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Striking the Right Balance:

Client Service and Profitability

Strategic Considerations

Presented by:

Ward Bower

Altman Weil, Inc.

World Services Group

North American Regional Meeting

February 10, 2012

www.altmanweil.com

The “New Normal”

• No/Slow Growth Economy—legal and other

• Clients more valuable than ever

• Vulnerable to competitor marketing

• Supply/Demand

• Buyers‘ market

• Price staffing, strategy

• ―Convergence‖ Movement

• Reconsolidation

• Management, control

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Classic Law Firm Strategy

• What? Practice Mix

• Who? Targeted Markets

• Where? Geography

• How?

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2011 Altman Weil CLO Survey October 2011

• 176 Law Departments

• 1 to 100+ In-House Lawyers

• Two-thirds Public; One-quarter

Private

• Budgets: $1 Million - $50 Million+

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CLO Survey

• #1 priority: controlling costs

• But 38% plan increase in-house lawyers in 2012

• 45% increased outside budget 2010-2011

• Only 15% plan increased use of OC in 2012

• #1 selection criteria: spend time to know our business

• #2 selection criteria: recommendations and reputation

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CLO Survey

• 60% designate in-house relationship

manager with outside counsel

• 79% discuss staffing with outside counsel

• 90% want new matter budgets

• 34% evaluate outside counsel (17%

communicate results)

• 77% recommend outside counsel to

colleagues

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CLO Survey

• 67% have outside counsel panels

(convergence)

• 42% encourage price competition via

panels

• 58% encourage collaboration on efficiency

with panel members

• 84% used AFAs—14% of fees paid

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Strategic Implications

• Position for convergence, panels

• Multiple jurisdictions; networks? WSG?

• Full range of service

• But avoid ―client capture‖

• Partnering program

• Client teams/relationship managers

• CLE

• Joint staffing

• Secondments

• Reverse seminars

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Strategic Implications continued

• Pricing/project management

• Branding

Results. Value. Dykema.

www.dykema.com

California | Illinois | Michigan | North Carolina | Texas | Washington, D.C.

Striking the Right Balance

Client Value / Firm Profitability

12

Client‘s Changing Perspective

Legal fees are no longer sacrosanct

General Counsel under their own pressure to reduce cost and demonstrate

value their own value internally

Demanding that their outside law firms provide similar or better quality at

lower cost

They expect firms to become more efficient and/or accept lower profit

margins

ACC Value Challenge offers pragmatic advice

13

ACC Value Challenge – 51 Propositions

Grouped under Seven (7) Categories

Matter Management and Efficiency – 8

Client Service and Value – 10

Understanding of In-House Functions and Needs – 10

Client Teams, Client Focus – 6

Fee Structures – 5

Professional Development – 5

Technology and Library – 7

Note that only 5 of the 51 propositions relate to rates

Value is defined by the ACC as more than just cost

Send me an e-mail if you have not seen and I will send a copy

14

Case Study –

IP Prosecution

Light Sigma Study Revealed

After years of client pressure for better value, realization had dropped to 77%

and profit margin to 40% - before partner compensation

Work processes and staffing varied widely by client and supervising lawyer

Very Little Use of ‗Prior Work Product‘

Staff changeover occurred frequently

Process flow was linear – tasks that could overlap did not

Lack of document assembly in-spite of repetitive nature of work and

documents

15

Before Lean Sigma Review

16

Client demand for Value Reduced Matter Profit

17

After Lean Sigma

Case Mgmt, Doc Assembly and KM

18

Efficiency is Not Directly Rewarded Under an

Hourly Billing Model

19

Combine Lean Sigma with AFAs for a Winning

Solution

20

Differentiate to Get More Work

21

Sample Dashboard

22

Sample Dashboard – Cont‘d

23

Fail to Plan / Plan to Fail

Project Management

24

Concluding Remarks

Areas of Perceived Client Value

1. Matter Management and Efficiency

2. Client Service and Value

3. Understanding of In-House Functions and Needs

4. Client Teams, Client Focus

5. Fee Structures

6. Professional Development

7. Technology and Library

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