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How AdvanceLaw Improves the Corporate Legal Market

The legal market has much room for improvement – we likely all agree on that.  But we don’t all agree on exactly how the legal market should be improved. I have therefore long been intrigued by AdvanceLaw, a group of over 150 corporate general counsel with a common vision for how to improve the legal market.  While well-known among general counsel, many law firms are less familiar with AdvanceLaw. So I was pleased to have an opportunity to interview Firoz Dattu, its co-founder and CEO.


Ron: What is AdvanceLaw?

Firoz: AdvanceLaw is a response to the fact that the legal market is opaque.  We’re a general counsel project to increase transparency in the legal market and provide greater quality assurance when retaining new firms.  We currently consist of 150 general counsel and their in-house teams.

Why did you start AdvanceLaw?

In collaboration with 20 large company GCs, we started AdvanceLaw to make it much easier to find top lawyers who would have a major incentive to excel on quality and all aspects of client service.  We also wanted to help GCs find those law firms that were truly innovative. Just as important, and this may be because of my background in economics and law, I really wanted to make the legal market perform better for both clients and firms.  A market can’t thrive and offer good outcomes for anyone if credible performance information doesn’t flow.

What do you do day to day?

We help in-house lawyers identify top outside counsel, and give those outside counsel an incentive to excel: they earn more work from our entire GC group through our performance feedback system.

Operationally, we work closely with our in-house law departments to understand their specific legal needs.  They often have a need to look for new firms, for example:

  • When incumbent firms disappoint
  • They’re expanding into a new business line or country
  • A large transaction or litigation arises
  • They want to create a law firm panel

 

As an extension of their teams, we find strong outside counsel candidates.  On a more reactive basis, the in-house counsel call us up with specific needs that come up: they need tax counsel in Italy, they have litigation in Florida, they have an M&A deal in the US and Singapore, you name it.  In those situations, we find lawyers and teams who are a good fit. But we also work proactively with our in-house legal teams, identifying portfolios of work they want to migrate to a law firm that really gets it, and is more likely to excel on client service delivery and results.

Additionally, and this is a big piece of what we do, we administer our performance feedback mechanism.  This is what gives in-house counsel assurance that they’re getting great lawyers and firms, and also what inspires top performance from the lawyers retained.

How does the feedback system work? How do in-house counsel rate firms or lawyers? And how do you share ratings?

In-house counsel provide feedback on specific lawyers quarterly and at the close of a matter. We ask about expertise, quality of work, responsiveness, and efficiency.  We also receive qualitative comments in writing.

So if you call us with a Prop 65 litigation in California or a wage and hour class action or a national IP litigation, we can look at the evaluations of lawyers who’ve done that work for AdvanceLaw general counsel and make recommendations on that basis.

We also publish a comprehensive report annually to our GCs and in-house counsel that provides scores and feedback by firm, type of legal work, and region/geography. We also list lawyers who have performed exceptionally well.

Why do GCs use AdvanceLaw rather than source their own legal services?

Probably the most basic answer is that we make it really easy to get the right counsel for the work.  We do most of the leg work, we know who can do what, and we can quickly come back to an in-house lawyer with specific options to choose from.  For them it’s a piece of cake.

But there’s also a strong assurance aspect when identifying new counsel.  Whether finding someone with expertise in a specific legal area or industry, a top lawyer in a certain geography, or a lawyer or team that’s simply better at delivering quality legal service than what they’re currently experiencing.  This is because we’re pooling multiple clients’ experiences.

As the general counsel of a Fortune 500 company said at one of our GC sessions, “The standard shouldn’t be that you never get fired for hiring Cravath. It should be you never get fired for using AdvanceLaw.”  Basically, the GC was speaking to the assurance aspect of what we’re all doing, since we’re basing attorney suggestions on actual performance evaluations and feedback.

And finally, with our approach, outside counsel are particularly keen to excel because of how we’re structured. Partners strive to impress, because they impress 150 clients at a time – not just one.

Do you pick the lawyers from anywhere?  How do you find them?

No, we think that’s dangerous as the market is so variable in terms of quality, and firms and lawyers will always say, “Yes, we can handle that!”  While they often have a client’s best interests at heart, that’s not the best way to find a lawyer.

We create a panel of firms with and for our 150 GCs.  The panel includes several thousand lawyers in the US and globally, so it gives us a lot of choice.  And it also means that we’re working with firms closely so we get to know which are truly committed to delivering top service.

How do you decide whom to recommend for a matter?

Three answers to that.  First, in conjunction with our general counsel, we vet panel firms every two years – so at the firm level we have a lot of information about practice groups, prior experience, capabilities.  That will generally frame whom we consider.

Second, because clients complete performance evaluations through AdvanceLaw, we know how well attorneys have performed in prior matters.  In many instances we can suggest a lawyer who has excelled in that specific work for another AdvanceLaw general counsel.

And third, we go through senior leadership of the firm to find out who the best lawyer is for a given matter.  Leadership is motivated to give us the best because impressing a client is the path to earning more work from the entire group of 150 clients.

You work with 150 GCs now – can any GC join AdvanceLaw?

So far we’ve grown solely by referrals and that’s worked well.  Overall, we want GCs who are excited about our approach and about changing the market, and who view AdvanceLaw as a way to achieve their own goals.  While every GC works with us in the way that’s best for them, all agree to contribute to make AdvanceLaw succeed for all.  One requirement is that general counsel commit to completing evaluations on outside counsel through AdvanceLaw.  Those evaluations are the coin of the realm for us.

How do you select law firms for the panel?

We start with suggestions and feedback from GCs – our group is big enough that they’ve worked with just about every corporate law firm.  Then we vet firms biannually based on GC evaluations and on our own assessments of the firms’ innovation, expertise, depth, client service, efficiency, commitment to diversity, openness to alternative fees, and dozens of other factors.  Interviews of clients and firms are part of this process. The key selection criterion is the firm’s willingness and ability to deliver top client service, which specifically includes the managing partner’s dedication to this ethos.  Our vetting process is rigorous, but it’s really important because we’re doing it on behalf of 150 companies.

You haven’t mentioned cost, which surprises me given what I read and hear. How much is AdvanceLaw about reducing cost?

While cost is something folks think about, we view that as a side benefit.  AdvanceLaw is really about getting in-house lawyers what they need – most often expertise, service quality, a focus on solutions, responsiveness, communication skills, and, sure, efficiency as well.  But the most important factor is almost always quality and expertise.  Overall, AdvanceLaw gets the star lawyers – the ones coming highly recommended based on prior work – who are interested in prioritizing these clients’ work and keen to outperform on all the things that matter to clients.  Interestingly, our data shows that the lawyers who get the highest scores on quality, responsiveness, and expertise typically get higher scores on efficiency too. That said, efficiency is also baked in: it’s one aspect of the firm selection process and one of the four evaluation criteria on each matter.

What do law firms tell you is the biggest benefit for them?

This is an opportunity to win new clients not just on a one-off basis, but on a larger scale, because great service is rewarded with more work from a large group of 150 in-house legal teams.  It’s an accelerator of growth relative to the normal, word of mouth, method to develop business.  As a side benefit, I think it’s also a way to be rewarded and recognized for innovation.  At our general counsel meetings – where we bring together 20-30 chief legal officers at a time along with some of the law firms’ managing partners  – we talk a lot about the specific innovations of the various law firms in the group, and even come up with ways the firms can further innovate to drive value for our GC group and the in-house community overall.

And how do the ratings play with law firms?

Great question – because concerns about this sort of thing have doomed efforts to rate or evaluate lawyers in the past.  We’re very intentional about who sees what. Law firms see their own performance scores/ratings in the aggregate.  They don’t see other firms’ scores.  We use the scores to place work – it informs our judgment – and with client permission, we will use client feedback to help firms improve.  That’s good for everyone, and the firms are very receptive.  But if the feedback was just out in the open, nobody would provide honest feedback.  So we need to manage it pretty closely.

Does this systematic approach ever result in major work shifting away from a client’s usual law firm?

Yes, absolutely. More than six years in, the list is long but here are some examples.  On the corporate side there have been several transactions in the US and abroad.  For instance, there was a half billion dollar deal in Japan on behalf of a US multinational where the GC was going to use an extremely pedigreed firm – one of the largest and most credentialed global firms in the world.  But the GC reconsidered and went through AdvanceLaw instead.  When the transaction was done, she gave the team of lawyers a perfect evaluation and provided effusive feedback.  More recently there was a roughly $200 million deal in the US that went through AdvanceLaw rather than to the client’s usual M&A firm, and the team of lawyers retained has received great feedback as well.

Just two weeks ago, on the litigation side, a class action in California went through AdvanceLaw rather than to the client’s incumbent firm.  And in at least couple of other instances I can recall there were extremely large litigations in the US – ones in which the billings were several million dollars per year –  that migrated to AdvanceLaw firms.  In these situations, the clients were delighted with the quality, responsiveness, efficiency, everything.

Sometimes portfolios of work (employment, patent) shift as well.  That’s not to say every retention is large, it comes in all shapes and sizes.  In many instances law firms that earned work from a client through AdvanceLaw become a key go-to firm for the client.

When incumbent law firms lose work, are they even aware of the loss?

Great question. Sometimes they are but often they are not.  This is because neither we, nor in-house clients, are looking to make incumbent law firms feel bad, so they’re not always informed.  We leave it up to in-house counsel, and it varies depending on the situation.

Speaking of rejection, has a firm ever lost its place on your panel?

Too many law firm panels are a de facto monopoly – the firms are locked in.  We designed this up-front to prevent that.  Every two years we review the panel, and it does indeed change.  We’re using input from our GCs and of course all the matter-specific performance evaluations.

The other big factor here is that we see our clients’ needs changing over time.  We see what’s different in their needs – so the panel changes every two years to respond to those changes.

As we move to a close, two final questions. First, you have 150 GCs in the network – and it’s still growing.  Why do GCs like what you’re doing?

To put it simply, they get better service.  The evaluation scores have been very good, and this system of incentives is working.  And GCs like that this is a GC group, rather than a law firm-created group.  I think GCs also like that they’re working to improve the profession and the market.  Right now, credible performance information isn’t shared, and that’s frustrating for clients because they don’t know whom to turn to.  It’s also frustrating for law firms because great performance isn’t rewarded as much as it should be.

And lastly, you’ve been doing this for over six years.  What’s next?

We have a special experiment that we’ve just begun within AdvanceLaw, in collaboration with a sub-group of twenty GC thought leaders, as well as a number of firms.  The project tests assumptions and theories about the industry: do flat fees work, what is the efficacy of firm legal project management, is competitive bidding valuable, does consolidated spend help, and so on.  We’re confident it will lead to major industry change that will affect both clients and law firms.  But we’ll keep you in suspense just a bit longer about the details, as we’ll be announcing it publicly in the new year.