Year: 2015

With an eye toward budget predictability and managing risk, more and more legal departments are looking for opportunities to implement alternative fee arrangements (AFAs) with outside counsel as an element of legal spend management.

While there was a time when any arrangement outside straight billable hours was uncommon, even unheard of, a greater number of outside counsel firms are now open to AFAs. The issue, therefore, has become one of structuring the best fee arrangement for the situation: one that both parties will agree to align to the goals and financial requirements of each and is based upon accurate historical data that gives the legal department confidence that the arrangement is intelligent and appropriate.

INITIAL CONSIDERATIONS

There are numerous types of alternative fee arrangements utilized these days. Still, before deciding which might be most suitable given the circumstances, it is wise to consider the engagement in terms of actual value to the organization and the desired outcome. Is it a “win at all costs” matter or something much less critical in the big picture? Is compromise an option? Is any future relationship with the opposing party involved a non-issue, or does it involve an entity with whom you will need to continue to conduct business for many years to come? Both internal and outside counsel need to understand the situation clearly.

These factors can immediately help decide which is the best outside counsel firm to perform the work if there has been any doubt. It can also lead to the legal department and outside attorneys then analyzing the situation upfront to seriously consider the best approach to achieve the desired goals cost-effectively, beyond simply the appropriate staffing level.

ESTABLISHING THE ALTERNATIVE FEE ARRANGEMENTS

Trying to get work done for less money is not necessarily the sole — or even primary — reason behind opting for AFAs. The legal department may be looking for predictability and to simply keep costs from being open-ended, or there may be interest in allocating costs in a particular fashion, or to giving outside counsel reason to assume greater ownership regarding costs, or to divide the risk so that outside counsel assumes at least some of it. These considerations can drive the decision regarding which type of arrangement is preferable.

In any case, having relevant data to base the pricing on is critical. In the best case, legal spend management technology can provide budgeting, performance, and billing information compiled from previous engagements involving the same outside counsel and/or similar projects involving other firms. There is no reason to go with a “gut feeling” when concrete data is available to guide you with specific measurements.

With that information providing insight, there is a much greater likelihood of arriving at a “win-win” fee structure — where both parties are agreeable and excited about the arrangement and will not second-guess the project as work progresses.

Many types of alternative fee arrangements can be successfully deployed between inside and outside counsel: fixed fees for the entire engagement; phased fees, with a fixed fee for each segment of a project; value-based fees, where an hourly fee gets augmented by a sum to base upon the favorable or unfavorable outcome of the matter; contingent fees, in which outside counsel gets paid only if its work leads to a financial recovery (in which case it would receive a percentage of that total amount); or a blended hourly rate (for all timekeepers or by category).

But the key is ensuring that you are entering the discussion from a well-informed position. Variables and unforeseen circumstances can arise during an engagement, but having historical data from spend management tools to point to when structuring a new alternative fee arrangement can make both parties feel better about it from the outset.

Request a demo of BusyLamp eBilling.space.

Ask any general counsel what keeps them up at night regarding outside counsel management, what frustrates them, or what makes them want to fire a firm. You’re likely to get some variation on this: unmet expectations.

General counsels are working in a fast-paced world of change, with increasing regulatory complexity and compliance challenges, focus on risk management, and ever-present cost constraints. They want efficient, dependable service from their outside attorneys – and they don’t always feel like they are getting that.

HERE ARE A FEW OF THE SERVICE AREAS AND CHARACTERISTICS THEY VIEW AS MOST IMPORTANT FOR OUTSIDE COUNSEL TO DEMONSTRATE:

• Be responsive. Being attentive and available at a moment’s notice — or at least within several hours — and excited about the opportunity to serve shouldn’t fade away after the contract is signed.
• Respect the budget. The budget is there for a reason. Discuss anticipated departures from the agreed-upon plan as soon as feasible. In billing, accuracy, transparency, and compliance with guidelines are expected and critical to working relationships. Inevitably, there are times when the scope increases and the staffing for outside counsel must expand to accommodate the new requirements. But that shouldn’t mean that there will be an unpleasant surprise waiting to be sprung months down the road: Timely communication can allow for a discussion of developments and restructuring expectations regarding staffing and billing.
• Understanding the business. General counsel expects outside attorneys working for them will know the industry, its complexities, culture, and current trends.
• Utilizing technology. Outside counsel should be comfortable using basic technology and proficient at leveraging the latest developments to provide the most efficient, effective service they can per billable hour.
• Be fair, ethical, and responsible. Staff the work appropriately and don’t try to milk a project for more than it is worth.
• Make it a good relationship. This is less important for a one-off project. Still, it is impossible to undervalue the benefits of a long-term, productive professional relationship of trust and mutual respect.

HOW BEST TO HELP THE RELATIONSHIP FLOURISH AND HANDLE THE TASK OF OUTSIDE COUNSEL MANAGEMENT? HERE ARE THREE KEY WAYS:

• Communication. It’s a simple concept that is sometimes difficult to execute. Nevertheless, it is a critical investment in time and effort; too often, a simple lack of communication or a missed message leads to a major problem easily avoided or more effectively managed with a timely phone call. And remember, the phone works both ways — it’s not entirely the responsibility of the general counsel or the outside firm to initiate conversations.
• Technology. As mentioned earlier, leveraging technology is essential for outside counsel to deliver state-of-the-art efficiency. It’s also a way for general counsel to manage the relationship, through real-time e-billing monitoring and collaboration software, for example. It’s a sensible way to track current projects and leverage information to make informed decisions in the future.
• Mutual respect. If outside counsel is performing admirably, saving money and/or producing exceptional results, they need to be applauded (or rewarded) and, over time, given the appropriate display of earned trust. Similarly, outside counsel should conduct business as if their purse strings were controlling the budget and that the client’s success is their ultimate goal.

Communication and mutual respect are a matter of professional behavior. On the technology front, if you’re a little behind the times, Onit’s European legal spend management solution BusyLamp eBilling.Space can show you how software can be a key team player in collaboration, efficient operations, compliance, and outside counsel management.

Law firms and legal departments may not typically have a reputation for being early adopters of technological advances. But to add value to the business, it is essential now to be taking advantage of the timesaving, performance-enhancing software that is readily available.

Specifically, we will look at software for e-billing, matter management, collaboration, and contract lifecycle management. These tools allow lawyers and other key people at your business to work more accurately and efficiently, focus more time and energy on high-value activities, and gain insight through data capture and analytics. Furthermore, while cost, capabilities, and design vary by brand and product, there most certainly are technological solutions to fit your department or organization, be it small or large, geographically concentrated or widely dispersed.

E-BILLING

By providing a better overview of your legal expenses, along with accuracy and efficiency through automation, e-billing software can allow legal departments and organizations to save time and money and help in-house counsel with controlling outside counsel costs. Additionally, modern legal spend management solutions, such as Onit’s European legal spend management solution BusyLamp eBilling.space, go beyond e-billing capabilities and provide pre-bill information, real-time fee tracking, and powerful analytics. This can give you an edge by turning billing information into strategically important insight for future planning and management.

MATTER MANAGEMENT

Everyone must deal with matter management, from solo practitioners to attorneys at multinational firms and major corporate entities. Some software types will offer features beyond the essential function of managing case and client information, such as documents, calendaring, communications, and contacts. More is not always better, however. You need to define your needs and consider budget and ease of implementation within your current operations. The best matter management solutions will empower the entire organization to work together on legal matters, sharing knowledge and driving results in a highly collaborative fashion.

LEGAL DEPARTMENT COLLABORATION

The ability to collaborate in real-time, securely, and efficiently is critical. Simple tools such as e-mail, instant messaging, and video conferencing are commonplace examples of technological collaboration. But for legal professionals, creating documents, controlling them, sharing, and collaborating in a secure environment has become an essential capability. Again, the key to which platform is best for you rests on your needs: what you want to be able to do, with how many parties are involved, and in coordination with what other systems. Another important factor to consider? What your future looks like. Look for a platform that can scale with your company, supporting the multitudes of processes and documents that come with growth.

CONTRACT LIFECYCLE MANAGEMENT

Contract Lifecycle Management (CLM) involves the end-to-end automation of the entire legal contract management process, reducing costs, freeing up resources, and increasing profits for the organization. The key to an effective CLM solution? One that supports every element of the contract lifecycle — from capture and creation through negotiation, approvals, execution, and management — with integrated AI features to help augment and organize contract review. Integration into existing processes is also critical; to ensure a seamless transition and uninterrupted workflows, look for a solution that works with features like Word and email and can get up and running in a very short amount of time.

Technology is not something for the legal profession to fear. Yes, there may be areas in which software functionality can now deliver a service quicker, cheaper, and better than a well-educated, trained professional. But more than anything, the legal tech world is here developing solutions that will allow the legal profession to operate quicker, cheaper, and better than before — and allow lawyers to use their training and education in a more focused, effective fashion for their clients.

Request a demo of BusyLamp eBilling.space.

“Surprise!” is not something you usually want to hear from someone reporting to you on outside counsel billing or the entire spend of your legal department.

Save surprises for a milestone birthday. In the case of budgeted-to-actual billing reports, there is nothing like the sweet sound of just what was promised and expected.

Given many legal matters’ open-ended and unpredictable nature, don’t expect entirely accurate forecasting. However, there are many steps to minimize the variables and help control risk regarding overall spend, including some measures available through legal e-billing.

1. HISTORIC REVIEW

To look to the future, first, start with the past. A comprehensive review should include the legal services performed in-house and outside, by category; which outside firms performed the different types of service; the mix and billing rates of timekeepers; the number of hours budgeted and billed; and any broken guidelines. Estimating becomes more reliable by reviewing past spend and identifying trends and potential or likely areas of change.

2. ESTIMATE, ESTABLISH BUDGETS, AND TRACK YOUR SPEND

With the features and data available from today’s e-billing software, the estimation, budgeting, and tracking process has become simpler as the information accrued has become more detailed and accurate. By mining the data, it becomes clear what costs, staffing, and time can be reasonably expected from similar matters so that initial estimates can be more on-target. Develop an annual budget broken down by month; track it; check mid-month or phase by phase to see if any forecasts need to be revised and, if so, why.

Establish clear expectations with outside counsel and have them generate regular status reports and request unbilled totals, if necessary.

3. ESTABLISH AND MONITOR GUIDELINES

Established guidelines are essential and should cover the full range of service variables: billing rates and staffing expectations; billing formats; reimbursable expenses; and timing. Establish provisions for failure to adhere to the regulations. For example, what if a 90-day limit is in place for filing invoices, and an outside firm sends a bill six months after the fact? (You do not want a holiday surprise like that for work performed in the summer.)

Download “Getting Started with Billing Guidelines” for examples and how to write them.

4. ALTERNATIVE FEE ARRANGEMENTS

Alternative fees can be a means of managing spend, reducing spend, or eliminating surprises. Arrangements can include retainers (an established amount paid for a specific period), blended rates (covering partners and associates), fixed fees for particular projects, a cap on rate hikes, or a volume discount once reaching a certain level of spend with one firm.

With e-billing systems like those in BusyLamp eBilling.Space, you can establish, share, and submit budgets; track projects, progress, and spending; generate reports; and readily and automatically collect and analyze data.

Of course, given the technological advances of recent years, that should come as no surprise.

Learn more about BusyLamp from Onit, our end-to-end legal spend management solution built for European corporate legal departments.