Focus on Corporate Legal Departments Visibility of Legal Spend and Work
The current opaque nature of information regarding legal costs and case activity breeds inefficiencies and bad practices. There is urgent need for a new and transparent way of working which can align both the needs of in-house teams and their law firms.
What is it the businesses want from their panel law firms? With increasingly tightened budgets, businesses are looking to adopt an atmosphere of collaboration between their panel firms. Transparency and visibility of work with open lines of communication are one of the most effective ways of building this and that means honesty coming from both sides of the relationship.
Businesses do not have an issue with law firms being profitable in fact they should encourage it as unnecessary downward pressure on fees which impacts of profitability will ultimately lead to a downturn in experience and service. This is not about attacking profits it is about understanding, visibility and efficiency.
Many corporates have historically used scorecards that rely on their panel firms to provide the information. These do have value but unless these metrics are accurate, and the information provided by the law firms is comparable then these scorecards can become meaningless and can in fact foster damaging practices.
It is time for a change. Both law firms and in-house teams need transparency so that they can work constructively, effectively and efficiently together to achieve the common goals of quality service at the best available price.
Why shouldn’t law firms and businesses have transparency of operation? What is needed is a fully collaborative and transparent approach that recognises that companies are entitled to best value and excellent service and law firms to manage the case and to make a profit. There is an opportunity to align the relationship so as to achieve the goals of both parties.
Businesses can then see that they are getting the service and quality legal advice that they need at a price that is fair and reasonable; and Law firms need make no apology for having sufficient income to provide that service and quality and to make a fair and reasonable profit in the process.
It is plainly in the interests of Corporates and their legal panel to be wholly aligned.
What information would be required by the Corporate to ensure a more informed evaluation of the law firm in order that interests can be aligned?
With Corporates spending millions on legal costs they have the right to understand how and why they are spending money and to ensure they receive the service that meets their expectations from appropriately qualified and supervised staff.
For a business to have a true control over their legal spend and activity they must be able to ensure that:
- Appropriate hourly rates are being charged at all times across the range of firms and fee earners.
- There is visibility of time entries to ensure they are at the appropriate charge out rate.
- The spend on external service providers such as Counsel are being controlled along with other disbursements.
- The time being spent on each transaction is appropriate and in keeping with the needs of the case.
- Service level agreement are being fully complied with.
- There is an ability to see case transactions to ensure that the matter is being driven forward.
- Bills as they are presented provide sufficient detail and are transparent for both direct and disbursements spend.
- There is an ability to assess law firm activity when there are multiple firms on one matter to ensure there is no duplication of time and work.
- There is the ability to review panel firm performance and compare it, not only within a firm but across the panel by reference to fee earner, department, office and firm.
With costs regarding certain claims being in the millions, for high value and complex legal matters there is an overwhelming need for complete visibility and transparency of how these costs are being applied and charged. Information should be supplied in real time enabling immediate interaction with the law firms.
If a business cannot access this level of information and if a law firm cannot provide it how can there by true transparency of operation and assurance that the time and expense in entering and finalising a procurement process has achieved the goals of all parties involved?
LHQ provides a simple, efficient, and cost-effective software solution.
LHQ software, through its law firm management analysis and costing tool, provides both the purchasers and sellers of legal services with the ability to operate a transparent and effective tool to monitor, control and interact on activities in legal transactions.
LHQ provides the in-house legal team with clarity and understanding of their legal spend and provides the law firm with the ability to manage their environment to drive efficiency and profits. The LHQ system is web-based software that extracts time recording and expenses data from the law firms practice management systems into real-time information and analysis.
The buyers and sellers of legal services of course have differing agendas but what must be aligned is the common need to provide and receive the best possible service and to charge or pay a fair price for that service. There is no point in a client reducing legal fees to a level that prevents a firm from providing the right service; and there is no point in a law firm applying unreasonable charges.
The LHQ system has the capability to provide Corporates with the following facilities:
- Transparency of costs and case actions - Through direct interaction with a law firm’s practice management system the in-house legal team is provided with the ability to monitor legal spend at a detailed level so providing a step by step analysis of the journey a legal case has taken recording each action and unit of time. The system can also identify when costs on a matter being handled under a fixed fee or cost cap have been reached or nearly reached, thus providing a warning to both the client and the law firm for action to be taken.
- Real Time Reporting - The system operates in a real time environment as it will receive information as the law firm’s system is updated. Whist it may not be appropriate to real time track every legal case and transaction on those cases where the possibility to do so is there it enables immediate interaction when a matter is about to exceed or has exceeded, a tolerance level.
- Comparison data - the LHQ system is capable of allowing the Corporate to assess a law firm’s performance at a very detailed level, so as to make informed comparisons, not just within the firm but across a panel of law firms.
- Disbursement spend and exposure - A firm should be capturing on their accounts system details of disbursements that have been incurred or anticipated (incurred but not paid) disbursements. This will also enable immediate interaction where spend is not acceptable or where there is an issue which can then be resolved quickly instead of at the end of a matter when often it is too late to remedy.
- Monitoring of Service Level Agreements - As the LHQ system is linked to the practice management system and collects data on actions and charges, clients are able to monitor actions taken against their own service level agreements. LHQ provides this facility through the user-friendly reporting dashboard which can be configured to highlight SLA breaches and automatically escalate these to the appropriate people for action to be taken.
- Visibility on Case Progression - A further benefit of linking the system to the time recording module in a law firm is that it enables the client to monitor case progression and gives the opportunity to interact and drive cases forward to prevent costly delays.
- Auditing and Risk Assessment - As the LHQ system enables visibility of case actions it will also provide an auditing functionality. This constant monitoring platform replaces the need to audit in the current manner and is significantly more efficient.
- Change in the decision-making process - Delivery of the ability to enable decision making and risk taking to be done on an informed basis. The collective data will build a picture on case progression and costs being incurred. It can show when taking a stand on some legal point is likely simply to escalate costs and is uneconomic in the context of the quantum of a case.
- Budget monitoring - If a legal department has set a budget for costs and disbursements the LHQ system will enable tracking of legal spend to that budget. If a law firm is clearly creating, or even risking, an exposure beyond that which is budgeted the in-house legal team can fairly and reasonably intervene, to discuss an appropriate course of action to be taken on an informed basis.
- Tender preparation and negotiation – by using LHQ insurers will have a wealth of information from which to base their proposals and, through doing so, to establish the appropriate price for the delivery of the legal services they need. It also enables feedback to be provided on the activity undertaken by existing panel solicitors and enable detailed discussions on process improvements that could result in legal costs becoming more competitive.
These benefits are not just accrued on individual cases. Over time substantial benefits can bereaped from the use of analytics on the panel law firms’ data. For example, data can be extracted to give a better understanding of fee earner efficiency; life cycle for different categories of cases; or the levels of damages, against costs incurred, for cases across different law firms. True and accurate scorecards can be created with detailed information ensuring the most productive and efficient firms receive the work they are good at. Weak firms, fee earners or areas of work can be identified, work redirected, and targets created to ensure improvements are made.
Panel firms have historically been influenced by the pressures imposed by the price-per-hour regimes. This has impacted on the firm’s productivity but not necessarily their profitability. In a new era of more open transparency and alignment between the needs of both the Corporate legal team and the law firm, law firms will find that productivity will improve without profits being hit, whilst Corporates will have quality of service at a reasonable price.
It is clear that huge benefits can be reaped by the legal departments in corporate organisations in embracing technology and obtaining transparent and visible information on the activities and legal spend of their law firms. Law firms have historically been more reticent to provide this information if they mistakenly see them as further challenges to their traditional ways of working and therefore to profitability. However General Counsel now will consider law firms’ efforts to innovate and increase productivity as paramount and that today and, in the future, openness, efficiency and accountability is what they are entitled to expect. Those law firms that do welcome the technology will actually come to realise that they too are better off.
For more information or a demonstration on the LHQ solution you can either email us at email@example.com or call us on 020 3637 1950.
Our website www.lhq-uk.com provides full and detailed information on our solution.