The Revolution is Coming – Where Will Your Firm Be When It Arrives?

This was the title of a program offered today by the Los Angeles chapter of Legal Marketing Association, with panelists Susan Hackett, General Counsel of the Association of Corporate Counsel, and Michael Roster, former chairman of ACC, General Counsel of several major corporations, and managing partner of a major law firm.

ACC, at its annual meeting in Seattle, WA in October 2008 intends to roll out an effort to relate law firm billings to client perceptions of value. To some degree, the panelists suggest that they seek to roll back the clock 40 years, when there was a “professionalism” about billing, a stronger and more effective bridge of communication between the client and its relationship partner at t he law firm and less emphasis on increased profits per partner. ACC is not quite sure how they intend to get there nor what the “it” will look like. But, the discussions with stakeholders has begun. And the ride promises to be interesting, to say the least.

Following are some of my thoughts in response to the comments made by Mike Roster, this movement’s titular leader and Susan Hackett, ACC’s staff representative. Both are clearly articulate and earnest in their endeavor to cause law firms to reexamine their processes and to provide more relevant and effective tools of operation for its members, counsel of Corporate America.

•    From the lawyer’s perspective, “value” is another term for decreased fees from outside counsel
•    While value is in the eye of the beholder, there is no definition that outside counsel can grab onto … and one must question whether corporate counsel adequately conveys their needs to their outside counterparts
•    ACC is seeking institutional change, not “one-off” bargaining for lower fees
•    Corporate America is under tremendous pressure to reduce its costs to be competitive in a world market
•    The problem does not exist with the $1,000 per hour (see recent WSJ article) lawyer who produces value, but rather with the $400 per hour associate who does not
•    The catalysts for the current ACC project are:
    •    the latest associate salary increases at Big Law
    •    the incredibly high profits of Big Law
    •    the incredibly high profits per partner (average $1,400,000) of Big Law
    •    corruption of the billable hour methodology that was originally created merely as a tool to better understand what outside counsel were doing
•    Most outside counsel are disconnected from their clients’ reality
    •    Outside counsel think in terms of “cya” and increased billings
    •    Clients think in terms of seeking business objectives and solutions
•    CEOs are asking how can “average” partners, many of whom are relatively young, be earning $1,400,000 per year when the many management executives who’ve been working for 20 years are earning only $200,000
•    CEOs are expecting something extraordinary from these high earners but believe t hey are receiving ordinary, or less, service and work product
•    CEOs are asking how can a new associate who really is still untrained in both the specialty expertise and client relations be earning as much as an executive who has significant managerial responsibilities honed over 20 years of experience
•    CEOs are compelled to drive for efficiency to be able to compete; law firms drive to increase profits per partner by terminating lower revenue-producing partners rather than increasing their efficiency and effectiveness
•    When asked about high CEO “hand-shake” deals on departure from a company whose share value has substantially decreased, Mike Roster suggested that this is an aberration, not the norm, and that the managerial responsibilities shouldered by CEOs and other management have no comparability to lawyers in any event
•    Mike Roster further asserted that law firms’ product, memoranda, etc., increasingly bear no relevance to clients and are expensive
•    Corporate America is looking for outcomes and solutions, not memoranda or hand-wringing
•    It was suggested that Corporate America may be equally responsible with Big Law, a co-conspirator by failing to look beyond Big Law
•    More than 50% of lawyers earn less than $100,000 per year; many of these lawyers could competently address the challenges faced by Corporate America
•    Mike Roster suggested that Corporate America will begin to look outside Big Law. From this writer’s perspective, this remains to be proven.

Irrespective of the outcome of ACC’s deliberations over the balance of 2008 and beyond, the challenge has been formulated, the discussions have become more serious and the conclusions will be nothing short of interesting, perhaps even revolutionary.

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