This roundtable brought together more than a dozen leading partners of law firms and corporate general counsels to discuss one of the most significant changes in legal practice. Spurred by the approach to legal work launched by DuPont in the early 1990s, both corporate counsels and law firms have been embracing various forms of “the DuPont Legal Model.” The featured guest of the event, Mike Warner, Senior Vice President and Associate General Counsel of DuPont, described what it means to bring process improvement and “business discipline” to legal services. The event was moderated by Daniel Casse, President of G100, and hosted by John Rodgers, Senior Managing for SSA & Company.
After each event, we develop a Playbook – a selection of observations from the discussion that’s intended to capture the best ideas from experienced business practitioners, linked to a handful of insights and actionable ideas for our participants. Below we offer some key insights shared at the meeting.
THE CHANGING RELATIONSHIP WITH GENERAL COUNSEL AND THE FIRM
If you have not figured out a way to develop a strategic relationship with General Counsel, you will likely get closed out.
The DuPont Model:
- Since it began its new approach to legal services, DuPont has reduced the outside law firms it hired from 340 to 34 by focusing on efficiency through technology and collaboration.
- DuPont treats outside counsel as strategic partners, working together on early case assessment, budgeting and AFAs. By sharing risk, partner firms have often found greater rewards.
- DuPont has a manager in-house who conducts annual benchmark studies for all network firms and reviews the work of individual lawyers.
The future of law firms and public company GC offices:
- At DuPont, the yearly challenge is 3-5% productivity improvement. Also, firm-client relationships will continue to develop the new win-win set up, adapting to the dynamic and the external world. The right partners are key to help with internal success. So if you were one of the outside firms that didn’t make the DuPont cut, you will need to develop a strategic relationship with another GC.
DuPont seeks outside law firms that:
- Can be creative and dynamic in an external environment
- See opportunity, not just risk; understand that “where there’s uncertainty there’s opportunity”
- Drive and measure legal recoveries; move from cost center to creative ways to bring in cash and help the bottom line
- Have a business-focused approach
- Communicate well at every stage of the work: whether it is explaining technical issues or presenting decision options to a CEO
HAS THE BILLABLE HOUR GONE AWAY?
As clients demand different pay structures, will AFA’s become the new way of doing business? Are AFAs a truly new model – or are they just a way for law firms to offer discounts?
- DuPont uses “shadow billing” to track AFAs—a process some dislike.
- Some argue that outside lawyers should do strategic budgeting. AFAs clearly have squeezed law firm margins.
- While many firms may be willing to end the billable hour, a company CFO often demands it.
- The billable hour would become less important if clients had better internal metrics for measuring success.
THE EVOLUTION OF LEGAL EFFICIENCY
From Six Sigma to Project Management:
- DuPont believes that the legal department should be subject to the same expectations of efficiency and continuous improvement that are demanded of other corporate functions such as marketing or purchasing.
- Moving from ‘belts’ to legal project management provides a more disciplined approach. Every lawyer at DuPont undergoes Six Sigma training for efficiency and flexibility. In addition to Six Sigma, DuPont believes that its own lawyers need to focus on legal project management for budgeting and decision making.
- At DuPont, process improvement increasingly focuses on end-to-end litigation processes.
- Work typically starts with a project charter to set clear expectations: who is on the teams and what are their roles? It’s important to get buy-in all around and provide regular communication to check-in and prevent scope creep.
What the firms are saying:
- Project management needs to be developed to deal with matters consistently.
- While corporate clients may demand efficient practices from firms, they act inefficiently themselves.
- While a corporate client may specify that they want only one lawyer in a certain meeting, they will bring five in-house lawyers.
- Many companies over-staff internal matters and adhere to inefficiencies, such as the weekly call.
Why law schools aren’t helping:
- What is needed is training that teaches lawyers to be good project managers. Unfortunately, law schools do not help prepare firms for success in the new model. Law schools teach analysis, not process or project management. However, as many graduates have recently failed to get jobs, the schools might be open for dialogue.
HOW BUSINESS PRACTICE IS SHAPING LEGAL PRACTICE
- Business fundamentals are increasingly important to legal work. Attorneys are being told to set goals up-front, in tandem; invest in early assessment.
Budgeting and risk:
- Budgets are best done in stages, 3-6 months; maybe level-set billing monthly.
- Budgeting is simple; risk-taking is an iterative process.
- If a case is unpredictable, it’s hard to know how to plan well up-front.
- Amount of bill is important, but avoiding surprise is even more important.
- Some partners prefer to take risk in both directions, but corporate clients want firms to assume the risk.
- Some clients want fixed fees, not to save costs but to predict them.
CHANGES IN THE MODEL IN RESPONSE TO EXCESS CAPCAITY
- Outsourcing to Indian firms for basic tasks like document review is not standard procedure – but some firms choose not to compete in this arena and focus instead on higher value work.
- Some firms have operations in India, but their staff operates as employees of the law firm, not contractors.
- Others keep their lawyers focused on high-level work, and outsource the lower-level work within the U.S., to lower-cost areas.
- Many firms very closely monitor the quality of outsourced work.