Strategies for Aligning Cost with Value
Recession" of 2008. As in most indus-
tries, the aftermath of the Great Recession
has had a significant impact on the
business of law, both for the consumers of
legal services in-house law departments
and for the traditional suppliers law
firms. The goals for each have remained
largely the same, but are now increasingly
in conflict with each other.
house law departments is to efficiently
achieve successful outcomes, while the
goal for most law firms is to increase
profitability. These goals can happily
co-exist when the cost of legal services is
not an issue. However, we all know those
days are long gone. Post-Great-Recession
law departments are now reporting to the
CFO as well as the CEO and the board.
Law department leaders are challenged
with managing risk, handling budget
pressure, creating predictability and
doing more with less and yet must still
achieve successful outcomes. Law firms
have their own challenges to manage
risk, handle client pressure on fees,
combat commoditization and maneuver
competition from technology and non-law
firm legal service providers and yet
increase profitability to retain top talent.
Has the new economic environment
created a dynamic where it is impossible
for law departments and law firms to
meet their sometimes shared, but often
conflicting challenges and goals? No, but
changes in approach and structure are
required from each.
Law firms have been slow to adapt.
Those that have been able to break away
from decades of traditional thinking have
done well. The firms that have made a
disciplined commitment to their place
in the market are thriving. Firms that
have narrowed their focus to exclusively
high-tolerance/bet-the-company matters
are able to command a premium for their
services. Also doing well are firms that
have restructured to eliminate ancillary
and low profit margin practices and who
have changed compensation structures to
more business-like models. Alternatively,
firms that are handling commodity work
technology and be mindful to stay within
their niche. Finally, the rise of high
quality boutique firms is increasingly
filling the need for sophisticated legal
services at more reasonable rates. (See 10
Boutiques Giving BigLaw a Run For Its
Money, Law360, July 8, 2015.)
What can law department leaders
do to align cost with value in litigation?
Like law firms, law departments have to
function and think differently. There are
three main strategies that law departments
are using in this regard: disaggregation,
alternative fee arrangements (AFAs) and
aggressive case management.
is to disaggregate the supply chain of legal
services. It is no longer the norm to only
use a select group of outside law firms
to satisfy all legal service needs. While
the largest shift away from using outside
counsel is to bring more work in-house,
it is a pendulum that swings every five to
10 years and is not terribly innovative.
The more interesting disaggregation
strategy has been to divide the legal
services pie into three parts: outside
law firms; technology and technology
service providers; and non-law firm or
non-traditional law firm service providers,
often boutique firms.
Horses for courses are important.
Within a disaggregation strategy is
the critical need for selection of the
appropriate outside counsel, and
clearly defining the scope of work to be
performed by that lawyer or firm. The law
departments that are leading the charge
on disaggregation not only choose counsel
that are best suited to handle a case, but
Barton LLP, cited by Law360 as "One of 10
Firms Giving BigLaw a Run For Its Money" and
by Acquisition International Magazine as "Ones
to Watch 2016, The Best Boutique Law Firms,"
March 2016. Roger is an accomplished litigator
with an international reputation for achieving
outstanding results. He has been rated by The
American Lawyer, Corporate Counsel Magazine
and the National Law Journal as one of the Top
Commercial Litigators in the United States and
has an "AV Preeminent" peer review rating in
Martindale-Hubbell. He has consistently been
selected to Super Lawyers in the New York Metro
Area, from 2013 to the present.
Graybar Building, 18
New York, New York 10170
bartonesq.com