I was interviewed by a reporter for the Wall Street Journal last week. He was asking for my reaction to news that some attorneys may begin charging clients $1,000 per hour for legal services. In the days since, I’ve had a number of people questioning a quote from me that was part of the article as well as expressing concern about the perceived loss of my mental facilities.
I did state and I do believe that there may be times when a $1,000/hour fee is warranted. If you are embroiled in a complex, “bet the company” type of litigation, most GCs will happily pay this hourly rate – provided the value received is commensurate with the fee. This means the services of an attorney with very specific and unique skills, plenty of experience, and the ability to quickly drive a high exposure problem to a favorable resolution.
The reality is that most companies will rarely, if ever, require these types of legal services.
Most of my discussion with the reporter focused on the larger issue, which is the economic misalignment between traditional firms and their corporate clients. I also shared with the reporter some of the things we are doing at Sun to reduce the impact of this misalignment.
As to the first issue, it’s something I’ve written about previously. And, just yesterday, I read of another example of how law firms continue to be primarily focused on maintaining profits through consolidation and growth of headcount. As a GC, what I’d rather see is an article about how law firms are creating new business models that reflect the reality of my organization – providing consistently high quality of service with a constant focus on efficiency.
To this end, here are some of the things that we have been doing at Sun.
As recently as four years ago, we had several hundred (that’s always embarrassing for me to say) law firms that we used for general purpose legal work in the United States. Since then, we have been aggressively reducing this number to the point that this year we announced that we are moving to nine “Preferred Partner” firms. The program has just started, but we are already seeing examples where these firms are proposing creative pricing models and investing in better understanding our business.
We have also been looking for opportunities to use dynamic bidding events or “DBEs”. While these are normally used in commodity purchasing, there are discrete portions of our legal work that lend themselves to a competitive bidding environment. In one example, we needed to have about 10,000 agreements reviewed and summarized for an on-line database. We send out an RFP to a large number of firms and through this process filtered the number of candidates down to a handful. These were then invited to participate in an on-line competition for the work. During the course of the event, it was fascinating to see firms from around the world compete to win the business. (If you’ve ever sold anything on eBay, you know the feeling.) The ultimate savings to Sun were substantial. We also used a dynamic bidding event as part of the consolidation of our patent prosecution work with a smaller number of law firms. I can’t say that in either of these cases that things went perfectly. However, each time we do this we learn more that can be used in the future. And, as I mentioned, we have achieved some real cost savings for our shareholders.
Another thing we’ve done is to look at the legal work we provide and better match it to the skills of our team. From a legal standpoint, Sun has an amazingly complex business. Part of it is the size of the company (we do business in over 100 countries) and part of it is the wide breadth of our product portfolio. But, perhaps, the biggest factor is that we are a company driven by innovation. For complicated legal issues, you need experienced attorneys. And, it doesn’t make economic sense to have these same attorneys also handling less complex work. It’s like asking Barry Bonds to bunt as frequently as he swings for the fences. With this in mind, we quietly started a small team several years ago called “GLN” (Global Legal Services). They are focused on efficiently handling the less complex, but higher volume agreements and services we provide. They do this through tools, automation and driving simplification of our contracting models. In the near future, this team will be providing legal support globally, 24×7 and in multiple languages. We’re not there yet, but the GLN team is making great progress.
This is some of what I discussed with the reporter, but none of it appeared in his article. And, that’s fine because the reporter (a good one) had a different focus for his story. But, as I mentioned above, context is everything and having a blog is a great way to provide it.