Innovation in Legal Services - Doing More with Less

Author: Richard G. Stock - Inside Counsel, Summer edition, 1997

Law department conferences and legal management publications have been featuring top-notch speakers and good advice for the last three (3) years on everything from alternative billing to the strategic contribution of the law department. Counsel new to the law department or recently promoted to management have very different requirements than those with more experience in the department and with corporate life. Still, there is no escaping the fact that there is more to do with less time, less money and fewer people. Even when the objectives are pretty clear for the law department, it seems almost an insurmountable task to begin and to complete those projects that are not client-related.

Since September, 1996, our assignments with three (3) law departments have included a component of customized benchmarking for requests for proposals, for engagement letters and for performance management. Discussion, rather than surveys, with ten (10) of Canada's best regarded law departments provided insight on exactly how it is possible to accomplish special projects and to position the law department more strategically within the company.

Innovation

Corporate law departments, like outside counsel, face unprecedented scrutiny and pressure to deliver high-quality, cost-effective and efficient legal services - an approach that appears focused on the here and now. Tushman and O'Reilly in their new book Winning Through Innovation introduce the notion of "ambidextrous organizations", firms that, on the one hand, reconcile people, processes, resources and structures to attain success today, and, on the other hand, simultaneously support a multiplicity of cultures, people and processes to create "innovation streams" or patterns by which the organization develops new and better products and services that extend and often replace the old ones. The law department must become an ambidextrous organization.

Resource Management

The best short-term approach to innovation in the law department, especially in smaller departments, is to begin on a number of fronts at the same time, with manageable and smaller-sized projects. The resource management area lends itself to this quite easily and the place to begin is with some form of activity-based tracking by the lawyers, paralegals and support staff of the department. The system need not be time-keeping and need not be linked to the company accounting system, unless there is a "charge-back" policy in force. But it should be sophisticated enough and networked across the department to allow each member to personally record the type of advice, document research, or transaction carried out for each client within the company. Good internal tracking systems with report-writing capability are available at a modest cost or can be developed in-house. Only in this way is it possible to improve work allocation and priority-setting, and to know what value to communicate to clients in the company.

The second thrust to doing more with less in resource management requires that certain functions be moved "downstream" in the law department or that they be eliminated altogether. Failure to do this necessarily means that the development projects for the department and the education and compliance programs with clients will be too few and too late. Some law departments are leveraging internally by recruiting paralegals, by seconding associates from law firms, and through the use of students. Many law departments prefer to hire counsel with four or five (4 - 5) years of call. The demographics for many of these departments simply make it too expensive to not delegate. A few US law departments, with a large litigation caseload, have cut back on administrative time by introducing paperless invoicing and payment of outside counsel. This works well provided inside and outside counsel rely on a formal system of case budgeting and reporting. Uniform Task-Based Management Systems should come to Canada sometime in 1998.

The final component of resource management that allows for considerable innovation is the working relationship with outside counsel. Whether this takes the form of out-sourcing, partnering or convergence, many law departments have no choice but to meticulously review their "supply chain". Requests for proposals are being customized and will become more common. As a minimum, engagement letters are under review and are more comprehensive. When it comes to outside counsel, law departments are carefully reassessing.

• the extent of the firm's knowledge of the company's business practices
• legal expertise
• case management capability
• alternative dispute resolution capabilities
• professional fees
• costs and disbursements
• technological sophistication
• the balance of service, results, and price to achieve added value
• the range of other services and benefits provided by outside counsel

Selecting the Projects / Goals

In most business sectors, a good number of counsel receive a portion (10 to 15%, according to the 1996 Price Waterhouse survey) of compensation in the form of a bonus. Interviews with a number of General Counsel indicate that this bonus is tied in whole or in part to company results. However, some law departments have succeeded with re-balancing the bonus entitlement, such that 30% depends on team or law department objectives and 30% on individual projects and improvement in personal capabilities. Like outside counsel, members of the law department must strike the right balance between results, costs and service in order to deliver value to the client. For this to happen, it is probably sufficient for each department member to have no more than three objectives for the year that are "innovative" affecting new services or results, costs and client satisfaction. The same is true for the law department's special initiatives - three to five (3 - 5) are enough as long as they are strategic and client-centered.

Communicating Value

Getting the basics right and innovating legal services is a tall order. Success in accomplishing both, the ambidextrous organization is greatly mitigated if the client and senior management does not know about it. A number of General Counsel use a combination of measures to get the message across. These include a walk-about or e-mail discussion with the client when the assignment or service is complete, reminding clients that they should recognize counsel's contribution personally, especially for significant accomplishments, preparation of a monthly 1-page statement of key successes by the law department circulated to the management committee and/or the corporate directors, and more formal surveys of client satisfaction. The law department will thrive provided it innovates. Good client service is no longer enough and resources are unlikely to be added. Selecting individual (3 - 4) and departmental (3 - 5) initiatives which are strategic and client-centered is the challenge and the solution to doing more with less.