8/3/17

Convergence Initiatives and Panel Programs — What If The Data Says We're Wrong?

Self-reflection can easily become self-delusion. I’m either about to write something that runs counter to my own vested interests, or I’m preemptively defending those interests from unfriendly empirical evidence. I don’t know myself well enough to tell you which. Regardless, I’ve long believed most convergence initiatives waste considerable time for limited benefit despite the fact that I regularly consult on convergence initiatives.

[For those who are unfamiliar with the term, “convergence” is the prelude to a preferred provider, or panel, program. It is the consolidation process by which a law department selects their preferred providers. These initiatives can often reduce the number of firms used by 60% or more. While a few win big, hundreds of firms can lose a client in the process.]

I am saying this now because AdvanceLaw and 25 of their GC’s have forced my hand (see here, here, here, and here for more details on this fantastic undertaking; see here for my initial encounter with AdvanceLaw).

AdvanceLaw is publicly conducting a study of what works and what doesn’t with respect to outside counsel management. This includes convergence initiatives, which are part of my consulting business. I therefore feel compelled to lay down a marker.

AdvanceLaw is performing a mitzvah. I could not be more in on their bringing data-driven decision making to the retention and management of outside counsel. Yet I am moderately confident that their findings will not bolster my sales pitch (another instance where I would be ecstatic to be proven wrong).

I predict that they will find little-to-no correlation between convergence initiatives and satisfaction with outside counsel. That is, when AdvanceLaw comes out with a data-supported list of the approaches that drive the most perceived value for in-house counsel, convergence initiatives will not rank near the top.

And that is because convergence initiatives, in isolation, do not accomplish much. They are a stage-setting exercise. They are a precursor. To me, a finding that convergence does not deliver high independent value is like finding that the mere purchase of home exercise equipment or gym membership does not result in physical fitness.

To be fair, convergence can, on its own, confer some immediate administrative benefits. Reductions in the number of data security audits to be performed is a straightforward example. The fewer firms you use, the fewer firms you need to expend the resources to audit. There are many similar loads to be lightened, such as annual performance reviews, obtaining diversity data, socializing changes to the invoice submission protocol, etc.

And while I am as dubious as ever about ‘discounts’, convergence remains an excellent opportunity to leverage volume to reduce unit cost. Unfortunately, that is about as far as most corporate law departments take it.

I vividly recall speaking to the head of legal ops of a massive corporation that had just completed a similarly massive convergence program. She was quite proud of the rate concessions her department had extracted from the surviving firms. I had the audacity to ask her what the law department intended to do next. Now that they had preferred providers, how were they going to use the attendant leverage and administrative surplus to drive better business outcomes, deliver better legal service, and develop better relationships with their firms? She looked at me quizzically. For her, the preferred provider panel was the end state. For me, it was just the beginning.

My opinions on this topic are not exactly shrouded in secrecy. I bring a relational view to managing a supply chain that includes law firms and alternative legal service providers. I genuinely believe continuous improvement can be woven into the fabric of every primary supplier relationship. But I don’t believe in magic. Improvement does not occur spontaneously. It is a deliberate exercise requiring sustained attention over an extended time horizon. While beneficial, on net, real improvement initiatives consume finite resources, especially time and focus.

Costs matter. But I agree with Bill Henderson that we make a mistake by framing our challenges as a cost problem. At core, we have a productivity problem. If you think in terms of costs, then a process to secure greater discounts seems like a solution. If you think in terms of productivity, then discounts present as the sideshow they are. Rather, you concern yourself with creating and enhancing systems for legal service delivery. You see the value in regular, onsite service delivery reviews as a part of an ongoing, structured dialogue.

All credit to AdvanceLaw. They get it. The headline to this article warmed my little heart:



I am not alone. There are many convergence initiatives that proceed from the right premise, including many that have followed the path I advocate without my influence, let alone my involvement (see e.g., Avis, Barclays, and 7-Eleven). Indeed, in the last year, I have reviewed more than 40 preferred provider RFPs that I did not write. Some are better than others. But almost all of them include questions about value-related aspects of service delivery such as project management, analytics, technology, ALSPs, knowledge management, or automation.

Yet the sense I get from inside and outside counsel is that, in most cases, this remains lip service. The shared assumption is that these are box-checking exercises, the responses to which are not read. Even if they are read, the responses do not factor into retention decisions. And, after retention, the topics are never revisited. In short, there are no measurable improvements in service delivery that result from most convergence initiatives.

This is not pure waste. Even lip service affects norms. Asked the same variant of a question enough times, law firms might recognize the need to formulate a cogent response. They might even see the need for the behavioral changes that would underpin that response. Still, the lost opportunity is substantial.

My statement earlier about the AdvanceLaw data potentially hurting my sales pitch wasn’t quite accurate. My pitch already includes the observation that what follows the convergence initiative is far more important than the initiative itself (though the initiative should be designed to support the program that follows). Admittedly, you will still have to work really hard is not a great pitch. But it is an honest one. My real concern is that the AdvanceLaw data will result in fewer pitch opportunities.

That’s not a bad thing. We could use more discipline. Most law departments are interested in progress rather than committed to change. Progress is incremental. Change is transformative. Interest means you do it when it is convenient. Commitment means you do it even when it is hard. Too many precious hours are being wasted chasing headline-grabbing shiny objects like convergence or comprehensive AI solutions. AdvanceLaw’s data will not be the final word on what works. But it could prove to be the best first words: “Start Here”*
A personal anecdote to close: Many lives ago, I assisted a large corporation navigate state-level statutes that governed incentive payments to their retailers. The corporation ran national incentive programs that had to satisfy every idiosyncratic state-level law. Always too precocious for my own good, I once asked a VP why not do some A/B testing to determine what worked—i.e., run different incentive programs in different states to understand which approach drove the most incremental sales. He responded, “Son, I’ve been in this business 30 years, I know what works.”

As it happened, later that day, I was speaking to one of the VP’s direct reports. He could not help but express his incredulity at the utter stupidity of the way the company’s incentive program was designed. Apparently, he had advocated for a different approach. I asked him how he knew his alternative approach was superior. He replied, “Son, I’ve been in this business 30 years, I know what works.”
As stated, I could not be more supportive of what AdvanceLaw is attempting to do regardless of where the data comes out.
* I lifted the Start Here concept from a great new collaboration involving my friend John Grant and several other innovators.

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D. Casey Flaherty is a legal operations consultant and the founder of Procertas. He is Of Counsel and Director of Client Value at Haight Brown & Bonesteel. He serves on the advisory board of Nextlaw Labs. He is the primary author of Unless You Ask: A Guide for Law Departments to Get More from External Relationships, written and published in partnership with the ACC Legal Operations Section. Find more of his writing here. Connect with Casey on Twitter and LinkedIn. Or email casey@procertas.com.

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1 comments:

Anonymous said...

Excellent post, Casey. Yes, cost matters but enhance productivity and service delivery drive true value. Thanks. Craig Lee

 

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