As I’ve been speaking with clients and writing about the challenges many law firms and in-house law departments face in negotiating fees, I’ve been reminded, time and again, that you cannot simply negotiate fee arrangements and forget about them. Even if you are defaulting to the old standby of the billable hour, if you don’t regularly communicate your assumptions about the efforts required to achieve the desired objectives, or about timing and progress toward those objectives, or perhaps even about staffing of the matter, you increase the likelihood of unpleasantness at the end. That’s what I want to focus on today: the reality that the fee negotiation is only one step, early in the process through which lawyer and client manage their relationship with respect to a particular matter.
There’s been some interesting traffic on different aspects of this issue in recent weeks:
- Ron Friedmann’s recent post on communications hit the nail on the head. Lawyers need to be better communicators – not with courts, regulators, and counterparties, but with their clients.
- Paul Lippe’s wonderful column about the need to develop useful metrics through which to talk about quality of legal services notes another critical dimension, and the comments from Jeff Carr and others add to the sense that this topic is important and brings out passionate responses.
- Jordan Furlong’s most recent post reminds us the role that clients (and how they experience our services) have to play in determining the value of the service. He’s spot on that we ignore service, in how we deliver services, at our peril.
- Patrick Lamb has, not just recently, but relentlessly stressed the importance of engaging clients in assessing what is value. Lawyers who do not ask may never know what clients really value about their services, to their own detriment.
As the practice continues to change – call it evolution, transformation, or outright rebellion – both in-house and outside counsel are finding that to achieve what their respective clients require they must work ever more closely, not only on transaction or litigation strategy, but on everyday matter management and execution. As more and more matters start being handled under so-called alternative fee arrangements – be those monthly retainers, fixed fees, success fees, collars, and more – lawyers and clients are finding that the hard part is not coming up with the fee arrangement, but changing old habits about how they manage the work subject to those arrangements. Law firms are starting to take notice and cast about for tools and methods they can use to manage matters more effectively. In my experience, it’s not just a question of adopting technology or a methodology, but of whether lawyer and client change how they collaborate.
- Legal Process Management, Lean and other related methodologies help increase lawyer’s awareness of process flows and bring some attention to waste so it can be reduced, but unless they are used collaboratively by counsel and client, they are insufficient to drive the kinds of efficiency gains that are demanded of the legal function today. Counsel can only leverage their templates and knowledge management tools and avoid reinventing the wheel if their clients are prepared to let them do so. Counsel can only avoid looking under every rock along a path if they can agree with their clients about which rocks could be hiding risks and which are really just gravel to be trod on.
- New, more granular, billing codes can help law firm partners and their in-house counterparts understand better what kinds of activities are taking how much time from which resources; with such data they can more effectively budget and plan future engagements. But unless those codes are used as intended by busy time billers, and unless law firm partners can believe that more granular and more accurate data will be used collaboratively and not punitively, tracking systems are more likely to produce defensiveness and frustration than efficiency or innovation.
- Clear engagement letters that go beyond the usual disclaimers and start to look more like professional services Statements of Work, which articulate deliverables, timelines, and assumptions critical to understanding the scope of effort expected by lawyer and client, are useful. But if they are filed away never to be looked at again, they become useless as a tool for jointly managing an engagement.
At the risk of restating the obvious, I’ll close with this point: negotiating fee arrangements, even when done collaboratively and creatively, is just the start. To achieve the savings, predictability, or accountability that in-house counsel may be seeking, or the profitability, revenue mix, or reputational benefits law firms may be striving for, lawyer and client must work closely together to implement the fruits of their negotiation. But if effective relationship management and change management processes are required for the implementation of their deal to be successful, perhaps the time to start talking about what those are is during the negotiation itself.