I'm back from vacation, and in this week's Law Firm Disrupted we'll look at how fast the movement that CLOC represents can drive real change in the legal market.

Please tell me what you think! I'm Roy Strom, the author of this weekly briefing, and I'm reachable at [email protected].

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Just How Fast is the CLOC Ticking?

 

I didn't have the chance to make it to the CLOC conference this past week. Poor planning of a vacation on my part.

But I've tried to keep up through some reporting my colleagues have done on the conference dedicated to legal business change. And the kind souls on legal Twitter have also been up to the task of relaying the messages from Las Vegas.

I also did cover one piece of news coming out of Sin City. Something like this: A public company teamed up with Elevate Services Inc. (which also affiliated with a new law firm) in an effort to cut the company's outside legal spend by 50 percent.

I'm going to try and use that news as a way to answer one of the biggest questions CLOC raises: Just how fast will the legal operations movement affect meaningful change in the legal market?

Jeffrey Carr, the general counsel of chemical distribution company Univar Inc., is the man behind the plan. He is no stranger to reinventing legal departments. At another Chicago-based chemical distribution company, FMC Corp., where Carr served as GC for 13 years, he pioneered a strict program to pay his outside counsel based on his valuations of their performance.

This billing program, known as “ACES,” includes a holdback of 20 percent of all fees followed by a payment of the holdback at between 0 and 200 percent based upon a report card that determines value. Value is defined as a combination of effectiveness, efficiency and client experience (known as “E3”).

“We focus on project budgets and we expect work to be done by the lowest cost resources capable of delivering value to us as the customer,” states a copy of Univar's new billing guidelines. “This is the essence of E3.”

Carr insists he will only work with law firms who agree to this set-up. They use his engagement letters; not the other way around. He says he is the customer. He gets to choose how he purchases services. And in that way, Carr is purchasing in a style that nobody would think is bizarre outside “Law Land.”

“Law Land has thought of itself as being exempt from these things because it is special,” Carr said. “Law Land is not special.”

You tell me: Is this an example of a “mature” in-house legal operation? Is it the type of program that would drive serious change (efficiency, communication and billing certainty) among Univar's outside counsel?

It seems like it to me. But what do I know? Let the in-house lawyers tell us.

Consider this survey from the Blickstein Group released in December, which asked legal departments to rank themselves from 1 to 5 on how mature they consider their legal operations departments. More than 42 percent of respondents answered a “4” or “5.”

So, 42 percent of legal departments are at least 80 percent of the way there? Is an “E3-style” billing program a “4” or “5” on that scale? If it is, 42 percent of legal departments are budgeting their work and paying law firms based on value? Could that be?

Seriously, if you were at CLOC, which for the uninitiated is a fast-growing organization that stands for Corporate Legal Operations Consortium, let me know what you think.

It seems like a hard sell. Even people involved with the survey doubted the results.

“Considering how new many law department operations functions are, and how much there is to be done, it's very surprising that so many consider themselves to be mature,” said Reese Arrowsmith, head of legal operations at Campbell Soup Co., who was involved in the survey.

Arrowsmith went further and noted that only 36 percent of respondents said they were using a preferred provider network, and “very few” were, for instance, measuring total case costs and making purchasing decisions based on that data.

Univar's news is the start of a possible success story. It is the start (perhaps the middle) of a meaningful change at the company.

But what about the bigger question: How fast will the industry change?

Univar spends about $7 million a year on outside counsel. Even if Univar hits what it considers a “moonshot” target of reducing that number by 50 percent, the legal market is out a mere $3.5 million. A top (and busy) partner can make that in a year billing about 2,900 hours at $1,200 a pop.

So the question is about scale. How many other legal departments will start on an adventure like Carr? Frankly, if 42 percent of in-house leaders think they are already there, the legal operations march won't drive much change.

So, I would echo the words of Arrowsmith (the Campbell legal ops head) in the Blickstein report. There is a “laundry list” of things in-house departments need to do before they are considered “mature.” For the sake of a lot of people betting on shaking up the legal market, hopefully the conference in Las Vegas energized in-house lawyers to set the bar higher.

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Roy's Reading Corner

 

On CLOC (some more): Reporting from the center of the universe—I mean the CLOC conference—my colleague Caroline Spiezio relays details from a panel on the future of data-sharing between clients and law firms. Featuring David Cunningham, the CIO at Winston & Strawn; ASOS.com general counsel Andrew Magowan; and T-Mobile's senior manager of legal department operations Winston Yeung, the group discussed the different things law firms and clients measure and what might happen if they shared those things with one another.

One interesting tidbit was the idea of clients sharing information on how efficiently different firms were handling their work. “Some firms will really enjoy that, and some firms are the ones swimming naked when the tide goes out,” Cunningham said.

On Collaboration: Toby Brown, chief practice management officer at Perkins Coie, writes here about what he views as an oft-forgotten aspect of what legal operations is all about: Driving change in the way lawyers work.

It is a useful read if you are looking for an actual example of change. He writes about a way to reduce the cost of acquisitions by 10 percent. It may seem obvious that tying change to a specific type of work is a practical way to achieve savings, he says, but there are challenges that often come down to communication between firms and in-house departments.

From Brown: “Innovation is more than selecting options. It must include a conversation around 1) a willingness to try new approaches, and 2) a willingness to adjust the structure of the fee deal so that both parties benefit. It also demonstrates that real change in the way legal services are delivered will benefit greatly from client/law firm collaboration. Win-win outcomes will be significantly more difficult to reach absent this combined effort.”

That's it for this week! Thanks again for reading, and please let me know what you think at [email protected].