The Artificial Lawyer is reporting on a costly disconnect between U.S. law firms and their clients’ legal departments: The 2019 Annual Law Firm Leader Survey on Outside Counsel Guidelines shows that in the majority of cases, attorneys pay little to no attention to billing guidelines that have been established by their clients until it is too late. This, despite the fact that the clients normally send these guidelines to outside counsel before the work begins.
The American Legal Administrators (ALA) report, conducted by the timekeeping software company Bellefield, warns that in an effort to save money, clients are increasingly using the enforcement of Outside Counsel Guidelines (OCGs) to reduce their costs.
The report states that “Today, Outside Counsel Guidelines stipulate contractual terms and conditions that define the client relationship across these three main areas:
1. Process and procedures such as conflicts, case assessment, status reporting, and staffing
2. Policies and policy management including security and cybersecurity, general compliance, confidentiality
3. Client billing guidelines, including fees, expenses, invoicing procedures, and appeals.”
It goes on to point out that “No two Outside Counsel Guidelines are alike; in fact, each can be considered a unique client arrangement and from the above list capture a vastly nuanced array of very complex rules for which non-compliance has very tangible consequences: i.e., not being paid, payment delayed up to 120 days, sued, or simply fired by the client.”
If a law firm ignores a client’s OCG when undertaking work, it runs the risk of non-compliance – which can be extremely costly. And yet, The Artificial Lawyer says, “almost three quarters of firms don’t have a proper process in place to keep track of their clients’ billing guidelines.” Further, “around 40% of these firms don’t get the message across to the partners,” and “even worse, the message is not getting through to individual lawyers who are project managing a matter for a client. In such circumstances it seems inevitable that firms will produce work and/or bill in a way that clients end up partially writing off.”
Both the ALA report and The Artificial Lawyer set out issues on both sides of the firm-client relationship that help to explain why this situation is so common, and suggest strategies to remedy the situation. Getting paid for legal work is so central to the success of every law firm that it seems senseless to dismiss the implications of ignoring client guidelines.
I am interested to know how your firm manages the issue of compliance with outside counsel guidelines. Are you looking for a strategy that works for both your firm and your clients? Let me know your thoughts on this – or on any matter relating to the management of law firms. You can contact me either in the comments section below, or directly via email.