Managing Legal
In Part 1 of this two-part post I wrote that the conventional business law firm does not compete on the terms of service — does not adhere to management disciplines — that best serve client companies:
- Know what the price will be before you agree to pay it.
- Don’t accept assignment of two lawyers to do the work of one.
- Every lawyer your company pays should be fully qualified to do the work you pay them for; don’t pay apprentice-type junior lawyers for their on-the-job training.
- Avoid labor-intensive use of lawyers on routine tasks. Automate what can be done by artificial intelligence and other tech-enabled solutions;
And low rates were not among the terms of service I emphasized:
“Picking the ‘low cost provider’ when choosing your company’s lawyers is dumb.”
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What’s a good first step towards these better terms of service — towards your lawyers adhering to the same management disciplines you require of every other function in the business — other than legal?
Get your company the terms of service — insist on basic management disciplines — in increments. Start somewhere.
Let’s say that federal income tax is a problem area for your company:
- You can look for a boutique law firm that’s focuses on tax;
- You can check out an accounting firm for the tax advice you need; or
- You can seek out an individual lawyer who practices within a conventional law firm — but retain solely that lawyer — avoid the “cast of thousands” that conventional firms try to add on.
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A friend of mine – new to his job as chief financial officer – received a bill from a law firm for advice in an obscure area of federal income tax law. The law firm was nationally prominent – one of the 100 highest revenues-per-partner practices in the country.
My CFO friend called the partner named in the bill:
“I’ve got your bill here. I see that you’re charging me for hours worked by associate tax lawyers Susan and Joe. I’ve worked with each. I respect them both. I’m fine with paying their charges.”
“But I see that I’m being charged for hours that you’ve worked. You and I have never met. I’ve never seen any of your work. I’ve never even heard of you until seeing your charges on this bill. How does payment for your work relate to some actual benefit that my company’s received?”
The law firm billing partner:
“I’m the relationship partner on your company’s account. I supervise the work that Susan and Joe do for you … Think of me as ‘quality control’.
My CFO friend:
“’Quality control’? Does that mean that you’re a tax lawyer yourself?”
The law firm billing partner:
“No. I’m not a tax lawyer — I practice in the real estate group.”
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My CFO friend had just learned that the lawyers on whom he’d been relying for sophisticated tax advice required “supervision” and “quality control” from another attorney.
This “supervision” and “quality control” came from a law firm partner who charged at a much higher rate than the attorneys my CFO friend had been dealing with directly.
The crowning blow: The attorney providing “supervision” and “quality control” — and charging handsomely for it — was not qualified at all in the legal specialty for which my CFO friend had sought advice.
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My CFO friend paid the bill in full – and then found a single partner in a boutique law firm whose practice is confined to the niche of federal income tax with which his company is concerned. He pays her $500 per hour.
My CFO friend deals solely with her. When he needs an answer, there are no time-consuming, error-prone games of “telephone” among a needless proliferation of lawyers.
And thus far his new lawyer hasn’t needed “supervision” or “quality control” from anyone else (!).
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For this incremental approach, my CFO friend got three of the above terms of service:
- No more needless multiplying of lawyers;
- No attorney who was inexperienced enough to require “supervision” or “quality control”; and
- No labor-intensive use of lawyers on routine tasks.
He continued to pay for this kind of advice by the hour.
And he continued to deal with this conventional law firm — and its dysfunctional terms of service — for his company’s other legal needs.
But this was a start.