December 4, 2019
A recent the American Lawyer article by Dan Packel, “Why Firms Struggle With Outside Counsel Guidelines – and Pay the Price,” reports on a new survey that draws a straight line between lower realization rates and law firms’ failure to communicate the substance of outside counsel guidelines to billing attorneys. The article reads:
Law firms are struggling to comply with clients’ outside counsel guidelines, leading to slower rates of realization and increasing write-offs, according to a recent report from timekeeping technology company Bellefield and the Association of Legal Administrators. In the groups’ inaugural survey of respondents from nearly 200 law firms, they found that firms’ failure to communicate the substance of these guidelines to the attorneys who actually bill leads to invoices that are rejected or reduced.
“They’ve got to make that business case to attorneys,” said Patricia Nagy, a director at Proxy PR who helped write the report. “Attorneys are being overwhelmed with new tasks, in terms of compliance and information governance, but this one hits directly and immediately to their pocketbooks if they don’t comply.”
While corporate legal departments have been probing the consequences of these outside counsel guidelines for several years, this is the first effort to gauge their impact on law firms. The survey received participation from 198 firms, over 20% of which have over 300 attorneys. Almost 35% had between 51 and 299 attorneys, and nearly 30% had between 10 and 50.
Nagy said that she was surprised to discover that nearly one-quarter of firms surveyed made no effort at all to communicate these guidelines to billing attorneys. Over 52% of firms share these guidelines with attorneys via email, and 24% simply post them on the firm’s intranet, with the hopes that lawyers look at them. “We weren’t surprised there were a lot of process failures,” Nagy said. “What was surprising was the degree of the failures, and that a lot of them were using ‘hope’ strategies.” Indeed, even among the firms that communicate these guidelines to billing attorneys, 82% do not require acknowledgment of receipt, and attorneys are only monitored to ensure they are following guidelines 55% of the time.
As a consequence, when navigating clients’ e-billing systems, firms are finding that an increasing number of invoices are being rejected, even as firms have managed to keep rates robust. The ALA and Bellefield survey shows that 70% of firms believe that e-billing has not improved billing and collections, with billing and collection cycles expanding, for the most part by 30 days, according to 41% of respondents, or 60 days, per 29%.
Rejections are also a growing problem. Nearly half the firms surveyed experience 5% to 10% of their e-bills rejected or reduced. And 15% do not appeal rejections, either because of inadequate staffing or because they treat them as a cost of doing business. Nagy noted that as clients increasingly use metrics to evaluate outside counsel, firms that make less friction during the invoicing process are more likely to receive repeat business.
Asked how they would like to improve the process, nearly 60% of respondents asked for more visibility into what corporate law departments actually want. This tracks with a conclusion that these guidelines have actually made it harder for firms to communicate with clients, a sentiment shared with 40% of respondents, compared to 11% who point to improved communications. And 45% of respondents hoped for a technological solution that would help them make sense of these guidelines. With different guidelines coming in from each client, automation becomes a particularly challenging task.