Outside Counsel Inside Counsel Partnering:
Through Technology to the Virtual Law Firm
A stunning 62 % of corporate legal departments considered firing one or more law firms in 2001 . The leading reason, by a significant margin, was "lack of responsiveness." Add Enron, pressures to cut legal costs on the part of clients, increased rates and demand for billable hours on the part of law firms, and increasing movement of lawyers and law firm mergers to this mix and you end get a very volatile situation.
Both law firms and corporate legal departments desire stable relationships where work can be done at a high level, responsively and in a way where law firms can be profitable while a corporate legal department can control costs.
There have been a number of significant efforts at "partnering" between corporate legal departments and their core law firms to create these types of stable relationships. The classic example is the famous "DuPont Legal Model" developed by DuPont and its outside law firms beginning in 1992 . The DuPont Legal Model grew out DuPont’s attempt to reduce the number of law firms it used (then over 300 ) to manageable number (currently 35 ) and, in the process, take advantage of a variety of techniques to improve the delivery of legal services.
The core elements of the DuPont Legal Model are ( 1 ) a business focus on DuPont’s legal issues, ( 2 ) an ongoing work process reengineering, ( 3 ) a commitment to cutting-edge technology, and ( 4 ) a shared culture of efficiency and cost control. (See http://www.dupontlegalmodel.com/files/onlinelibrary_detail.aspibid= 14 ). All lawyers who have corporate clients would be well advised to meditate upon these four elements.
Among other things, the DuPont Legal Model has resulted in the creation of the DuPont Primary Law Firm Network, an early form of a "virtual law firm," a collaborative team of law firms and service providers who are willing to and do work together. DuPont believes that the next step beyond simple "partnering" is the collaborative work team and that turning partnering relationships into collaborative work teams offer great value.
Consider this description of a "virtual law firm" (http://www.dupontlegalmodel.com/files/onlinelibrary_detail.aspibid= 14 ).:
The virtual law firm connects lawyers electronically and culturally. Through the use of applied technology, such as extranets, integrated case management software, computerized databases, electronic invoicing software, document imaging, cell phones, personal digital assistants, and trial presentation software, team members in different geographical locations can perform legal work efficiently and cost-effectively in a shared environment. But this technology still depends on the human element and on the willingness of committed participants to implement and use it constructively in furtherance of an articulated vision and clear goals. In a virtual law firm, participants must share a common culture.
This description raises many issues and is an excellent basis for your discussion of this topic.
I also want to emphasize this comment from DuPont’s white paper (http://www.dupontlegalmodel.com/files/onlinelibrary_detail.aspibid= 14 ): "Without the benefit of sophisticated technology, neither the concept of the virtual law firm nor the DuPont Legal Model could exist."
This article will focus on the technology side of moving to partnering then to collaboration and to virtual law firms and perhaps beyond. There are also very difficult issues raised by taking these steps, competitively, economically, culturally and otherwise that also deserve very serious deliberation. I want to sketch out some key questions for you, some areas worth exploring more and some practical tips for getting started or moving forward.
1 . Ask Your Clients. A recent survey indicated that over 90 % of corporate general counsel would respond to surveys from their law firms. A tiny fraction of law firms use client surveys. Are there clients with whom you can extend existing relationships by means of technology or current technology cooperation into greater partnerships? Are they aware of initiatives like the DuPont Legal Model? Might they be considering such initiatives without including you in the discussion?
2 . Listen to Your Clients. I have heard many stories of companies all but begging their law firms to cooperate on technology. Note that the number one reason law firms get fired is lack of responsiveness. If you survey clients, you must follow up. Find out where they want to go, what their priorities are and what they want to accomplish with their legal services. Of course, you will want to get a clear idea of where you fit into that picture. A very important lesson from the DuPont Legal Model is that clients are not necessarily adversarial with their law firms. Cost cutting may not be the primary concern and companies are willing to explore creative fee arrangements that may be more lucrative for law firms while maintaining a more stable relationship. Don’t assume; ask.
3 . Learn The Playing Field. You cannot move very far toward implementing client-driven technologies if you do not know what technologies and capabilities your firm has or can obtain. It is rare to find a firm that is using or is even aware of all the capabilities of its software and systems, let alone to find lawyers and firms who have a good understanding of all the new developments in legal technology. In addition, it is vital to understand what software and technologies your clients use for their own work and how they would prefer to interact with you. You might use surveys, meetings with the client or meetings between IS people to compare notes on what software and systems are used.
4 . Find Ways to Cut Costs and Improve Profits. How much good will it do you to have your client telling peers and colleagues that his or her lawyer actually came to him or her with a way to cut legal costs? Likely areas of potential include identification of lower level work that can be commoditized or value billed, improved communications, hosting databases or eliminating the need for duplicate systems. Consider the issue of electronic billing. Corporate clients are bemused by law firms’ reluctance to move to electronic billing. They see electronic billing as a way to streamline procedures and cut their own costs while at the same time improving the cash flow of their law firms by speeding up the payment cycle. Isn’t this win-win? It is certainly worth taking the time to consider fully.
5 . Get You IS Departments to Talk. Exchanging ideas and creating good relationships between your high-level IS people and the comparable client IS people will ultimately be a key to any successful efforts in this area. Do they know each other now? Do they meet with each other? Can you facilitate that in constructive ways? This effort will help resolve existing problems, result in shared knowledge and set the stage for more extensive efforts.
6 . The Extranet Family. A key concept in collaboration has been the use of private, shared web sites commonly known as extranets. Extranets can take many forms – information portals, access to files and communication, case monitoring, document libraries and virtual deal rooms. It is important to realize that clients do not need the same features or even a full-blown extranet. A virtual deal room that simply gives access to documents in a case or transaction may be a perfect introduction to the use of technology for both a firm and a client. The time and cost savings of not Fedexing documents can be a measurable means of showing return on investment. Another idea gaining some momentum is the "project portal," an extranet dedicated to the work and resources in connection with a particular project.
7 . Apply the 80 / 20 Rule. The 80 / 20 rule definitely applies in this area. The idea is that, as a general matter, 20 % of your efforts will get you 80 % of your results. You want to identify and act on that 20 %. Which ideas make the most sense in your current context? From your point of view, which initiatives will best address the common reasons law firms are fired (improving communications to avoid "lack of responsiveness" issues) and hired (how can you show your expertise and understanding of the client’s business?)? Do these initiatives cut costs or enable creative billing approaches? Do these approaches connect the client to you and make it harder for the client to leave? Are these approaches useful to other clients? Finally, are they responsive to your client’s own list of priorities?
8 . Make a Plan. Obviously, these kinds of initiatives cannot be done on a "back of the envelope" basis. Written plans are appropriate. In this case, educating your client is a form of marketing. Implementing the systems may an element of firm survival with a client in addition to solid marketing. The more you show your knowledge of the options, your familiarity with what others have done and the benefits for your client in the form of a well-conceived plan, the better shape you will be in. Part of any plan should be a method of measuring results.
9 . Make it Reusable – Think Different. Some of the initiatives you take can be reused. Some aspects might even be licensed as moneymakers for your firm or even sold as products, either by your firm or jointly with a client. Be alert to intellectual property issues and opportunities, as well as reusable methods to implement similar projects for other clients. Databases of knowledge and expertise may also serve you well in the event of departures from your firm.
10 . Make it Sticky. Stickiness is a term that is sometimes used in connection with web sites. It refers to a site’s ability to keep a visitor on the site for a significant time and to visit multiple pages. By using technology to address key concerns for clients and to make it easy for them to work with you, you can also create a "stickiness" in working with your firms and your systems. As a result, you increase the costs and effort for a firm that wishes to take a client form you.
Conclusion. The DuPont Legal Model began in 1992 . More than 10 years later, DuPont and its primary law firms are still working out the model for a virtual law firm. It is not realistic for you to expect that you can jump immediately into a virtual law firm model. For one thing, the cultural and economic issues alone are too complex. But you can definitely take advantage of opportunities to collaborate with clients to put down the technological underpinnings that can lead to such a model and, in the interim, provide significant benefits for both law firms and clients, including, in some cases, allowing your firm to survive and do work for its biggest clients. If you do not address these issues, your clients may dictate the answers for you, and, lately, that may mean that they think about firing you.
Ten Practical Tips for Partnering with Technology Initiatives.
1 . Educate yourself. My web page at http://www.denniskennedy.com/clientdriventech.htm is a good starting point. But it takes a lot of work to get up to speed on technology alternatives. Hiring appropriate expertise may be desirable in many cases.
2 . Thoroughly understand the DuPont Legal Model. Your clients may approach you about the DuPont Legal Model before you approach them. They are reading about it and hearing about it in seminars. A great resource is http://www.dupontlegalmodel.com.
3 . Send a survey. Statistics indicate that the vast majority of clients are willing to respond.
4 . Listen to what your clients are already saying to you about technology. Lack of responsiveness is the major reason law firms get fired.
5 . Give your clients new ideas to think about. Clients cannot know everything that is available. Give them some great suggestions. Clients appreciate creative solutions. Be the first to mention the ideas.
6 . Get the right people involved. Are you the right person for this initiative? Who is? What role will your IS department play in the initial phases? I suggest that a high-level IS person be involved at the earliest opportunity.
7 . Facilitate relationships between your IS people and the client’s IS people. Here is a simple test. Ask the head of your IS department how many of the heads of clients’ IS departments are in his or her contacts list. I bet it is too small a number. Are there ways you can get IS people to get together on a regular basis. Presentations by your IS group to client IS groups may make sense.
8 . Find creative ways to control costs. Clients like law firms that are creative. They are also under pressure to control legal costs. Technology may allow you to show you are good at both. Controlling client costs is different from cutting your fees and profits.
9 . Use technology initiatives in a way to increase the costs for a competitor to steal your client away.
10 . Lead, follow (closely) or get out of the way.