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Law firms are paying a heck of a lot of money to get the answer to a perennial question: how to improve their relationships with clients. Morrison & Foerster, Pillsbury Winthrop, Gray Cary Ware & Freidenrich and others have recently been plopping down hefty sums to have outside consultants do extensive in-person interviews of key clients. While most corporate counsel say they care about cost and quality, the studies may serve another purpose — letting clients know that the firm is keenly interested in maintaining a good relationship. “If I and fellow GCs can get the message through to outside counsel they have to be more in tune with what counts most with in-house lawyers,” then the surveys will be a success, said Michael Roster, general counsel of Golden West Financial Corp., who has been repeatedly canvassed. Increasingly, that concern comes down to one thing — controlling costs. Firms have always cared about their relationship with clients, but in the last few years, it’s become more important as general counsel have cut back the number of outside firms they use. This practice, dubbed convergence, is intended to give companies leverage with outside counsel — in negotiating rates, staffing and time devoted to them — in exchange for giving them more work. According to Boston’s BTI Consulting Group Inc., corporate law departments are using 25 percent to 30 percent fewer law firms than they did three years ago. At the same time, corporate legal staffs have shrunk 40 percent, even as companies shift more work to outside firms. As a result, more emphasis than ever is being placed on maintaining relationships. “These are trends that would make law firms stand up and say, ‘I better find a way to make my clients happier,’” said BTI President Michael Rynowecer. THIRD-PARTY FAVORS Client surveys are nothing new, of course. But recently firms have turned to outside consultants to get more candid feedback. Six months ago, MoFo hired the Zeughauser Group to interview about 100 decision-makers among the firm’s clients. While firms say the results are confidential, what they are learning is apparently making an impact. “We’re spending a significant amount of time at our worldwide partners meeting [in Washington, D.C., this weekend] discussing the results of the survey,” said MoFo Chairman Keith Wetmore. “We think they will be shaping how we describe ourselves.” While Wetmore declined to say how much the survey cost, he acknowledged that it was expensive. The Zeughauser Group’s Mozhgan Mizban met with five of MoFo’s clients in Tokyo, as well as several in the United States. She is now in the process of doing similar interviews for Pillsbury and a couple of other firms. Mizban began doing client interviews when she was chief marketing officer at Cooley Godward, and sought to continue the practice when she helped found the Zeughauser Group three years ago. One common refrain she hears from clients is that they want much more than a straight legal adviser. “They want someone who really understands their business,” Mizban said. Thelen Reid & Priest is among other firms that have used outside consultants to interview their clients, having used the Massachusetts-based Law Firm Development Group for a similar project 18 months ago. Thelen Reid client teams also hold monthly telephone meetings with clients to discuss the firm’s work and any issues the company is facing. Consultants aren’t the only ones sitting down to chat with corporate counsel. Some firms interview their clients directly, rather than going through an intermediary. Reed Smith recently hired a long-time general counsel, Julia Kopta, to the new position of director of GC relations. Other firms have set up internal structures to improve client relationships and attract more business. Pillsbury has client teams that focus on the firm’s top 30 clients, researching and analyzing not only the client, but also the client’s industry. Orrick, Herrington & Sutcliffe launched a similar program this year in which a partner and staffer evaluate the business of each client and pinpoint additional work they might pursue. “Every one of our clients has work beyond what we are doing for them,” Orrick Chairman Ralph Baxter Jr. said. Some firms have even hired coaches to train partners in how to pitch themselves to clients. Fenwick & West has a pilot project under way in which a consultant is coaching 18 partners on how to improve client relationships. Orrick also had a coaching program but decided to drop it. “We concluded it was too superficial and didn’t go to what we really need to go to — enhancing the relationships with clients,” Baxter said. With all the attention already being paid to keeping clients happy, will the surveys be any help? It depends on the firm, said Daniel DiLucchio Jr., director of the law department consulting group at Altman Weil Inc. He said some firms are very proactive, creating action plans for clients. But, he added, “a lot of firms never do anything.” BTI’s Rynowecer said small and midsize firms in particular have taken steps to improve their services. Such measures include formalizing their progress reports to clients, providing more detailed invoices and changing billing arrangements, such as setting a cap. “It sounds trivial, but it’s a big deal for general counsel,” Rynowecer said. “On average, they are trying to manage 10 to 40 law firms” as CEOs, chairmen and boards of directors cast a sharp eye over their legal bills. MORE FOR LESS Consultants say firms could do a lot more. In a survey of chief legal officers completed last year, Altman Weil asked what new or creative practices their law firms had initiated. New ways to control costs was the No. 1 innovative practice cited. But the survey revealed deeper issues. “The problem is that only 22 percent of responders to the survey could identify any innovation at all,” DiLucchio said. “That’s kind of a statement in and of itself.” The surveys could ultimately force law firms to acknowledge a truth that the firms themselves are already dealing with — law departments, too, have become more focused on the bottom line. “For a long time the law department was an area that was mysterious to the rest of the company,” DiLucchio said. “That veil of mystery has been pulled aside.” Ralph Savarese, of Santa Ynez, Calif.-based McMorrow Savarese Consulting, said corporations now regard law firms the way they do other suppliers of goods and services and want to have more control over their behavior. Savarese said large corporations with expensive outside legal budgets have tried to rein in costs by forcing firms to adhere to strict guidelines. For some time they have produced hefty outside counsel manuals specifying such things as how many people should be on a deposition and requiring prior approval to add staff to a case. “These manuals are designed to get law firms to line up [the way] a non-legal executive wants,” Savarese said. “They’re fed up with spending all this money on legal costs.” For certain tasks, of course, companies will still pay exorbitant fees to get top counsel. “Most of the work done for most large companies is not brain surgery but more treating colds, sores, tonsillitis, measles,” Savarese said. “When it’s brain surgery, they want to go to the surgeon who’s done that specific brain surgery 1,000 times and won’t ask the cost.” Some corporate counsel say that although cost is not their No. 1 concern in hiring outside counsel, it will become more of a consideration in the future. “I believe that some firms will be pricing themselves out of the marketplace,” said Jonathan Mack, Hewlett-Packard Co.’s deputy general counsel of litigation. Broadcom Corp. Deputy General Counsel Mark Brazeal agreed. The billing rates at some firms have increased 25 percent to 30 percent per timekeeper over a three-year period, he said. “That’s not sustainable.” But while clients have been complaining about costs and the need for alternative billing models for years, it may be a while longer before they see any dramatic change. “Law firms feel pressure but they don’t feel pain,” DiLucchio said. “Until it gets painful, there won’t be the kind of action corporate counsel are looking for.”

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