Lexpert Magazine

70 LEXPERT MAGAZINE | JANUARY/FEBRUARY 2018 BY RICHARD STOCK | COLUMNS | Richard G. Stock, M.A., FCIS, CMC is a partner with Catalyst Consulting. For law department manage- ment advice that works, Richard can be contacted at (416) 367-4447 or at rstock@catalystlegal.com. Resistance or Collaboration? IN THE PAST five years I have seen the ascendency of legal procurement profes- sionals and Directors of Legal Operations in the corporate setting. In almost every instance over the past 20 years of leading procurement initiatives for banks, tele- com companies, utilities, and insurance companies, I have encountered procure- ment professionals who also manage the procurement of other professional services for their companies. Categories such as IT, benefits and payroll, and management search come to mind. Similarly, Directors of Legal Operations tend to have re- sponsibility for activities such as recruitment, technology, infra- structure and budget. It is inevit- able that procurement and legal operations should overlap when it comes to managing more struc- tured processes for retaining exter- nal counsel. e Chief Legal Officer typ- ically has a seat at the company's executive table, while Procurement rarely does. Legal departments jealously guard their relation- ships with external counsel. ere is ample evidence that in-house lawyers continue to do so in the face of initiatives to better leverage a company's prestige and buying power as a way to secure greater value from external counsel. Lawyers consider working with exter- nal counsel as a relationship-based busi- ness except for the most routine work. And law firms like this. For this reason, procurement professionals require more than project-management skills and ro- bust processes if they are to act as equals with Legal Operations. ere are three basic conditions and op- portunities for collaboration. e first is to collect solid information about the com- pany's consumption patterns for legal ser- vices. Many companies with good matter management systems — systems typically managed by the law department — will be able to identify total billings and hours by area of law for each law firm. Yet, many features of such systems are not activated or available, particularly those that can ana- lyze the relative complexity of matters and staffing patterns by legal specialty. Most companies fail to ask for detailed matter budgets from their law firms. ose that do fail to analyze pricing patterns and pre- cedents. Procurement and Legal can work together to upgrade the type of informa- tion that is essential for the next generation of arrangements with law firms. e second area that both Procurement and Legal Operations need to improve is legal service delivery. ere are two as- pects to this. e first relates to the kinds of infrastructure and technology that are increasingly available from law firms to support the simplification and acceleration of instructions given to law firms, how in- dividual matters are defined and budgeted, and how the work of the firms is to be in- tegrated with the work of the legal depart- ment and internal clients in the company. Too few law departments have streamlined and harmonized these processes across the different members of the law department. Law firms have more "know-how" about this than most law departments. Procure- ment and Legal should collaborate to introduce harmonized operating practices with preferred external counsel. e second aspect of legal services deliv- ery is performance management. Very few law departments systematically evaluate and compare the performance of law firms across specializations and over a sustained period. Evaluation may not feel like a nat- ural process in a relationship-based inter- action, yet Procurement can help legal de- partments manage this important process. ere is a final area ripe for improvement in legal service procurement. is is the migra- tion away from hourly-based fee arrangements towards business models that will price portfolios of legal work using a hybrid ar- rangement: a base fee in combina- tion with performance-based fees that target innovation, results and cost management. It is too easy for Legal and Procurement to elbow each other for primacy over discounted hourly fees, but managing a race to the bottom of the hourly rate barrel adds no value to a company's relationship with pre- ferred counsel. Law firms will remain professional in the work they do, one hour at a time. But Procurement professionals and Directors of Legal Operations must cra a new game plan anchored in solid data analytics, trans- formative service delivery and performance management, and non-hourly fee arrange- ments if they are to secure greater value from external counsel. Collaboration should trump resistance every time. Procurement professionals and directors of legal operations would do well to pool their resources LAW DEPARTMENTS 'PROCUREMENT and Legal can work together to upgrade the type of information that is essential for the next generation of arrangements with law firms'

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