Law Firm Profits Increase with Strategic Legal Management

Article excerpt

As corporate clients move to apply strategic management principles to legal service, law firms must move in the same direction

MUCH is being written about the new ways in which corporate clients are managing their outside counsel to achieve better outcomes. For instance, there were two feature articles in the January 2001 issue of ACCA Docket, the publication of the American Corporate Counsel Association, an organization of nearly 20,000 members.(1)

While the focus of this attention has been on the client side of the lawyer-client relationship, there has been less attention paid to what these new developments will do to or for law firms that furnish legal services to corporations.

Law firms that adopt the approaches known as "strategic legal management" (SLM) will be on track with their corporate clients and should be able to increase their profits or draw from $20,000 to $100,000 per partner per year. These law firms can gain a significant marketing advantage with current and prospective clients because their SLM approaches provide what clients have been seeking for years: better, more predictable and measurable legal services.

Interested? Read on.

MANAGEMENT REVOLUTION

A management revolution is transforming business around the world as thousands of companies strategically retool and improve their human resources, manufacturing, sales and accounting departments. In the past few years, corporate America has invested more than $50 billion in such efforts as enterprise resource planning, customer relationship management, and the so-called Six Sigma systems.(2)

A similar management revolution can streamline and improve the work law firms are asked to perform for corporate legal departments. Those departments spend a median of $11.7 million on outside counsel annually, which over-all amounts to 0.3 to 0.6 percent of sales, or well more than $100 billion spent on outside counsel per year.(3) For nearly a decade, law departments have been looking for better ways to manage outside counsel, but they have been slow to embrace proven strategic management principles, primarily because there were few tools available and fewer consultants with experience applying these techniques to real legal matters.(4)

This is changing. Leading companies are beginning to invest in strategic approaches to improve their legal results. Leading law firms need to know what is happening and be ready for the changes they will bring.

Strategic management in the corporate legal department improves the quality of legal services, produces better legal outcomes, reduces legal costs, improves law firm profits, restructures relationships and delivers other benefits. It starts with the tools of task-based billing, but then goes far beyond that into process analysis and the application of newly available technology to bring about dramatic improvement in the quality of legal matter management.

As more companies apply strategic management ideas to their legal functions, they begin to identify best-practice approaches to optimize results and make legal expenditures more predictable.(5) As they do, the invisible walls that separate law department management from business-side management principles begin to crumble.

TASK-BASED BILLING

Six years ago, the American Corporate Counsel Association and the American Bar Association endorsed the breakthrough uniform task-based management system (UTBMS) code list for litigation. More than 50 major corporations and outside law firms developed the code sets, which now have been expanded to cover bankruptcy, intellectual property, workers' compensation and general counseling. Made available on a royalty-free basis, these task codes give the legal profession a common dictionary to describe the work that lawyers perform for their corporate clients.(6)

Now organizations that pay more than half of all legal fees in the United States have declared their commitment to task-based billing. …