The team at BT Legal has spent the past three years changing the way it deals with external lawyers and manages its own lawyers. Most recently, it has brought in a new e-billing platform, MyLegal, which has overhauled how it manages legal spend.
David Griffin, head of legal and governance systems and change at BT, says the company wanted to move away from the smoke-and-mirrors approach to billing from some law firms, introducing more accountability and transparency to how matters are managed. Hopefully, this will mean the team can catch problems early and avoid getting unexpectedly large bills from their external counsel.
‘It’s about codifying the work that’s done by lawyers and not letting things slip through the gate. We want to put these checks on [law firms] systematically,’ he says. ‘How do we grab these challenges before they become material? Avoid bill shock? Can we review the work that’s being done? You have to be proactive.’
BT Legal’s approach may be followed by many more in-house legal teams in the years to come. Despite the never-ending focus on reforming fee arrangements over the past decade, new data from Legalease Research Services, which contacts over 150,000 clients in the UK annually to provide assessments of law firm service, shows that clients are still unhappy with the amount of information they get from their law firms about billing. Many clients feel fed up with the lack of transparency, which leaves them surprised by bills and unsure about what they are being charged for.
The annual UK Client Survey has revealed broad dissatisfaction with private practice billing tactics, with year-on-year approval ratings falling across the board.
The survey sees thousands of businesses and corporate counsel offer their candid appraisal on hundreds of law firms across the UK on 12 different client satisfaction metrics. These range from the quality of lawyers, value for money, partner availability and engagement, communication and case management, as well as industry knowledge and profile.
While most law firms in the UK score strongly across nearly all client satisfaction categories, one area that they persistently rank poorly on is on the transparency of their billing arrangements.
‘They provided me with an estimate and then billed nearly three times that. Despite our protestations, they have refused to make a single amendment. I could not recommend them in any way,’ says one client of a regional firm.
Another client of a City firm says: ‘Billing was opaque at best, and extremely high for doing very little. They refuse to provide hours and a breakdown. They are old school, refusing to account for their time and hours – as is normal. Absolutely shocking.’
Tony Williams, principal at Jomati Consultants and former managing partner of Andersen Legal and Clifford Chance, says that in-house legal teams are increasingly unwilling to accept unclear bills – and are demanding more transparency from law firms than ever before. ‘The larger corporates with any decent legal spend are putting [billing] front and centre,’ says Williams. ‘Years ago, unless the final bill was totally outrageous, people didn’t question how the deals were done. Rightly so, customers now demand transparency: “What am I paying for here? How efficient are you going to be?”’
Digging further into the data, we find that Magic Circle firms score particularly badly. Clients still report high levels of satisfaction when it comes to quality of advice, but are less and less willing to put up with billing opacity. Not all firms are criticised for their lack of transparency. Large, multi-jurisdictional, international mid-tier firms, such as Clyde & Co and Taylor Wessing, followed closely by the boutique firms and London’s big four legal providers all score well on billing transparency. In many cases, these firms are praised for their ‘prompt and clear billing’, ‘pragmatic approach’, and ‘competitive and imaginative proposals’, as various clients reported to The Legal 500.
Williams believes that there is now a split between more progressive firms that are willing to embrace new billing technologies or alternative fee arrangements versus the traditional big firms. ‘The old guard [law firms] can no longer rely on the lion’s share of the work based on their market reputation alone,’ he says, adding that traditional law firms need to ‘get sensible’ and innovate on billing or risk being left behind.
Dissatisfaction is partly driven by new technology, and clients expecting better data from their law firms. Ten years ago, clients may have been happy receiving a monthly or quarterly email with an invoice or spreadsheet detailing how much they owed their law firm. But these days many clients want near real time e-billing data, so they can accurately and efficiently track their spending.
Chris Bull, a principal at Edge International and former chief executive of Osborne Clarke, says that firms have ostensibly spent a lot of time and money on new applications and platforms in recent years to tackle this issue.
But he believes this has not been enough to satisfy clients because there has been a ‘dramatic shift’ in power between clients and their firms, with the rise of increasingly demanding and influential in-house legal operations teams putting pressure on law firms to provide more information.
‘Clients have become ever more unwilling to accept the unacceptable status quo,’ he says, adding that the rise of e-billing systems has not helped the situation. The insight into costs provided by these technologies enables clients to ask pointed questions about how lawyers are spending their time and what exactly they are billing for. This often puts external counsel on the defensive.
‘If anything, the client/lawyer relationship has typically become more, not less, adversarial as e-billing systems have been deployed,’ says Bull.
E-billing platforms, such as those offered by Thomson Reuters and LexisNexis among others, are now widely used by clients. More than 80% of firms now use e-billing to submit at least some of their invoices, according to a survey by data provider Statista earlier this year.
Hillary McNally, general manager of corporate legal at Thomson Reuters, says that many in-house teams have introduced e-billing to reduce their external legal spend. The aim of these platforms is to ‘systematise transparency’, incentivising good timekeeping and punishing block billing until good practices become widespread. She says that around four fifths of corporate legal departments now have a dedicated legal operations professional – an individual who is responsible for reducing legal spend and streamlining processes.
‘Clients don’t want to cut corners on outcomes, but they don’t want these outcomes at the expense of visibility,’ says McNally. ‘Transparency is here to stay, and it’s better to be collaborative and to embrace the opportunities it presents than to see it as a threat.’
Back at BT Legal, Leeanne Whaley, transformation director, says that introducing new platforms to monitor the work of external lawyers has enabled the team to not only cut costs, but also introduce new ways of working, such as alternative fee arrangements.
‘We spend a lot of money with external law firms,’ she says. ‘It historically suited law firms to not be transparent, but outside of big-ticket M&A and litigation, the job of a commercial lawyer is more replicable than ever.’
To find out more, visit www.legaleasedata.com