Every director or general counsel responsible for managing litigation is tasked with achieving better outcomes for less. In essence, the task is to achieve better value for your company’s litigation spend. However, you can’t achieve better value without an objective sense of what value looks like – how do I know when I am getting good value for my litigation spend?
This is NOT value
The problem is we use crude proxies for value that disguise rather than illuminate questions of value. In particular, in the absence of a more objective and sophisticated framework for understanding value, we resort to two poor proxies for value: result and price.
The result (by result, I mean whether you win or lose at trial) is a poor predictor of value for at least two reasons. First, the biggest predictor of the outcome of litigation is the actual facts and the legal consequences of those facts. Not even the most effective lawyer will achieve a result that is at complete odds with the facts. Which is not to say that lawyers do not play a critical role in achieving a particular result, it’s just to acknowledge that no lawyer can control the outcome. There are always factors that will affect the outcome of a dispute beyond the control of the most brilliant lawyer. Secondly, you may achieve a successful result in a dispute but spend substantially more than was necessary to achieve that result. That can arise for a whole host of reasons – undertaking work that was not necessary, duplication or general inefficiency. As Finkelstein J said in Black and Decker v GMCA [2007] FCA 623 at [4]:
“a case that is reasonably well prepared is just as likely to be decided correctly as a perfectly prepared case”.
Thus, the result alone is a poor indicator of value.
Price is often used as the most basic measure of value. In my experience, price is one of the poorest indicators of value. Using price alone, how can you make any realistic assessment about whether you get better value out of the lawyer charging $500 per hour compared to the lawyer charging $800 per hour? The cheaper lawyer by price may take twice as long to perform the same task as the more expensive lawyer. The more expensive lawyer may offer valuable insight and experience that the cheaper lawyer does not bring. The problem is, the reverse may hold true (and, indeed, I have seen it hold true on far too many occasions) – the cheaper lawyer may do it in half the time as the expensive lawyer and offer insights and experience of far greater value. (This also highlights one of the many absurdities of time-based billing.)
Thus, price alone is a particularly poor indicator of value.
The point is not that the result and price are irrelevant, clearly, they are important, and they feed into the question of value. The point is, alone, they are poor measures of value. Alone, they do not allow a client to determine whether they are getting good value for their litigation spend.
So how do you know if you are getting value for your litigation spend?
Delivering value
Your lawyer can’t provide value without a framework for focusing on and delivering value. Thus, the first step, is to ensure your lawyer has that framework. So, what would that framework look like? In my view, it would have five basic elements:
1. an alignment of interests: it should be trite to note the obvious conflict between the interests of a lawyer and their client when a lawyer charges by the hour (how long can clients continue to ignore this obvious conflict…). How can you deliver value if the profitability of the model for delivering the legal service is so fundamentally tied to unnecessary and inefficient work? Value must be predicated on some basic alignment of interests. An alignment of interests requires a law firm to measure its own performance in ways that are consistent with a client’s expectations. For example, if we assume responsiveness to be a key driver of client satisfaction, then a law firm should value responsiveness by measuring and rewarding its lawyers for being responsive;
2. value based pricing: consistent with an alignment of interests, to deliver real value there should be an obvious relationship between the value to the client of the legal service being provided and the price. One important way of measuring value is to ensure that the ultimate cost is proportionate to the issues and amount in dispute;
3. project management: to deliver value, your lawyer must have an ability to plan for and manage a litigation project in a way that prioritises outcomes and effectiveness. Your lawyer must have a capacity to apply basic project management principles, processes and tools;
4. independence: if your lawyer is just your cheerleader you will not be receiving value – you will fail to properly assess risk, you will incur costs unnecessarily and you will miss opportunities to negotiate timely, favourable outcomes. Resolving disputes effectively requires a thoughtful and realistic assessment of risk, an assessment that necessarily involves being able to be honest and critical about a client’s conduct and expectations. In litigation, that realistic assessment can only be delivered by a lawyer who maintains and values independence;
5. focus on outcomes: finally, delivering value is ultimately about taking only those steps that are necessary to resolve a dispute. The dispute resolution process should not feel like you are strapped into an interminable, archaic and expensive ride where the outcome is unpredictable. If your lawyer is not explaining how each step in the process is helping to resolve a dispute and why that step should be favoured over other, considered alternatives, then you are not receiving value. The hardest and often the most important decision in litigation is not necessarily whether to start the process, but whether to continue. You cannot sensibly evaluate that step if your lawyer is locked into slavish adherence to process.
Measuring performance
The second step to getting value, is to develop meaningful ways to evaluate and measure performance. In my view, any measure of your litigation lawyer’s performance should include four basic elements:
1. estimate v actual: managing and resolving disputes is ultimately about assessing and managing risk. While it is always difficult to predict the eventual result of any dispute should it proceed to trial, that does not mean that the process and outcomes are inherently uncertain and unpredictable. Thus, the first and most obvious measure of performance is that there should be little or no surprise, whether upside or downside. The most obvious example is cost – you should measure the extent to which your actual cost meets the estimated cost and you should ask your lawyer whether they are measuring this for other clients. This is particularly important with time-based billing but is also necessary with fixed-price billing, by measuring the extent to which the scope of work creeps and why. Equally, there should be little or no surprise in the process and ultimate outcome;
2. responsiveness: it’s obvious, but your lawyer should be responsive. That this even makes it into my list indicates just how poor lawyers are at consistently responding to their clients’ concerns. There should be a clear (and reasonable) expectation about when your lawyer will respond to your questions or concerns, and you should measure performance by whether your lawyer meets that expectation. Equally, your lawyer should not be just reactive. There should be clear expectations about when and how you are informed about the progress of your dispute, and you should measure performance by whether your lawyer meets that expectation;
3. adherence to timeframes: court timetables are not guides. Where a timetable is set for completion of necessary steps in the dispute resolution process, your lawyer should always meet that timetable. Failure to meet court-imposed timetables is a substantial cause of unnecessary cost;
4. speed: it’s an unfortunate and often inexplicable truism, but delay causes cost – the longer your dispute takes to resolve, the more it will cost. A lawyer who can consistently resolve disputes faster is therefore likely to deliver better value. If you take the time between a dispute arising and its resolution as a measure of your lawyer’s performance, you will encourage your lawyer to be more innovative in their approach to resolution.
Finally, you should always consider more than one lawyer before engaging a lawyer to resolve a dispute and you should be open to changing lawyers along the way.
You can’t assess value without meaningful comparison. It is remarkable how many companies embark on expensive litigation projects without first applying basic procurement principles to ensure transparency, certainty and competitiveness in pricing and service delivery.
You can’t demand value without a willingness to change lawyers. Just as you are not stuck with your dispute, you are not stuck with your lawyer. Indeed, the way in which a new lawyer proposes to manage taking on an existing dispute in a way that avoids unnecessary duplication and wasted costs will often be a measure of the value that lawyer is likely to deliver.
Conclusion
Every client should be concerned with getting value from their litigation spend. You can’t improve value without an objective sense of what it looks like. To ensure you are getting value, you should first look to ensure your lawyer has a framework for focusing on value, secondly, have a series of objective measures to assess performance, and finally, a willingness to compare and change lawyers.
If you would like to discuss how to develop an organisational framework for measuring value, or just to learn how Aptum focusses on and delivers value, please contact me.
