The GCs have spoken. And already, their outside counsel have heard a “wake-up call” and a “warning bell” about impending change that could shake up competition among law firms.
A group of 25 general counsel from major companies on Tuesday announced a plan to share and analyze data on the law firms they use and the outcomes they achieve, with the goal of figuring out what types of firms and billing arrangements work best.
The “GC Thought Leaders Experiment” will use data to answer questions such as: How do the most pedigreed global firms perform relative to others? Do more expensive partners tend to receive higher performance scores than lower-priced peers? Do competitive bids negatively impact quality?
For firms that have built their business by presuming answers to those questions, the potential for the sand to shift underneath them will cause anxiety. Others, confident they’ve answered these questions correctly, see opportunity.
“There are going to be winners and losers here,” said William Henderson, an Indiana University Maurer School of Law professor who studies the business of law. “If you understand how this works and build your business around the right answers to these empirical questions, you will get more work. If you choose to ignore this, you will be cut out of work.”
The project is being run by a consultancy called AdvanceLaw, which includes general counsel and invited law firms.
The data the GCs are sharing includes firm names, billing rates, billing arrangements, matter types, practice areas, relationship length with outside firms, if a firm is a preferred provider and frequent performance reviews from in-house counsel. Every month, a different general counsel will write a report answering a new question based on the data.
Outside Counsel React
Law firm leaders reacted to the project with a mix of excitement and angst.
The excitement was borne out of a desire to please clients and an acknowledgement that law firms could use more input from clients on how to do that.
“I’d love to see the results of what they learn and be able to communicate that to people here to help us be better at what we’re doing,” said Timothy Mohan, chief executive partner at Chapman and Cutler, a finance-focused Am Law 150 firm with $196.5 million in revenue last year.
About 40 percent of Chapman and Cutler’s revenue comes from matters using alternative fee arrangements, Mohan said. And in that way, the firm may have a rooting interest in what the GCs find. Mohan said he is hopeful the project comes out in favor of “deep relationships.”
“You can invest more in your client as [a] law firm—provide free advice, do free work—to the extent there’s a volume of work that supports it,” Mohan said. He added, “The data may or may not back me up.”
Paul Theiss, chairman of Mayer Brown, echoed Mohan’s sentiment around the benefits of deeper, longer-term relationships. Theiss said he believes the proliferation of panel engagements, a topic the AdvanceLaw group will study, has benefited firms and clients.
“As a general matter, consolidation through panel appointments, done well, should result in an arrangement that looks more like a partnership and less like a business arrangement,” Theiss said.
The companies involved in the GCs endeavor include MasterCard, Panasonic North America, Flex, PayPal, Petco, Keurig Green Mountain Inc., Sony Electronics, Rockwell Automation Inc., Avaya Inc. and more.
Mohan and others were aware of other groups studying engagements between clients and firms, including Corporate Legal Operations Consortium and the ACC Value Challenge, but they said the idea of studying data to answer basic questions about the value of alternative fees or panel-based hiring represented the next step in a push by clients for better service.
Warts and All
The introduction of data analysis into the equation, however, did raise some concern for lawyers.
David Rueff, a partner and legal project management officer at Baker, Donelson, Bearman, Caldwell & Berkowitz, said the data could potentially be used to analyze how the same firm staffs matters across multiple clients. If that is the case, he said it could be “an unveiling” of how staffing and pricing can differ from matter-to-matter.
“This is going to reveal a lot of inconsistencies in the way lawyers move from one client to the next,” Rueff said. “So I think it’s a wake-up call for all of us. It’s the next phase in a dramatically changing market.”
Rueff did have some concerns about how useful the data may be on questions such as the benefits of legal project management. Given the different level of project management expertise at different firms, for instance, Rueff said the data may include “bad management practices.”
“So you’ll identify problems, but you may not be able to identify solutions with that data,” Rueff said.
Chris Emerson, chief practice economics officer at Bryan Cave, said one looming question about the project is “how good is their data?” Still, he said he was excited to learn the results from the project.
Emerson said positive results from the AdvanceLaw analysis could bolster his firm’s pitches at meetings with prospective clients. He said he could also draw insights from the results as he consults for in-house legal departments through his role as co-leader of Bryan Cave’s BCXponent.
“Being able to leverage the outcomes of this study could not only help us rethink or change some of how we’re pricing or packaging or trying to differentiate ourselves, but it could provide potentially some additional credibility around that,” Emerson said.
One longer-term outcome of the AdvanceLaw project could be to convert a broader swath of corporate clients to new ways of managing outside counsel. Skeptical lawyers may be persuaded by the power of data. For law firms, that means the report is worth paying attention to, Indiana University’s Henderson said.
“In the world we are headed into, there are clearly winners and losers,” he said. “There is an opportunity to make your business more defensible by getting yourself closer to these questions and paying attention to this.”