This month, we are delighted to feature Jaimes Sher, Chief Intellectual Property Officer of Chemtura Corporation.

MS: Good morning, Jaimes. We are very happy to have you join our discussion today.

JS: Thank you very much.

MS: We will be talking about the state of the economy and how the new administration will affect your area of expertise, Intellectual Property. Could you please describe your role and key responsibilities at Chemtura?

JS: I am the Chief Intellectual Property Counsel for Chemtura Corporation and I handle and manage all Intellectual Property matters for the company worldwide.

MS: What are your top goals and priorities for 2009?

JS: We’re going to continue with our process improvements in terms of managing our IP better and more smartly for each of our businesses; and in addition, implementing various cost control measures, which I’m sure many corporations around the world are putting in place, with respect to controlling how we spend money, what we spend money on, and outside counsel consolidation.

MS: Recently we’ve seen many news stories focusing on the state of the economy and how the bailout bill and the new administration are going to impact companies. What impact do you think the economic downturn will have on your company, particularly your legal strategy for 2009?

JS: I think 2009 is going to be difficult and challenging particularly because I believe that with most companies, budgets are going to be substantially less than previous years and our businesses are going to expect the same services. As a result, companies are going to have to be much smarter at how they manage and use their limited budgets in terms of maintenance fees, filing of new patents and trademarks, and use of outside counsel. It’s quite possible that companies could resort to hiring in-house lawyers versus sending work outside. That’s always a good way to reduce costs and improve efficiencies. I can see this happening not only in the IP arena, but in the general legal arena as well. It’s hard to judge because at the same time companies are cutting employees, so of this I’m not quite certain.

MS: Do you see more companies aggressively protecting their IP assets or has this become a secondary priority?

JS: I don’t think that it’s become a secondary priority for the IP function or the technology organization, but for our businesses it is probably true. These days, businesses are more interested in trying to sell whatever it is they’re selling and generate revenue for the corporation. The technology folks we work with pretty much continue to do what they’ve been doing, although they’ve been hamstrung to some extent because their budgets are being cut as well. They are also losing people so everybody is feeling the crunch.

MS: Is there any direct impact on IP filings with the economic downturn?

JS: I believe that IP filings are going to be reduced—not substantially, but they will go down, primarily because there’s less R&D activity and as a result less new product being developed. It’s not just patents that will be affected; there will also be fewer marketing initiatives: the trademark world will see a diminishing number of trademark applications that will be filed over the next few years as well.

MS: How do you think the financial challenges might impact Chemtura’s legal issues in the future?

JS: All the writing on the wall suggests that in two years things will be substantially better than they are today, but not as good as they were a few years ago. As a result, I don’t think you’re going to see too many changes in two years as compared to what you’ve seen over the last several years. During this two-year gap, companies are going to look more carefully at what they spend on IP and the value of the IP function and technology organizations—what assets they are bringing to the corporation. Much of this will depend on the technology that’s involved, and the type of company, whether chemical, biotech or software.

MS: Then we’ll see a more conservative approach for a while.

JS: I think that’s a fair statement. I believe approaches are going to be a lot more conservative. Rather than filing several patents on a particular product, maybe only one gets filed. Rather than putting off decisions to hold onto intellectual property in the hopes of either developing the technology further or licensing the technology in the future, business today might decide in today’s economic climate that it’s not worth waiting, and abandon the assets earlier in their lifecycle. It’s hard to say. It’s also business dependent and has competitive implications that must be considered.

MS: I think everyone is feeling their way.

JS: That’s correct. Legal functions within corporations are functional and some corporations look at ways to reduce costs. The way to reduce costs such as overhead is to reduce the sizes of their functional organizations. As a result, less work gets done on the inside by these functions, one of them being the intellectual property group. Many business executives often view Intellectual Property as an expense. If you’re the CFO and you’re looking at the balance sheet and you see that you’re spending x number of dollars on Intellectual Property, the first question you should ask is, “What are we getting for that?” In some companies, it’s very hard to put a value on it. It’s not that easy to say, “How much is this patent worth?” or “How much is this trademark worth?” Some companies can do that. When you’re talking about a company such as ours with several thousand products and many different processess. it’s hard to say which patent or trademark is worth more than any other

MS: With regards to the new administration. Is there any particular impact you see on your legal department and your IP policies?

JS: From the standpoint of IP, I don’t see much that is going to be changed over the next several years. Congress has a lot bigger fish to fry, many more economic issues to deal with, than worrying about various nuances with respect to some of the changes that have been taking place in IP. I think there will be some important changes that need to be made, but I’m not sure they will be properly vetted. It’s going to take some time to put together a new workable system. Pendancy in the patent offices has gone up. Maybe they need to hire more examiners or raise fees when looking at all this rather than taking away basic patent practice processes that have been around for decades. People aren’t getting their intellectual property as soon as they would like to have it. That affects people’s strategy with respect to whether they file for patent protection or not. It’s more applicable to patents than it is to trademarks, but if it takes five years to get a patent and the product lifespan is only a few years, maybe it’s better to rely on trade secret protection than it is to try to seek patent protection.

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This month, we are delighted to feature Ron Kuykendall, Executive Vice President, General Counsel and Secretary, Sandy Spring Bancorp, Inc.

MS: Good morning, Ron. Thank you very much for being with us today to talk about the state of the economy and how the bailout bill and new administration will impact companies—especially those in your industry, financial services. I’d like to begin with some background. Could you please describe your role and key responsibilities at Sandy Spring Bancorp?

RK: I’m the General Counsel and Secretary for Sandy Spring Bancorp, which is a financial services company that’s publicly traded on NASDAQ’s global market index. We’re about $3.3 billion in asset size, and I have the combined duties of law and regulatory management as the General Counsel and the publicly-traded corporate governance side as the Secretary.

MS: What are your top goals and priorities for your legal dept in 2009?

RK: 2009 will be a difficult year if what the commentators are saying about the economy comes true. It’s impacting our department, in that we’re expected to do more with less, to hunker down and get through. If the economy turns around towards the end of the year as some people are saying, then there might be light at the end of the tunnel. Right now, we are trying to identify mission-critical objectives and give our best attention to those. In other words, this will not be a year for new projects and expanded resources.

MS: Have you come up with any specific steps that you will take to handle the next year or two?

RK: One of the things that we try do with some regularity—made even more critical because of the economy—is look at process improvements. Over time, we often find ourselves doing things without remembering why we do them; when, perhaps, the original need has long since evaporated. We’ve also developed a departmental cross-skills training approach to what we’re trying to do so that as we have to move from one fire to the next, we will have people who are ready to pitch in and help. It’s an “all hands on deck” mentality. Cross-skills training will help get more people to the problem faster, and help us prepare for sudden changes.

MS: What impact do you think the bailout bill will have on your company and in particular on your legal strategy for the coming year or two?

RK: We are trying to sort through that. My company participated in what is referred to as the US Treasury Department’s TARP Capital Purchase Program, and we’re in the process, even as we speak, of finalizing much of the legal work associated with it. We think that ultimately, the federal program will result in a lot more government regulation and oversight. As lawyers, we celebrate the purpose of a program such as this, but we are mindful that it will ultimately be much more work for us and for outside counsel as well. This particular approach, as a solution for economic ills, given its magnitude, is going to involve very significant oversight from many different agencies.

MS: Have you seen or do you think you will see a change in the types of matters you are facing at this time?

RK: I don’t have a definitive answer to that. My best guess, and what I have heard, is that regulations are going to be comprehensive and broad and the impact of the congressional or government oversight process in general will be significant. From that standpoint, we’re anticipating the worst and trying to prepare for it by staying on top of the other day-to-day issues; we don’t have any other specific focus at this time.

MS: How do you think that the financial challenges will affect your organization’s legal issues in the future?

RK: I think part of the natural fallout of the economic situation is going to be consolidation within the industry. We’ve actually seen some of that already. Weaker financial services companies are not going to be able to survive. The infusion of TARP capital will help bolster the balance sheets of the stronger institutions. Overall, the market dynamics will cause the industry to shrink somewhat. For example, Capital One, whose headquarters are in Northern Virginia, recently announced the acquisition of Chevy Chase Bank, a longstanding institution serving customers within my company’s market footprint. Capital One, as a national company, will have a much larger marketing budget, so the competition, for us, in this case, naturally, is going to get more intense. With that said, we believe our company is well-positioned to earn the business of small businesses and consumers that prefer dealing with a locally owned and operated company, so we’re gearing our legal services toward the business products and services that will foster that approach.

MS: How about the new administration? Could you describe any particular impact you foresee the new political regime having on your legal department and corporate policies?

RK: With regard to the legal department, it will be sort of an after-effect, like when you squeeze the bottom of a balloon and the top bulges. The full impact of the administration’s philosophy toward business will be felt at the business unit level, but that will ultimately impact the legal department in terms of regulation and oversight. As a result of that, we see things happening quickly. President Obama has indicated his intention to be right on top of things; we expect him to be very proactive with his agenda and, consequently, what he accomplishes will play out not only over the course of his first year, but take perhaps a year or longer to reach its full impact. The team he has put together, especially his economic team, is strong. We’re excited about having the right brainpower in the room trying to solve the problems banks are facing. To me, as an observer only, the problem is so massive that I’m not sure what the answer is. We’re seeing experts first try one thing and then reverse course and try something else. As a bank lawyer, it’s a little unnerving, but right now I’ll defer to the administration’s expertise and expect that they’re going to get the job done.

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Today’s large corporate buyers use nine law firms for the bulk of their legal work. On average, two of these firms are primary law firms (clients’ first string, the “go-to” firms) and seven are secondary (integral to the business with access to significant matters). Primary law firms generally capture upwards of 15% of corporate legal budgets –$3 to $4 million annually on average, and more than $40 million at the high end. Secondary law firms earn anywhere from $600,000 to over $1 million—from a single client.1

With this amount of money at stake, each individual client relationship is critical. All attorneys want what’s best for their clients. Yet even the best intentions can be muddled by a firm strategy that does not outpace the competition.

The BTI Consulting Group’s analysis of client relationships reveals that 13 law firms—the BTI Power Elite—boast more, high-quality relationships than their peers. This select group of law firms enjoys a greater number of primary relationships, higher client satisfaction and a more distinguished reputation in the eyes of their clients, according to direct feedback from more than 400 corporate counsel at large and Fortune 1000 organizations.2 While these 13 law firms represent some of the nation’s biggest and best, attorneys from law firms of all sizes can benefit from the four powerful strategies these top performers use to wow their clients and pull ahead of the pack.

Give Clients What They Want

Targeting developing market needs may sound simple, but few law firms regularly anticipate client needs to stay one step ahead of everyone else. Many law firms stress their practice instead of targeting needs. Market needs typically fall into one of three categories:

Industry-specific

• Develop customized marketing content designed specifically for each industry sector
• Mobilize your law firm’s existing practice groups to target clients by industry
• Target specific companies within each industry for marketing and new business development
• Rely on industry research to define emerging opportunities and top-of-mind issues

Melding practices into needs

• Craft the right mix of practice offerings to capitalize on needs
• Pinpoint gaps in your law firm’s current strategy and practice mix
• Target practice groups with the best fit and long-term prospects for development
• Learn which needs are prime for growth in the upcoming year
• Tap legal services forecasts to pinpoint high-growth areas by practice and industry

Client-specific

• Conduct annual reviews with clients to identify upcoming goals and needs
• Solicit feedback from current clients to understand what is keeping them up at night
• Align recruitment and staffing decisions with client needs

Law firms that provide services in areas where a need exists are perceived as high value. Deliver on emerging and unmet client needs to leverage growth opportunities, cement client relationships and differentiate your firm from the competition.

Be Aggressive

Law firms that care about relationships make client acquisition and development the backbone of their growth strategy. They outline explicit steps and metrics to reach their goals. Each initiative is tied back to the overall growth strategy of the firm. Metrics are backed by big budgets and big rewards.

Examples include:

Modified compensation systems with key metrics linked directly to new client development

• Number of new originations
• Dollar value of new business portfolios
• Hours spent on client development
• Win targeted clients

Absorb new clients through competitive growth measur

• Lateral hiring initiatives
• Acquisitions and mergers

Hyper-focus on cross-selling to existing clients by setting discrete goals

• Introduce clients to partners from practice areas in which there is a known need using a value-added approach
• Provide proactive advice on a new matter—at no cost to the client
• Establish firm goals to provide service in one new practice area to your key clients

Habitually Over-Deliver

Law firms that establish the best relationships also go above and beyond expectations. To build and bolster these relationships:

Set up Google alerts for clients

Use Associates and librarians to track client news

Track the company, industry and key competitors at a minimum

Send proactive updates to clients on:

Emerging risks

Regulatory changes

Host off-site strategy sessions with the client

Develop and share best practices of top clients with other clients for litigation management strategies and ensuring compliance with changing regulations, for example:

Ask clients to evaluate your entire case team

Solicit and act on client feedback systematically and regularly

Rely on client feedback to guide strategies, offerings and investments

Use key milestones as a natural point for clients to assess your progress

Offer constructive criticism to the General Counsel

Be aware that as overall client satisfaction continues to rise, this approach may simply allow you to keep pace. Think about developing new strategies to truly distinguish yourself or your firm.

Reinvent Yourself

A select group of law firms increased their share of primary relationships by adopting client-focused strategies. These firms:

• Provide client service delivery
• Institute client service metrics across the firm
• Include client service activities in Partner goals
• Provide tools to partners to boost client service
• Train attorneys and staff in client focus
• Adopt client service teams to better serve existing clients

o Focus on the goals of the client

o Define accountability and leadership

o Have a dedicated budget

o Include clients as an integral part of the program

o Rely on measurable performance metrics

Maintain a market focus

More importantly, these law firms showed the strategic discipline to stick with their strategies for three years. The dividends are now coming in. Each of these four high-impact strategies is proven to drive stronger client relationships. Commit yourself today to adopting just one of the many tactical examples presented. Your clients will thank you.

FOOTNOTES

1. The BTI Consulting Group’s 8th Annual Survey of Corporate Counsel to be published in an upcoming webinar, Best Practices in Managing Outside Counsel (November 2008)

2. BTI Power Rankings: The Client Relationship Scorecard for Law Firms (2008)

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“The Client,” is a new feature of The Complete Lawyer. We bring you candid, thought-provoking interviews with the world’s leading corporate counsel conducted by long-time TCL contributor, Marcie Shunk, of BTI Consulting. BTI’s senior researchers conduct thousands of interviews each year with corporate counsel, delving into the nuances of client satisfaction, probing for new, undefined issues and delineating drivers behind key market trends.

This month, we are delighted to feature Jeff Carr, General Counsel of FMC Technologies. Jeff is an outspoken leader in the field of legal services.

MS: Thanks for joining us for this discussion today, Jeff. Our topic is how corporate counsel are managing their legal departments in the face of the declining economy. Could you please describe your role and your key responsibilities at FMC Technologies?

JC: Sure. I’m the VP, General Counsel, and Secretary of the company. I break down the traditional general counsel role into three areas. First, I’m the strategic legal advisor to the board and the senior management of the company. Second, I provide cost-effective legal services that are the right size for the company. Third, I develop and manage a high performance legal team.

MS: What are your top goals and your priorities for your legal department in 2008?

JC: Most important is to further manage and develop my people. We don’t have any significant legal issues going on; we’re just blocking and tackling right now. We are completing the spin-off of about 20 percent of our business, a major project that consumes a lot of time. But we’re really focused on maintaining the ethical compass of the company, developing our compliance programs, reducing our costs, staying within our budget or below, and then continuing to develop the people on the team.

MS: What steps are you taking to achieve these goals?

JC: On the compliance side, we’re organized as a legal team; there is a primary lawyer for each of our four major business segments and a couple of other lawyers working beneath them. Each of those lawyers is responsible for delivery of legal service to that business segment, but each member of the team also has a sector specialty that is distinct from everyone else’s. It’s a kind of matrix organization: we have both line and specialty responsibilities. Suppose one of my guys is in charge of the delivery of legal services for the energy processing group. He may call on me on an international issue, someone else for a litigation issue, and a third person for an environmental issue. He’s the team leader, and we’re all team resources. We do a “make or buy analysis” on any legal work. Since it’s always cheaper for us to do the work in-house, we ask, “Do we have the capability to do the work?” and then, “Do we have the capacity to do the work?” If the answer to both of those questions is no, we go to our outside providers. Like most companies, we have a list of about 15 preferred legal providers whom we go to first; we call them alliance counsel, and they make up 85% percent of our spend. We use alternative billing with them. We only do performance based pay for legal engagements. We’re extremely rigorous about metrics, measuring performance and staying on budget. This year, we’re particularly focused on standardizing our processes and procedures as a legal team so we can leverage our internal knowledge…

MS: You’re talking about internal process changes.

JC: Lawyers are really good at reinventing the wheel because that’s what they get paid for. Plus, because they’re really smart, they always think to themselves, “Why should I ask somebody else? I can answer that.” But this thinking is irrelevant in today’s world. We’re trying to avoid spending a lot of money to answer the same question twice. Every time we answer a question, we’re trying to establish a process and then improve the process so that all lawyers ask themselves, “Have we done this before?” This will prove a tremendous savings for us. In 2001, we were spun off from another company that had eight attorneys, and the total company revenue was about $2.2 billion. Today our revenue is about $4.6 billion, we still have eight attorneys and our overall legal spend, internal and external, has stayed relatively flat since 2001.

MS: That’s remarkable.

JC: You can’t do that when firms are raising their rates every year because internal costs go up due to salary increases. The only way you can keep expenditure down is by what I call “creative denial of service.” When I talk to other clients, I talk to them in terms of empowerment: give people the tools to answer the questions themselves and then standardize those processes and procedures so that you’re not constantly answering the same question twice.

MS: And that’s working?

JC: (laughing) Yeah, it is; you know, you can always improve.

MS: Are there any other ways you’re managing your law firm differently to help you meet your objectives?

JC: Well, we do a couple of things a little differently than most folks. Most people use matter management systems these days—we’re very rigorous about doing that. We only accept bills electronically. We pay about 50% of our bills using a Visa purchasing card. This streamlines our back off as processing of invoices but it helps the law firm get its money more quickly. We also do constant performance evaluations on our law firms, a process that’s built into our matter management system. My attorneys can’t close a matter without doing a performance evaluation. These performance evaluations are then linked to compensation of the law firms. Another rigorous procedure is that the attorneys can’t close a matter without doing an after action. We want the focus to be both procedural (“How could we have handled this matter better?”) and substantive (“What could we do to avoid being in the situation?”). Then we put the matter into our management system and make it part of our process, ensuring that it will recur. We capture what we learn and then act on it.

MS: That sounds very comprehensive and really tight, so it works.

JC: It does. Like everything else, it’s probably better in theory than in practice but (laughing) we’ll keep getting better.

MS: From the viewpoint of a law firm, what is the one thing a firm could do to help you meet your goals and objectives?

JC: I’m thinking of Felice Wagner’s poem, “The Client.” The gist of it is this: “If only you’d ask, I’d be happy to say I wish you would do things more often my way.” Basically, it acknowledges that firms need to recognize that fundamentally we are not in the business of answering interesting questions of law, nor are we in the business of winning cases. We are in the business of making and selling equipment, products, and services to our customers. Legal services are an adjunct to that. They empower us and enable us to achieve our business objectives; they protect us from risk and they help us in controversies—and that’s all they do. It’s not part of our core competency to be great lawyers. As a company, our core competency is to manage legal affairs to help the business achieve its objectives. A law firm that understands that is helpful to us. A law firm that thinks that we’re interested in making new interesting questions of law is not.

MS: On a different note, how would you characterize the state of today’s economy?

JC: (laughing) Bifurcated. We’re primarily in the oil and gas industry, so the economy is superb for us. I recognize that elsewhere it’s different.

MS: Some of us don’t feel so good about that.

JC: Absolutely. But with oil at $120 or $150 a barrel, there is an increased demand for our products and services. From our standpoint, at a micro level, that’s a good thing. From a macro level, when the economy’s in distress, it is problematic because this can’t continue; it’s unsustainable. Even though our business is doing extremely well, our legal team is under intense pressure to reduce our costs, increase our performance, and manage risk better. Businesses look to us to help them manage their legal risk because that’s ultimately what gets a company in trouble. So our take on the economy may be a little bit different than others but the dynamic is the same.

MS: Have you seen a change in the types of matters you’re facing because of this downturn?

JC: We haven’t. I know other sectors have, particularly the financial service industries. We don’t play in that particular pond. We do see some increasing bankruptcies. But that’s not a threat to our business as long as we manage who we’re doing business with and how we manage through this period. There’s a little more pressure on employment, I suppose. We’re not letting people go but some of my brethren are and so that would increase the demand for employment-type services. But no, in general, we’re not seeing a huge change.

MS: Do you think that if the downturn continues it will have more of an impact on your legal issues?

JC: Sure. It’s inevitable that we’ll move away from a hydrocarbon economy. When that happens, we’ll have to reinvent ourselves, and that will create new challenges for the legal team as well. Personally I like change; it’s invigorating and exciting. I think the biggest challenge we’re facing concerns talent. How do we manage and motivate people in organizations in which staff departments like law are facing reduced head count? We’re working with people from a new generation who have very different perspectives on work/life balance, dedication to work, what it means to be a lawyer.

MS: What role could outside lawyers play in helping you navigate the economy as it is now?

JC: You know, the best thing that they could do is stop paying first-year associates $160,000 a year. Frankly, I know firms have to pay new lawyers top dollar to get good people. Their salary structure is their issue, not mine. My issue is that I’m not going to pay for it. I’m not going to permit law firms to pass through those costs to us. This means that law firms are going to have to change their economic model and become more efficient over time. If they wish to maintain their levels of profitability without increasing their cost to the client, they’ve got to find new ways to deliver legal services and focus on reduction of cost as opposed to growing profits through simply increasing the top line. They’ve got to increase their profit margin, and they’ve got to start focusing on their costs. I don’t see any focus on these issues in the law firm market today. That’s the single most important thing that they could do. The second thing is to figure out a way to leverage their knowledge base so that they are not charging us to answer the same question twice. But this requires them to completely change their billing model which is not based on selling hours. The more often they answer the same question twice, the more hours they get to bill.

MS: Do you have any other insights that you’d like to share with your readers?

JC: Two points. First, we need our law firms to survive and be profitable, so we can’t treat them simply as vendors; we need to find new ways to partner with them so that they can be profitable while fulfilling our needs. Second, the reason the industry has not changed is because the people on my side of the table aren’t changing. We’re simply complaining, and that’s not a particularly effective form of dialogue. We have to work together to find ways to change this industry and make it both profitable and sustainable.

MS: Jeff, it’s been a pleasure speaking with you. Thank you for giving us your input.

JC: Thank you, Marcie; it’s been my pleasure.

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Senior Vice President, General Counsel, and Secretary of Source Interlink Companies, Inc.

“The Client,” is a new feature of The Complete Lawyer. We bring you candid, thought-provoking interviews with the world’s leading corporate counsel conducted by long-time TCL contributor, Marcie Shunk of BTI Consulting. BTI’s senior researchers conduct thousands of interviews each year with corporate counsel, delving into the nuances of client satisfaction, probing for new, undefined issues and delineating drivers behind key market trends.

This month, we are delighted to feature Douglas Bates, Senior Vice President, General Counsel, and Secretary of Source Interlink Companies, Inc.

MS: Thank you very much for joining us today. Our topic is one that many corporate counsel have expressed extraordinary interest in—alternate billing and ways to reduce legal costs. I’ll begin with some background. Could you please describe your role and your key responsibilities at Source Interlink?

DB: I am the Senior Vice President, General Counsel and Secretary of Source Interlink Companies. I handle and supervise all of the legal affairs of the company. I’m also responsible for the Real Estate portfolio management—strategic decisions regarding some 130-odd facilities that comprise our Real Estate portfolio. I also spend a lot of time advising and consulting with senior executives on a variety of strategic tactical and operational matters.

MS: What are your top goals and your priorities for your legal department for 2008?

DB: We’re focused primarily on improving and streamlining processes. One of our key performance indicators for this year is what we call cycle time—the time between first learning of a contract and signing it.

MS: What are some of the steps you are taking to achieve this goal?

DB: Well, there are a variety of things. Like many legal departments, we need to improve our objective measurement of what really is happening. For example, we’ve found that the biggest impediment to improving cycle time has nothing to do with the law department—although every business person will tell you that it’s those lawyers who always delay the project. It’s the documents sitting on the salesman’s desk. Generally, we’ve been improving processes throughout our department to be able to track information, develop performance indicators, and then monitor and measure these to look for ways to improve.

MS: And then make it known throughout the company.

DB: That’s right.

MS: One of the key areas we have heard you, your peers and other corporate counsel discuss in recent months is how better to manage outside counsel and the rising cost of legal services. Could you discuss what strategies Source Interlink is currently employing to help reduce legal costs?

DB: Our first step, when we looked back at costs for outside legal services, was to try to gather as much information as we could. We wanted to simply understand what we were doing and how we were doing it. Then, we tried to identify opportunities to streamline that process and reduce costs. Having information is the most important factor in making sound business judgments. Most legal departments are small—we have five attorneys here—and they don’t think about gathering information. So, the first step was to gather that.

Second, we’ve undertaken a wholesale revision of our outside counsel billing guidelines. After meeting and talking with each of our principal contacts at all our outside firms we developed, in partnership with them, guidelines that worked for them and for us. We must have spent five months doing this and it’s fairly tight. That is a huge help for us. Sometimes it seemed as if we were negotiating over seemingly silly things, but the amount we spend for copy charges and those sorts of things makes a big difference.

MS: What has been the actual impact on your legal costs after you finished this process?

DB: We’re still measuring the return; however, our preliminary results indicate that the cost of outside legal services is down about 13 to 14% this year over what it would have been had we not put in place these guidelines. So that’s an actual decrease.

MS: Do these guidelines include alternative billing with your firms?

DB: We do use alternative billing arrangements. They are not in our guidelines other than a general statement that we want to talk about them. Alternative billing arrangements have been hotly discussed and of great interest to inside counsel for years. The problem for alternative billing arrangements is they’re promising but difficult to implement. In theory, everything works, but there are so many variables, not all of which can you control. That is, whether you’re working on a transaction or working in litigation, you have to be responsive to your opposition, and they may do things that increase your costs significantly.

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The BTI Consulting Group’s newest research uncovers how clients are using alternative billing arrangements to get more for less—and why law firms are making out on the deal.

Three Key Trends In Alternative Billing

BTI recently completed its 7th annual survey of legal services, including in-depth telephone interviews with more than 250 in-house counsel at large and Fortune 1000 organizations. This comprehensive research uncovers what is capturing clients’ attention in law firm billing—what’s innovative, what’s not, and how your law firm can leverage simple changes in billing into new business and higher revenue.

1. Nearly 70% of large organizations use some form of alternative billing
Our analysis reveals that the use of alternative billing arrangements is widespread among large and Fortune 1000 organizations. Nearly 70% of corporate counsel report that at least some of their legal work is contracted under alternative billing arrangements. Among unconventional billing methods, fixed fees dominate.

2. Fewer than 15% of outside counsel fees are paid under non-standard arrangements
Despite the first trend, the amount of legal fees paid outside of the traditional billable hour context is relatively small. Less than 15% of legal work, on average, is performed under alternative billing arrangements. More than three-quarters of companies spend less than $1 million on legal fees using unconventional billing methods—a startlingly small number given the airplay dedicated to alternative billing.

3. Litigation paves the way for alternative billing
Corporate counsel most likely to use alternative billing arrangements hail from highly litigious industries such as manufacturing, pharmaceuticals and energy. They are typically smaller in size (outside of the Fortune 500) and spend less overall on outside counsel than their larger counterparts.

However, the demand for alternative billing arrangements is rising at companies of all sizes. As clients demand more value from their law firms, savvy outside counsel are devising innovative ways to capture the attention of the world’s biggest clients. Read on to learn what law firms are doing to win client recognition—and business.

Three Best-In-Class Approaches To Billing

Billing issues are among the most frequently voiced challenges corporate counsel face with their law firms. Over billing, unpleasant surprises and confusing invoices top the list of complaints. Yet in the midst of this turmoil, 55 law firms set themselves apart for innovative billing, winning recognition and business from some of the world’s most demanding clients. Here are three billing approaches corporate counsel applaud as best-in-class.

1. Get Creative

The most innovative law firms are proactively approaching corporate counsel with new and creative ways of billing, many of which can have a positive impact on the bottom line. From the perspective of clients, innovative billing is just as much about a law firm’s process as it is about the financial transaction.

Corporate counsel specifically laud key process changes that help streamline the review and approval of invoices, such as:

a. Electronic billing tools and software
b. Well-organized bills categorized in line with the clients’ profit centers
c. One-page summaries of all active matters
Plus, law firms benefit from these as well: the easier an invoice is to understand, the quicker it gets paid.

2. Be Predictable

Corporate counsel is accountable for devising—and sticking to—internal budgets. Law firms can help by adding a level of predictability to their fees (often in the form of budget estimates) as well as by keeping clients informed of changes or unexpected events that impact costs.

A proactive approach to budgets, in particular, wins kudos from clients, and distinguishes savvy law firms from their competitors. Law firms who make budgets a matter of course cater directly to client needs, helping corporate counsel to meet internal requirements and streamline legal management.

3. Offer Client-Focused Alternatives

Corporate counsel celebrates the law firms who work with them to determine new approaches to billing. (Fixed fees are the most frequently used method of alternative billing, relied on by more than 50% of corporate counsel. Contingency, or success-based fees, are the second most popular at nearly 25%.)

Yet what stands out in clients’ eyes is a firm’s willingness to consider alternatives rather than the alternatives themselves. Corporate counsel specifically recognizes law firms for being flexible and accommodating.

For example, two very different clients—with different types of work, needs, and billing arrangements—can consider the same law firm as the absolute best in innovative billing. Each client believes that its billing method is what one corporate counsel refers to as his “special arrangement” with the law firm.

It is this sentiment, not the billing itself, that makes the best law firms shine in the eyes of clients.

Post from: The Complete Lawyer

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