A New Approach to Control Outside Counsel Costs
Hildebrandt consultant Rees Morrison wrote a very good article, Cost Control Patrol (Legal Times, May 17, 2004), in which he outlines five existing approaches for inhouse counsel to manage outside counsel and proposes a new, sixth way. It’s an interesting idea and raises indirectly, I think, some provocative questions about lawyers and technology.
Morrison describes five approaches to controlling outside counsel costs that have been tried over time:
1. “We’re legal professionals, leave us alone.” Until 1980 or so, business people did not even concern themselves with legal expenses.
2. “You can only manage what you measure.” Law departments utilize metrics such as task-based billing or legal expense as a percent of revenue. “Six Sigma is the latest manifestation of the metrics model.”
3. “Technique of the day.” Techniques tried include convergence, budgeting, and now, e-billing.
4. “Let your administrator do it.” Have a staff person manage outside counsel using the above three approaches.
5. “Procurement to the rescue!” Let the procurement professionals fix the problem (even if they do not understand what lawyers do).
Morrison then describes what he views as a sixth, new model, that he describes as “[e]nlist the lawyers.” He argues that the cost of outside counsel is determined by “myriad, day-to-day” interactions and that inhouse lawyers must therefore be actively involved in managing outside counsel. This means annual reviews must incorporate measures of controlling outside counsel cost control. This model “will incorporate the best of the previous five.”
I agree with Morrison that the best way to control outside counsel is for the inhouse lawyers actively to manage them. The question is, can they? Over the last 15 years I have seen many lawyers resist learning new technology, complaining that it is too complicated. At one time, this complaint was valid. I no longer buy it though. I am increasingly of the view that lawyers’ resistance to learning or using technology reflects a deeper seated resistance to changing how they work.
For example, why don’t more lawyers – inside or outside – prepare case budgets? Some lawyers would answer that it’s not their job to learn a spreadsheet. First, I disagree – that’s like saying a doctor does not need to learn how to use a particular instrument or test. And second, a lawyer can delegate the mechanics if necessary. The resistance is to the underlying idea of budgeting and managing but can manifest itself as resistance to technology. A similar argument applies to litigators who fail to decide consciously and in a timely manner on a document management strategy. They say that it’s not their job to understand databases and digital data. I believe the real resistance is to planning, managing, and making decisions.
Morrison actually tips his hand a bit in this direction when he writes, in his section about techniques, that “for a general counsel, techniques seem always to be activities that someone else should do, that pass the unpleasant work elsewhere.” I believe this attitude must be overcome; lawyers need to stop passing the unpleasant buck. They have to learn better ways of working and managing. Sometimes this may mean learning new software, but many times it means new ways of thinking. It’s likely that the technology is the easy part!
For related ideas about managing outside counsel, see my posting Five Big Ideas Reviewed – Need for a Process Approach
ADDED 5/27/04: Morrisons’ article is now available at Corporate Counsel magazine
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