry, the responsibility for it resides at the doorstep of general counsel. As Ron Friedmann pointed out yesterday (with a great five-point checklist to boot), if a GC doesn’t do this, others can. And will.
Tomorrow, a closer look at #3 in the list above. Will technology be the answer this year? Stay tuned…
I want to start the new year looking at the state of the legal nation. Yes, I am borrowing the format from the constitution; which commands the president thusly:
“He shall from time to time give to Congress information of the State of the Union and recommend to their Consideration such measures as he shall judge necessary and expedient. ”
— Article II, Section 3 of the U.S. Constitution
I’m fairly certain that this is the first time I’ve cited the constitution here. It’s about time.
I will leave matters relating to the real Union to our President; you, dear readers, can be the Congress, though. And we know what the public thinks of Congress…
First, a definition. By “legal” I mean the corporate legal industry, i.e., that which is focused on the delivery of law to the enterprise. Like the president, I want to look at some important issues, and then see what it means for the corporate legal agenda this year.
So this is State of Legal 2012 item one: It takes a lawyer.
What I mean is that for all the talk of cost control, collaboration, teamwork, project management or social media “connecting,” nothing gets done unless someone does something. Each of those laudable concepts or techniques can get bogged down by the fact that often everyone is expecting someone else to take ownership and initiate action.
If any enterprise lawyer wants to stand out these days, try this: when someone asks “Who will take on X?” say this first in a confident tone:
I will.
Yes, everyone sitting around the conference room table will turn and instantly look at you. Many will think “Whew, I dodged that bullet.” And at least one will mumble almost audibly “What an idiot…”
What’s more, you do it without caveats, provisos, limitations or memos-to-follow. We’re talking pure, unadulterated commitment.
Responsibility involves risk, and yes, also involves work. Nothing will happen in 2012 without work, so the official sign for the road ahead is:
Taking this image literally, you need the right tools, and you have to dig in the right place. More about both in the coming days. If some lawyers want to take more responsibility publicly, there will be ramifications for legal departments, law firms, and lawyer training, I can assure you.
If there is any Opposition response to this, that can go in the comments. Not exactly equal time, but it’s the best I can do.
I was pleased to learn yesterday (via @ronfriedmann) that this humble blog was mentioned in the 2011 Canadian Law Blog Awards.
There is a “Friend of the North” category for the “CLawBies,” devoted to blogs from the U.S. or Europe with a Canadian nexus. The winner was the excellent 3 Geeks and a Law blog.
The Wired GC rounded out a group of runners-up that included Above and Beyond KM and Strategic Legal Technology.
There are three reasons why this is very gratifying, beyond the fact that the Wired GC HQ is only about 20 miles from the border of U.S. and Canada:
1. I was GC for a JV that was owned by a major Canadian company. I worked alongside many fine lawyers based in Toronto and Calgary. Most were adept at talking less and accomplishing more. They are thus well-positioned as our industry leaves time-sheets behind.
2. I have often said to family and friends that “If X wins the next election, I’m moving to Canada.”
3. I know that the line “Born and raised in South Detroit” in Journey’s “Don’t Stop Believin’” literally refers to Windsor, Ontario.
Congratulations to all the winners, and a special “Thank You” to Stem Legal, the organizers of the CLawBies. They really get how lawyers should use the Internet.
And no, that is not a line from a Rush song…
About 300 miles due north of the Wired GC man cave is Lake Superior State University. It is in Sault Ste. Marie, Michigan, where they occupy a nice campus, near the Soo Locks.
What they are known for this time of year beyond snow is their List of Banished Words. There are some amazing ones each year, and 2012 is no exception. One did catch my eye, however:
THE NEW NORMAL. “The phrase is often used to justify bad trends in society and to convince people that they are powerless to slow or to reverse those trends. This serves to reduce participation in the political process and to foster cynicism about the ability of government to improve people’s lives. Sometimes the phrase is applied to the erosion of civil liberties. More often, it is used to describe the sorry state of the U.S. economy. Often hosts on TV news channels use the phrase shortly before introducing some self-help guru who gives glib advice to the unemployed and other people having financial difficulties. Robert Brown, Raleigh, North Carolina.
Huh? Wait a minute, we were just getting used to this concept in the law! What’s next if it’s not new or normal? Let’s just hope Mr. Brown never needs a corporate lawyer by the hour, at money-center firm rates. No value for you!
I was concerned that banishment of this particular phrase could do harm to a quality resource written by two of the most intrepid leaders of the legal change movement (maybe there are now three, or four). So I called in a few markers from the LSSU faithful and think I have an understanding that the use of “The New Normal” for good and right legal purposes is grandfathered in for 2012. Beyond that, we shouldn’t push our luck, or there might be some blowback.
While I am glad in some ways for the shared sacrifice that was 2011 to come to an end, I think 2012 has potential for real progress. Perhaps even involving some ginormous things. I will outline seven that reflect “The State of Legal – 2012″ right after New Year’s Day. I immodestly predict that at least a few will help smart lawyers win the future (without any trickeration).
I want to wish everyone a very happy new year, and thank you in advance for coming back next week.
(Image source).
There was news this week that Bryan Cave and Holme Roberts & Owen were “merging.”
However, it looks like the 900 lawyer Bryan Cave is really acquiring the smaller Holme Roberts, which has 175 lawyers or so. A sign that this really isn’t a “merger” is that two of the offices of Bryan Cave’s target will be known as “Bryan Cave HRO” for 18 months.
It’s interesting that this deal involves a firm based in St. Louis (Bryan Cave) and Denver (Holme Roberts), while the merger earlier this year of Faegre & Benson and Baker & Daniels involved firms based in Minneapolis and Indianapolis, respectively.
So while we are seeing legal M&A in the fly-over parts of the US, what about firms on the East or West coasts? Part of the answer for the lack of similar deals there may be that the larger firms based in the money centers already have a presence in key areas of the US or are looking internationally for growth.
The press release for the Bryan Cave HRO deal contains this note about its rationale from the latter’s managing partner:
It was clear to us from the beginning that Bryan Cave and HRO share common values, including a passion for building long-term relationships with clients. This combination allows for the unbroken continuity of those professional relationships while also permitting us to offer a wider array of legal services to existing and new clients. We look forward to serving Bryan Cave’s existing client base in our home markets.”
To grow, all large law firms need to offer more services to an expanding client base. I define that as organic growth. Acquiring a firm can be a smart strategic move. But it is not the same as organic growth. That is increasingly rare, due in part to the cost control and quality gauntlets that most general counsel have thrown down.
In this new legal world, law firms have to re-earn the work every month.
All that said, a tip of the Wired GC cap to Bryan Cave for stepping up and showing optimism at a time when many firms are retrenching. And good wishes to the attorneys at Holme Roberts & Owen; hopefully being HRO will be A-OK.
