Vendor management: what makes a sophisticated buyer?

Denise Nurse, CEO and co-founder, Halebury, shares her experience of vendor management and the steps you can take to become a sophisticated buyer. The views in this article are the author's own, and do not represent the views of Juro nor those of CLOC.

‘You get what you pay for’. This is a truism for consumers across many industries, but it hasn’t always been the case for legal, where for the most part, until recently, the industry operated pretty much the same way it did fifty years ago. Legacy brands could still charge extortionately by the hour for an indeterminate service, without really committing to how long it would take or how much it would cost. In-house legal teams were expected to suck it up.

The global shift of power in-house has changed all that, along with the arrival of disruptive models - NewLaw, Alternative Legal Service Providers, Legal Process Outsourcing, and so many others - that look to high-growth tech businesses for inspiration, rather than hardback-toting, inflexible law firms. With that in mind, in-house lawyers should aim to be sophisticated buyers of legal services, ensuring quality counsel support the business at the right times, on the right matters - and for the right price.

Be a sophisticated buyer

The first step is to find the right vendors. Prestige brands, old boys’ networks and the like still carry disproportionate weight in legal. Exuberant networking is key to overcoming that inertia. We’ve never had more opportunities as lawyers to meet innovative providers at events, or through online groups and networks or exchanging e-business cards; beyond that, it’s easy to leverage your network’s network. Talk to your peers and find out if any innovative vendors impressed them lately. Cast the net wide - if you ask the same friends for recommendations, you’ll invariably get the same answers.

Once this gives you an expanded list, narrow your criteria by being clear on what your business actually needs from a law firm. Legal skill and acumen should be a given - nobody doesn’t need that, and nobody would market themselves as not having it - so what else is vital to the success of this brief? It might be aligning to cultural fit; understanding specific business objectives; project management skills; technological integration; these criteria can be used to narrow the range from which you choose, to make sure you find a partner with the quality to deliver. Perhaps the names you come out with matches the referrals from that old boys’ network - but perhaps not.

As often as we’ve written its obituary, the billable hour lives on. This is partly because clients choose to perpetuate it

How should you pay?

The next step is to make sure the price is right for you. As often as we’ve written its obituary, the billable hour lives on. This is partly because clients choose to perpetuate it: RFPs still regularly ask for a list of hourly rates by role. To break this vicious cycle we all need to realise that businesses work to budgets, not to success. A private practice law firm deploys as much resource as it needs to ‘win’ a matter, but companies don’t run on infinite resources; ‘no surprises’ is much more the mantra in-house. Buyers of legal services have every right to demand transparency, and to expect fixed fees, because even if a project ends elsewhere than where it started, it still involved a level of expertise that was scoped and communicated. Smart vendors will still offer flexibility within fixed fee arrangements. That being the case, you have to ask yourself: why should your business expect anything less?

How should you monitor?

Tracking the billing and performance of your vendors, once appointed, is mercifully easier than it’s ever been, thanks to matter management and e-billing software. Large organisations can get visibility of spend, as well as the extent to which vendors stick to fee estimates, over time. But not every in-house legal department has the legal ops person to manage this strategically, nor the budget to procure software. Even so, business-minded lawyers can still set up spreadsheets to track the basics - who is being instructed, how, why, and for how long. Working with in-house clients, it’s always a surprise the extent to which some lawyers aren’t even taking these baby steps towards accountability and transparency. More encouraging is the ongoing dialogue that we see between legal, procurement and finance: savvy lawyers know to take advantage of the expertise these teams offer, rather than seeing them as a limiter or even adversary in the process. Specialist conferences for legal and procurement are a new development. For some in-house lawyers this is a natural collaboration from the necessary teamwork on, for example, transactional work; for others, it’s a GC-mandated obligation to force lawyers to be mindful of cost. Either way, it’s a sensible alignment of skillsets that can only benefit the business.

Let innovation in

Pressure on budgets, together with a business-minded, procurement-influenced approach, will naturally influence in-house buyers to consider innovative providers in a way they might not have 15 years ago. ALSPs in particular are set up to deliver against the factors that vendors are looking for: business-focused, data-driven, transparent, tech-enabled, budget-minded - run like a business, not a law firm. Emotional intelligence is also a factor companies can pay for when considering an outside resource, and there’s a much greater awareness that huge legal projects are often actually about change management as much as they are about legal process - finding people who can deliver that change sensitivity is extremely valuable. Finally, flexible lawyering has also forced its way into a profession that hasn’t always been keen to adopt new practices; this was ALSP-led, but its success can be measured by the fact that a whole host of top-20 law firms now offer their own on-demand services.

Each new, disruptive provider makes it harder and harder to explain why you aren’t taking advantage of technology to address low-value high-volume tasks at a sensible price

The obvious consequence of such fierce commercial scrutiny of the value chain is unbundling, or ‘disaggregation’ if you prefer, which must be a key component of vendor management for the modern in-house lawyer. Each new, disruptive provider makes it harder and harder to explain why you aren’t taking advantage of technology, or ALSP resources, or both, to address low-value high-volume tasks at a sensible price, rather than throwing the same instructions to the same firms for a price that only ever increases. We can do better than this.

Be a sophisticated user

The next step in vendor management is becoming a sophisticated user of the vendors you select. This plays out in how you set objectives, how you monitor your vendor, how you negotiate the vendor agreement template, and how you communicate.

It’s hard to overstate the importance of clear objective-setting, and the outcome for the project. Don’t assume your provider - however sophisticated - knows exactly what you want. Success in a project involving outside counsel or resources is rarely as simple as a binary achieved/not achieved metric. Be clear on what you want, why you want it, when, and how. Define what good looks like: if this goes well, where will we be? Are the key indicators to do simply with time taken or cost incurred, or is it in fact about delivering a different kind of relationship, or a new process?

Then at a more granular level, the question of how you’ll work together needs to be defined. Does your vendor need to provide data at a certain cadence, to align with your need to report to the CFO? Should outside counsel be attending team meetings, and if so, how often? Have you established weekly check-ins? Agreeing all these objectives and ways of working helps to mitigate problems from arising down the road. Clear expectations as to the service level to be provided help both sides to judge the success of the project as it proceeds.

When it comes to what should actually be monitored, as a vendor, we focus on five simple questions that help keep the project on track. Are we doing what we said we’d do? Are we responsive enough? Are we delivering added value (as defined in the scope at the outset)? Would you hire us again, based on our work so far? And finally, would you recommend us? There are myriad KPIs and data points that can be monitored beyond these, but if a vendor can’t answer these questions satisfactorily, it’s a red flag that the relationship is not driving success.

Simple questions like these can be powerful in surfacing problems: for example, if responsiveness is not where it should be, is this due to vendor inertia, or might it be because they don’t have access to the documents they need on the other side? At the base level, in-house lawyers should always be monitoring things like spend, time, and instruction volume, but by answering these success-focused questions, you can make sure the vendor is delivering real value - not just ticking the boxes.

Throughout all these processes, communication is key. Dialogue must be constant. Check-ins must be diarised and those appointments must be kept. We even make them contractual - the perceived time-cost is nothing compared to the headaches they can help to avoid. Similarly a lack of communication is often the main driver behind a relationship turning sour, and trust breaking down - dialogue is a cheap solution to an expensive problem.

A collaborative future

Although these techniques aren’t, as yet, universal, there is a great deal more that in-house lawyers and their vendors can do to work together, and this is only set to increase as technology enables closer collaboration. Sharing data is a big step forward that has immediate benefits: providing your external counsel with logins for the systems you use, and insisting on the same from them, provides genuine transparency, particularly around cost. If your vendor implements technology, are they delivering dashboards to your desktop so you can monitor its success in real time? These kind of trust-building steps should become commonplace, but in our experience, even if they have access, many lawyers don’t even log in and take a look. Although vendor management can and will become more closely collaborative, it will depend on lawyers - on both sides - developing both the skillset and the mindset to truly collaborate to the extent that technology allows.