TR Forefront: How to gain advantage from outside counsel guidelines by Tikit

This article was originally written by Peter Zver, president, Tikit, North America

These days, we’re all familiar with outside counsel guidelines, right? Those 15-plus pages you get from every client when they first take you on which set out the rules of engagement.

Typically, they’ll detail every aspect of the work you do for them. This might include things like:

  • How often you invoice the client and what costs can and can’t be included (e.g. no photocopying and courier costs)
  • How you describe what you’re invoicing for (e.g. itemized invoices with multiple entries)
  • Who can and can’t handle different pieces of work (e.g. no senior lawyers doing paralegal work and vice versa)
  • The minimum increments of time that can be billed as well as the total time for a single day (e.g. not more than 8 hours unless by prior agreement)

And so on.

Of course, outside council guidelines vary between clients. And that’s just one of the challenges—ensuring you’re always following the specific rules of the client in question.

That said, the overall purpose tends to be the same across all clients. They all want billing that is timely and which accurately and precisely reflects the work done on their behalf. They all want a level of predictability so that legal spend can be planned and budgeted for with no unpleasant surprises. Above all, perhaps, they all want transparency that is full visibility of exactly what they’re paying for, often to a high degree of granularity. The underlying driver is that clients need to see and feel the value that they’re getting for their legal spend.

All well and good. If these are the rules of the game, firms will accept them and get on with it.

But the challenge is how you implement the guidelines in such a way that you achieve compliance and in such a way that enforcement of the rules doesn’t become a costly burden on the firm or the individual.

The cost of non-compliance

The truth is that implementing outside counsel guidelines can be onerous and costly in a number of ways. Onerous because systems have to be implemented and enforced to ensure consistent compliance. I’ll speak to this later.

But not addressing outside counsel guidelines effectively can be costly in several other ways. First, and most obvious, financial penalties are often imposed when firms breach the guidelines. This can be expensive, plus it disrupts your cash flow when the payment of an invoice is delayed by an issue.

Second, any time you’re chasing a lawyer to clarify an invoice (i.e. non-compliant narrative or some coding parameters), you’re taking up their valuable time, which is a cost, as well as holding up the invoice being sent.

There’s also often a temptation to remove a non-compliant line from your invoice rather than delay submitting the whole invoice for the sake of one non-compliant item. This, I would suggest, is a slippery slope. It may not seem cost-effective to chase down a lawyer over a stray 15 minutes within a $50k invoice. But once you start doing this habitually, those dropped line items will start to add up to ultimately a significant amount of money.

And there’s the final cost of failing to accurately implement outside counsel guidelines. That’s the cost to your reputation and relationship with the client. If your firm is forever submitting invoices that need to be queried, forever trying to push through expenses that violate guideline requirements, and forever surprising the client with costs they didn’t anticipate, you will make your firm unpopular.

Remember, one of the things that outside counsel guidelines enable is like-for-like comparisons that the client can make between all the firms it retains. So, when the client compares the overhead you create with the lack of overhead they get from your competitors, it does you no good. Their credibility with the client will rise, and yours will fall. At the end of the day, this could be a very big cost indeed.

Enforcing the rules

How can firms enforce the outside counsel guidelines efficiently and cost-effectively? The simple answer is with technology that can step up to help everyone in the firm apply the rules of the game consistently.  

I recommend that technology be deployed in two main areas. First, the firm has to take the guidelines (usually in the form of a Word document) and convert them into electronic form such that the rules can be consumed and enforced by all your intake systems. For example: “Hours worked per lawyer for client X cannot exceed 8 on any single date.” Several systems exist that can convert and host outside counsel guidelines in electronic and structured form.

Second, the rules need to be referenceable and consumable by all the systems performing an enforcement role. For example, your timekeeping software ought to be able to reference and apply the above 8-hour rule that has been made available by the hosting system. Likewise, a good timekeeping system can accommodate rules such as the validation of narratives as well as who is authorized to act on different matters.

It means that once the rules are electronically available for consumption, whenever one of your lawyers or assistants tries to enter data that infringes a rule, the system will refuse to accept or validate the input. Once you have these rules in place, their enforcement is automatic.

I will add a note of caution however. The end game is to enforce the rules with the minimum amount of pain, disruption, and cost.

Bear in mind—especially when it comes to timekeeping—that if the enforcement system is too aggressive (at the wrong time) it can be counter-productive. Remember that the timekeeping systems which log the most time are those that enable contemporaneous capture in easy, user-friendly ways.

Conversely, if your lawyers are confronted with an exasperating error message at every turn when they try to enter time contemporaneously, it will inevitably lead to high levels of frustration and lost time as they decide that entering small increments is literally more time than it’s worth.

Instead, make sure that what you implement is a good balance between enforcing conformity and ease of use. In particular, do whatever is practicable to take the burden of validation away from lawyers and push it toward assistants. For instance, don’t have error messages appear when data is being inputted, but rather at a later point when it’s being submitted. In this way, you are isolating usability and compliance to different stages of the process.

Above all, don’t lose sight of the fact that, guidelines notwithstanding, the aim remains capturing as much time as possible. Time, after all, is revenue. It can be helpful to find a system that is strict on compliance at one stage while being lenient on capture at another. This is the blend that you should aim for and the way to implement outside counsel guidelines effectively with the least cost to your firm.

Hopefully it means that when clients are comparing how reliable, efficient, and accurate their outside counsel is—and therefore who they should offer more business to in the future—your firm’s name will be at the top of their list. That’s the advantage you can gain from adherence to outside counsel guidelines. 

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