Eight Tips for Creating Strategic Outside Counsel Guidelines

Outside Counsel Guidelines can be a singularly effective tool for managing outside counsel. When reducing outside counsel costs, improving matter oversight, increasing billing efficiency and promoting better communications with outside counsel are the goals, Guidelines should be the first tool of choice.

Serving as the administrative guide for law firms to follow when interacting with their corporate client, and often outlining internal law department processes and procedures as well, Guidelines are the cornerstone of effective billing and matter management. For most law departments, that’s stating the obvious. Less obvious is how Guidelines can make or break your strategic objectives and affect the firms that are expected to follow them.

LexisNexis offers the following tips for creating Outside Counsel Guidelines that align with strategic objectives and foster a collaborative relationship between you and your firms:

  1. Start with your Strategic Objectives

By taking your departmental or corporate strategic objectives into consideration when formulating Guidelines, you can ensure that not only do Guidelines not conflict with them, but in fact, reinforce them. If a strategic goal is to shorten the time to close matters in favor of the corporation, for example, it can be stated and standards formulated to incentivize law firms for improving matter cycle time. Similarly, a strategic objective such as improving the predictability of annual outside counsel spend could be addressed by including a requirement that firms submit matter level budgets or agree to a fixed-fee arrangement for handling certain types of matters.

  1. Communicate Objectives, Internally and Externally

Communicating and partnering with firms and internal stakeholders fosters collaboration (see Tip #4) and streamlines processes. When everyone, including law department staff and firm personnel, understand what the Guidelines entail, why they are being implemented, and how compliance will be monitored and evaluated, the process stands a better chance of success. It’s easier to get to a destination when you have a map.

  1. Standardize Rules for Outside Counsel Engagement – but be Flexible

Varying Guidelines by practice area or geography may seem like a harmless idea, but doing so can complicate compliance tracking when several firms have several different Guidelines expectations.  Best practice is to implement a common set of Outside Counsel Guidelines with the understanding that individual firms at times may require specific accommodations to address areas of the Guidelines that may conflict with a firm’s internal rules or processes.

There are sample Guidelines online, including ones from CLOC (Corporate Legal Operations Consortium) and CLM (Claims and Litigation Management Alliance), that can be used as a template. LexisNexis offers consulting on developing Guidelines that match the corporate culture and strategic objectives of each client and align with the legal team’s approach to the business of law. Standard Guidelines can serve as a framework that you can then customize to meet your specific requirements for law firm engagement and the collection of data to support strategic decision making

  1. Encourage Collaboration

Asking for feedback from your outside law firms as you develop Guidelines and the rules associated with them enhances your firms’ sense of ownership. This encourages support for your legal department’s initiatives, can identify areas of potential conflict early on and helps to drive adoption. Your willingness to collaborate on Guidelines is as important to the relationship as the firm’s willingness to do the same. This doesn’t mean you should bring every firm you work with into the conversation, nor should it be an ongoing effort. Pick a group of your top firms and consider inviting them in for a discussion. They’ve been there before with other clients and they may not only appreciate your reaching out, but they will likely have something valuable to add.

Having documented acceptance of Guidelines in place can add a level of comfort when assigning matters to outside counsel. A feature in LexisNexis CounselLink allows law firms to acknowledge that they have read and accept the Guidelines by providing an electronic signature.

  1. Track Compliance

No matter how good your Guidelines are, if you don’t know whether or not they’re being followed, they aren’t going to serve their intended purpose. Although invoices can be monitored manually, this is generally a very labor intensive and time-consuming process. An Enterprise Legal Management (ELM) system such as CounselLink monitors compliance by automatically reviewing the invoices your law firms submit, flagging violations of the billing Guidelines to which your firms have agreed, and reporting the status of matters and billing. Another advantage of using an ELM system is that it can enable the creation of scorecards that graphically display performance metrics that allow tracking of things such as vendor compliance and matter disposition. Armed with the important information that tracking provides, law departments are able to improve their data driven decision making capabilities as well as provide effective feedback to their law firms. 

  1. Enforce Your Guidelines

The effort that you expend in crafting Guidelines – no matter how interactive the process and how realistic they seem to be – will be wasted if you don’t enforce them. The right ELM system allows users to use rules to enforce rates, billing and other requirements. Features within true Enterprise Legal Management systems also allow users to control budgets and staffing and enhance communication and collaboration by providing document attachment and journaling functionality so that everyone is able to communicate critical matter information within the same system.

Since ignoring a firm’s failure to comply with one or more of your Guidelines isn’t in anyone’s best interest, the best course of action is to address the problem promptly and directly. Do the firm’s timekeepers fully understand the expectations of the Guidelines? Sometimes failure to comply boils down to the firm simply not knowing what’s expected of it. Do any of your Guidelines perhaps conflict with one of the firm’s own processes? The only way to find out is to communicate honestly and openly. Once you understand why the guideline isn’t being followed you can begin to determine how best to resolve the situation. Again, communication is the most effective tool you have at your disposal. 

  1. Revisit Guidelines and Related Rules Periodically

Even the most carefully thought out Guidelines can eventually get out of sync with the situation on the ground. If you observe that a billing rule is being overridden often, for example, it could be that the related guideline no longer makes sense and that the underlying assumptions should be reevaluated.

Guidelines and compliance metrics should be reviewed periodically to provide a real-time view into whether Guidelines remain appropriate. If necessary, Guidelines should be updated to reflect changing strategic objectives and industry trends. Periodically reviewing Guidelines, and the rules related to them, provides the opportunity and the impetus to modify where realignment is needed. Follow-up communication will help ensure that your law firms understand and meet your new expectations.

  1. Share Results

Good communication is essential to making Guidelines work – not only externally, but within the legal department. Law department stakeholders must be kept apprised of what’s working and what isn’t in order to optimize the process and leverage its results. People respect what you inspect, and that goes for the people in your department. If one person is actively reviewing law firm performance on their matters and another is barely glancing at the invoices, find a direct way to bring it up and express the importance of maintaining uniform oversight within the department.

Law firms require feedback for the same reason. Both praise and constructive criticism can lead to process improvements that better support your strategic objectives. Making Guidelines compliance a part of your vendor evaluation process and then sharing the results of your assessment with your law firms is an effective way to provide valuable feedback you can leverage to drive process improvements.

With proper planning, execution, evaluation and follow-up, outside counsel Guidelines can be a winning proposition for law departments as well as their outside counsel. Law departments that implement Guidelines successfully typically enjoy the benefits of lower outside counsel costs, improved operational efficiency and more collaborative relationships with their law firms. Outside counsel that adhere to the Guidelines benefit by reducing billing errors, speeding payments and securing reputations as valuable, trusted and productive partners.

*Originally posted on the Business of Law blog: http://businessoflawblog.com/2016/02/outside-counsel-guidelines/