Editor: How did you identify rising costs of outside counsel as a major concern for corporate counsel and what are the reasons for that concern?
Clark: We looked at industry surveys that are available in the legal community. The information was remarkably consistent in that costs continue to be a 'top of mind' concern for GCs. For instance, in the Fulbright & Jaworski Second Annual Corporate Counsel Litigation Trend Survey, respondents were asked, "What is the one phrase that you hate to hear from your law firms?" and the answer was "It will cost more." At LexisNexis, we have to hear and respond to that. One of the reasons that outside legal spending is at the top of the list is that the rate of increase of those costs is about double the rate of increase in the corporate law department budget.
Editor: What are some of the ways experts have suggested to control outside legal expense?
Clark: There are lots of different ways to manage legal spending - for instance, law firm convergence projects, so that the law department will assign a greater proportion of its work to a smaller number of firms, or alternative fee arrangements, or even freeze the rates for outside counsel. The problem is that for any of these methods to succeed, the GC needs to have information on which to base these decisions and on which to evaluate the effectiveness of these strategies. Gathering the baseline information can be time consuming, tedious and expensive without technology to do the work for you. In fact, it's so labor intensive that if there isn't technology in place, it doesn't happen.
Editor: What types of information would you say are the most critical in terms of the management process?
Clark: If you're looking at spend management, you'd want to get as much of your spend information as possible for all of your legal matters, including amounts you're charged by your attorneys, their hourly rates, the type of work being done by certain levels of professionals, as well as expenses that are charged by vendors employed by your law firms. All of the cost information needs to be there, including any alternative fee arrangements that you already have in place. In addition to gathering all of the information, it's helpful to be able to break down data in a way that is meaningful to you.
Editor: In a sense, collecting the information is dependent on law firm cooperation.
Clark: Well, yes and no. There are certain systems that require the law firms to submit their invoices electronically. Our solution, CounselLink, does not require that. They can still submit a paper invoice. Assuming that a customer is going to be using electronic transmission of information, the law firms do need to participate. Today, law firms recognize electronic invoicing as a standard business practice. Law firms are also starting to recognize that there are advantages to these systems for them as well. With CounselLink, law firms can go on line and find out where an invoice is in the approval and payment process. Typically, if a solution has a good workflow engine and moves the invoice along, it will result in more predictable and speedier payment to the firms.
Editor: Is any help provided by the system in terms of developing comparisons with the numbers you're getting from your firms as compared with some norm?
Clark: With this kind of a tool you can compare firms on many variables if you have the right reporting package. It depends on the types of matters that the law firms are handling and the result you are seeking. It depends on how the GC views success, and what the GC values most in terms of the firm's performance. It is very important to our customers that they have the ability not just to capture the information, but to really look at it and evaluate it in ways that are meaningful to them.
You can look at cycle time, staffing ratios, costs - there are many, many ways to evaluate a particular matter and compare firms. One customer was very happy with one of his firms, but realized when he looked at the information that only partners were working on his matters. He started to think, "Why am I only being charged partner time?" He and the relationship partner at the firm structured a plan so that going forward the firm would hire a number of associates that would be dedicated to this client's work. The firm would be able to build a depth of bench and the customer would benefit by having some associate level rates on his bill. The information can be used in many ways.
Editor: What about the mix of work? Does it become more difficult to judge the effectiveness of a firm if it's doing mainly transactional work or giving advice rather than litigation?
Clark: GCs are always going to be focused on results first and cost as a close second. Whether it is a transaction or litigation, there is a result that you are aiming for. Once you get a handle on an appropriate cost for each type of matter, whether it's a transaction or litigation, you have latitude to initiate more effective spend management. For instance, you can move into an effective alternative fee arrangement. I don't think any types of matters would be excluded from effective spend management.
Editor: How would you characterize CounselLink? Is it matter management, invoice management or a combination?
Clark: That's an excellent question. CounselLink incorporates elements of electronic invoicing, matter management and more. It also has elements that are focused on fiscal management of the law department, such as budgeting tools, litigation plans, and a very sophisticated reporting capability. Law departments want to know that they're going to have a reliable reporting system that they can use themselves. In today's business climate, it is an important element of fiscal management - being able to get the data, manipulate it and analyze it without having to rely on another department or expert.
One of our customers was a Six Sigma black belt. Once he started using the system, he was awed by the power of the data that he had. As a result of using the data to influence attorney selection, to monitor trends, and notify business units of new litigation in time for them to remediate product flaws, the company was able to save almost 50% of its outside counsel spending. He was able to use spend management information and then take it to the business environment for further savings. CounselLink's flexibility in assisting with compliance objectives is demonstrated by the fact that some of our customers also use CounselLink to help track and monitor the achievement of their diversity goals.
Editor: What are the unique qualities of your service that would not be offered by the competition?
Clark: There are some notable differences. One advantage is the way we designed the product. The first thing we hear from law departments is, "If we implement this, what will that do to our law firms?" So, we have intentionally focused on trying to create a solution that will take the law firms into account. For instance, unlike some of our competitors, CounselLink doesn't require any coding of invoice entries and will accept any format of invoice, even paper. We also don't charge the firms for license fees, installing upgrades or maintenance. They can also administer their own information within the application.
For corporate counsel, the power of our reporting tool also distinguishes CounselLink. It is surprisingly easy to use. Even a novice can use our reporting system and create phenomenal reports. That's very important to GCs.
Also, the system is very flexible in workflow, data collection and types of fees that can be managed. CounselLink has successfully managed over 100,000 matters using alternative fee arrangements. As GCs move toward more alternative fee arrangements, they want these fee arrangements to be captured and included. Without the flexibility to include, monitor and report on alternative fees, a law department is really capturing only part of its overall legal spend picture.
Editor: What kind of help do you provide to the customer in terms of adapting the system to their particular requirements?
Clark: When someone is coming on board, they will be assisted by our professional implementation consultants. We also provide ongoing support with an account manager and support teams. We are very committed to customer service.
In terms of implementing, one of the other features that is great about CounselLink is that it has adaptability. CounselLink is a modular system, so we have a level of product and price point that can appeal to any size law department. We try to help our customers match their needs to the features and functionality that they want to implement. We work with them to find how they'd like their workflow to work, what data they want to capture, what type of reports they are interested in, and how they would like those delivered. Then, in addition, and equally important, we find which internal enterprise systems they would like to integrate with CounselLink.
Another aspect that would not be available on other systems is the synergy CounselLink has with services offered by LexisNexis. LexisNexis provides a spectrum of research and technology solutions so that corporate law departments have one partner that they can turn to to meet their legal and business needs. For instance, we have CounselLink for spend management, Applied Discovery as an electronic discovery tool, and compliance training from Compliance 360.
Editor: With respect to Sarbanes-Oxley, is CounselLink helpful in satisfying the auditors that the legal department dollars are being spent in the most effective way possible?
Clark: Not only has it been helpful, but in some cases it has been why the customer has come to us. The great thing about CounselLink is that it imposes the same discipline for every invoice, and it creates an audit trail for every action that is taken on any invoice.
Editor: How can I get more information about CounselLink?
Clark: You can call (800) 600-2282 for additional information, or go to www.counsellink.net. I can be reached at (916) 679-3791.
Published April 1, 2006.