AFAs and Facing the Client Paul Covey Julia Stahl-Hughes Lucy - - PowerPoint PPT Presentation

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AFAs and Facing the Client Paul Covey Julia Stahl-Hughes Lucy - - PowerPoint PPT Presentation

Apr 08, 2023 50 likes •486 views

#AALL14 #AALL14 #AALL14 AFAs and Facing the Client Paul Covey Julia Stahl-Hughes Lucy Curci-Gonzalez, Moderator #AALL14 Presenters Paul Covey Julia Stahl-Hughes Managing Director for Strategic Director of Library Services Pricing &

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AFAs and Facing the Client

Paul Covey Julia Stahl-Hughes Lucy Curci-Gonzalez, Moderator

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Presenters

Paul Covey

Managing Director for Strategic Pricing & Analytics O’Melveny & Myers LLP

Julia Stahl-Hughes

Director of Library Services Stradley Ronon Stevens & Young LLP

Lucy Curci-Gonzalez

Director of Library Services Kenyon & Kenyon LLP

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Outline

  • Market Trends
  • Strategic Pricing
  • Informed Pricing
  • Alternative Fee Arrangements
  • Matter Budgets
  • Legal Project Management
  • Finding a Way In

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Market Trends

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Growth in Demand for Legal Services

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Flat Demand Increased Competition Buyer’s Market

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Clients focused on VALUE

Law Firms focused on deliveringVALUE

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The Search for Value:

Clients

  • Growth of in-house
  • ACC Value Challenge
  • Billing metrics

Law Firms

  • Growth of fixed fees
  • New staffing models
  • Giveaways

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Value Price

From 2013 Altman Weil Chief Legal Officer survey results

When offered four possible law firm pricing options, 36.4% of CLOs said they wanted ‘transparent pricing’ in which they understand how and why the price is set and have the

  • pportunity to discuss changes;

One-third of CLOs chose ‘guaranteed pricing’ as their preference; and 20.3% of CLOs preferred ‘value-based pricing’ that varies based on results. Only 9.6% of Chief Legal Officers say they wanted the ‘lowest price’ available.

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Strategic Pricing

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What is “Strategic Pricing?”

Strategic pricing sets a product's price based on the product's value to the customer, or on competitive strategy, rather than on the cost of production. Competing through pricing means recognizing what your customers value and charging them accordingly.

From What is Strategic Pricing, Evangeline Marzec, Demand Media 12

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The Best Strategic Pricing Arrangements:

  • Better align law firm and client interests
  • Emphasize value
  • Increase predictability of outside legal spend
  • Encourage efficient matter management
  • Create a genuine partnership between law firm and

client.

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Informed Pricing

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Client Intelligence

  • Legal Spend

– Magic Bullet? – Reference USA – Annual Report

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Client Intelligence

  • Current Firms - Litigation

– Federal

  • Court Link
  • Monitor
  • PACER
  • Bloomberg Corp Rpt.

– State / Local

  • manual

– Monitor??

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Client Intelligence

  • Current Firms – Transactions

– SEC

  • Knowledge Mosaic
  • Monitor?
  • Current Firms - Transactions

– Other Transactions

  • Capital IQ
  • Merger Market
  • Deal Book
  • Asset Backed Securities Alert database
  • Search
  • Monitor – levereagedloan.com

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Client Intelligence

  • Current Firms – Other

– Web Search – Press Release search

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Competitive Intelligence

  • Strengths/Weaknesses

– CourtLink – Martindale – Website – Rival Edge (ALM) – Legal Intelligence (ALM) – Local Newspapers (general / legal / business)

  • Rate Structures

– Valeo

  • Cost data for similar

cases

– TyMetrix

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Matter Intelligence

  • Judge / Jurisdiction

– Almanac of the Federal Judiciary – Westlaw Profiler – Manual (Westlaw/ PACERpro)

  • Opposing Counsel

– Westlaw Profiler – PACER/ PACERpro – Manual (Westlaw / PACER) – Rival Edge

  • Other Sources

– Lex Machina – Litigation Monitor – CourtLink – Rival Edge – Legal Intelligence – News Aggregators

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Alternative Fee Arrangements

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AFAs – A Continuum of Risk

Volume Incentives

  • Lower hourly

rates as volumes increase

  • Provide an

incentive for the client to send more of its work to the firm

  • Do not inherently

reward efficiency

  • r offer the client

budget certainty Blended Rates

  • Can reduce

sticker shock of partner rates

  • Best for work that

can be well leveraged

  • Do not inherently

reward efficiency

  • r offer the client

budget certainty Matter Budgets

  • Often a de facto

fee cap from the client’s perspective

  • Provide

Predictability

  • Encourage

Efficiency

  • Improve

Communication

  • Align Incentives

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#AALL14 Fixed Fees

with or without collars, by segment, matter or client

  • Provide

Predictability

  • Encourage

Efficiency

  • Improve

Communication

  • Align Incentives
  • Reduce

Administrative Resources on Invoice Review

AFAs – A Continuum of Risk

  • Zero or small cost

to client up front

  • Provide an
  • pportunity to

earn a large fee based on specified

  • utcomes
  • Align firm and

client interests; firm assumes high risk for high potential reward Contingency

  • Lower cost to

client up front

  • Provide an
  • pportunity to

earn a greater fee based on specified

  • utcomes
  • Align firm and

client interests; firm puts “skin in the game” Holdbacks + Success Fees

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Matter Budgeting

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From a client, following a complete victory achieved in a case that could have resulted in the client paying more than $1B in damages

“Achieving a great legal outcome is assumed from any firm that we hire. So even if you get a great result for us, if you exceed the budget in the process, we will consider the representation a failure.”

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#AALL14 Discuss case trajectory, key assumptions, client risks, what the client considers “success”

The Budgeting Process

Talk to the client Create/Modify budget Communicate Budget

Look at representative matters, consider available staffing Capture the scope of work covered by the budget and the key drivers in a memo to the client

Repeat Monitor budget

Use emails, data on matter pages and the monthly bills to monitor activity levels against the budget

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Sample Matter Budget Excerpt

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Legal Project Management

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Staffing

– Work – Processes – Flow

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Staffing

  • Right person for the right job…

– Legal

  • Staff Attorneys
  • Contract Attorneys
  • Outsource

– Administrative

  • Professionals – library / accounting
  • Para-professionals – paralegals, IT staff
  • Outsource

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Efficiency

  • Research and Develop

– Knowledge Management – Document Assembly – Consistency Evaluators – Research Tools

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  • A focus on staffing mix & efficiency
  • Better communication
  • Increased use of Phase & Task Codes
  • Timely Time Entry

Some Implications of Fee Constrained Work

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  • Understand what “success” means to the client, both qualitatively and

quantitatively

  • See matters from a client’s perspective and understand the performance

metrics that are important to them

  • Invest effort into capturing more aspects of matter experience to enhance

knowledge and enable the ability to confidently price services

  • Create budgets, even when not requested, and communicate with clients

regularly about case trajectory and budget impact so that there are no surprises

  • Seek client feedback regarding performance, both in providing legal service,

and also in matter management

Key Take-Aways

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Finding a Way In

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Getting Involved

  • Unintentional
  • Intentional

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Unintentional Organic

  • Dumped

– Up to speed – Triage – Plan – Involve other departments

  • Sidelines

– Act don’t react – Assess the situation – Make Contact(s)

  • Casual discussion
  • Open ear

– Offer professional assistance

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Intentional Create a Need

  • Go Big or Go Home

– Grant family – Who’s house?

  • Knight in Shining Armor (KISA) – champion

– Old / New Normal – Back channel iteration

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Intentional Back-channels

  • Monitor research/retrieval

– Reference staff? – Practice Group Structure – Committees – In general? Keep your ear to the ground

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Intentional Back-channels

  • Touch

– Monitor/Update – Practice Group Point person (KISA) – Committee Person (KISA) – Administrative staff

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Intentional Back-channels – touch

  • Casual discussion – where?

– Coffee Room (visit different floors) – Elevator (?) – Hallways/Library/Office – Lunch – Events

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Intentional Back-channels – touch

  • Casual discussion – about?

– What they are doing – LISTEN – Existing helpful work product (repurpose?) – Offer expertise (share) – Develop bibliography/repository

  • FOLLOW UP (repeatedly)

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Intentional Back-channels – foot there

  • FOLLOW UP (repeatedly)
  • Leads to possible meetings - CALENDAR

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Questions and Answers

Contact Information

  • Paul Covey: pcovey@omm.com
  • Julia Stahl-Hughes: jhughes@stradley.com
  • Lucy Curci-Gonzalez: lcurcigonzalez@kenyon.com

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