Legal Dept Spend & Efficiencies By Jeffrey Carr
I’ve been drawn lately to David Parnell of Forbes reporting on the legal industry. He wrote an article interviewing the GC of FMC Technologies, Jeffrey Carr, regarding corporate legal departments on two interesting trends and one fascinating idea.
On Value-Based Billing
Value defined by Carr “…achieving the objective effectively and efficiently”. Imagine FMC or another legal department hiring a law firm for an engagement costing $100k total under a fixed fee arrangement. The client holds 20% and pays the firm 80%. Then they give the law firm a report card of 6 different factors. Based on the report card, the firm gets paid 0-200% of the 20% withheld.
Carr calls this their report card system. Feedback and reward. Compensation and delivered value.
Legal Market Opportunity
What would Carr do if he left FMC?
He would approach CEOs and ask what their legal spend was for the past 5 years. He then would commit to doing all their legal work for 80% of their average spend. Of that 80%, he would only get paid 80% and then request a report card of performance. The report card would then be linked to a bonus/reward of 0-200% of the 20% not yet paid. He would ultimately make 80-120% of what he billed the client.
Carr – “I am absolutely convinced that there is enough inefficiency in the way that companies are currently providing or accessing the legal system that we can eliminate that. And over time, we can drive year over year performance gains by focusing on prevention as opposed to focusing on reaction”.
Aggregate Purchasing & Sharing Resources
Carr – “The only thing I hate more than answering the same questions twice, is paying to have the same question answered twice.”
Carr referred to the 2001 DuPont Consortium or the Legal Solutions Network. Twelve GCs from different companies pooling their annual spend and legal departments to aggregate purchasing power and sharing their own resources.
The idea is more nebulous than the previous two concepts mentioned above, but legal departments would marry technology with process control and a preventative law approach. This is not necessarily “best practices” but sharing service providers and sharing their in-house teams.