Value-Related Fee Arrangements
Published on 31. May 2012
Book
Paperback/Softback
103 pages
978-1-908640-35-2 (ISBN)
Description
AS IN-HOUSE lawyers prod outside lawyers and the legal profession to jettison the hourly rate as the primary basis for the fees paid by businesses to their external legal service providers, they must inevitably face the question of: What will replace the hourly rate? To date, the term usually used to define what they seek is alternative fee arrangement (AFA). That nomenclature conveys a very significant truth: they wish - they crave - to replace something with another thing that is not the replaced thing, but which itself has not yet assumed shape. It's defined by what it is not. In 2008, the Association of Corporate Counsel (ACC) launched the ACC Value Challenge "to reconnect the value and the cost of legal services". ACC determined not to provide in the ACC Value Challenge a single definition of value, opting instead to exhort ACC members to discuss the issue with their outside legal service providers. This would allow each member to develop their own definitions of the term to suit their company's needs. In the context of legal service, of course, the term value has not had a clear-cut or easily measureable meaning.
A single definition likely proves elusive (at least at this stage of the dialogue within the profession). At the same time, however, we can identify some traits or characteristics of higher-value legal service that could help forge a working definition. Different companies regard those aspects of value differently. To one company, cost control or cost predictability may be the most important trait of the lawyers' work; everything else ranks below that in the company's estimation. Another company, on the other hand, may see reliability of outcome as its pure test of whether the lawyer have added value to its operations. Even one company might regard these elements of value in different order depending on the circumstances (one ranking for litigation and a different one for transactions). These traits (let's call them valuerelated qualities, or VRQs) may not comprise a definition in the pure sense of that word.
Because they are more distinct, more identifiable and capable of greater measurement, though, they may enable in-house and outside attorneys to learn a shared language that will assist those attorneys to provide legal service that more closely mirrors a particular company's valuerelated needs and expectations. Perhaps, in light of the variation among clients' perceptions of value, we should not seek a single definition of value but, instead, a framework or approach with which to construct a context-specific definition of the term. VRQs should enable in-house and outside lawyers to engage in a collaborative process to determine fee structures that more closely align outside counsel's interests with those of their clients. Simultaneously, VRQs can provide the basis for morespecific measures of the success of those arrangements and other aspects of the client-counsel relationship, including some that are less tangible. In light of the confusion and uncertainty surrounding the concept of value, how can we successfully approach the challenge of defining and delivering high-value legal service?
We must start with the basics, recognizing that value does not exist in a vacuum and is not an immutable constant like the speed of light. Rather, it represents the relationship between the cost of something and the benefit that one enjoys from it. In this way, the ACC Value Challenge really represents an effort to help ACC members to recalibrate value and cost, rather than to reconnect them. A connection between value and cost has always existed, but the relationship between them has become more and more attenuated and unsatisfactory as in-house attorneys frequently experienced the cost outweighing the benefits. Increasingly, they viewed the hourly rate as an incentive for outside counsel that does not coincide with clients' interests in cost-effective service.) The cost may include more than out-of-pocket expense and the benefit may be expressed in other than monetary terms. In this report, the author sets out a methodology with which counsel can identify a client's VRQs for a particular engagement or type of engagement. This, in turn, will enable counsel to devise a fee arrangement that advances the client's value-related expectations and needs.
The end result will be more satisfied clients (because their value-related vision will be reflected in how the lawyers define and serve their interests) and legal service that receives a more welcoming reception than it often does. Chapter 1 sets the scene of the current legal services fees structure. Chapter 2 explores why firms are being increasingly pressured to adopt fee arrangements not based on the hourly rate. Chapter 3 introduces the concept and variety of interpretations of what can encompass AFAs. Chapter 4 describes the impact of the traditional hourly rate on both inside and outside counsel, and the legal service; and why a more manageable approach to defining value and structuring fee arrangements is desired. Chapter 5 explains the true meaning of 'value' and identifies crucial context for each value related quality (VRQ), from both the client's and law firm's perspective. Chapter 6 outlines different types of fee arrangements, and associated the benefits and costs. Insightful examples of the different fee structures are provided in Chapter 7.
In the form of case studies, Chapter 8 reveals two law firms' experiences with fees and costs in the current legal environment, and their associated VRQs: Ogletree, Deakins, Nash, Smoak & Stewart, P.C., and Baker & Mackenzie discuss the impact and benefits of their migration from fixed fees to alternative fees arrangements. Alternative fee arrangements are also discussed from the in-house perspective at KONE Corporation and FirstGroup Plc. Chapter 9 provides crucial guidelines on the factors to consider when planning and developing an appropriate fee arrangement. Chapter 10 justifies the necessity of a new approach to cost control in what is a fast-growing cost-focused legal landscape, if the legal sector is to sustain viability and future prosperity. Guidelines for developing a budget are provided and concepts such as task-based budgeting introduced. Chapter 11 takes a technical turn, providing guidance on key metrics and management in relation to fee structures, from the perspective of both the law firm and law department. Case studies from American Express and Motorola support key themes.
Chapter 12 identifies major obstacles firms and legal departments will come up against with AFAs, and provides solutions to mitigate these challenges. Readers will learn how to improve relationships, get to grips with the costs of legal services and improve communication. Chapter 13 explores the use of project management, Six Sigma, Lean Six Sigma and other management approaches, in practice.
AS IN-HOUSE lawyers prod outside lawyers and the legal profession to jettison the hourly rate as the primary basis for the fees paid by businesses to their external legal service providers, they must inevitably face the question of: What will replace the hourly rate? To date, the term usually used to define what they seek is alternative fee arrangement (AFA). That nomenclature conveys a very significant truth: they wish - they crave - to replace something with another thing that is not the replaced thing, but which itself has not yet assumed shape. It's defined by what it is not. In 2008, the Association of Corporate Counsel (ACC) launched the ACC Value Challenge "to reconnect the value and the cost of legal services". ACC determined not to provide in the ACC Value Challenge a single definition of value, opting instead to exhort ACC members to discuss the issue with their outside legal service providers. This would allow each member to develop their own definitions of the term to suit their company's needs. In the context of legal service, of course, the term value has not had a clear-cut or easily measureable meaning.
A single definition likely proves elusive (at least at this stage of the dialogue within the profession). At the same time, however, we can identify some traits or characteristics of higher-value legal service that could help forge a working definition. Different companies regard those aspects of value differently. To one company, cost control or cost predictability may be the most important trait of the lawyers' work; everything else ranks below that in the company's estimation. Another company, on the other hand, may see reliability of outcome as its pure test of whether the lawyer have added value to its operations. Even one company might regard these elements of value in different order depending on the circumstances (one ranking for litigation and a different one for transactions). These traits (let's call them valuerelated qualities, or VRQs) may not comprise a definition in the pure sense of that word.
Because they are more distinct, more identifiable and capable of greater measurement, though, they may enable in-house and outside attorneys to learn a shared language that will assist those attorneys to provide legal service that more closely mirrors a particular company's valuerelated needs and expectations. Perhaps, in light of the variation among clients' perceptions of value, we should not seek a single definition of value but, instead, a framework or approach with which to construct a context-specific definition of the term. VRQs should enable in-house and outside lawyers to engage in a collaborative process to determine fee structures that more closely align outside counsel's interests with those of their clients. Simultaneously, VRQs can provide the basis for morespecific measures of the success of those arrangements and other aspects of the client-counsel relationship, including some that are less tangible. In light of the confusion and uncertainty surrounding the concept of value, how can we successfully approach the challenge of defining and delivering high-value legal service?
We must start with the basics, recognizing that value does not exist in a vacuum and is not an immutable constant like the speed of light. Rather, it represents the relationship between the cost of something and the benefit that one enjoys from it. In this way, the ACC Value Challenge really represents an effort to help ACC members to recalibrate value and cost, rather than to reconnect them. A connection between value and cost has always existed, but the relationship between them has become more and more attenuated and unsatisfactory as in-house attorneys frequently experienced the cost outweighing the benefits. Increasingly, they viewed the hourly rate as an incentive for outside counsel that does not coincide with clients' interests in cost-effective service.) The cost may include more than out-of-pocket expense and the benefit may be expressed in other than monetary terms. In this report, the author sets out a methodology with which counsel can identify a client's VRQs for a particular engagement or type of engagement. This, in turn, will enable counsel to devise a fee arrangement that advances the client's value-related expectations and needs.
The end result will be more satisfied clients (because their value-related vision will be reflected in how the lawyers define and serve their interests) and legal service that receives a more welcoming reception than it often does. Chapter 1 sets the scene of the current legal services fees structure. Chapter 2 explores why firms are being increasingly pressured to adopt fee arrangements not based on the hourly rate. Chapter 3 introduces the concept and variety of interpretations of what can encompass AFAs. Chapter 4 describes the impact of the traditional hourly rate on both inside and outside counsel, and the legal service; and why a more manageable approach to defining value and structuring fee arrangements is desired. Chapter 5 explains the true meaning of 'value' and identifies crucial context for each value related quality (VRQ), from both the client's and law firm's perspective. Chapter 6 outlines different types of fee arrangements, and associated the benefits and costs. Insightful examples of the different fee structures are provided in Chapter 7.
In the form of case studies, Chapter 8 reveals two law firms' experiences with fees and costs in the current legal environment, and their associated VRQs: Ogletree, Deakins, Nash, Smoak & Stewart, P.C., and Baker & Mackenzie discuss the impact and benefits of their migration from fixed fees to alternative fees arrangements. Alternative fee arrangements are also discussed from the in-house perspective at KONE Corporation and FirstGroup Plc. Chapter 9 provides crucial guidelines on the factors to consider when planning and developing an appropriate fee arrangement. Chapter 10 justifies the necessity of a new approach to cost control in what is a fast-growing cost-focused legal landscape, if the legal sector is to sustain viability and future prosperity. Guidelines for developing a budget are provided and concepts such as task-based budgeting introduced. Chapter 11 takes a technical turn, providing guidance on key metrics and management in relation to fee structures, from the perspective of both the law firm and law department. Case studies from American Express and Motorola support key themes.
Chapter 12 identifies major obstacles firms and legal departments will come up against with AFAs, and provides solutions to mitigate these challenges. Readers will learn how to improve relationships, get to grips with the costs of legal services and improve communication. Chapter 13 explores the use of project management, Six Sigma, Lean Six Sigma and other management approaches, in practice.
A single definition likely proves elusive (at least at this stage of the dialogue within the profession). At the same time, however, we can identify some traits or characteristics of higher-value legal service that could help forge a working definition. Different companies regard those aspects of value differently. To one company, cost control or cost predictability may be the most important trait of the lawyers' work; everything else ranks below that in the company's estimation. Another company, on the other hand, may see reliability of outcome as its pure test of whether the lawyer have added value to its operations. Even one company might regard these elements of value in different order depending on the circumstances (one ranking for litigation and a different one for transactions). These traits (let's call them valuerelated qualities, or VRQs) may not comprise a definition in the pure sense of that word.
Because they are more distinct, more identifiable and capable of greater measurement, though, they may enable in-house and outside attorneys to learn a shared language that will assist those attorneys to provide legal service that more closely mirrors a particular company's valuerelated needs and expectations. Perhaps, in light of the variation among clients' perceptions of value, we should not seek a single definition of value but, instead, a framework or approach with which to construct a context-specific definition of the term. VRQs should enable in-house and outside lawyers to engage in a collaborative process to determine fee structures that more closely align outside counsel's interests with those of their clients. Simultaneously, VRQs can provide the basis for morespecific measures of the success of those arrangements and other aspects of the client-counsel relationship, including some that are less tangible. In light of the confusion and uncertainty surrounding the concept of value, how can we successfully approach the challenge of defining and delivering high-value legal service?
We must start with the basics, recognizing that value does not exist in a vacuum and is not an immutable constant like the speed of light. Rather, it represents the relationship between the cost of something and the benefit that one enjoys from it. In this way, the ACC Value Challenge really represents an effort to help ACC members to recalibrate value and cost, rather than to reconnect them. A connection between value and cost has always existed, but the relationship between them has become more and more attenuated and unsatisfactory as in-house attorneys frequently experienced the cost outweighing the benefits. Increasingly, they viewed the hourly rate as an incentive for outside counsel that does not coincide with clients' interests in cost-effective service.) The cost may include more than out-of-pocket expense and the benefit may be expressed in other than monetary terms. In this report, the author sets out a methodology with which counsel can identify a client's VRQs for a particular engagement or type of engagement. This, in turn, will enable counsel to devise a fee arrangement that advances the client's value-related expectations and needs.
The end result will be more satisfied clients (because their value-related vision will be reflected in how the lawyers define and serve their interests) and legal service that receives a more welcoming reception than it often does. Chapter 1 sets the scene of the current legal services fees structure. Chapter 2 explores why firms are being increasingly pressured to adopt fee arrangements not based on the hourly rate. Chapter 3 introduces the concept and variety of interpretations of what can encompass AFAs. Chapter 4 describes the impact of the traditional hourly rate on both inside and outside counsel, and the legal service; and why a more manageable approach to defining value and structuring fee arrangements is desired. Chapter 5 explains the true meaning of 'value' and identifies crucial context for each value related quality (VRQ), from both the client's and law firm's perspective. Chapter 6 outlines different types of fee arrangements, and associated the benefits and costs. Insightful examples of the different fee structures are provided in Chapter 7.
In the form of case studies, Chapter 8 reveals two law firms' experiences with fees and costs in the current legal environment, and their associated VRQs: Ogletree, Deakins, Nash, Smoak & Stewart, P.C., and Baker & Mackenzie discuss the impact and benefits of their migration from fixed fees to alternative fees arrangements. Alternative fee arrangements are also discussed from the in-house perspective at KONE Corporation and FirstGroup Plc. Chapter 9 provides crucial guidelines on the factors to consider when planning and developing an appropriate fee arrangement. Chapter 10 justifies the necessity of a new approach to cost control in what is a fast-growing cost-focused legal landscape, if the legal sector is to sustain viability and future prosperity. Guidelines for developing a budget are provided and concepts such as task-based budgeting introduced. Chapter 11 takes a technical turn, providing guidance on key metrics and management in relation to fee structures, from the perspective of both the law firm and law department. Case studies from American Express and Motorola support key themes.
Chapter 12 identifies major obstacles firms and legal departments will come up against with AFAs, and provides solutions to mitigate these challenges. Readers will learn how to improve relationships, get to grips with the costs of legal services and improve communication. Chapter 13 explores the use of project management, Six Sigma, Lean Six Sigma and other management approaches, in practice.
AS IN-HOUSE lawyers prod outside lawyers and the legal profession to jettison the hourly rate as the primary basis for the fees paid by businesses to their external legal service providers, they must inevitably face the question of: What will replace the hourly rate? To date, the term usually used to define what they seek is alternative fee arrangement (AFA). That nomenclature conveys a very significant truth: they wish - they crave - to replace something with another thing that is not the replaced thing, but which itself has not yet assumed shape. It's defined by what it is not. In 2008, the Association of Corporate Counsel (ACC) launched the ACC Value Challenge "to reconnect the value and the cost of legal services". ACC determined not to provide in the ACC Value Challenge a single definition of value, opting instead to exhort ACC members to discuss the issue with their outside legal service providers. This would allow each member to develop their own definitions of the term to suit their company's needs. In the context of legal service, of course, the term value has not had a clear-cut or easily measureable meaning.
A single definition likely proves elusive (at least at this stage of the dialogue within the profession). At the same time, however, we can identify some traits or characteristics of higher-value legal service that could help forge a working definition. Different companies regard those aspects of value differently. To one company, cost control or cost predictability may be the most important trait of the lawyers' work; everything else ranks below that in the company's estimation. Another company, on the other hand, may see reliability of outcome as its pure test of whether the lawyer have added value to its operations. Even one company might regard these elements of value in different order depending on the circumstances (one ranking for litigation and a different one for transactions). These traits (let's call them valuerelated qualities, or VRQs) may not comprise a definition in the pure sense of that word.
Because they are more distinct, more identifiable and capable of greater measurement, though, they may enable in-house and outside attorneys to learn a shared language that will assist those attorneys to provide legal service that more closely mirrors a particular company's valuerelated needs and expectations. Perhaps, in light of the variation among clients' perceptions of value, we should not seek a single definition of value but, instead, a framework or approach with which to construct a context-specific definition of the term. VRQs should enable in-house and outside lawyers to engage in a collaborative process to determine fee structures that more closely align outside counsel's interests with those of their clients. Simultaneously, VRQs can provide the basis for morespecific measures of the success of those arrangements and other aspects of the client-counsel relationship, including some that are less tangible. In light of the confusion and uncertainty surrounding the concept of value, how can we successfully approach the challenge of defining and delivering high-value legal service?
We must start with the basics, recognizing that value does not exist in a vacuum and is not an immutable constant like the speed of light. Rather, it represents the relationship between the cost of something and the benefit that one enjoys from it. In this way, the ACC Value Challenge really represents an effort to help ACC members to recalibrate value and cost, rather than to reconnect them. A connection between value and cost has always existed, but the relationship between them has become more and more attenuated and unsatisfactory as in-house attorneys frequently experienced the cost outweighing the benefits. Increasingly, they viewed the hourly rate as an incentive for outside counsel that does not coincide with clients' interests in cost-effective service.) The cost may include more than out-of-pocket expense and the benefit may be expressed in other than monetary terms. In this report, the author sets out a methodology with which counsel can identify a client's VRQs for a particular engagement or type of engagement. This, in turn, will enable counsel to devise a fee arrangement that advances the client's value-related expectations and needs.
The end result will be more satisfied clients (because their value-related vision will be reflected in how the lawyers define and serve their interests) and legal service that receives a more welcoming reception than it often does. Chapter 1 sets the scene of the current legal services fees structure. Chapter 2 explores why firms are being increasingly pressured to adopt fee arrangements not based on the hourly rate. Chapter 3 introduces the concept and variety of interpretations of what can encompass AFAs. Chapter 4 describes the impact of the traditional hourly rate on both inside and outside counsel, and the legal service; and why a more manageable approach to defining value and structuring fee arrangements is desired. Chapter 5 explains the true meaning of 'value' and identifies crucial context for each value related quality (VRQ), from both the client's and law firm's perspective. Chapter 6 outlines different types of fee arrangements, and associated the benefits and costs. Insightful examples of the different fee structures are provided in Chapter 7.
In the form of case studies, Chapter 8 reveals two law firms' experiences with fees and costs in the current legal environment, and their associated VRQs: Ogletree, Deakins, Nash, Smoak & Stewart, P.C., and Baker & Mackenzie discuss the impact and benefits of their migration from fixed fees to alternative fees arrangements. Alternative fee arrangements are also discussed from the in-house perspective at KONE Corporation and FirstGroup Plc. Chapter 9 provides crucial guidelines on the factors to consider when planning and developing an appropriate fee arrangement. Chapter 10 justifies the necessity of a new approach to cost control in what is a fast-growing cost-focused legal landscape, if the legal sector is to sustain viability and future prosperity. Guidelines for developing a budget are provided and concepts such as task-based budgeting introduced. Chapter 11 takes a technical turn, providing guidance on key metrics and management in relation to fee structures, from the perspective of both the law firm and law department. Case studies from American Express and Motorola support key themes.
Chapter 12 identifies major obstacles firms and legal departments will come up against with AFAs, and provides solutions to mitigate these challenges. Readers will learn how to improve relationships, get to grips with the costs of legal services and improve communication. Chapter 13 explores the use of project management, Six Sigma, Lean Six Sigma and other management approaches, in practice.
Reviews / Votes
"We all need to achieve at least one and eventually all three Value Challenge targets: reduce the client's total legal costs by 25% (in-house and outside combined), provide near certainty in cost, and significantly improve outcomes. Steve Lauer's book on value-related fee arrangements contains some very useful tools and insights and provides a good foundation for accomplishing this, and it is nicely written from the perspectives of both the clients and the law firms." Michael Roster, former managing partner of Morrison & Foerster's Los Angeles office, former general counsel of Stanford University and Golden West Financial and currently co-chair of the ACC Value Challenge steering committee"We all need to achieve at least one and eventually all three Value Challenge targets: reduce the client's total legal costs by 25% (in-house and outside combined), provide near certainty in cost, and significantly improve outcomes. Steve Lauer's book on value-related fee arrangements contains some very useful tools and insights and provides a good foundation for accomplishing this, and it is nicely written from the perspectives of both the clients and the law firms." Michael Roster, former managing partner of Morrison & Foerster's Los Angeles office, former general counsel of Stanford University and Golden West Financial and currently co-chair of the ACC Value Challenge steering committee
More details
Language
English
Place of publication
United Kingdom
Publishing group
Globe Law and Business Ltd
Target group
Professional and scholarly
Illustrations
Illustrations
ISBN-13
978-1-908640-35-2 (9781908640352)
Copyright in bibliographic data and cover images is held by Nielsen Book Services Limited or by the publishers or by their respective licensors: all rights reserved.
Schweitzer Classification
Person
AS PRINCIPAL of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the value of legal service. He assists them to better align and recalibrate the cost and value of legal service delivered to corporations and other business entities. Steve served as corporate counsel for Global Compliance Services in Charlotte, North Carolina, specializing in data protection and privacy for that hotline and compliance services company. Before that, he served for over two years as director of Integrity Research for Integrity Interactive Corporation, in which capacity he conducted research, wrote white papers and otherwise worked with clients and potential clients of the company on issues related to corporate ethics and compliance programs. Those two positions culminated Steve's almost ten years in the compliance industry. Previously, he consulted with corporate law departments and law firms on issues relative to how in-house and outside counsel work together after spending over 13 years as an in-house attorney in the real estate industry, in law departments ranging in size from two attorneys to over 300 attorneys and as the sole in-house attorney for an organization, serving as its general counsel for over a year. He also spent over two years as executive vice president, deputy editor and deputy publisher of The Metropolitan Corporate Counsel, a monthly journal for in-house attorneys. For six years prior to becoming an in-house attorney, he was in private practice. From April 1989 until May 1997, Steve was an assistant general counsel for The Prudential Insurance Company of America. During that time, he held increasing responsibility for the management of legal affairs for the company's commercial real estate investment units, especially in respect of environmental issues and litigation and disputes to which Prudential was a party. From March 1996 until May 1997, he was project director for the Prudential Law Department's Outside Counsel Utilization Task Force. In that capacity, he designed and managed the preparation and distribution of 109 distinct work packages (or RFPs) by which Prudential restructured its purchase of legal services and the evaluation of hundreds of proposals submitted by over 130 firms to handle those packages of work. He organized a series of orientation meetings with the 22 law firms that won the most work under those RFPs and helped to organize and implement the Prudential Law Department's Best Practices Conference in February 1997. Steve was the in-house environmental attorney in the Prudential Law Department's Real Estate Section for almost seven years. As such, he managed all environmental litigation for the company's commercial real estate investment units. He also organized a team of environmental litigation counsel (with which he met annually) to handle that litigation for those clients and he developed other litigation-management tools, including a litigation-policies-and-procedures manual. For several years, he was responsible for management of all litigation for those real estate units. He represented Prudential in several industry groups such as the National Realty Committee (now the Real Estate Roundtable), the ASTM committee that developed an industry standard protocol for environmental assessments, the Mortgage Bankers Association and the American Council of Life Insurance. Steve was a member of the task force that developed the Uniform Task-Based Management System codes for task-based billing for the legal profession. He has authored numerous articles on the relations between in-house and outside attorneys, the selection of counsel by corporate clients, the evaluation of legal service, litigation management and other topics relevant to corporate compliance programs and corporate legal service. He has authored Conditional, Contingent and other Alternative Fee Arrangements (Monitor Press Ltd., Sudbury, Suffolk, UK, 1999), Managing your Relationship with External Counsel (Ark Group, London, UK, 2009) and The Value-Able Law Department (Ark Group, London, UK, 2010). He has spoken at numerous conferences in respect of those subjects and organized conferences and seminars (including online seminars) as well. He is a faculty member of the Law Partnering Institute (www.lawpartnering.com), a member of LawPartnering Advocates, a Participating Principal in the Managing Litigation as a Business and Managing Litigation Reference Model initiatives (http://www. managinglitigation.com/default.aspx), vice chair of the Corporate Counsel Committee and vice chair of the Corporate Compliance Committee, both of the American Bar Association Section of Business Law and a Fellow of the Claims and Litigation Management Alliance. He co-founded and co-chairs the Open Legal Standards Initiative. He received a B.A. from the State University of New York at Buffalo and a J.D. from Georgetown University Law Center.
AS PRINCIPAL of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the value of legal service. He assists them to better align and recalibrate the cost and value of legal service delivered to corporations and other business entities. Steve served as corporate counsel for Global Compliance Services in Charlotte, North Carolina, specializing in data protection and privacy for that hotline and compliance services company. Before that, he served for over two years as director of Integrity Research for Integrity Interactive Corporation, in which capacity he conducted research, wrote white papers and otherwise worked with clients and potential clients of the company on issues related to corporate ethics and compliance programs. Those two positions culminated Steve's almost ten years in the compliance industry. Previously, he consulted with corporate law departments and law firms on issues relative to how in-house and outside counsel work together after spending over 13 years as an in-house attorney in the real estate industry, in law departments ranging in size from two attorneys to over 300 attorneys and as the sole in-house attorney for an organization, serving as its general counsel for over a year. He also spent over two years as executive vice president, deputy editor and deputy publisher of The Metropolitan Corporate Counsel, a monthly journal for in-house attorneys. For six years prior to becoming an in-house attorney, he was in private practice. From April 1989 until May 1997, Steve was an assistant general counsel for The Prudential Insurance Company of America. During that time, he held increasing responsibility for the management of legal affairs for the company's commercial real estate investment units, especially in respect of environmental issues and litigation and disputes to which Prudential was a party. From March 1996 until May 1997, he was project director for the Prudential Law Department's Outside Counsel Utilization Task Force. In that capacity, he designed and managed the preparation and distribution of 109 distinct work packages (or RFPs) by which Prudential restructured its purchase of legal services and the evaluation of hundreds of proposals submitted by over 130 firms to handle those packages of work. He organized a series of orientation meetings with the 22 law firms that won the most work under those RFPs and helped to organize and implement the Prudential Law Department's Best Practices Conference in February 1997. Steve was the in-house environmental attorney in the Prudential Law Department's Real Estate Section for almost seven years. As such, he managed all environmental litigation for the company's commercial real estate investment units. He also organized a team of environmental litigation counsel (with which he met annually) to handle that litigation for those clients and he developed other litigation-management tools, including a litigation-policies-and-procedures manual. For several years, he was responsible for management of all litigation for those real estate units. He represented Prudential in several industry groups such as the National Realty Committee (now the Real Estate Roundtable), the ASTM committee that developed an industry standard protocol for environmental assessments, the Mortgage Bankers Association and the American Council of Life Insurance. Steve was a member of the task force that developed the Uniform Task-Based Management System codes for task-based billing for the legal profession. He has authored numerous articles on the relations between in-house and outside attorneys, the selection of counsel by corporate clients, the evaluation of legal service, litigation management and other topics relevant to corporate compliance programs and corporate legal service. He has authored Conditional, Contingent and other Alternative Fee Arrangements (Monitor Press Ltd., Sudbury, Suffolk, UK, 1999), Managing your Relationship with External Counsel (Ark Group, London, UK, 2009) and The Value-Able Law Department (Ark Group, London, UK, 2010). He has spoken at numerous conferences in respect of those subjects and organized conferences and seminars (including online seminars) as well. He is a faculty member of the Law Partnering Institute (www.lawpartnering.com), a member of LawPartnering Advocates, a Participating Principal in the Managing Litigation as a Business and Managing Litigation Reference Model initiatives (http://www. managinglitigation.com/default.aspx), vice chair of the Corporate Counsel Committee and vice chair of the Corporate Compliance Committee, both of the American Bar Association Section of Business Law and a Fellow of the Claims and Litigation Management Alliance. He co-founded and co-chairs the Open Legal Standards Initiative. He received a B.A. from the State University of New York at Buffalo and a J.D. from Georgetown University Law Center.
AS PRINCIPAL of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the value of legal service. He assists them to better align and recalibrate the cost and value of legal service delivered to corporations and other business entities. Steve served as corporate counsel for Global Compliance Services in Charlotte, North Carolina, specializing in data protection and privacy for that hotline and compliance services company. Before that, he served for over two years as director of Integrity Research for Integrity Interactive Corporation, in which capacity he conducted research, wrote white papers and otherwise worked with clients and potential clients of the company on issues related to corporate ethics and compliance programs. Those two positions culminated Steve's almost ten years in the compliance industry. Previously, he consulted with corporate law departments and law firms on issues relative to how in-house and outside counsel work together after spending over 13 years as an in-house attorney in the real estate industry, in law departments ranging in size from two attorneys to over 300 attorneys and as the sole in-house attorney for an organization, serving as its general counsel for over a year. He also spent over two years as executive vice president, deputy editor and deputy publisher of The Metropolitan Corporate Counsel, a monthly journal for in-house attorneys. For six years prior to becoming an in-house attorney, he was in private practice. From April 1989 until May 1997, Steve was an assistant general counsel for The Prudential Insurance Company of America. During that time, he held increasing responsibility for the management of legal affairs for the company's commercial real estate investment units, especially in respect of environmental issues and litigation and disputes to which Prudential was a party. From March 1996 until May 1997, he was project director for the Prudential Law Department's Outside Counsel Utilization Task Force. In that capacity, he designed and managed the preparation and distribution of 109 distinct work packages (or RFPs) by which Prudential restructured its purchase of legal services and the evaluation of hundreds of proposals submitted by over 130 firms to handle those packages of work. He organized a series of orientation meetings with the 22 law firms that won the most work under those RFPs and helped to organize and implement the Prudential Law Department's Best Practices Conference in February 1997. Steve was the in-house environmental attorney in the Prudential Law Department's Real Estate Section for almost seven years. As such, he managed all environmental litigation for the company's commercial real estate investment units. He also organized a team of environmental litigation counsel (with which he met annually) to handle that litigation for those clients and he developed other litigation-management tools, including a litigation-policies-and-procedures manual. For several years, he was responsible for management of all litigation for those real estate units. He represented Prudential in several industry groups such as the National Realty Committee (now the Real Estate Roundtable), the ASTM committee that developed an industry standard protocol for environmental assessments, the Mortgage Bankers Association and the American Council of Life Insurance. Steve was a member of the task force that developed the Uniform Task-Based Management System codes for task-based billing for the legal profession. He has authored numerous articles on the relations between in-house and outside attorneys, the selection of counsel by corporate clients, the evaluation of legal service, litigation management and other topics relevant to corporate compliance programs and corporate legal service. He has authored Conditional, Contingent and other Alternative Fee Arrangements (Monitor Press Ltd., Sudbury, Suffolk, UK, 1999), Managing your Relationship with External Counsel (Ark Group, London, UK, 2009) and The Value-Able Law Department (Ark Group, London, UK, 2010). He has spoken at numerous conferences in respect of those subjects and organized conferences and seminars (including online seminars) as well. He is a faculty member of the Law Partnering Institute (www.lawpartnering.com), a member of LawPartnering Advocates, a Participating Principal in the Managing Litigation as a Business and Managing Litigation Reference Model initiatives (http://www. managinglitigation.com/default.aspx), vice chair of the Corporate Counsel Committee and vice chair of the Corporate Compliance Committee, both of the American Bar Association Section of Business Law and a Fellow of the Claims and Litigation Management Alliance. He co-founded and co-chairs the Open Legal Standards Initiative. He received a B.A. from the State University of New York at Buffalo and a J.D. from Georgetown University Law Center.
Content
Developing a workable definition of value for purposes of designing a fee arrangement ... 25 A fee arrangement based on VRQs... 28 Corporate law department perspective ... 29 Law firm perspective... 29 Chapter 6: Different types of fee arrangements... 31 Fixed fee ... 31 Retainer ... 32 Value-based fee... 32 Percentage fee... 33 Contingent or conditional fee ... 33 Task-based or unit fees... 34 Hourly rate plus contingency or premium... 35 Incentives to expedite ... 35 Fee arrangements incorporating the hourly rate... 36 Chapter 7: Examples of successful appropriate fee arrangements ... 39 Contingent fee for defense ... 39 Hourly rate (discounted) plus premium ... 39 Fixed fee for multiple litigation ... 40 Fixed fee for multiple litigation, with adjustments ... 40 Fixed per-case fee for multiple litigation - Two examples... 41 Fixed retainer for counseling work, with a 'collar'... 41 New relationship - Fixed fee with a collar... 42 Combination of litigation and counseling - Budgeting and retainer ... 43 Retainer for replacement counsel in litigation ... 43 Blended rate - Representation of insured ... 44 Blended rate... 44 Increasing percentage discount based on billings... 45 Blended rates with contingent premium ... 45 Fee hold-back with premium... 45 Chapter 8: Case studies ... 47 Ogletree, Deakins, Nash, Smoak & Stewart, P.C. - Fees and costs in today's environment ... 47 Baker & McKenzie - Fees and costs in today's environment ... 49 KONE Corporation - Successful efforts to design and implement appropriate fee arrangements... 51 FirstGroup Plc - Successful efforts to design and implement appropriate fee arrangements... 52 Summary... 54 Law department perspective... 54 Law firm perspective... 54 Chapter 9: Designing an objective-oriented fee arrangement... 55 Before designing the fee arrangement ... 55 Designing the fee arrangement ... 55 Law department perspective... 58 Law firm perspective... 59 Chapter 10: A new approach to cost control ... 61 Task-based budgeting as the mechanism to achieve a new pricing ... 64 Matter-specific budgets for litigation - The microeconomic view of costs... 65 Aggregate budgeting data - The macroeconomic view of costs... 69 Chapter 12: Metrics and management ... 73 Benchmarking ... 74 Self-diagnosis metrics analysis ... 74 Choosing metrics... 75 Case study - Motorola Mobility Incorporated... 77 Case study - American Express Company... 78 Metrics and fee arrangements... 80 Metrics from the perspective of a law firm... 81 Metrics from a law department perspective ... 84 Chapter 12: Overcoming hurdles and vaulting to the next level... 85 Obstacles to wider use of alternative fee arrangements... 85 Insurance company perspective... 87 Overcoming the obstacles... 89 Improving the relationship ... 89 Understanding the costs of legal service ... 90 Improving communication ... 94 Overcoming other obstacles... 95 Law department perspective... 96 Law firm perspective... 96 Chapter 14: The use of project management, Six Sigma, Lean Six Sigma and other management approaches... 97 Law department perspective... 99 Law firm perspective... 99 Afterword... 101 Index ... 103