As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at both clients and firms and to explore potential solutions and make predictions on where things go from here. Key takeaways from each meeting will be published for the public following each discussion.
The below meeting was conducted primarily with the client-side group.
Taking the Pulse
We started this week’s call by asking what people are feeling out there. One Luminary mentioned that while their company isn’t looking directly at Legal as a place to cut, one of the departments’ KPIs is its cost as a percentage of company revenue, and with the company now projecting lower revenue, Legal must follow suit. They said, “It’s not necessarily a bad thing because it gives us added incentive to create efficiency.”
Another Luminary mentioned that their company is showing compassion and working to give people what they need for remote working, but it has been made clear from both the CEO and the GC that the pandemic should not be used an excuse for not achieving its goals. One relevant example to the participants and audience, the company was already reworking its law firm panel toward using more specialty firms, and that work continues.
There are also some clients acting very aggressively, demanding big discounts to already-done work with no discussion. Fortunately, these harsh tactics seem to be the exception as opposed to the rule with those on the call. That being said, those bad stories seem to be getting a lot more play than the many positive examples of firms and clients that are working together.
Some Luminaries wondered about the role of pricing and project management professionals at their firms. Those people are trying to be as involved as possible. Some are trying to frame the dialog for their partners and help them to understand the goals and help them to prioritize work and clients. Some are finding their partners receptive, some not so much. [For much more information on how law firm pricing and project management professionals are managing through the crisis, please visit our Council of Luminaries-Law Firm posts.]
Finding Internal Efficiencies and Cost Savings Opportunities
One Luminary said they are looking for more insourcing opportunities and use of the corporation’s own shared services center. “Whether these moves lead to cost savings this year is questionable, but they lay the groundwork for the future.”
“It’s hard to dislodge some of the commodity tasks, like contracts and NDAs from our in-house counsel, but we are trying to push them to the service center.” They also have moved some back office work there.
For some, COVID has highlighted the opportunity to focus on some larger matters and put a spotlight on the fact that some matters become very overextended—and have now ground to a halt. Some are looking to their firm contacts to be their ‘eyes and ears’ for what is going on in their matters. Where have things slowed down? Where can we safely adjust fee arrangements to reflect current status? They are working to refocus those firms, possibly reassessing assignments or pushing those expenses out.
Using Artificial Intelligence
Some are also seeing an opportunity to take further advantage of unbundling and to more fully leverage ALSPs and AI into areas of the portfolio where these tools are not currently in use.
We heard from one Luminary that has had success using AI in certain areas. They said they are hearing from people on the AGC level looking for help being creative to meet their goals. They admit that some law firms have embraced it, while some have not. Not surprisingly the firms they partner with more closely have been more likely to embrace it. “We are having to adjust and reassess the way we are working and we hold those expectations up to the firm.” Building on a message from the last Luminaries call, clients want to hear what firms are doing to become more efficient and reduce cost. Firms should be proactive in letting clients know about new initiatives, etc. that are designed to help meet client needs.
Best practice sharing is also something that can be valuable to clients. Clients want to know what other clients are doing to meet their goals. Working with many different clients in many different situations, firms are in an excellent position to share creative approaches being undertaken by peer clients.
Moving Work to ALSPs
The Luminaries were asked if they have any apprehension turning to ALSPs if faced with a hard cost cutting requirement. All agreed: No apprehension. This represents a change from the last economic downturn and points to the fact that much of the low hanging cost saving fruit has already been picked.
One Luminary mentioned that they have an internal investigation going on, with both a law firm and an ALSP involved. The ALSP has been nimbler in adjusting the way they work through the crisis and they’ve shifted more work to them.
ALSPs are often more agile and more open to new approaches, like remote interviews in an investigation. The feeling is that law firms are struggling to react on the fly, and there were concerns over whether the law firms’ service models can adapt.
ALSPs also tend to be better budgeters. They provide better information on who will be staffed, how many hours, etc. Law firms struggle with that sometimes. One Luminary told the story of asking both the firm and the ALSP for a budget on a matter they were working on together. “When we lined up the budget, it turned out the firm was planning to spend a lot of time overseeing the ALSP. We didn’t necessarily need that.”
Firms and some in-house lawyers sometimes push back on ALSP use and firms are sometimes reluctant to accept ALSP work product. This can be for self-serving reasons, but, as one Luminary said, “If the firm is signing off on the work product, they do need to be comfortable. As the client, we need to make sure everybody is aligned. I do feel it’s fair for the firm to get some comfort, but once they get that….it shouldn’t be like the old days with law firms pushing back against contract attorneys.”
Some law firms are forming their own “Captive ALSPs” that might fit better on the risk scale and serve as a bridge. When asked if those operations might be hurting the firms’ brands, one Luminary responded, “I would argue they hurt their brand more with $600 associates doing work inefficiently in these times.” All Luminaries agreed they welcome proactive communication from firms on the potential to utilize such offerings and recommend firms frame the opportunities such that they can be easily communicated to internal stakeholders. Showcasing how the firm can do things more efficiently and at a cost saving to the client can help firms prevent ‘leakage’ of work to ALSPs.