As Canadian corporate legal departments continue to grow in size, collecting data about spending and benchmarking against how others perform is becoming “table stakes,” a room of in-house lawyers heard Monday.
Leading the pack on in-house metrics and benchmarking are Canada’s big banks. At the Association of Corporate Counsel’s Law Department Leadership 2.0 conference in Toronto yesterday, representatives from BMO Financial Group and the Royal Bank of Canada spoke to the challenge of tackling it all during a session entitled: Show me what you do! Demonstrating the value-add of your legal department.
Bindu Cudjoe, deputy general counsel and chief administrative officer with BMO, said there has been a “fundamental shift” in terms of legal department focus on how external firms are bringing value to their clients.
“Thank you for the glossy brochures, bios, and information on where you are ranked with Chambers, but the point is how are you going to help us demonstrate value?” she asked, referencing the revolution around value-based billing, alternative fee arrangements, and disaggregation of legal services.
Both Cudjoe and David Aylward, senior business manager with RBC, spoke to the challenges of going through the process of consolidating the number of law firms their organizations use and the reaction from internal clients. In particular, they discussed the difficulty in convincing internal users that a firm they have long worked with is no longer on the roster because they simply don’t measure up.
“We have the lash wounds from doing that with internal customers,” says Aylward. “It’s tough to try and pull away the firms they love working with but you have to tell the story and explain why.”
Cudjoe said it requires considerable communication throughout the process about what historical costs have on things such as settlements with firms that didn’t make the cut as well as other factors.
“We just talk about it ad nauseam,” she said. “They say ‘But they’re my neighbour’ or ‘They’re good guys,’ or ‘They took me to dinner last week’ or ‘We’ve been using them for 20 years.’ Instead, we look at how innovative they are and what kind of technology they use. It’s a conversation.”
Also on the panel was Matthew Den Ouden, vice president with Huron Consulting Group Inc., who suggested legal departments share the historical billing data they gather about their outside firms to enable a more informed conversation.
“You will be amazed at the attention you will get from your firm when you have information about how you are working with them. It helps them see what you know about them. Many are gathering the data, but telling the story to the firm is the key as well,” he said.
To help in the data gathering, Aylward is a strong advocate of the adoption of e-billing and matter management software.
“E-billing is invaluable in helping you tell that external story,” he said.
Den Ouden noted if a department has more than $5 million in outside firm spending a system can net a return on your investment fairly quickly.
And law firms have been more than accommodating to in-house departments that purchase billing software. It is not uncommon for law firms to have 10 or more different e-billing systems running to accommodate clients.
Aylward emphasized the importance of doing due diligence on e-billing providers and understanding that a system can be good for providing intelligence data but not as good at measuring the outcome of a strategy.
However, he said looking at cycle times for cases can bring a “discipline” to the business of the law department and is a good story to tell to senior management.
“A certain kind of file might take six to 14 months but as long as you know that it breeds a certain credibility,” he said.
When it comes to benchmarking, Cudjoe said it’s important to also measure your department against like-sized organizations and industries/sectors.
“I look at what are my legal costs compared to insurance companies or the Canadian operations of a bank here,” she said.
Benchmarks can also be a double-edged sword. While initially departments will be able to see how they are cutting costs or finding efficiencies, eventually there will be a “tipping point” and can become just another target for finance to pull out for discussion if costs go up or stay stagnant.
Den Ouden advised to be realistic and initially look for areas that as lawyers, in-house can take aim at and see real results.
“Ask ‘What are the things I can change? What are the levers I can pull?’ Keep your eye on the things you can make a difference on,” he said.
Aylward said while it may be tough to do with smaller departments or for those who are the “only legal officer,” in-house lawyers need to take an interest in the data collection on billings and how matters are being handled from an efficiency perspective.
“Get involved in how your department is evolving. Jump in. Move away from only doing law,” he said.