Legal Departments: Are You Sharing Your Metrics With Outside Counsel?

From Legal Project Management (LPM) to the arrival of Legal Operations Officers at Legal Departments, insurers have become far more discerning and discriminating buyers of legal services than ever before.  Technology allows for any number of measurements of the performance of outside law firms, and therefore comparison of outside law firms.

Should this data be kept secret? Not if the insurer truly wishes to incentivize outside lawyers become the kind of lawyers the metrics are designed to create in the first place.

There are concerns, of course, about disclosing proprietary data, and information regarding other firms.  These issues, however, are easily addressed by 1.) providing metrics outputs to lawyers and law firms, not the methodologies and 2.) showing the outside lawyer or firm how it stacks up against averages, or par, as opposed to providing data on other lawyers or firms.

For an insurer to measure the data and not use it to influence outside lawyers toward the benchmarks the insurer is aiming for is to use but half of the tool.

The metrics themselves are as diverse as the objectives, but some of the more popular ones are:

  • Cycle Time  – how long a case takes from assignment to closing
  • Return on Investment – how much exposure was eliminated or reduced in exchange for payment of legal fees to defend a claim.  (This can also be an effective marketing tool for a law firm:  I was able to demonstrate to a large national insurer that over the course of several years that for every dollar they invested in legal fees,  my firm was able to eliminate six dollars in corporate contingent exposure.)
  • Leverage  – similar to ROI, a measure of dollars spent in relation to dollars at stake. Designed to prevent lawyers from killing flies with sledgehammers.
  • Overall Grade – somewhat subjective, but a great overall metric which allows General Counsel to grade how their outside lawyers are doing

We will delve into metrics in more detail in a future post.  In the meantime, remember that what can be measured can be used to steer outside lawyers in the direction the insurer wants to go.   Good outside lawyers will neither mind being measured, nor adjusting their performance to suit the insurer’s needs.

CJH

GCs: How Would YOU Like To Compensate Your Outside Law Firms?

Good lawyers can be bad listeners when it comes to legal fees.  Under ever-increasing pressure to fold more efficiency into the hiring and use of outside law firms, General Counsel are looking for alternatives to a running meter, which counter-incentivizes what clients want most – fast, cost-effective results.  Did I mention fast?   The best and most flexible law firms and lawyers are the ones who are responsive to that.

I’ve handled all kinds of cases, including litigation, under alternative fee arrangements (AFA’s) for years.  Generally, however, they have been arrangements lawyers  have designed and my clients have haltingly approved, or reluctantly agreed to try.   But even that model – the lawyer proposing to the client, amidst the ever – increasing speed of the rate of change in the hiring and use of outside legal counsel, may not be adequate responsiveness to a client’s needs.

What would the ideal fee arrangement be for an insurer’s in-house legal department to have an outside lawyer perform a coverage opinion?  Handle a bad faith case?  Perform a claims file review to do some bad faith preventative maintenance?  What would that look like to General Counsel’s Office?

GC’s and in-house lawyers, what is the best outside counsel fee arrangement for your company ?  That is the question to be asking, and good outside lawyers and law firms will be very interested in the answer.  Email us at  chaddick@dmclaw.com  and describe  YOUR ideal fee arrangement.   None of the responses will be shared unless you would like us to do so.

Looking for ideas on AFA’s?  Stay tuned for the posting of our AFA Resource Page, discussing any number of AFA options for both litigated and non litigated matters.  The options are virtually limitless.   These options can serve either as a pre-packaged deliverable fee arrangement, or a jumping off point to tailor an arrangement to meet your needs.

Best,

CJH

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