Reduce Legal Expense or Value Based Billing which camp do you sit in?

Earlier this week I had the opportunity to attend the Corporate Counsel’s Controlling Legal Cost Seminar. There were a number of fantastic presentations, John Weber (TyMetrix, General Manager) and Steven Williams (Managing Director of General Counsel roundtable) presented the findings of the Real Rate Report. For me this is always interesting, but I’ve seen it before and done the presentation myself. What knocked my socks off was Amy Schulman’s (Pfizer’s GC) and Lisa Damon’s (Managing Partner, Seyfarth Shaw) presentations.

Both set the tone for what Value Based Billing should really be all about. As Amy put it (I’m paraphrasing), in the first instance it cannot be about saving money. You need to focus on how to truly drive value (For her this was about deepening the relationship and creating predictability in their budgets). If you successfully do that you’ll get the greatest bang for your buck and ultimately will save money and get better outcomes.

Lisa did a great job of getting the audience involved and identifies ways that the industry itself can start to move more in the direction of Value Based Fees. Many folks agreed TRUST was the big hurdle and a requirement to making Value Based Billing a success. There was also agreement that clients need to get comfortable with the fact that when done right Value Based Billing is a win-win for law firms and clients. There will be situations where the law firm makes more on a deal because they efficiently and effectively managed it (which is what we are all driving for after all).

Another comment that I found very insightful was from Cindy Westervelt of Staples (who joined Lisa during her presentation). Cindy noted that as Staples began their transformation into more value based arrangements a change in mindset was required for both internal and external attorneys. One example she cited was that everyone wanted to do A+ work all the time, yet not all matters require A+ work (and the associated costs that go with an A+ effort). “Sometime it is okay to do just enough” Cindy commented. By getting everyone on the same page and working together on identifying the A+ and the NOT A+ matters they created a positive environment for all that was a win-win for both Staples and the firms.

In reflecting on this seminar and a number of other conferences and meetings I’ve participated in during 2010, I see two camps forming. One camp is highly focused on saving money through auditing of bills, modifying rate agreements and other tactics (including the establishment of AFA arrangements), while another seems focused on driving to Value Based Billing with a strategy not so much about reducing legal expense but about getting the best value for each dollar spent. In my experience both strategies can work, but you need to decide what camp you sit in. Those trying to straddle the fence may find they’re sending conflicting messages and ultimately may not achieve the results they expect.