5/20/10

THE Answer to Lowering Legal Fees

Watching Greg present to HALSM and participating in the lively and thoughtful dialogue, I came up with THE answer to lowering legal fees.
First some back ground - Greg was presenting on how "Efficiency" is finally becoming vogue in the legal market. He then went on to showcase how that trend can be and is being applied in the e-discovery realm. This lead to an engaging dialogue on the subject of lowering the costs of e-discovery. Greg pointed out the relatively recent article from Craig Ball on how e-discovery costs are 5 times higher than they should be. This discrepancy exists for a number of reasons, but a big one is the fact that selling the restructuring of legal processes for efficiency and lower costs has been falling on deaf ears. Not that in-house and outside counsel don't care about costs. It's just that the fix for this problem means doing things differently (a.k.a. outside the paradigm of precedence), and not just a getting bigger discount on rates.
So - here comes THE answer. There is a group inside the company that is very focused on lowering costs. This department is called purchasing or procurement. The problem this group has been having is a lack of understanding of how legal services are consumed. As they try to unitize legal costs they invariable go to hours and rates, which is doing things the same way and not currently working well for lowering costs. However, if purchasing actually understood the problem and knew about the fix, they would force the issue and get the in-house counsel department to drive the change.
That's THE answer. Go to purchasing with effective legal cost savings ideas. If this group actually figures this problem out, then change will quickly ripple through the system. In-house lawyers will be pushed to change, which will in turn drive the same with outside counsel.
It's not that these lawyers don't want to lower costs - the problem is that they don't know how. This e-discovery case study is just an example. Imagine if purchasing realized they could deconstruct numerous legal service approaches and restructure them for cost savings. We would quickly find ourselves in Enlightenment 2.0.
I'm just sayin ...

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3 comments:

Steven B. Levy said...

That would turn the legal world on its ear to be sure. Good, bad, or both? Don't know... though probably both. But it should scare the heck out of BigLaw to think that the same folks who make purchasing decisions for desks might do the same for their services.

Steven B. Levy, author of Legal Project Management: Control Costs, Meet Schedules, Manage Risks, and Maintain Sanity

Chad Schmidt said...

This really depends on the company, obviously. We've seen many instances when Legal trumps Purchasing... or more accurately the GC trumps Purchasing. It's an onion.

Toby Brown said...

To Chad's comment - I'm seeing a shift in that balance of power between GCs and Purchasing. Although the GCs have held the trump card, the CFO and CEO are taking it away.

GCs are actually on board and want to drive down costs, but they don't have the background and ability to do that.

If purchasing is empowered with the knowledge on how to help - they will.

 

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