In this week’s Law Firm Disrupted, we look at ways other than cost savings to value the success of new legal service delivery models.
I’m Roy Strom, the author of this weekly briefing, which you can express how much (or little) you value here: email@example.com.
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Finding Meaningful Metrics to Measure Client Success
There are a typical set of metrics that many in-house counsel point to when they discuss how they have redesigned their legal departments.
A convergence program may winnow a list of outside advisors to 20 from 200.
Outsourcing a portion of your legal department may lower spending by 30 percent.
Flat fees might provide some savings, too, just in case you feel underwhelmed by mere “price certainty.”
But truly re-engineering how legal work is handled should be done with other metrics in mind, too. Metrics that show the ultimate client, the business, is getting better results; not just a cheaper product. Cutting costs, after all, could simply be a down payment on the longer term costs associated with accepting more risk.
An example of good measurement comes from a partnership between Seyfarth Shaw and convenience store chain 7-Eleven Inc., which was recently recognized with a “value champion” award from the Association of Corporate Counsel.
The chain’s parent company has some ambitious goals to grow its footprint. By 2019, they want 10,000 7-Eleven stores in the U.S. and Canada. By 2027, they want 20,000 stores. That is a lot of work, however you slice it. But it would be even more daunting when you consider an internal metric the company kept that showed “deal fall-through rates” to be as high as 25 percent.
For every three stores that 7-Eleven opened, one fell through the cracks. Kristen Cook, senior counsel at 7-Eleven, said the legal department wanted to do better.
“You can’t be a fresh food and Slurpee destination if you don’t have a real estate operation to open stores,” Cook said. “One of our core goals is to not only be cost-effective, but to make sure we are aligned with the business department and supporting the strategy of the company.”
The department began a process of making its real estate operation more efficient in 2015, when it implemented an e-billing system. The system presented an obvious target for cost-saving: One-third of the company’s legal spending was on real estate matters.
Seyfarth Shaw had been a long-running adviser to 7-Eleven, with a relationship stretching back about 25 years. The firm won a bidding process to handle all of the company’s real estate work in the U.S. and Canada. The firm is paid a flat fee per store opening.
With the goal of reducing the number of failed store openings, members of 7-Eleven’s legal and real estate teams sat down with Seyfarth’s lawyers and members of their Seyfarth Lean team, which applies modified Lean Six Sigma principles to legal services.
Despite a company-wide hiring freeze, the legal team was able to show it could save money by hiring two new in-house real estate lawyers. One works directly with the Seyfarth lawyers on new store openings and other construction issues. And a second is focused on real estate litigation. (A third focuses on transactional issues for existing 7-Eleven stores.)
The resulting “process map” of 7-Eleven’s real estate closing process provides consistency across the store’s contracts and helps its team more quickly spot issues, such as zoning restrictions that lead to dead deals. Seyfarth lawyers also trained 7-Eleven’s 100-plus member team of real estate representatives on the new process and other legal issues.
Members of both the external and in-house legal teams can track a deal’s progress on SeyfarthLink, which Cook said helps hold the teams accountable to not let deals languish. It also provides data on how long deals take (or how many fall through) in different regions or cities that can help point out where more training may be necessary.
Eric Greenberg, a Seyfarth partner who has worked with 7-Eleven since joining the firm in 2005, said the project relied on about four project managers from Seyfarth and included lawyers that, like him, are certified in Lean Six Sigma projects.
“It is hard work. You really have to put a lot into it,” Greenberg said. “We gave Kristen and her team homework to do. And they put the time and effort into it. And if you have both the in-house and outside counsel team working so collaboratively together, you can come up with some really good product that helps the client and helps the business meet its goals.”
Ultimately, the new process has dramatically lowered “DFT,” or deal fall through rate. That metric is currently around 1 percent, Cook said. The program has saved plenty, too. Transactional outside counsel spend dropped 68 percent from 2016 to 2017, Cook said. And that is despite the volume of contracts being signed rising 19 percent.
Cook said she is considering getting a “green belt” certification in Lean Six Sigma. It is part of a “culture shift” in the 7-Eleven in-house legal department that she said has employees seeking out more efficient ways to do more types of work.
“We just think it shows the business that we understand what matters to them,” Cook said. “That we support the company and support services that help the whole company move forward. [We’re] not just [sitting] in a box and being a cost center to the company.”
That is a measurement more law firms should help their clients focus on.
Roy’s Reading Corner
On the Partner Track: My colleague Christine Simmons reports on a move by Weil, Gotshal & Manges to shorten its associates’ partnership track from roughly 10 years to about eight years. Alright, technically, it’s from about nine-and-a-half years to about seven-and-a-half years. But I figure the difference between 10 years and nine-and-a-half is about as meaningful as the difference between whatever was happening at Weil and whatever will be happening. It’s a story worth reading.
I’m just not sold on what exactly is attempting to be accomplished here. That’s partly because Weil’s executive partner Barry Wolf said the move is explicitly not motivated by a number of factors. It’s not an attempt to become an “up or out” modeled firm. It’s not an attempt to shave off one (or two) years of assured associate employment. And it’s not an attempt to inflate the income partner ranks. (Even though it may end up doing all those things? Who can say!)
What is the motivator? From the story: “The current generation of lawyers doesn’t want to wait nine or nine-and-a-half years” for a promotion decision, Wolf said.
Millennials are impatient. Got it. Either way, unless a firm is getting less stingy with its equity, what it calls its lawyers at various times in their careers does not seem to be much of a meaningful change.
Off the Partner Track: You may recall the story about John Quinn firing off a testy email to Faith Gay when she left Quinn Emanuel Urquhart & Sullivan earlier this year to form her own firm with another ex-partner. You know, the one where he said she’d been paid $100 million during her time at Quinn Emanuel. My colleague Scott Flaherty brings us the latest development in the dispute between the firm and Selendy & Gay, which is a reminder that the largest motivator in litigation is often emotion.
Quinn is apparently trying to enforce a clawback provision in the firm’s partnership agreement that gives it the right to collect 10 percent of fees from clients that partners take with them for 18 months after they leave. Gay’s firm says it is the first time the provision has been enforced by Quinn Emanuel. The request is at odds with New York State bar’s ethical rules restricting a lawyer’s right to practice, claims Gay’s new firm. Lawyers can’t do noncompetes. Straightforward enough.
But here’s some more detail about how the split led to this spat from Flaherty:
“The Selendy & Gay lawyers further allege that after they left Quinn Emanuel, Quinn sought assurances that they would not “poach” top associates from their former firm, in exchange for an agreement that Quinn Emanuel would not seek to enforce the forfeiture-for-competition provision. Selendy & Gay refused to sign onto any anti-poaching agreement, believing that, too, would run afoul of New York ethics rules. The petition alleges that Quinn Emanuel’s arbitration demand followed soon after those anti-poaching discussions ended.”