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CCCA_V6No4_Dept-LawDeptMgmt-FIN_CCCA_V6No4 11/26/12 3:16 PM Page 14 Law Department Management Legal cost containment Cost-conscious clients are mindful now of billing practices and add-ons. By Joe Milstone to review one that was 45 pages long and certainly important, perhaps the applica- had more commandments than the 613 tion and multiplier effect of it is even more allegedly in the Torah. relevant. Regardless of the use, or not, of hourly rates, there is nothing more irritat- 1. Happy Anniversary! ing for many corporate counsel than firms No annual hikes please… continuing to bill for multiple resources Da da da da da da da da. You say it’s the doing the same work. It’s one thing to pay firm’s birthday? Time for an annual across- $700 for a specialist to give you an efficient the-board fee hike. But on the way to the and pragmatic solution to a question. It’s bank does anyone at the firm consider another to pay $3,500 for five people to sit lmost every day I meet with corpo- whether corporate counsel budgets are around a table and figure it out together. Arate counsel clients who are increasing commensurately (they’re not) or Or to pay for three layers of resource — intrigued by, and in many cases feel whether the same level of law firm one to do the job, a second to review the compelled to find out more about, alter- resource is now providing a double digit job and a third to sign off on the job, so native law firm structures. One might be percentage increase in value for the same that outside training and education is surprised to know that of all the virtues work? The move to alternative fee struc- effectively borne by the client. and key value propositions espoused, tures, to the extent it’s even occurring, does And let’s face it — as the large firms nothing makes hay more than when the nothing to solve this problem — it merely continue to struggle with overcapacity, the discussion turns to financial terms skins it in a different way using the same internal incentive is for lawyers to bill for OTHER THAN straight hourly rates. underlying and inflated cost structure everything they can in order to meet tar- Not that hourly rates, and more specifi- deployed in the traditional hourly model. gets and survive. That may be at least part cally the size of them, aren’t painful or Recently the general counsel of an of the explanation why one engagement reflective of a cost-plus, supply-driven international pharmaceutical company (a letter insisted that we not bill for a list of model that has long counted on the con- former and loyal Bay street lawyer) confid- about 58 things (I lost track after subpara- servatism of corporate counsel consumers ed in me that he “switched off” the old graph (hh)), including reviewing and con- for their continuance. They are. But that’s firm after the 2008 financial downturn sidering conflict of interest matters, prepar- for another article. when, as sure as his own birthday, the ing invoices and providing a budget esti- There are three other facets of the tradi- annual fee raise letter arrived with no mate when requested. I guess this has real- tional outside-pricing proposition that explanation or justification whatsoever. ly been done to people. drive clients crazy, particularly while cor- Pundits have finally begun to scratch porate counsel themselves have been in beneath the surface of the legal business, 3. And forget about disbursements almost total lockdown mode for a number correctly asking why, in the face of ram- This is a biggie — and a favourite missile of years in having to do exponentially pant advances of technology-enabling effi- target in the engagement letter. I remem- more work with the same or even lower ciencies, this is perhaps the only industry in ber being at a big firm cocktail party a level of resources and budgets. I know this the world where seemingly none of those number of years ago where one of the from my meetings, but even more so from gains are returned to the customer. partners was boasting that incoming faxes the engagement letters we get (and chuck- was one of the best profit centres and le at) from clients which read like a confes- 2. No more piling on deserved its own line item on the firm sionary litany of cumulative pain they've Most savvy corporate counsel know that financial statements. More recently, a litiga- endured over the years. Recently we had while the underlying pricing structure is tion firm to whom I referred a client had VEER 14 CCCA Canadian Corporate Counsel Association WINTER 2012