Innovative pricing, shredded ambition

In-house legal teams and law firms should be more accountable for changing self-interested behaviour, says Paul Gilbert, chief executive of LBC Wise Counsel


Paul Gilbert

When in-house legal teams run their appointment processes to select law firms to act for them on their so-called panels, there are a small number of words in every tender document that result in a visceral shudder for partners and bid teams.

“Please give examples of innovative pricing models.” It’s as if the ghosts of general counsel past have visited.

It is amazing really how seven such innocuous words can arrive dripping with low expectation and rank with the whiff of stale ideas. I am sure that shoulders must sag at the very sight of these words because in reality, it should say:

“Dear Law Firm,

“We are a bit rushed right now on what we call real work, but our colleagues in finance and procurement want us to go through this dull-as-dishwater process. Frankly, they think we spend too much money on legal fees, but we all know it isn’t that simple. Anyway it has to be cheaper.

“We are too busy to do the job properly, so we have some incomplete and unreliable data to give you. We have also given some thought to what we would like from you by way of ‘value add’ (free training mostly). It is a long list of wishes, but rest assured we are not that bothered. Basically please just come up with something that looks cheaper. The folks here also think you should be more innovative; goodness knows what that means, but see what you can do.”

The result is all very predictable. Most firms know that the pain of the bid process will be replaced by the familiar status quo of time-based charging and an inefficient client; therefore, lots of scope to make good money. In the meantime, however, they must look bothered and come up with an innovative pricing model.

SOUNDS CLEVER

Their usual response is to talk half-heartedly about fixed fees and also to describe something that sounds clever, but requires so much effort they know it will never happen. This can all be wrapped up in the pleasing sounds of words like “commitment”, “partnership” and “long-term value” – blah!

The bid document written, the balance of discomfort then switches to the in-house legal team who will soon be in receipt of the glossy, picture-strewn bid response, weighed down with all the biographies of every partner currently exhibiting a pulse.

The key is to lose the fixation with the word ‘innovative’ and replace it with something a little more hard-edged such as ‘accountable’

The in-house legal team will then search each document in vain for something, anything, which shows one firm might have a different proposition from the others. In truth they do not search too hard, because experience tells them it won’t be there.

And so it will not be too long before weasel words like these are heard: “I know it doesn’t say so in the bid document, but X firm are brilliant and Y partner has worked with us for years, they get us and so whatever we decide they must therefore be on the panel.”

Several weeks later, a few ground teeth and with the thin smiles of thank goodness that’s over, the panel firms are selected; a mix of relieved familiar faces and perhaps one new hopeful firm to show that the process must have been thorough.

In my view, given the realities of life, innovation is always unlikely. Even if there are good ideas the day job will crowd out any enthusiasm for change which will soon be replaced by that all too familiar swimming-against-the-tide feeling. Most of the ideas, therefore, are confined to the confidential waste bin where the law firm bid document is sent on its journey to the shredder.

Will it be cheaper? In a world where law firms have most of the data, most of the resources and most of the incentive to maximise their profitability, and where in-house teams rely mostly on trusted relationships, my guess is that not much will be cheaper ether.

Is there a better way? Of course, but it’s harder to do well. The key is to lose the fixation with the word “innovative” and replace it with something a little more hard-edged such as “accountable”.

Innovative is a lazy, fad-diet, snake-oily word. Accountable is a grown-up word. In-house teams should be accountable for their data and their processes. Law firms should be accountable for justifying every cost incurred against proportionality and client need. Above all in-house teams and law firms should be more accountable to their employers and clients for changing self-interested behaviours.