Canadian Lawyer InHouse

November/December 2015

Legal news and trends for Canadian in-house counsel and c-suite executives

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NOVEMBER/DECEMBER 2015 42 INHOUSE L a w D e p a r t m e n t M a n a g e m e n t fee arrangements, and disaggregation of legal services. While many fi rms think alternative fee arrangements are about cutting into the traditional billable hour and fi rm profi t, Cudjoe argues AFAs serve to "share risk and drive correct behaviours." Both Cudjoe and David Aylward, senior business manager with RBC, spoke to the challenges of going through the process of consolidating the number of law fi rms their organizations use and the reaction from in- ternal clients. In particular, they discussed the diffi culty in convincing internal users that a fi rm they have long worked with is no longer on the roster because they simply don't measure up. "We have the lash wounds from doing that with internal customers," says Aylward. "It's tough to try and pull away the fi rms they love working with but you have to tell the story and explain why." Cudjoe said it requires considerable com- munication throughout the process about what historical costs have on things such as settlements with fi rms that didn't make the cut as well as other factors. "We just talk about it ad nauseam," she said. "They say 'But they're my neighbour' or 'They're good guys,' or 'They took me to dinner last week' or 'We've been using them for 20 years.' Instead, we look at how inno- vative they are and what kind of technology they use. It's a conversation." Also on the panel was Matthew Den Ouden, vice president with Huron Consult- ing Group Inc., who suggested legal depart- ments share the historical billing data they gather about their outside fi rms to enable a more informed conversation. "You will be amazed at the attention you will get from your fi rm when you have information about how you are working with them. It helps them see what you know about them. Many are gathering the data, but telling the story to the fi rm is the key as well," he said. To help in the data gathering, Aylward is a strong advocate of the adoption of e-bill- ing and matter management software. "E-billing is invaluable in helping you tell that external story," he said. The systems can enable oversight and transparency and create discipline for inter- nal lawyers, law fi rms, and the business. And after years of collecting fi nancial data from e-billing, many companies are now moving to harness it for metrics. Some systems al- low organizations to generate numbers on average cost per matter, average blended rate (and how much it has gone up over the last 12 months), as well as average matter duration and how much is being spent with each fi rm. Den Ouden noted if a department has more than $5 million in outside fi rm spend- ing a system can net a return on your invest- ment fairly quickly. And law fi rms have been more than ac- commodating to in-house departments that purchase billing software. It is not uncom- mon for law fi rms to have 10 or more dif- ferent e-billing systems running to accom- modate clients. Aylward emphasized the importance of do- ing due diligence on e-billing providers and understanding that a system can be good for providing intelligence data but not as good at measuring the outcome of a strategy. However, he said looking at cycle times for cases can bring a "discipline" to the busi- ness of the law department and is a good story to tell to senior management. "A certain kind of fi le might take six to 14 months but as long as you know that it breeds a certain credibility," he said. When it comes to benchmarking, Cudjoe said it's important to also measure your department against like-sized organizations and industries/sectors. "I look at what are my legal costs com- pared to insurance companies or the Cana- dian operations of a bank here," she said. Benchmarks can also be a double-edged sword. While initially departments will be able to see how they are cutting costs or fi nding effi ciencies, eventually there will be a "tipping point" and can become just another target for fi nance to pull out for discussion if costs go up or stay stagnant. Den Ouden advised to be realistic and initially look for areas that as lawyers, in- house can take aim at and see real results. "Ask 'What are the things I can change? What are the levers I can pull?' Keep your eye on the things you can make a difference on," he said. Aylward said while it may be tough to do with smaller departments or for those who are the "only legal offi cer," in-house lawyers need to take an interest in the data collection on billings and how matters are being handled from an effi ciency perspective. "Get involved in how your department is evolving. Jump in. Move away from only do- ing law," he said. IH E-billing is invaluable in helping you tell that external story. MATTHEW DEN OUDEN, Huron Consulting Group Inc. '' ''

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