#AALL14 #AALL14 #AALL14 AFAs and Facing the Client Paul Covey Julia Stahl-Hughes Lucy Curci-Gonzalez, Moderator
#AALL14 Presenters Paul Covey Julia Stahl-Hughes Managing Director for Strategic Director of Library Services Pricing & Analytics Stradley Ronon Stevens & O’Melveny & Myers LLP Young LLP Lucy Curci-Gonzalez Director of Library Services Kenyon & Kenyon LLP 2
#AALL14 Outline • Market Trends • Strategic Pricing • Informed Pricing • Alternative Fee Arrangements • Matter Budgets • Legal Project Management • Finding a Way In 3
#AALL14 4
#AALL14 Market Trends 5
#AALL14 Growth in Demand for Legal Services 6
#AALL14 Flat Increased Buyer’s Demand Competition Market 7
#AALL14 Clients focused on VALUE Law Firms focused on deliveringVALUE 8
#AALL14 The Search for Value: Clients Law Firms • Growth of in-house • Growth of fixed fees • ACC Value Challenge • New staffing models • Billing metrics • Giveaways 9
#AALL14 Value Price When offered four possible law firm pricing options, 36.4% of CLOs said they wanted ‘transparent pricing’ in which they understand how and why the price is set and have the opportunity to discuss changes; One-third of CLOs chose ‘guaranteed pricing’ as their preference; and 20.3% of CLOs preferred ‘value - based pricing’ that varies based on results. Only 9.6% of Chief Legal Officers say they wanted the ‘lowest price’ available . 10 From 2013 Altman Weil Chief Legal Officer survey results
#AALL14 Strategic Pricing 11
#AALL14 What is “Strategic Pricing?” Strategic pricing sets a product's price based on the product's value to the customer, or on competitive strategy, rather than on the cost of production. Competing through pricing means recognizing what your customers value and charging them accordingly. From What is Strategic Pricing , Evangeline Marzec, Demand Media 12
#AALL14 The Best Strategic Pricing Arrangements: • Better align law firm and client interests • Emphasize value • Increase predictability of outside legal spend • Encourage efficient matter management • Create a genuine partnership between law firm and client. 13
#AALL14 Informed Pricing 14
#AALL14 Client Intelligence • Legal Spend – Magic Bullet? – Reference USA – Annual Report 15
#AALL14 Client Intelligence • Current Firms - Litigation – Federal • Court Link • Monitor • PACER • Bloomberg Corp Rpt. – State / Local • manual – Monitor?? 16
#AALL14 Client Intelligence • Current Firms – Transactions – SEC • Knowledge Mosaic • Monitor? • Current Firms - Transactions – Other Transactions • Capital IQ • Merger Market • Deal Book • Asset Backed Securities Alert database • Search • Monitor – levereagedloan.com 17
#AALL14 Client Intelligence • Current Firms – Other – Web Search – Press Release search 18
#AALL14 Competitive Intelligence • Strengths/Weaknesses • Rate Structures – CourtLink – Valeo – Martindale • Cost data for similar – Website cases – Rival Edge (ALM) – TyMetrix – Legal Intelligence (ALM) – Local Newspapers (general / legal / business)
#AALL14 Matter Intelligence • Other Sources • Judge / Jurisdiction – Lex Machina – Almanac of the Federal – Litigation Monitor Judiciary – CourtLink – Westlaw Profiler – Rival Edge – Manual (Westlaw/ PACERpro) – Legal Intelligence • Opposing Counsel – News Aggregators – Westlaw Profiler – PACER/ PACERpro – Manual (Westlaw / PACER) – Rival Edge
#AALL14 Alternative Fee Arrangements 21
#AALL14 AFAs – A Continuum of Risk Matter Budgets Volume Incentives Blended Rates • • • Lower hourly Can reduce Often a de facto fee cap from the rates as volumes sticker shock of client’s increase partner rates perspective • • Provide an Best for work that • Provide incentive for the can be well client to send leveraged Predictability more of its work • • Encourage Do not inherently to the firm Efficiency reward efficiency • Do not inherently or offer the client • Improve reward efficiency budget certainty Communication or offer the client • Align Incentives budget certainty 22
#AALL14 AFAs – A Continuum of Risk Holdbacks + Fixed Fees Contingency Success Fees with or without collars, • Zero or small cost by segment, matter or • Lower cost to to client up front client client up front • • Provide Provide an • Provide an Predictability opportunity to opportunity to earn a large fee • Encourage earn a greater fee based on Efficiency based on specified • Improve specified outcomes Communication outcomes • Align firm and • Align Incentives • Align firm and client interests; • Reduce client interests; firm assumes Administrative firm puts “skin in high risk for high the game ” Resources on potential reward Invoice Review 23
#AALL14 Matter Budgeting 24
#AALL14 “Achieving a great legal outcome is assumed from any firm that we hire. So even if you get a great result for us, if you exceed the budget in the process, we will consider the representation a failure.” From a client, following a complete victory achieved in a case that could have resulted in the client paying more 25 than $1B in damages
#AALL14 The Budgeting Process Talk to the Discuss case trajectory, key assumptions, client risks, what the client considers “success” client Create/Modify Look at representative matters, consider available budget staffing Capture the scope of work covered by the budget Communicate and the key drivers in a memo to the client Budget Use emails, data on matter pages and the monthly Monitor bills to monitor activity levels against the budget budge t Repeat 26
#AALL14 Sample Matter Budget Excerpt 27
#AALL14 Legal Project Management 28
#AALL14 Staffing – Work – Processes – Flow 29
#AALL14 Staffing • Right person for the right job… – Legal • Staff Attorneys • Contract Attorneys • Outsource – Administrative • Professionals – library / accounting • Para-professionals – paralegals, IT staff • Outsource 30
#AALL14 Efficiency • Research and Develop – Knowledge Management – Document Assembly – Consistency Evaluators – Research Tools 31
#AALL14 Some Implications of Fee Constrained Work • A focus on staffing mix & efficiency • Better communication • Increased use of Phase & Task Codes • Timely Time Entry 32
#AALL14 Key Take-Aways • Understand what “success” means to the client, both qualitatively and quantitatively • See matters from a client’s perspective and understand the performance metrics that are important to them • Invest effort into capturing more aspects of matter experience to enhance knowledge and enable the ability to confidently price services • Create budgets, even when not requested, and communicate with clients regularly about case trajectory and budget impact so that there are no surprises • Seek client feedback regarding performance, both in providing legal service, and also in matter management 33
#AALL14 #AALL14 Finding a Way In
#AALL14 Getting Involved • Unintentional • Intentional 35
#AALL14 Unintentional Organic • Dumped • Sidelines – Up to speed – Act don’t react – Triage – Assess the situation – Plan – Make Contact(s) – Involve other departments • Casual discussion • Open ear – Offer professional assistance 36
#AALL14 Intentional Create a Need • Go Big or Go Home – Grant family – Who’s house? • Knight in Shining Armor (KISA) – champion – Old / New Normal – Back channel iteration 37
#AALL14 Intentional Back-channels • Monitor research/retrieval – Reference staff? – Practice Group Structure – Committees – In general? Keep your ear to the ground 38
#AALL14 Intentional Back-channels • Touch – Monitor/Update – Practice Group Point person (KISA) – Committee Person (KISA) – Administrative staff 39
#AALL14 Intentional Back-channels – touch • Casual discussion – where? – Coffee Room (visit different floors) – Elevator (?) – Hallways/Library/Office – Lunch – Events 40
#AALL14 Intentional Back-channels – touch • Casual discussion – about? – What they are doing – LISTEN – Existing helpful work product (repurpose?) – Offer expertise (share) – Develop bibliography/repository • FOLLOW UP (repeatedly) 41
#AALL14 Intentional Back-channels – foot there • FOLLOW UP (repeatedly) • Leads to possible meetings - CALENDAR 42
#AALL14 Questions and Answers Contact Information • Paul Covey: pcovey@omm.com • Julia Stahl-Hughes: jhughes@stradley.com • Lucy Curci-Gonzalez: lcurcigonzalez@kenyon.com 43
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