“A Good Crisis is a Terrible Thing to Waste…” The ACC Value Challenge

1. “A Good Crisis is a Terrible Thing to Waste…” The ACC Value Challenge Reconnecting Cost with Value July 17, 2009 ACC Northeast Chapter Susan Hackett, ACC

2. Do clients and firms really mean it this time? • Decades of escalating legal costs without improved efficiencies: The Tipping Point • Changing economic pressures on both sides – now emphasized by the downturn • Not a matter of blame; both sides need to change & take responsibility for driving value

3. Client practices focusing on value… • Cigna’s “Nailing the Basics”: Budgeting practices • Only real-case budgets rewarded • Training programs support skill development • Metrics and comparatives drive evaluations • Client reports on performance and accountability • DuPont’s paralegal program: using in-house talent • Outside firms cannot bill for tasks paralegals can do • Strong paralegal training and self-management • Measuring use through e-billing/year-end evals

4. Client practices focusing on value… • GE’s Preferred panel firm training • Focus on portfolios of work – in this case, M&A • Training/skill building at GE’s exec learning center • Regular collaboration meetings • Knowledge management – continuous improvement • SoCal Edison’s balanced scorecards • Measuring department performance to targets: • Results achieved, progress against goals, performance against budget, people related goals • Reporting quarterly to clients to show dept. value

5. Client practices focusing on value… • FMC Technologies ACES system • Combining a mixture of alternative and success fee billing practices for outside firms with • Rigorous performance evaluations: both inside and outside counsel. • “Unpredictable” nature of law ≠ inability to budget/set targets • All counsel compensated based on results/driving the focus on outcomes • All lawyers valued for their business judgment first

6. Some large law departments and their focus on value may take a lead or get more attention … • … But adopting value practices is just as important (and maybe more so) for smaller law departments • Many of larger department techniques are scalable for smaller department use. • Many smaller law departments have value lessons and practices they can teach their larger brethren, too. (And the same goes for firms.)

7. Firm practices focusing on value… • Drinker Biddle: tackling the entry associate crisis - no deferments, but mandatory training - cutting back on starting salaries and hours - educators drawn from excess capacity • Abbott Simses: early case assessment services - firm specializes in settling out matters early - decision tree analysis/process - incentive fees for working a case less

8. Firm practices focusing on value… • Seyfarth Shaw: lean six sigma in a law firm - regular caseloads are reverse-engineered - process management: process times are down, as are client costs - intelligent staffing options employed • Valorem: value billing, defined by client - budgets are set as are expectations - final bill has a client “value adjustment” line item

9. “Yes, you can!” • There’s nothing in any of these practices that you don’t know and recognize: most are just plain common sense combined with a decision to drive value in process. • What is it that you need to move from intellectual agreement with the theory to practical applications you can begin to implement? • Change management can be both radical and incremental – it can be planned and collaborative • The real risk (for both firms & departments) is not acting: everyone wins

10. Unique Opportunities… … For firms that are early adapters – demonstrating their savvy in managing their own business. (Helping clients who don’t have the time/capacity to re-invent the firm for them.) … For firms with a clearly defined value proposition and a willingness to open the kimono to clients – trust, risk sharing, transparency, collaboration. … For the mid-tier and value-firms, as well as boutiques: reasonable rates, lower fixed costs, greater flexibility, nimbleness … For clients that previously did not have the leverage of the Fortune 50 in driving innovative terms with firms … For in-house counsel to drive better internal mgmt.

11. In the end, it’s all about value.