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GETTING VALUE FOR MONEY FROM
YOUR LEGAL ADVISERS

'The good the bad and the furry'

Duncan S. Hart LL.B MBA

Even sophisticated organisations have difficulty in managing arrangements with their legal advisers. It is often difficult for a CEO or CFO to make informed judgements about:

• The nature of a lot of the work their lawyers do
  
• The relative merits of advice being received
  
• The complexity of the matters they are being asked to advise upon
  
• What amounts to fair staffing and resourcing of particular assignments
  
• The timeliness of the responses they are receiving.

In addition there are always concerns about:

• How confidentiality is being maintained
  
• The approach the firm has to detecting conflicts with their other clients
  
• Whether the firm will act against you and if so in what circumstances?
  
• How will disputes concerning fees and disbursements be resolved?
  
• Are they properly insured?
  
• Who actually does the work and at what rates?
  
• What priority will your work receive?
  

For example: If the quoted rate is $360 per hour then for each 6 minute block of time spent on your matter you will be charged $36. So far so good. However if less than 6 minutes is worked then you may still be charged a minimum of $36! It is therefore quite easy to find that where a firm is handling multiple matters the effective hourly rate is much higher than the quoted rate.

Price is not the only criteria
Value however involves more than price. Responsiveness, reliability, accountability and technical competency are other critical factors that you should seek assurances about when evaluating law firm performance.
Similarly:

• reporting regimes,
  
• accounting and billing transparency,
  
• partner accountability and KPIs,
  
• additional benefits and discounts and
  
• the 'spread' of partner, senior associate and other legal support you receive,

And what about your reputation?
It may seem obvious but an organisation's future and reputation is often inextricably linked with that of their professional advisers. The speed with which companies moved away from Andersens after their association with the Enron scandal was evidence enough of that. A close watch needs to be maintained on your adviser's role in representing other clients and their public comments that might adversely effect your reputation or standing. What protection have you got from disengaging from your advisers in circumstances where you may not consider they have done a poor job but you simply want to distance yourself from them?

It is common practice also to find law firms referring to your organisation or assignments they may have handled for you in their newsletters, web sites and marketing material. What does your retainer agreement with them say about that and what about the copyright in documents that have been created for you but you now see being used by one of your competitors?

Conclusion
Just as companies are looking more critically at their arrangements with their auditors the role of the legal adviser needs equally careful scrutiny and attention. Those vested with the responsibility of managing those arrangements should:

• Regularly review how their present legal advisers are meeting their organisation's current and anticipated needs
  
• Put in place guidelines and KPIs as to what they expect from their legal advisers
  
• Manage carefully the tender process and negotiations which lead to the selection of one or your panel of legal advisers
  
• Consider regular external audit and if necessary, renegotiation of existing arrangements with external counsel

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© Duncan Hart Consulting Pty Ltd, 2003

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