LEADING PRACTICES PROFILES SERIES Leading Practices in Law

LEADING PRACTICES PROFILES SERIES

Leading Practices in Law Department Metrics: Company Best Practices


Copyright © 2013 Association of Corporate Counsel

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Updated October 2013

Provided by the Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200 Washington, DC 20036 USA tel +1 202.293.4103 fax +1 202.293.4107 www.acc.com

This Leading Practices Profile updates the 2005 ACC Leading Practices Profile, Law Department Metrics.

The information in this Leading Practices Profile (“LPP”) should not be construed as legal advice or legal opinion on specific facts, and should not be considered representative of the views of ACC, unless so stated. Further, this LPP is not intended as a definitive statement on the subject; rather, it is intended to serve as a tool for readers, providing practical, benchmarking information to the in-house practitioner.

Susan Tahernia, J.D., Legal Consultant for ACC, interviewed the featured participants for this written Leading Practices Profile, and she is the principal author of the document.

For more information about ACC please visit our website at www.acc.com.



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OVERVIEW

Updated October 2013

In 2005, ACC published the Leading Practices Profile, Law Department Metrics. In that piece, we showcased the leading design and implementation of metrics programs of six law departments.

In 2013, ACC revisits the question of law department metrics as a tool for measuring success and improving value delivery. Through interviews with 10 law department leaders in this area, we present here the updated design, development and implementation approaches of highly effective and diverse metrics models. Department leaders profiled here offer vital advice on how to capture and use metrics results to drive enhanced law department and outside counsel performance. These thought leaders also share resources and tools that have facilitated their development and evaluation of strong metrics practices, in the hopes that these can help other corporate counsel seeking better ways to measure, and ultimately to maximize, their own legal department’s performance.

Legal heads from the following 10 industries present their leading outside counsel and law department metrics practices below:

§ Energy: FMC Technologies, Inc., Houston, TX

§ Aerospace and defense: Rockwell Collins, Cedar Rapids, IA

§ Power generation: Capital Power Corporation, Edmonton, AB, Canada

§ Commercial property casualty insurance: Zurich North America, Schaumburg, IL

§ Education: York University, Toronto, ON, Canada

§ Consumer products: The Clorox Company, Oakland, CA

§ Pharmaceuticals: Taro Pharmaceuticals U.S.A., Inc., Hawthorne, NY

§ Port authority: Massachusetts Port Authority, Boston, MA

§ Energy and petrochemical: Shell International B.V., The Hague, the Netherlands

§ The Profile also includes a sidebar interview with an independent non-profit researchinstitution headquartered in the Middle East.

For more Leading Practices Profiles please visit http://www.acc.com/lpp

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Contents

I. Introduction ....................................................................................................................................... 7

II. Summary Overview of Metrics Programs ...................................................................................... 9

A. Outside Counsel Performance Metrics ............................................................................................................ 9

B. Law Department Performance Metrics ......................................................................................................... 12

III. Summary Overview of Leading Practices and Trends ................................................................ 15

A. Leading Practices and Trends ........................................................................................................................... 15

B. Advice and Parting Thoughts ........................................................................................................................... 17

IV. Company Program Summaries ..................................................................................................... 18

A. FMC Technologies, Inc. ..................................................................................................................................... 18

B. Rockwell Collins .................................................................................................................................................. 23

C. Capital Power Corporation ............................................................................................................................. 26

D. Zurich North America ...................................................................................................................................... 29

E. York University ................................................................................................................................................... 32

F. The Clorox Company ........................................................................................................................................ 34

G. Taro Pharmaceutical Industries Ltd. ............................................................................................................... 37

H. Massachusetts Port Authority .......................................................................................................................... 39

I. Shell International B.V. ....................................................................................................................................... 41

V. Policies, Templates, and Guidelines .............................................................................................. 46

A. Capital Power Corporation: ............................................................................................................................ 46

1. Client Feedback Questionnaire ..................................................................................................... 50

2. Metrics Scorecard ............................................................................................................................ 53

B. FMC Technologies .............................................................................................................................................. 55

1. ACES Summary, Availability and Service Package ..................................................................... 55

2. Counsel Evaluation and Feedback Form ..................................................................................... 62

3. MPR Legal ........................................................................................................................................... 63



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C. Rockwell Collins .................................................................................................................................................. 85

1. Guidelines for the Initial Conversation with Outside Counsel ............................................. 85

2. Checklist for AFA Discussion with Outside Counsel .............................................................. 86

3. Success Fee Insert – Litigation ....................................................................................................... 87

4. Success Fee Insert – Non-Litigated .............................................................................................. 89

VI. Additional Resources ...................................................................................................................... 94

VII. Endnotes ........................................................................................................................................... 97


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I. Introduction As in-house counsel, each of us is deeply committed to the efficient and effective delivery of services for our corporate clients. We look for strategies to help contain costs and enhance performance. We know that tools that can help us monitor both matters and relationships are vital for achieving these goals. ACC understands that monitoring and tracking performance, matters, relationships and costs are vital components for law departments seeking to deliver the greatest value to the organization.

ACC commissioned this Leading Practices Profile to help corporate counsel understand what legal department leaders view to be today’s best tools and process for measuring performance and tracking costs. Through interviews with members who have successfully leveraged metrics to implement streamlined value practices, this LPP highlights how ten legal departments deliver value in a way that is smart, efficient, and responsive to all who have a stake in the department and in the organization it serves.

We asked our law departments to describe how metrics monitoring systems enhance law department performance. The answer, it turns out, is fairly simple. Performance metrics systems allow these legal departments to measure performance in a quantified way by facilitating comparisons: actual output against expected outcomes (i.e., metrics showing actual spending versus budget); corresponding data points to identify outliers - both good and bad – in a way that allows department heads to understand what causes the difference.

The legal departments we interviewed explain how metrics enhance their ability to measure performance, manage expenses and enhance value output for both organization and stakeholder. This Leading Practices Profile reveals that corporate legal department efforts to track and measure these key components are continuously improving, with strategies centered around the two major facets of service and expenditure: outside counsel management and law department performance.

What do metrics measure?

Effective metrics systems help law departments track the number of contracts reviewed or generated; the number of products or policies developed; average turnaround times; number of claims; number of active matters; number of matters open/closed in the year; number of cases settled; and cycle time (average period of time between opening and closing a matter).

But a good performance metric delivers more than a tool for measuring performance in a quantified way. Performance metrics can lead the way in also demonstrating a return on investment in overhead (e.g., ratio of in-house to external legal spend and estimated value of savings generated; cost savings achieved by insourcing or bringing work in-house; number of in-house counsel per X million of revenue; number of employees per attorney). Metrics, moreover, can educate senior management on the legal function’s purpose and how it adds value to the business.



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With increasing frequency, legal departments are joining other company divisions in assessing performance in obje-ctively measurable ways. They do so by generating detailed reports of matters and budgets and by developing scorecards that can translate goals into measura-ble units that show progress and improvement.1

By tracking and studying value delivered, liabilities averted, recoveries gained and total spend, a growing number of departments are finding that metrics are vital for measuring operational success and strengthening the department’s position as a strategic and indispensable business partner.

ACC’s 2013 CLO Survey finds that law department metrics are frequently used to help drive and measure operational success in the following five areas:

§ External legal spending

§ External counsel management

§ Internal legal spending

§ Forecasting for legal services

§ Internal legal staffing

Company representatives featured here describe programs and strategies that rely on similar metrics to track and measure performance of internal and external legal services. Among the impressive results is the overall efficiency they afford. Legal teams here credit these programs with reductions in three areas: case cycle time, total dispute resolution costs, and legal spending as a percentage of revenue. These teams draw on advanced metrics processes that include the use of technology to mine critical data and drive efficiencies in the way their departments manage internal and external legal spending and performance. They also use metrics to make more

Corporate law departments have not always been quite so adept at using metrics to measure and manage performance. According to Serengeti Law’s Patrick Johnson, unlike other business departments, legal departments traditionally have not busied themselves with tracking metrics on departmental performance. This reality has been changing in recent years, however, as both the complexity of running a legal department and C-suite scrutiny of legal departments have increased. See, “Top Ten Metrics Your Legal Department Should be Tracking,” ACC Top Ten, March 2013.

ACC offers many useful resources to help enhance the value of legal services; many of these resources reside in the ACC Value Challenge library. Within this library, members can access tools and models for tracking and measuring performance and costs in the dozens of resources residing in the Evaluation Performance & Metrics section.

http://www.acc.com/legalresources/resource.cfm?show=1327148

http://www.acc.com/legalresources/resource.cfm?show=1327148

http://www.acc.com/valuechallenge/index.cfm

http://www.acc.com/valuechallenge/index.cfm

http://www.acc.com/ValueChallenge/resources/avcresources.cfm?rs_vc=393


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informed, real-time management decisions by relying on customized billing and matter management systems. The results have paid off, as data gleaned from carefully crafted metrics processes has been applied by these departments to reduce costs, enhance performance and target matters that deliver the greatest value to the organization as a whole. The legal teams featured here also cite to essential matter management resources and share their leading practices in operating successful metrics programs that serve the needs of today’s -- and tomorrow’s -- corporate legal department.

II. Summary Overview of Metrics ProgramsFor many of the legal departments we spoke with, an effective metrics program that tracks and evaluates both law department and outside counsel performance facilitates case success and reduces cycle time, total dispute resolution costs and legal spending as a percentage of revenue. A key value tenet at FMC Technologies, for example, is to deliver cost-effective legal solutions that align legal services with desired objectives. “In almost all litigation, success is a dollar value: either getting out of the case at or below the liability reserve, or at or above the anticipated receivable,” explains FMC’s Jeff Carr. FMC’s customized fee-structuring model rewards outside firms for efficiency and for resolving matters quickly and reducing litigation cycle time.

Each of the ten organizations featured here shares information about their law department metrics programs. They discuss two principal categories of metrics programs: those designed to track and measure outside counsel performance and spend, and those designed to track performance and value of internal legal operations and services. Summarized below are some principal performance metrics. Further information on these and other metrics tools and processes can be found in the individual program summaries in Section IV of this Profile.

A. Outside Counsel Performance Metrics All of the legal departments we interviewed have metrics programs that measure performance and cost of outside counsel. Highlighted below are programs that range from tracking expenditures and negotiating fees to assessing client satisfaction with outside counsel performance.

Financial Metrics: Each legal department featured here has programs designed to track and evaluate expenditures for legal services provided by their external counsel. Company representatives from Zurich and FMC Technologies described systems they use to track total legal spend, both in absolute dollars and in terms of a percentage of company revenue. In calculating total internal or in-house counsel legal spend, a number of companies, including Zurich and Massport, use the fully-loaded hourly cost to compare costs of external versus internal counsel. Doing so allows these legal teams to determine and demonstrate savings achieved on legal matters that are handled exclusively in-house.

Like many other legal departments focused on driving efficiencies and enhancing services, York University maximizes its outside counsel value by prioritizing cost-effectiveness over straight cost savings. In doing so, York reviews the outside firm’s deployment of counsel and considers whether the appropriate level of counsel is being assigned to files. “For smaller matters, we expect



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to see the use of less experienced (and thus less costly) counsel,” explains Harriet Lewis, University Secretary and General Counsel.

Overall, the most effective metrics systems motivate value in the delivery of legal services by ensuring that company success criteria are met in an efficient and effective way and that internal and external lawyers provide exceptional customer service. Beyond successfully defending a lawsuit or executing a deal, exceptional service includes delivering as much craft and professionalism as possible in a client-responsive way. Of all its measures for monitoring total annual legal spend, Massport’s assessment of outside counsel is driven most by performance: The Authority would prefer to “spend a little more and get a terrific result than spend a little less and get a mediocre result,” explains Mackey, former Chief Legal Counsel for the Authority.

In addition to tracking results and performance against budget, the Clorox law department uses metrics that reflect its values and assist in quantifying and comparing performance based on the degree to which its outside counsel perform pro bono work or the degree to which they embrace diversity and inclusion. Taro Pharmaceuticals reins in legal expenses and tracks spending over time with the help of a spreadsheet-based client reference number system that audits external legal fees and helps monitor work and manage costs. By using Lean and Six Sigma principles, the Rockwell Collins law group has restructured its process of engaging and evaluating outside counsel, in the process implementing changes that have helped yield an overall savings of over $1 million over a fifteen month period while improving its relationship with outside counsel.

Discounted Hourly Rates and Consolidated Spend: Many of the law departments featured here negotiate a reduction in the hourly billable rate and designate outside law firms as preferred providers, thereby reducing the number of outside law firms handling company business and consolidating legal spend. Additionally, some law departments, including those at FMC and Rockwell Collins, withhold a percentage of the amount billed by external firms and disburse a percentage of this holdback based on the results of a counsel evaluation process.

Alternative Fee Arrangements: Law departments at Clorox, Zurich, Shell and Rockwell Collins described achieving and tracking savings through the use of fixed fees, either for the entire case or matter, or for particular tasks or up through and including certain stages in litigation. Capital Power Corporation achieves savings by relying on fixed monthly fees in connection with the

Practice Tip:

Effective use of metrics can be a very powerful way to manage performance. Legal Departments in companies that utilize “Six Sigma” and other quantifiable performance management tools will likely find a good cultural fit in legal metrics tools that track performance. For other companies, engraining this approach into the Legal Department’s operating fabric may take more time, but the time invested can yield great long-‐term results.

For additional tips on using metrics within the law department, see, ACC Value Challenge Tool Kit Resource, “How to Utilize Metrics,” Sept. 2009, http://www.acc.com/advocacy/valuechallenge/toolkit/loader.cfm?csModule=security/getfile&pageid=745892&page=/legalresources/resource.cfm&qstring=show=745892&title=How%20to%20Utilize%20Metrics

http://www.acc.com/advocacy/valuechallenge/toolkit/loader.cfm?csModule=security/getfile&pageid=74589


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handling of a case/matter/file, and a success fee based on how long it takes to resolve the matter. The York University law department describes paying a fixed daily fee for legal work of a certain kind. Zurich’s law department relies contingent or partial contingent fee arrangements for some matters, with outside counsel sharing in the recovery obtained. The Clorox law department relies on alternative fee arrangements ranging from varying fixed fees that depend on the nature and complexity of the work, to caps and buckets. And both Clorox and Massport occasionally rely on blended rates, a structure that provides for a set fee for all work, whether performed by a senior partner or a first year associate.

Bonuses/Incentives and Penalties: Law departments at Clorox, Rockwell Collins, Capital Power and FMC Technologies reward successful matter outcomes through the award of a success fee, calculated monetarily to encourage early resolution, success or to build in granularity. In addition, FMC’s law department rewards (or penalizes) performance by comparing actual to forecasted budget for a matter according to whether the case is below or above target. Another metric at FMC allows for comparison between the amount of the settlement or judgment paid and the expected value, adjusting upward or downward to account for the deviation. Zurich also compares the cost to the estimated exposure to ensure a net benefit to the company.

Client Satisfaction Metrics: The performance evaluations and feedback that go along with some metrics models, such as FMC Technologies’ ACES system, have been extremely helpful in improving outside counsel performance for legal departments. “[T]he true benefit of a convergence program is not the ability to negotiate lower rates; it’s the ability to improve performance and build better relationship[s],” according to FMC’s Jeffrey Carr. The results for FMC have been impressive: over a span of little more than a decade, performance evaluation scores across all FMC law firms have risen significantly. “What these metrics tell me is that our performance is improving while our costs are decreasing; the data helps us control costs and enables our outside counsel to better understand our needs and meet our expectations,” according to Carr.

Many law departments, including those at York, Massport, Zurich, Capital Power, Rockwell Collins and Shell, have developed client satisfaction surveys or evaluations to solicit feedback regarding outside law firms from internal clients (including by in-house counsel) with respect to such additional qualitative performance measures as responsiveness, effectiveness, timeliness, quality/value, etc. The law departments at Clorox, Shell, Rockwell Collins and Massport also rate the performance of outside counsel using diversity metrics (consistent use of diverse personnel, demonstrated diverse thinking and inclusion, etc.). Some law departments pay the success fee based upon a qualitative assessment of the law department’s performance that considers factors that include cost/timeliness, efficiency/lean and/or results obtained.

Several legal teams use after-action and lessons learned reports to help align external counsel services with enterprise best interests. At Rockwell Collins, these reports highlight areas of strength and improvement for management, in-house counsel and outside counsel for each matter. After action reviews that incorporate case closure evaluations and performance reviews enable Shell’s legal team to counsel business owners on ways to modify business practices to reduce future litigation risk. In addition to capturing total external counsel fees, amount of settlement/judgment, amount originally claimed, and length of dispute, the case closure evaluation collects information on objective and strategic lessons and dispute management.



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B. Law Department Performance Metrics Our featured law departments have metrics programs that also measure internal performance. Highlighted below are programs that range from tracking budgets and using production and output metrics, to assessing client satisfaction with department performance.

Client Satisfaction Metrics: Shell, Capital Power, Zurich, Massport and FMC rely on client satisfaction surveys for feedback with respect to the performance of the law department. Performance reviews such as the one used by Shell’s global legal department rate the department based on its efficiency, expertise, experience and effectiveness. Key performance indicators that measure financial discipline, creative solutions to litigation and effective execution of processes in evaluating internal performance are also used. The FMC law department uses the same report card (and criteria) to measure the performance of inside counsel that it uses for outside counsel. This report card, in turn, is factored into the performance evaluations of FMC lawyers and is tied directly to their compensation. Clorox collects feedback from a companywide engagement survey that allows the law department to gauge how it is engaging with its own members and also to determine whether in-house attorneys are satisfied and prospering. At Capital Power Corporation, the legal department solicits outside counsel’s input on how they can become a better client and better help the firm add value. Capital Power also measures law department performance through a scorecard that tallies recipient evaluation in the areas of overall effectiveness, business acumen, quality of work, market intelligence, and solution orientation. At Zurich, the client satisfaction survey is an integral part of the law department’s matter management system. Each Zurich leader is responsible for the performance of his or her legal practice area and performance is measured according to specific requirements within each such area.

Production and Output/Delivery Metrics: Several legal departments use metrics to align their key priorities with those of the enterprise as a whole. At Clorox, the metrics process focuses on achieving business partner satisfaction. To do so, the department identifies the top priorities that staff members within the department are responsible for driving and determines areas where they can add the most value, be the most proactive, or identify trends or emerging risks/opportunities. These metric-driven goals and priorities are measured against a scorecard, in combination with a Performance Management Plan. At Rockwell Collins, tracking performance metrics facilitates the driving of behaviors and demonstration of value creation.

The Zurich North America law department has systems that track production and output (e.g., number of contracts received; length of time between receipt of contract and completion of its review; matters received, closed, settled, etc.). This department also evaluates performance of in-house counsel by reviewing results and outside counsel legal spend. Assessment of performance using these measures is used, in part, to make individual adjustments to internal lawyers’ annual incentive compensation.

Financial Metrics: York University’s law department updates company executives at least quarterly on the status of actual-to-forecasted budget with respect to external legal spend. A number of law departments, including those at Zurich and FMC, are evaluated on the basis of cost savings, not only in terms of a reduction in total legal spend but also legal spend as a percentage of revenue. Other law departments, including those at Rockwell Collins and Massport, specifically track the reduction in the percentage of their annual budget allocations on outside counsel expenses or on the percentage of total legal spend using alternative fee


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arrangements.

Several law departments realize savings by shifting more legal work in-house. In an effort to manage the escalating cost of legal services, Massport has added attorneys to its in-house legal staff, decreasing its reliance on outside counsel. By using financial metrics that 1) track total legal spend by project category and as a ratio of outside to inside counsel spend; and 2) calculate blended hourly rates for outside counsel and in-house counsel time, Massport has been able to reduce its annual budget allocation for outside counsel expenses by 15% over the last four years and reduce its hourly blended rate.

Top Ten Metrics That Your Legal Department Should be Tracking

Which metrics are most valuable for legal department management? According to Serengeti Law’s Patrick Johnson, the following 10 items are starting points for law department tracking. Implementing these trackers will facilitate the demonstration of the department’s value add:

1. Spend to Budget: Tracking budgets is the single most effective way to predict and control costs for legal departments. A department cannot determine if expectations have been met if there are not budgets in place to track internal and external legal department spending.

2. Staff Workload Metrics: Effectively measuring the workload of an in-house staff is an important metrics to track so that a department’s resources can be efficiently allocated.

3. Spend by Matter Type and Business Unit: These metrics helps answer a basic question: From where is a department’s legal spend being generated?

4. Outside Counsel Evaluations: There is one princicple behind this metric: work should be given to outside counsel that provides the greatest value.

5. Outside and Inside Spending as a Percentage of Company Revenue: This metric is interesting to track because it calculates the entire cost of your legal department, both internally and externally, rather than just on the outside legal spend.

Continued



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6. Invoice Savings: This is a metric that can be broken down into more detailed categories such as expense guideline reductions, timekeeper rate guideline reductions, and hours billed reductions. Much of these savings represent low-hanging fruit – it’s simply enforcing your company’s billing and expense guidelines.

7. Track and Benchmark Timekeeper Rate Increases: There are several reasons to track and benchmark timekeeper rate increases over time. Tracking rate increases over time allows a legal department know whether this year’s rate increases are abnormal or in line with historical averages. Many legal departments will have a cap on rate increases for their firms or have a rate freeze for the years or for certain matters, so tracking actual rate increases is vital for enforcing these requirements.

8. Litigation Exposure Over Time: Within a legal department’s litigation matters, tracking exposure (at least for the larger cases) is an important metric for corporate counsel to be able to manage and reduce that risk. Tracking maximum and minimum exposure, along with likely outcome, allows the legal department to keep key stakeholders apprised of potential risks and avoid embarrassing surprises.

9. Internal Trainings vs. Ethics Complaints: Tracking ethic complaints and HR violations by business unit allows the legal department to target training to those departments with the most complaints. Showing these trainings and complaints over time shows the effectiveness of the trainings and cost savings by reducing these types of claims.

10. Lessons Learned by Matter: Like tracking outside counsel evaluations, tracking lessons learned in legal matters allows a legal department to build up a repository of information on the types of matters they deal with regularly.

For the complete analysis, see “Top Ten Metrics That Your Legal Department Should be Tracking,” Patrick Johnson, J.D., Senior Marketer, Serengeti Law – a Thomson Reuters Business, March 2013, http://www.acc.com/legalresources/publications/topten/ttmtyldsbt.cfm


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III. Summary Overview of Leading Practices and Trends

For the legal departments featured here, metrics programs help align the department’s goals and strategies with those of the enterprise as a whole. Strong metrics programs and practices are essential for achieving this alignment.

The results of management and spending metrics have been impressive for the featured organizations: law departments report reduced spending both absolutely and as a percentage of revenue, thanks to customized measurement and evaluative systems that allow tracking of vital, cost-saving data. A metrics process at Rockwell Collins that uses Lean and Six Sigma principles, as an example, has helped the law group re-engineer how it manages outside counsel to achieve great results and great savings: during FY 2012 alone, the group yielded an impressive overall savings of over 17% by relying on alternative fee arrangements. At FMC Technologies, financial metrics that are based on a customized fee-structuring model have helped reduce the company’s total legal expenditure by approximately 35%. As a result, the company’s total internal and external legal spend is a fraction of that of other comparable companies of its size. By moving more legal work in-house with the help of expense tracking metrics, Massport has reduced the percentage of its annual budget allocation on outside counsel expenses from 55% to 40% over a span of four years, in the process reducing its hourly blended rate. Total legal spending has also declined steadily at Capital Power over the last four years, despite a growing workload, thanks in part to the department’s commitment to measuring and evaluating performance to ensure value.

To better understand how these initiatives have led to such successes, we asked participants to identify aspects of their programs they considered to be leading practices and trends. Below is a representative sampling of some of the metrics program elements viewed to be leading or best practices or that distinguished their programs. Individual program summaries in Section IV provide additional detail on these and other practices and program elements.

A. Leading Practices and Trends Adding Value to the Business: Value is about quality delivered at a reasonable cost. FMC Technologies uses a variety of metrics to measure performance, but the most important, according to Jeffrey Carr, Senior Vice President, General Counsel and Secretary, are those that measure total legal spend as a percentage of revenue. Why? Because “that’s real money to the corporation. This is the metric that really identifies the relative performance of the legal team [as compared to] the rest of the company.” Similarly, the metrics programs at Massport, York and Shell are tools that allow these departments to demonstrate their cost savings and, as importantly, their cost-effectiveness.

According to Harriet Lewis, University Secretary and General Counsel, what distinguishes York’s metrics program is its value proposition. “We’re not just buying services. It’s not just about the price; it’s about the value we derive for the money spent. Building a relationship with a firm that will move with you, that will respond to your needs, values you, and knows your business



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very well is a high value-add.” At Rockwell Collins, Clorox and Taro Pharmaceuticals, data tracking allows the legal teams to demonstrate alignment of the performance of the law department to specifically identified strategic goals and objectives, actions, and resources of the company.

Alternative Fee Arrangements: Almost all of the law departments we spoke with view alternative fee arrangements with favor as a way of reducing overall total legal spend relative to revenue. At FMC Technologies, the Alliance Counsel Engagement System (ACES) Model supports the department’s value tenets by helping to ensure that the company’s success criteria are met efficiently and that both external and internal counsel provide exceptional service. The Rockwell Collins legal department relies on alternative fee arrangements that include success fees, capped fees and fixed fee calculations. At Zurich North America, alternative fee arrangements may include pre-negotiated hourly fees, contingent fee arrangements and utilization of joint counsel in cases involving multiple parties. Negotiated hourly rate discounts enable York University to maximize cost effectiveness: “We’re not just buying services. It’s not just about the price; it’s about the value we derive from the money spent,” explains the university’s general counsel. These alternative fee models represent a trend in pricing internal services. At FMC Technologies, for example, similar approaches are being adapted in several non-legal arenas (e.g., accounting, tax, consulting, etc.)

Client Satisfaction Surveys: Virtually all of the profiled legal departments consider client satisfaction surveys to be an important tool for sustaining employee engagement. “You can learn a lot just by listening to your employees and [understanding] what they’re dealing with, whether it’s in terms of substantive legal matters or in terms of the tools that you’re using, whether it’s e-billing or matter management,” adds Zurich Executive VP, General Counsel and Secretary Dennis Kerrigan. Taro Pharmaceuticals measures the performance of its law department in terms of how closely it aligns with the company’s goals and objectives.

In-House Counsel Performance Evaluations by Outside Counsel: are regarded by the Capitol Power Corporation’s law department as a leading practice for relationship-building insofar as they elicit feedback from outside counsel with respect to the department’s own performance. Seeking feedback on performance also evinces commitment by the law department to continuous improvement.

Understanding the Needs of Business is a Value Driver. Law firms that prioritize communication, efficiency and functioning as business partners are highly valued. Explains Clorox’s GC Laura Stein: “We really like it when firms excel at project management, manage our matters in a way that’s seamless and plans well in advance. We also like firms that are really living our business, putting themselves in our shoes, and proactively approaching us when they have suggestions on how we can be more effective in our work based on our clients’ needs or what things they know about us or risks or trends we should be on the watch for.” The ability to understand the needs of the business is as important as legal competency. “Quite often,” Capital Power’s Sr. Vice President Kate Chisholm explains, “I find that external counsel will get rave reviews for the level of their technical legal expertise, but business clients are less interested in the level of their legal expertise than, for example, in the level of their understanding of our business and their ability to proactively contribute to it. … And so [surveying internal service recipients about their experience with the outside counsel] enables me to illustrate to the firm that you are technical legal experts but that’s not exactly what we need from you.”


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Commitment to Improvement: The best metrics programs allow legal departments to measure processes so that they can be controlled and improved; in turn, this process allows departments to improve output quality while reducing costs. Leading practices that yield constant improvement of services for Capital Power include the use of a law department scorecard, relationship-building meetings with outside counsel and the department’s ongoing solicitation of feedback on how the company can be a better client. At Clorox, the metrics program is a leading practice for the law department, especially as it allows the team to identify top priorities and realign resources to meet the year’s most critically urgent needs. Taro Pharmaceuticals measures the performance of the law department in reference to how closely it aligns with the company’s goals. Guided by Lean and Six Sigma principles, the Rockwell Collins Law Group has saved more than $1 million over 15 months while improving their relationship with outside counsel.

Technology Tools (matter management, e-billing, and similar systems) play a crucially important role in the success of law department metrics programs at FMC, Zurich, Shell and Rockwell Collins, especially with regard to completing evaluations and lessons learned/after-action reports. Zurich’s matter management system accounts for approximately 80% of the metrics that are reported in the monthly scorecard. Reference to data for similar matters captured by such systems is used by the Taro, Shell and Rockwell Collins teams to set budgets and make more accurate early case assessments. This leads to better case management. Shell’s global litigation arm relies on a global matter management system for litigation management. At Rockwell Collins, matter management, e-billing and performance analytics software systems help the department keep track of its external counsel performance, both in terms of progress and cost. This, in turn, enables the department to accumulate historical information that it can use in future pricing of comparable work. The FMC legal team achieves its goal of delivering cost-effective legal solutions that align legal services with desired objectives by relying on customized technology tools. These tools, which help track external and internal counsel performance through the use of customized billing and matter management systems, reward efficiency and smart lawyering. Through ACES, its customized fee-structuring model, FMC’s legal department enhances value delivery by linking compensation to pre-established success criteria in a way that continuously improves performance.

B. Advice and Parting Thoughts Rockwell Collins’ Gary Chadick underscores the importance of aligning the department’s goals and strategies with those of the enterprise. Metrics programs and practices are essential for achieving this alignment. Equally important however, is to use metrics and comparative data to drive behaviors, rather than simply as a tool for reporting results, adds Chadick.

Asked what most important advice she would give to a colleague in developing and evaluating metrics practices and programs, York University’s Lewis cautions law department leaders not to lose sight of value by focusing only on price and metrics. “Sometimes the metrics don’t reflect the full value of the service being provided. Law is a people business…. I would advise my corporate counsel colleagues to keep close tabs on the major matters that are of importance to the organization so that [they instruct properly and get a result they can live with.]”

Adds Zurich’s Dennis Kerrigan: “Focus on a few key metrics to start with. Whether it’s the number of attorneys to the number of employees in the entire enterprise, the number of attorneys to the amount of revenue in the enterprise, the amount of legal spend as compared to the



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company’s overall revenue, the percentage of money spent on in-house counsel versus outside counsel – just keep it quite simple because those are the metrics for which you can get the most external data.”

To compare the cost of in-house counsel time verses the hourly rates charged by outside counsel, “really try to capture the entire cost of an in-house counsel hour of time,” explains Massport’s Mackey. “That’s not just salary; that’s not just benefits; that’s fully loaded costs. It’s the cost of the support staff, all office supplies, and all rent, because it’s only if you capture the complete cost of an in-house lawyer time can you fairly compare it to hourly rates you’re being charged by outside counsel.”

IV. Company Program Summaries The following are summaries from interviews with 10 companies regarding their law department metrics programs and practices.

A. FMC Technologies, Inc. Headquartered in Texas, FMC Technologies, Inc. is a leading global provider of technology solutions for the energy industry. The company’s FY 2012 total internal legal expenditure was US $3.1 million; its external legal expenditure was more than double that amount, at $6.7 million. Nine primary law firms accounted for 92% of FMC’s external legal spending in 2012.

FMC Technologies’ legal team constantly seeks new and better ways to procure and deliver legal services to its internal clients. Headed by Jeff Carr, Senior Vice President, General Counsel and Secretary, the legal team has prevailed in cases and significantly reduced case cycle time, total dispute resolution costs, and legal spending as a percentage of revenue, thanks in part to an effective metrics process that tracks and evaluates both law department and outside counsel performance.

Outside Counsel Performance Metrics

One of the team’s key value tenets is to deliver cost-effective legal solutions that align legal services with desired objectives. The FMC legal team achieves this goal by tracking external and internal counsel performance and rewarding efficiency and smart lawyering through the use of customized billing and matter management systems.

When it comes to tracking performance and rewarding value, the cornerstone of FMC Technologies’ fee structuring model is the Alliance Counsel Engagement System Model (“ACES Model”). This innovative model, which is built into the e-billing/matter management platform Serengeti Tracker used by the company, is organized around the following tools:

§ ACES (“ACES for Litigation”)


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§ ACES2 or ACES Squared (“ACES for ACES”)

§ ACES LT (“ACES Long Term”).

Philosophically, the objective of each ACES tool is similar: to motivate value in the delivery of legal services by ensuring first, that the company’s success criteria are met in the most efficient and effective way possible, and second, that internal and external counsel provide great customer service. The ACES Model enables Carr and his legal team to enhance this value delivery by linking compensation to the established success criteria in a way that continuously improves performance. “What this model does is force me and my lawyers to be very clear with the outside firm what our objective is and what we expect in terms of customer service. By linking it to compensation with the budget criteria [defined below], it forces my lawyers to be honest with outside counsel. And because lawyers are naturally competitive, it forces outside counsel to listen to our feedback on what they can do better.” According to Carr, the company utilizes one form or another of ACES, its alternative fee system of choice, in more than 95% of its matters.

Under these models, the FMC legal team typically withholds 20% of the amount invoiced and places that amount in an “at risk bucket.” Depending upon which model is used, the firm may forfeit the amount at risk or may earn some, all or more than the amount at risk, based upon the achievement of success or the “report card” it receives. Bonuses above the amount at risk can be substantial.

The premise of the ACES Model is to reward the firm for efficiency and for achieving the client’s engagement objectives, as defined by the success criteria. As a general rule, the objective is to resolve matters quickly and reduce litigation cycle time. “In almost all litigation, success is a dollar value: either getting out of the case at or below the liability reserve, or at or above the anticipated receivable.” To keep this definition of success at the forefront, Carr’s group manages each matter in five time-based phases, each with its own target budget. The sum of the target budget for the five phases equals the overall budget for the entire matter (“total target”). A very important aspect of the system is that these time-based targets are precisely that: targets, not caps. A firm is free to engage in work that might push the fees above the phase target, but if they do so, the amount paid changes from 80% to 20%. This means that above the phase target the firm is placing 80% of its compensation at risk. Obviously a rational firm would do so only if it was convinced that the additional effort will materially increase the probability of success. This permits the FMC Technologies legal team to focus on the overall objective and strategy, avoids micromanagement of the tactical decisions the firm should be both adept at and responsible for, and permits both flexibility and creativity to accommodate changing circumstances and styles.

The ultimate compensation depends on whether success is achieved and consists of the amount at risk (i.e., the reserved, unpaid percentage of the invoice) plus a multiplier based on three criteria. The first determinant of the multiplier depends on the point in time when success is achieved, starting at 125% for the first phase and declining to 25% for the last phase. Even though the calculation always results in a windfall to the firm (i.e., premium to the firm’s regular rates) for success achievement, this declining multiplier has the effect of paying a higher bonus for early success and progressively lower bonuses for cases/matters that drag on before resolution.

Second, the multiplier is adjusted up or down for overall efficiency if the actual amount billed for the case/matter is above or below the target budgets and, therefore, the overall or total budget.2 If



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the firm is on target, no efficiency adjustment is made.

Third, the multiplier is adjusted for deviation from the mutually agreed upon expected value of the case for any settlement or judgment.3 If success is achieved, the firm will recover its unpaid fees, but if success is not achieved, the firm will forfeit the full amount of at-risk fees.

So, if a matter is successfully resolved in the earliest stage by a very efficient firm, the amount paid can exceed the amount withheld quite substantially. If resolved in the final phase, but the firm has been either inefficient or inaccurate, the firm may not even recover the full amount at risk. This system recognizes effectiveness and efficiency, reasonably allocates risk and reward, and therefore aligns the interests of the firm and its customer.

ACES for ACES: ACES for ACES is a team-enabling model to share savings below benchmarks and is a variation of the basic ACES model. The same exact basic ACES model applies, but the distinguishing factor is a portfolio of cases (e.g., 10 wrongful discharge employment cases stemming from the same set of facts) for which a single budget is prepared. This model lends itself well to the management of a number of similar cases being handled by the same firm (e.g., personal injury cases) or the management of multiple cases of a similar nature by multiple law firms (e.g., wage and hour violations of a certain type).4 Additionally, the model encourages team cooperation and incentivizes fact investigation and legal research expense-sharing, often translating into an overall reduction in the cost of the team provided service to FMC. 5

ACES LT (Long Term): Conceptually, ACES Long Term is the same as ACES for Litigation, except that the firm may earn a “performance-based” bonus based on its evaluation. The evaluation criteria measure the performance of outside counsel in the following six categories:

§ Understanding Goals (e.g., business and legal objectives);

§ Expertise (e.g., knowledge and expertise of substantive issues);

§ Efficiency (e.g., staffing and time spent, use of technology and prior work product, reasonableness of overall fees & expenses);

§ Responsiveness (e.g., to deadlines, client policies, communication);

§ Predictive Accuracy (e.g., reasonableness of budget, performance to budget and predicted results); and

§ Effectiveness (e.g., strategy, execution, results).

Performance in each category is graded on a five point scale, with “1” being the lowest score (e.g., does not meet most requirements) and “5” being the highest score (e.g., consistently exceeds most requirements). A score of “3” (e.g., meets requirements) reflects expected performance. Thus, any firm that receives all “3s” across the board is paid 100% of its billed amount; the firm recovers in full the 20% withheld. Conversely, any firm with an average score of higher than “3” is paid more than 100% of its billed amount. 6 Thus under this performance rating system, the company pays its outside counsel between 80% and 120% of the amount billed, based on the overall score or grade


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on its report card.

The Counsel Evaluation & Feedback Form is completed quarterly and at the end of the engagement and is embedded in the Serengeti Tracker matter management system. Invoices cannot be posted without current firm status reports and budgets and cannot be approved without current evaluations. The actual feedback sessions with the firm occur regularly but no less frequently than annually and, in any event, at the conclusion of the project.

On average, under the various iterations of ACES, FMC Technologies pays its alliance firms 107% of the invoice. And yet paradoxically, even though the company has more than tripled in size over the past decade, its total legal expenses have declined. In other words, the company pays its counsel more than they bill yet overall expenses have declined. The paradox is easily explained: the company is buying less outside counsel service, while at the same time increasing the quality of that service. Through ACES, FMC Technologies has found a system that works for both inside and outside counsel to deliver value to the customer.

The ACES Model for measuring performance and shaping outcomes has been extremely successful in improving outside counsel performance. According to Carr, the performance evaluations and feedback that go along with it “allow the firms to get to know the company better, understand what we do, what we don’t do, what we do and don’t like, what areas of risk we’re comfortable with and what areas we aren’t. This is the true benefit of a convergence program: it’s not the ability to negotiate lower rates, it’s the ability to improve performance and build a better relationship.” Over a span of little more than a decade, the result has been impressive: a rise in the performance evaluation score across all FMC law firms -- from an average of 2.8 in 2001, to 3.2 in 2012. “What these metrics tell me is that our performance is improving while our costs are decreasing; the data helps us control costs and enables our outside counsel to better understand our needs and meet our expectations.” In terms of improving value, the ACES Model clearly delivers a winning solution for all legal matter stakeholders.

Law Department Performance Metrics

The law department at FMC Technologies is staffed by 15 members: 12 lawyers; 2 patent agents; and 1 corporate paralegal. This staffing level is significantly below general and manufacturing specific benchmarks.

Inside ACES: In-house attorneys are held to the same performance standards as the company’s outside counsel. The same report card (and criteria) that is used to measure the performance of outside counsel is used in measuring the performance of FMC’s lawyers. These evaluations are used as part of the performance evaluations of the FMC lawyers and is tied directly in to their compensation.

While FMC Technologies uses a variety of metrics in measuring performance (e.g., everything from the number of patents, number of new matters or matters that are open or were closed, number of training sessions, variation to budget, cycle time for litigation cases, settlement value or deviation from expected value), in Carr’s estimation, the most important metrics are budget-to-actual performance and total spend as a percentage of revenue. With respect to the latter, “the one number that really matters is percent of legal spend as a percentage of revenue: that’s real money to the corporation. This is the metric that really identifies the relative performance of the legal team versus the rest of the company.”



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The results of these budget and spending metrics have been impressive. Carr’s law department has reduced legal spending both absolutely and as a percentage of revenue: not only has the company’s total legal expenditure dropped from US $14.8 million and around 50-60 open cases in 2001, to US $9.8 million and 10 open, none with a reserve in excess of US $500,000 in 2012, but the company’s total legal spend as a percentage of revenue was .14% compared to .5% on average for companies of its size. Thus while smaller in terms of headcount and internal spend than benchmarks, the FMC Legal Team does not simply increase outside spending.

Asked for his opinion on trends in law department metrics, Carr cites to the appropriation of the ACES Model in the context of non-legal services: “As a company we’re actually using the ACES Model for non-legal services as well; some tax services, some accounting services, and other consulting services are being assessed that way now too,” he adds.

Leading Practices

Carr cites three most important resources for tracking and evaluating performance. While other components (including use of alternative fees, feedback, organization, case budgets) are also essential for successful implementation of a metrics program, the three most important, according to Carr, are a tailored matter management system, an after-action process, and a project management discipline system. “A matter management system gives you the ability to watch budgets, it gives you the ability to accumulate information. With the right matter management system you can also embed evaluation data there. An after action process allows the team to evaluate the matter both procedurally (what could we have done better in handling this case?) and substantively (what were the facts and circumstances that led to this litigation in the first place?). The most recently adopted discipline is an approach to project matter management that ensures clear articulation of the objective of the work, the deliverables, as well as the role and responsibilities of each team member. If I could only do three things, those would be the three I would choose.”

From FMC’s standpoint, Serengeti Tracker reinforces three critically important components of matter management: front end organization/project management, attorney evaluations and lessons learned. In response to a specific request by Carr’s law department, Serengeti embedded the attorney evaluations feature right into the system. The lessons learned tool is also built into Serengeti. “What is really important about these features is the way we use them: My lawyers can’t close a matter without doing an evaluation. They can’t pay a bill if they haven't done an evaluation in the last quarter. They can’t close a matter unless they fill in the lessons learned field. So what we’ve done is we’ve used technology to force people to do something that is incredibly easy but they don’t want to do.”

In short, technology tools help the FMC legal function track and manage performance. “We use technology, first, to streamline reporting and workflows to organize information, but then also to leverage and enforce these disciplines that we have said are important.” Carr offers this parting advice to other law department leaders: “Find what works for you, try it, keep it simple, and don’t be afraid to experiment with change.”


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B. Rockwell Collins At aerospace and defense giant Rockwell Collins, a company that provides aviation electronics and communications solutions to both commercial and military customers around the world, the Law and Corporate Secretary Group (“Law Group”) understands the importance of developing efficient and effective processes for the engagement of outside counsel. By using Lean and Six Sigma Principles, the Law Group has restructured its processes for selecting, engaging and evaluating outside counsel. They have developed new procedures for seeking request for proposals from multiple law firms and for entering into alternative fee arrangements. In addition, the Law Group has developed documented workflow charts that contain the templates and guidance needed to effectively and efficiently use these new documents. As a result, the Law Group has saved more than $1 million over a fifteen-month period while improving its relationship with outside counsel.7

When Rockwell Collins was spun off from Rockwell International as a public company in 2001, Gary Chadick came aboard as the new company’s first General Counsel. Mr. Chadick spoke with ACC about his law department’s successful restructuring efforts.


As part of its re-engineering efforts, the Law Group developed multiple sets of terms and conditions of engagement and different billing guidelines for use with outside counsel depending on the type of alternative fee arrangement. The selection of outside counsel is an interactive process for that group. During initial conversations, matters such as the scope of the engagement, hourly billing rates and the availability of historical data reflecting average costs for the type of matter under consideration (either for the matter as a whole or for specified projected phases of the matter) are fully explored. The company also probes the firm’s willingness to enter into alternative fee arrangements and the particular factors that would define “success” in a success fee type of alternative fee arrangement.

In a typical success fee arrangement, the Law Group receives a 10-15% discount from the law firm’s standard hourly rate and withholds an additional 15-20% from each invoice (excluding disbursements and third party fees). The withhold amounts are put in a “success fee pool.” At a key milestone or near the end of the matter, the Law Group will evaluate the firm’s/attorney’s performance against the success fee criteria and award the law firm anywhere from 0 to 200% of the success fee pool.

In assessing the performance of the counsel, the following factors are most commonly considered:

§ Results/Outcome: Did the outside counsel achieve the desired outcome while controlling costs?

§ Strategic Thinking: Did outside counsel develop a practical and cost effective strategy for resolution or completion of the matter, proactively suggest modifications of the strategy to address unanticipated events, etc.?



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§ Execution Acumen: Did outside counsel effectively execute the strategy adopted for the matter, demonstrate “ownership” of responsibilities, meet them in a timely manner, and proactively execute “course corrections” as necessary?

§ Responsiveness/Communication: Did outside counsel communicate openly, honestly and with sufficient frequency to keep the company adequately and promptly informed of all material developments?

§ Cost/Schedule Performance: Did outside counsel perform all services on schedule and within budget? Did outside counsel provide invoices on a timely basis and obtain approval to perform services or incur costs in excess of the budget?

§ Efficiency/LEAN: Did outside counsel consistently employ Lean, Six Sigma and/or similar processes (i.e., Was there waste in the process? Did they send four lawyers to a deposition when two might have sufficed? Did they have to rewrite the memorandum because they missed the key points we were asking them to hone in on? Did we have to go through seven drafts to get a good document or did the first draft they sent us need very little editing?)

§ Diversity and Inclusion: Did outside counsel consistently use diverse personnel and demonstrate diverse thinking and inclusion?

The use of alternative fee arrangements has resulted in a cost savings of about 17% (or $740,000) in fiscal year 2012 for Rockwell Collins (derived from comparing the actual hours recorded by outside counsel in the Serengeti eBilling tool to what the company actually paid out under its alternative fee arrangements). As a result of the success in FY2012 and the maturity of the processes from continuous improvements, Mr. Chadick decided to require “as the default approach” that for all matters where outside counsel fees are expected to exceed $15,000 in fiscal year 2013, the Law Group will use an alternative fee arrangement. “Above this $15K threshold, Rockwell Collins attorneys are expected to enter into discussions with their outside counsel about engaging in an alternative fee arrangement such as a success fee or a fixed fee.”

In addition, the Law Group tracks its spending on diverse outside counsel. “We track the hours worked by minority counsel (i.e., people of color and women) and compare those hours to the total hours worked by outside counsel and we are pleased with the fact that in FY2012, 47% of the total hours worked were performed by diverse counsel. The Law Group also tracks the percentage of total legal spend using alternative fee arrangements. In FY2012, 60% of the outside counsel fees were under AFAs.” In addition, the Law Group prepares lessons learned reports for its legal matters. These reports highlight areas of strength and improvement for management, in-house counsel and outside counsel for each matter. They then have a discussion with outside counsel about the Law Group’s evaluation of their performance and seek honest feedback about their own performance. “At the end of the day, with the combination of those lessons learned discussions, discussions about our expectations at the beginning of the matter and discussions throughout the matter, we have improved our relationships with our outside counsel. For success fee arrangements, the discussion about what success looks like to us for that particular matter has been very useful. It has set expectations and helped align our outside counsel with the company’s best interests,” notes Chadick.


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Besides success fee arrangements, fixed and capped fee arrangements are other types of alternative fee arrangements that the Law Group uses for its legal work, which Chadick sees as a significant benefit to the company. “We file over a hundred patents a year, and we do that on a fixed fee basis per patent. It doesn’t matter how many hours it takes them to do it, we agree on a fixed fee for that scope of work. We are also looking in litigation, for example, at breaking some of the litigation tasks into phases or into a scope of work that we can define on a fixed price basis and work with our outside counsel on a fair fixed price for certain aspects of litigation,” explains Chadick. With a capped fee arrangement, “we agree on an hourly rate usually with a discount associated with the hourly rate, and then we will agree to pay them up to a certain dollar amount. So let’s say that we want them to help draft a contract and we say, ‘For us, that’s worth $10,000. So we’ll pay your discounted hourly rate for the work up to $10,000, so if they can draft the contract and it takes only $8,000 worth of effort, then we will pay $8,000. If it takes $12,000 to complete the task, we’re going to pay $10,000, the cap amount,” continues Chadick.

Rockwell Collins relies on Serengeti’s eBilling software to assist it in tracking the performance of its outside counsel. “Serengeti plays an important role in our AFA program because it helps us track our outside counsel performance both in terms of progress on a matter as well as their cost and schedule. It also enables us to have actual historical information that we can use in the future to set fixed prices with our outside counsel for certain work,” observes Chadick.


Rockwell Collins has processes in place to develop performance metrics. Each business unit and shared services leader, including Chadick as the Leader of the Office of the General Counsel, is required to develop a five-year strategic plan. Thereafter, each leader must develop a one year annual operating plan that includes actions/initiatives to be performed during the fiscal year, Lean actions and savings goals, and a Diversity Scorecard which require diversity education and activity goals. These department goals are then utilized to develop individual goals. To enhance the visibility of the annual department goals, Rockwell Collins’ Chief Executive Officer conducts quarterly cadence meetings. In addition, department leaders discuss progress toward these goals with their teams during monthly staff meetings. At the end of the fiscal year, individual employees’ performance, including whether they achieved their annual performance, lean and diversity goals, are assessed and factored into annual incentive compensation decisions. For the Law Group, the attorneys are also evaluated on their use of alternative fee arrangements.

Overall, Chadick underscores the importance of aligning the department’s goals and strategies with those of the enterprise. Strong metrics practices and programs are essential for achieving this alignment. To that end, Chadick offers advice to other law department leaders who may be contemplating building or enhancing metrics processes. First, “law department leaders should use metrics to drive behaviors, rather than simply as a tool for reporting results.” Finally, Chadick encourages law department leaders to use alternative fee arrangements and AFA metrics to better align outside counsel’s interest with the company’s best interests and enhance the value that outside counsel bring to legal matters. Tracking performance metrics is a great way to drive behavior and demonstrate the value created by the in-house legal team.



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C. Capital Power Corporation Capital Power Corporation, a power generation company headquartered in Canada, has a law department of 20 attorneys and five support staff. For fiscal year 2012, the company’s total external expenditure was $8 million dollars, three times more than its total internal expenditure for this same period of time. Capital Power’s law department relies on a survey of external counsel performance and also on a balanced scorecard with annual metrics that measure internal client satisfaction with the group’s overall effectiveness, business acumen, quality of work, market intelligence and solution orientation.


Every year, Capital Power’s law department surveys internal service recipients about their experiences with outside counsel and shares the consolidated results with each counsel’s respective law firm. Feedback regarding the quality and performance of outside counsel is solicited in the form of a questionnaire. This “Performance Evaluation: Client Feedback Questionnaire” is designed to assess the law firm (not individual attorneys) and focuses on the following four principal measures of performance: quality, service, value and general perspective.

With respect to “quality,” the Questionnaire seeks answers to a variety of questions, such as, for example: the breadth of counsel’s experience, whether their work is thorough and activities well documented, whether progress updates are provided regularly, and whether required results achieved. Concerning “service,” the Questionnaire asks details about, among other things: counsel’s accessibility, cooperation, communication, and attention to deadlines. Regarding “value,” the Questionnaire seeks to know about counsel’s creativity, knowledge of both the company and industry, anticipation of needs, and reasonableness of fees. The last section, “General Perspective,” seeks responses to whether good value was received from the law firm and whether, based on the legal services rendered overall, a very high rating would be warranted. Readers interested in learning more should refer to the complete Client Feedback Questionnaire, included below in Section V, Policies, Templates and Guidelines.

Satisfaction in each category is graded on a five point scale, with “5” being the highest score and “1” being the lowest score. Questionnaire participants are also asked to rate the importance of each category, using a similar ascending scale.

Kate Chisholm, Senior Vice President, Legal, External, and Investor Relations explains the reason for assigning a level of importance to each measure: “I do this because quite often I find that external counsel will get rave reviews for the level of their technical legal expertise, but business clients are less interested in the level of their legal expertise than, for example, in the level of their understanding of our business and their ability to proactively contribute to it. … And so this enables me to illustrate to the firm that you are technical legal experts but that’s not exactly what we need from you.”

After sharing the results of the Questionnaire with the law firm, Chisholm meets with the firm’s relationship manager to discuss the results and how they can be used to improve future performance. Of note, Chisholm solicits the law firm’s input on ways in which Capital Power Corporation can become a better client for them. Prior to meeting with the law firm, Chisholm


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asks such questions as what the company can do to improve the practices that we apply to their retention or their instruction that would make it easier for them to add value or do we have any bad habits that make it difficult for them to meet our needs?

With respect to alternative fee arrangements, Capital Power uses three primary types. The first type is a pre-negotiated fixed fee for handling a matter from start to finish, regardless of its duration.

The second type is a set flat monthly fee in which both the law firm and client share the risk. According to Chisholm, “[I]t is a fee that is negotiated so that both the law firm and the client share the risk. For example, if we pay $10,000 a month and on a billable basis in that particular month the law firm would only have billed us $5,000, then they have received a windfall for that month; but if in the following month they would have billed us $15,000, then we’ve saved a lot of money. This type of fee arrangement takes the guesswork out of budgeting.”

The third type is a success fee. “The success fee – which is neither a fixed nor a flat fee – is a fee that you would pay to counsel who is helping you with litigation. You decide in advance how much they’re going to be paid upon resolution of a file and the fee decreases as time goes by, so the more time that is spent on the litigation file, the less ultimately the lawyer will be paid. This rewards them for early settlement,” explains Chisholm.

For every file that is not a fixed or flat fee, Capital Power requires outside counsel to submit an estimated budget of legal fees and expenses and update that budget as the matter progresses. In addition, Capital Power requests that matters handled by outside counsel be staffed with the goal of fostering or promoting diversity and inclusion.

Of all the measures, what drives the performance of outside counsel the most, at least with respect to corporate commercial matters (which accounts for 80% of outsourced legal work), is how well they understand the company and industry and how effectively they communicate. “[T]here are a number of law firms that are so liability risk-adverse, that they insist on providing very, very formal opinions, and communicating in very formal ways. And the costs of doing those things add up, so I want somebody who is willing to provide me with a bullet point email if that’s what I tell them I need,” says Chisholm. As for litigation, the result certainly is quite important, emphasizes Chisholm.


The performance of the law department is also evaluated annually, using a scorecard. Here, internal service recipients are surveyed on their opinions of the law department’s overall effectiveness; business acumen; quality of work; market intelligence; and solution orientation. Other metrics include the rate of voluntary turnover. A seven-point scale is used, applying a threshold, target, and stretch, which drives department compensation (e.g., the pay will be higher with the attainment of a stretch than target or threshold).

Another measure is the percentage of staff that have career development plans in place, including attainment of specified employee career goals. The level of career development plans and attainment of goals are measured on an absolute basis, not a threshold, target, or stretch basis. The level of industry leadership is also evaluated by department attorneys’ participation on boards and in speaking engagements. Additional metrics bearing on department compensation are analyzed quarterly and include: adherence to budget; total expense per billion in total corporate overhead;



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average employee cost per megawatt produced; and average external counsel rate paid.

This scorecard, the client satisfaction survey, the relationship-building meetings held annually with outside counsel, and the law department’s ongoing solicitation of feedback on how the company can be a better client are, collectively, effective leading practices that yield constant improvement of services for Capital Power. “I strongly believe that what gets measured gets done,” Chisholm opines. This commitment to measuring and evaluating performance drive the department’s commitment to excellence. It also translates into success: over the last four years, Capital Power’s total legal spending has steadily declined, despite a growing legal workload. Equally important for Chisholm is the focus on measuring total legal spend, rather than focusing separately on total internal versus external legal spend. Still, “measuring total legal spend allows me to manage the corporation’s legal costs by increasing internal legal spend when doing so decreases our reliance on external counsel. Since the total cost of my internal legal counsel is only a fraction of external hourly rates, its makes sense to have as much core legal work as possible performed in-house.”


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D. Zurich North America Headquartered in the US, Zurich North America is part of the worldwide Zurich Insurance Group and is in the business of commercial property and casualty insurance. Revenue in North America for fiscal year 2012 was US $13.8 billion. The law department in North America is comprised of 44 members, 26 attorneys and 18 non-attorneys serving in a legal support staff role. The legal group successfully uses a detailed monthly scorecard and an annual client satisfaction survey to measure overall performance of law department operations.


Zurich North America utilizes a scorecard that captures a variety of different metrics. The primary focus is on legal spend (internal and outside counsel) and litigation matter management. Specifically, the company tracks overall outside counsel legal spend by matter as well as law firm, the relationship to corporate law and project work, as well as how much of its external legal spend is attributable to panel firms versus non-panel firms. Since it predominantly utilizes panel firms, Zurich North America also tracks legal spend by panel type (e.g., claims panel firm usage, local panel firm usage or group panel firm usage); and utilization of panel firms as a percentage of total legal spend, separately with respect to corporate law and project work. Thus, its guidelines for outside counsel include a requirement for a budget, which is standard practice for significant matters.

In addition, Zurich North America assesses case results by comparing the total case cost to the estimated exposure to the company, in order to ensure a net benefit or positive result. “We also look at case results by calculating the genuine exposure of the matter versus the amount of expense and ultimate settlement or litigation costs put into the matter, to make sure our case results in a net benefit to the organization,” explains Executive Vice President, General Counsel & Corporate Secretary Dennis Kerrigan.

To manage legal expenses and achieve cost savings, Zurich North America has employed a variety of fee arrangements as alternatives to the straight hourly rate. Depending on the particular law firm, the matter, or complexity of the case, they might include discounted or pre-negotiated hourly rates; contingent fee or partial contingent fee arrangements; utilization of joint counsel in cases involving multiple parties; and/or flat fees for entire cases or negotiated flat fees on a per task basis.

“Not too long ago we had a brief done on a flat fee basis, with a giveback if the total hours spent were below a certain level, and we ended up actually getting a second brief done under that flat-fee arrangement,” explains Bill Peterson, Associate General Counsel for Litigation. “So we had some protection in the sense that if the brief ended up being less time consuming than something that would work out to roughly the same at an hourly rate, we had the right to get some additional work from them for no additional payment above the flat fee.”

At the conclusion of all opened matters, attorneys within the Zurich North America law department are expected to complete a questionnaire regarding the outside law firm or individual attorney representation. According to Kerrigan, the four principal metrics upon which the retained law firm or lawyer are measured are: value, or the quality of the legal services for the



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price; responsiveness, or how quickly calls are returned with substantive responses; efficiency, which includes not only the amount of time expended but also how a case is staffed and other resource choices; effectiveness, which concerns not just ultimate case results but, alternatively, whether the outcome was reasonable or should have been expected.

A lot of what drives the selection and assessment of outside counsel is the exposure of the case, offers Ed Paulis, Assistant General Counsel. “The exposure of the case is driven by the nature of the plaintiff’s claims, the plaintiff’s attorney, and the jurisdiction of the matter. Because we manage a tremendous range of matters – from small claims cases to multi-million dollar class actions -- , we really have to calibrate which outside firm is retained with the needs of the particular matter. Having useful metrics of past performance helps us do that.”

Finally, Zurich North America also compares the percentage of outside legal spend to inside legal spend using fully loaded costs (excluding the costs of settlement which are charged not to the law department but to a particular business unit). Thus, the types of metrics the company tracks separately on a monthly basis also include fully loaded expenses; fully loaded attorney costs vs. outside legal costs (for both corporate law and project work, separately); and total legal spend as a percentage of revenue. Furthermore, with respect to operations, the company tracks the number of attorneys per billion dollar of prior year revenue and the number of employees per attorney.


Zurich North America measures the performance of its law department through the use of a client satisfaction survey, which is an integral part of the matter management system it uses. The survey, developed by the Business Innovation Team (with input from key legal departments as to types of questions and whom to survey), is distributed regularly to clients and stakeholders within the organization.

“We survey about 600 clients and stakeholders throughout the organization on the services that we’re delivering as a function. We go through the results and then usually convene a team or a working group, and assign responsibility for identified issues to specific attorneys or other members of the professional staff to follow up. Those issues could include things like improved communication or outside counsel fees on particular matters,” explains Kerrigan.

In terms of specific legal department functions, each leader is responsible for the performance of his/her respective legal practice area. Thus, for example, performance of the litigation team might be measured in reference to results and outside counsel spend; for the regulatory team, it might be adequate support for product development efforts; and for the enterprise team, it might be supporting Human Resources, the company’s contracting and procurement function, or the company’s advertising and communication function. In this way, the law department must track and keep relevant data, including the number of requests or contracts reviewed per attorney and the length of review and response, taking into the consideration the dollar volume or complexity of the request or contract.

“We utilize a matter management platform provided by Corporation Service Company that tracks everything related to not only lawsuit activity, but other legal matters, so matters received, matters closed, subpoena counts, inquiry counts, case settlements, dismissals, cases won, net results, open received and closed matters by matter type,” explains Kerrigan. “We have different types of cases. We’re also tracking things by internal business unit, line of business, so we’re able to identify matters, categories of matters, and also report back to specific clients,” adds Peterson.


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The company tracks matter management and litigation management separately, non-litigation year-to-date by Business Unit/Strategic Business Unit/Strategic Support Unit (includes open/received/closed counts quarter-to-date and year-to-date) and lawsuit year-to-date litigation activity (includes open as of, received, and closed counts by BU/SSU), and law suit settlements, down to the number of inquiries or subpoenas responded, and number and net results of matters won/dismissed and number and net results of settled matters, respectively. According to Business Innovation Manager Debbie Erickson, the matter management system used accounts for about 80% of the metrics that are reported out in the monthly scorecard. The same system also processes outside counsel invoices electronically and applies the company’s billing guidelines and is critical not only to tracking the number of invoices that are processed but also the types of discounts and the cost savings that are achieved.

Kerrigan cannot overstate the importance of employee engagement, whether it be through means of a formal survey or simply informal communication. “You can learn a lot just by listening to your employees and what they’re dealing with, whether it’s in terms of substantive legal matters or in terms of the tools that you’re using, whether it’s e-billing or matter management. Those are tools that are meant to make their jobs easier and if they’re not, you need to change them. Employee communication is key because they are the ones who are on the front line handling the cases and drafting the contracts and working on the human resources matters every day, so you have to make sure that they feel their lives are being improved by these platforms and innovations,” adds Kerrigan.

The other piece of advice Kerrigan would give to a colleague interested in developing and evaluating metrics practices and programs would be to keep it simple and understandable. “Focus on a few key metrics to start with. Whether it’s the number of attorneys to the number of employees in the entire enterprise, the number of attorneys to the amount of revenue in the enterprise, the amount of legal spend as compared to the company’s overall revenue, the percentage of money spent on in-house counsel versus outside counsel – just keep it quite simple because those are the metrics for which you can get the most external data,” he concludes.



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E. York University Headquartered in Toronto, Ontario, York University is the third largest university in Canada. The university’s four full-time internal attorneys are part of an 18-member office that combines the law department and the secretariat of the institution. Legal department and outside counsel performance is tracked with the help of internal client interviews.


As a non-profit institution, York University is particularly interested in how external counsel manage the institution’s legal matters. York requires outside firms to provide a budget for certain corporate commercial matters and reviews these budgets with its internal attorneys, looking for ways to control external legal spending. “We look at the deployment of counsel and consider whether the appropriate level of counsel is being assigned to our files. For smaller matters, we expect to see the use of less experienced (and thus less costly) counsel,” explains Harriet Lewis, University Secretary and General Counsel. On some matters, the university also tracks dispute resolution cycle time.

Like the other organizations profiled here, York’s ultimate goal is to maximize its outside counsel value. Doing so means the university is less interested in straight cost savings and more interested in cost-effectiveness. Three law firms handle the majority of the university’s legal work, enabling the university to request and receive a discount on the hourly rates from most of the counsel with whom it conducts repeat business. As a result, York is typically able to negotiate a discount of between 10-20% off the hourly fees for most projects. This includes the fixed rates it pays for labor relations work or the negotiation of collective bargaining agreements.

In addition to the discounted hourly or daily rates that are more frequently used for repeated transactions, York contains costs by pursuing fee arrangements that include waiver of certain charges and project-based fees, including: the waiver of the first $250 dollars of photocopying services; waiver of expenses for legal research performed by the firm’s law student interns; and the implementation of project-based fixed fees in certain types of transactions. York also maximizes outside counsel value by seeking on-site, free or low-cost educational sessions presented by the firm on matters of interest to the university.

York measures internal client satisfaction with its outside counsel through an informal questionnaire and by soliciting internal feedback on outside counsel performance. Through the informal questionnaire and annual or semi-annual meetings with the university’s major internal clients, York determines whether its outside counsel provided timely and effective advice and interacted with internal clients and with in-house counsel in a satisfactory manner. Lewis also evaluates individual outside attorneys based on the caliber of their legal advice and their responsiveness to the law department and its internal clients.

This overall assessment of outside counsel performance considers the university’s satisfaction with timeliness, the effective assignment of counsel, overall responsiveness, and level of communication and collaboration between counsel and the client.

For fiscal year 2012, the university’s total expenditure for external counsel was close to budget, at


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Canadian $1.5 million. The law department monitors the external counsel budget and reports to the Chief Financial Officer on a quarterly basis. “Our way of keeping track of external legal spend is to make sure that we know where it is in the process; we do this by reviewing all of the accounts and approving them before they’re paid,” explains Lewis. Regular electronic spreadsheet reports showing when a matter was opened and its status facilitate this process: “For matters involving specific business functions within the university (union grievances and Human Resources, for ex), the spreadsheets report whether the matter went to arbitration, etc.,” continues Lewis

Leading Practices

According to Lewis, what distinguishes York’s metrics program is the value proposition. “We’re not just buying services. It’s not just about the price; it’s about the value we derive for the money spent. Building a relationship with a firm that will move with you, that will respond to your needs, values you, and knows your business very, very well is a very high value-add, It’s an old-fashioned way of looking at legal services, but for us it has worked well,” reflects Lewis.

The most important advice Lewis would give to a colleague in developing and evaluating metrics practices and programs is to be careful not to lose sight of value by focusing only on price and metrics. “Sometimes the metrics don’t reflect the full value of the service being provided. Law is a people business: our business, the university business, is a people business. And so I would also advise my corporate counsel colleagues to keep close tabs on the major matters that are of importance to the organization so that they are instructing properly, and so that the result they get will be one they can live with,” adds Lewis.

Lewis herself values the input of fellow corporate counsel leaders and regularly studies the best practices of other law departments in formulating strategies. “Meeting with colleagues across the country and abroad, understanding how they do it, comparing practices with other university solicitors in Canada, and creating a collegium across the country has been very helpful to my department in developing and evaluating our own metrics practices and programs,” she concludes.



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F. The Clorox Company At the California-based consumer products company, The Clorox Company, the law department relies on approximately 75 members, more than half of whom are in-house counsel. For every matter in excess of the threshold of $50,000, a very detailed, granular-based budget (built into Serengeti) guides the expenditure.


The Clorox Company tracks the performance of outside counsel against both the budget for an individual legal matter assigned and the law firm’s handling of multiple matters for them over time. The review of performance is primarily results-based: did the firm obtain the best outcome possible for the company, and was the firm efficient and responsive to the company’s needs.

In-house counsel with responsibility for a particular matter manage the outside counsel also assigned to the matter. If a need arises to course-correct during the progression of the matter, in-house counsel work in concert with their manager to address and correct the problem and effectuate any changes in direction.

Depending on the particular matter, the law department may utilize an alternative fee arrangement, ranging from varying fixed fees dependent on the nature and complexity of the work, to caps and buckets. “A fee cap is a not to exceed amount. For a particular phase of a project, the company and firm agree that there is the maximum amount that will be spent, and the firm could bill up to that amount; and conversely, the basket is the floor, it’s the minimum amount. So you may agree that the company will spend $20,000 on a matter or phase of a project, not to exceed $40,000. That may be one way to structure a particular project,” explains Managing Counsel Brian Hayle.

Even in the case of capped or fixed fees, success fees may apply. According to Senior Vice President & General Counsel Laura Stein, “We sometimes build in incentives - if we get a certain result, there will be a greater upside than if we don’t. We look granularly into each stage of a project and sometimes incentive arrangements are put in place at various milestones as well.”

Hayle explains the operation of success fees in this way: “It relates to a particular outcome in a particular matter, such as whether it’s a successful litigation. Examples would include concluding a litigation matter positively on summary judgment, rather than going through a full trial, or a successful acquisition or divestiture. Basically, the company pre-negotiates what the fees will be for stages of a matter, and, if the objectives are met by the law firm, there is a success fee, which is essentially a bonus for meeting an objective that was laid out in advance.”

Adds Stein: “[W]hat we really focus on is the result we’re trying to achieve and how can we incentivize the firm to share some of the burden if that result is not achieved. We also want firms to be incentivized and be rewarded when the result we are seeking is achieved efficiently. Other times, we might look at incentives to encourage a firm to be more efficient than is projected with the budget, so there is potential for our firms to share in some of the savings if they’re faster or more efficient,” offers Stein.


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The bonus that is paid may be either a percentage of the fee or a flat number. Other alternatives to the straight billable rate negotiated by the law department include discounted hourly fees (where staffing is closely watched), blended fees (set fees agreed to in advance for all work regardless of whether a senior partner or first-year associate does the work), and contingency fees.

The law department is concerned not only with the “what,” as Stein refers to it, but also the “how.” “How is the communication when unexpected things happen and we need to revisit the budget. We try very hard in our budgeting of alternative fee arrangements to foresee as much as we possibly can so that we’ve contemplated at the outset of the engagement what the responsibilities of both in-house and law firm lawyers are going to be and what’s going to be paid for what. But when unanticipated circumstances happen, communication, trust and how we partner with each other is key,” says Stein.

“And as for the ‘how,’ we really like it when firms excel at project management, manage our matters in a way that’s seamless and plan well in advance. We also like firms that are really living our business, putting themselves in our shoes, and proactively approaching us when they have suggestions on how we can be more effective in our work based on our clients’ needs or what things they know about us or risks or trends we should be on the watch for,” concludes Stein.

In addition to tracking results and performance against budget, the law department uses metrics that reflect its values and assist in quantifying and comparing performance, such as the degree to which its outside counsel performs pro bono work or the degree to which they embrace diversity and inclusion.


Within the law department, metric-driven goals and priorities are measured or evaluated against a department scorecard, in combination with each individual’s Performance Management Plan. The law department takes enterprise-wide strategic objectives and priorities into account when it sets its yearly budget, goals and priorities, and tracks them with these in mind. It then drives goals, priorities and metrics down to each individual attorney in the department, and these individual goals, priorities and metrics, help form the bases or criteria for individual attorney evaluations.

Stein explains this process of alignment as follows: “We look closely at goals, priorities and metrics for the year. We align our key priorities to what the company is trying to achieve. So if the company has set forth certain strategic priorities, we look at what we can do to enable those priorities and strategies and then capture those actions on our scorecard. One of the metrics we have is business partner satisfaction, so we evaluate how are we doing from a business partner standpoint, as well as what’s the result we’re seeking to drive. Within our different priorities, we establish metrics for each of them so to best evaluate whether or not we’ve done what we should be doing.”

Stein adds: “We focus also on things we’re doing within our function to guide and protect the company, so we pick key priorities that different people in the department are responsible for driving. We have robust sessions deciding where we think we can most add value, be proactive, be mindful of trends or emerging risk areas, and emerging opportunities, and then really try to drive progress and results in those areas. We try to clearly articulate what success looks like for each priority.”

In addition to these metrics, Clorox also collects feedback through the use of a company-wide



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Engagement Survey. This tool enables the law department to gauge how it is performing with its own members and to determine whether in-house attorneys are satisfied and prospering -- in short, are they being engaged from both a “heart and a head standpoint, which will increase discretionary effort and make Clorox a better place to work.”


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G. Taro Pharmaceutical Industries Ltd. Taro Pharmaceutical Industries Ltd., a NYSE listed, Israel based company with a significant presence in the United States, has a legal department of seven, located in New York and Israel and made up of four attorneys, one compliance professional and two administrators.


Taro Pharmaceuticals keeps a tight rein on legal expenses through the use of a Taro Client Reference Number (or TCRN) System. The TCRN system carefully tracks fees charged by external or outside law firms and consultants through the use of a tracking number and resulting data is used to generate various reports. According to Stephen Manzano, Interim General Counsel, VP of Compliance, “We communicate to all outside counsel vendors at the start that in order to work on a matter for Taro, they must have a pre-approved number. And that they must bill on a matter-by-matter basis using that number. This enhances our ability to take a more proactive approach to monitoring fees, rather than having much tougher, and often less fruitful, conversations after the fact.”

By tracking these fees monthly on a matter-by-matter basis, Taro is significantly better able to manage the costs associated with various matters – whether corporate, commercial, litigation, real estate, environmental or other - at quarterly and annual intervals. As Mr. Manzano explains, “We’ll have an employee suit, which falls in the employment category; we’ll have the name of that suit; and we’ll track who has worked on that and how much they bill us each month.” This enables Taro to better monitor outside counsel working on multiple matters in the same category. It also allows the company to track billing to each individual matter through separate invoices, as opposed to relying on one overall invoice. The law department then compares the reported totals generated by TCRN across periods of time. “For instance, we just finished our ninth month of the twelve-month fiscal year and can now compare that period to the first nine months of the previous fiscal year,” says Mr. Manzano.

The law department also utilizes a separate report for firm-by-firm totals to help manage against being overcharged. Whether the law department requests or requires an estimated budget and/or forecast of legal fees from outside counsel depends on the type of matter. “For product liability, we usually demand a budget; for others we’ll get a rough estimate; and for some we don’t get an estimate.” For those types of matters in which the law department secures a budget or estimated budget, it requires periodic updated budgets or forecasts of legal fees as the matter progresses.

The measure that ultimately determines the performance of outside counsel most is a combination of efficient billing and assessment of whether counsel has done a good job. Mr. Manzano regularly holds conversations with members of his law department regarding their experience with a particular law firm’s handling of a matter. Mr. Manzano is particularly interested in the efficiency of outside counsel. “We look at how each matter is staffed -- whether it’s overstaffed or understaffed and what the overall hours are compared to what we feel the work has required.” In addition to efficiency, Mr. Manzano is interested in the monetary value of any judgment, disposition or settlement and once the decision to litigate or attempt to settle a particular matter is made, whether that decision and/or the strategy is attributable to Taro or outside counsel. In this instance, subject matter expertise on the part of external counsel assumes increased importance for



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Mr. Manzano.

For Taro Pharmaceuticals, these outside counsel performance metrics are useful not only in managing legal expenses but also in keeping apprised of the current status and staffing of a matter. Moreover, they are useful in making more accurate or helpful early case assessments, leading to better case management. “They are used in terms of decision-making on how to handle a particular matter going forward. For instance, we may decide it’s costing too much and we may need to push for a settlement or we need to think of a different strategy; but that’s one component of many,” says Mr. Manzano.


Taro Pharmaceuticals measures the performance of its law department in terms of how well or closely it aligns with and meets the company’s goals and objectives. According to Mr. Manzano, “I will push those goals -- from a performance standpoint -- down to the individual attorney every year. For instance, if we want to cut our legal fees in half, that will be a goal. Then we’ll look at it from a department basis and challenge each in-house attorney to achieve that goal without sacrificing the quality of representation.”

Taro also establishes a budget for its law department every year, taking into account everything from external to internal fees and costs, including personnel and travel expenses. The company then reviews the budget monthly to ensure the department is and remains on target.

Taro also measures law department performance by reference to the performance of individual attorneys. Each attorney is measured against achievement of the department goals set at the beginning of the year. Mr. Manzano also considers the volume of matters handled independently by each attorney, the level of efficiency in handling matters, and extraordinary contributions to the company, if any, made by the attorney. Concludes Mr. Manzano: “From an internal standpoint our performance evaluation on an individual basis drives the individual attorneys. It’s also tied to our bonus, which has both a subjective and objective component.”


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H. Massachusetts Port Authority Headquartered in East Boston, Massachusetts, the Massachusetts Port Authority has three principal lines of business: aviation, owning and operating three airports in the Commonwealth of Massachusetts including Logan Airport in Boston; maritime, owning and operating a container terminal, a cruise ship terminal, and other port-related facilities in the Port of Boston; and commercial real estate, owning and developing various parcels of real estate in South and East Boston. The company’s total internal and external legal spend in fiscal year 2012 accounted for slightly more than one percent of its overall operating revenue of $570 million dollars. The law department has 16 attorneys and 8 non-attorneys.


To monitor and determine the total annual legal spend, both externally and internally, the Authority continually tracks the total amount spent on every individual legal matter. To accomplish this, the company requires outside counsel to submit monthly invoices specifying the total amount spent to date on a matter regardless of how long the matter has been open. Even in those cases involving a fixed fee arrangement, the Authority nonetheless requires outside counsel to submit a bill detailing the total hours expended. This helps inform the company whether the fixed fee engagement was cost-effective. “Massport has a fairly elaborate standard retention order, which sets forth the Authority’s expectations of its outside counsel, and, in its metrics, the Authority measures financial performance of outside counsel,” explains David Mackey, former Chief Legal Counsel for the Authority and now in private practice at Anderson & Kreiger in Cambridge, Massachusetts. In addition, “Every six months, the firm has to execute a retention order, which provides a budget and a scope of work, as well as lists the attorneys or paralegals who will be billing time on the matter and their respective rates. The Authority will not pay for lawyers or paralegals who aren’t reflected on the retention order (or an amendment to it) that has been approved.” Finally, the Authority emphasizes to its outside counsel that matters be staffed with the goal of fostering or promoting diversity and inclusion.

According to Mackey, of all the measures, the Authority’s assessment of outside counsel is driven most by performance (i.e., aggregate case results): “Overall quality of the legal product obtained as efficiently as possible, it’s really hard to measure. I certainly wouldn’t say that the cost of an outside counsel is the most important part. I think the performance is the most important part; and a significant part of performance is successfully executing the deal or successfully defending the lawsuit and bringing as much craft and professionalism to it as possible in a client-responsive way.” In short, the Authority would prefer to “spend a little more and get a terrific result than spend a little less and get a mediocre result.”


In an effort to manage the escalating cost of legal services, the Authority has added attorneys to its in-house legal staff, and decreased its reliance on outside counsel. The Authority is primarily interested in four types of financial metrics: the ratio of outside to inside counsel hours; total legal spend for each category (e.g., litigation, public finance, real estate, etc.); the average hourly rate for outside counsel; and the average hourly cost for in-house counsel. “You can literally have an increasing in-house hourly cost just because of cost of living increases in salary, and so forth. You



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can also have an increasing outside counsel rate, but at the same time, your blended rate can be decreasing because you’re increasing the ratio of in-house time to outside time,” explains Mackey.

By moving more legal work in-house, the Authority has been able to reduce the percentage of its annual budget allocation on outside counsel expenses (i.e., fees and costs) from approximately 55% in fiscal year 2008 to approximately 40% in fiscal year 2012. In addition, the move toward doing more legal work in-house has resulted in a reduction in the hourly blended rate from $163 dollars in fiscal year 2008 to $158 dollars in fiscal year 2012, notwithstanding an increase in fiscal year 2012 in the hourly rates for in-house and outside counsel.

The total in-house legal spend is factored into the company’s overall financial metrics. For the in-house legal spend, “The Authority tries to measure the fully loaded cost of the legal department, thus all of the payroll, all of the benefits, and our share of the rent of the space – as close as it can get to the total cost of supporting the in-house department there,” says Mackey. Only by capturing the entire cost of an in-house counsel hour of time can the Authority perform a fair comparison of it against the hourly rates charged by outside counsel.

Accordingly, one of the most important pieces of advice Mackey would give to a colleague in developing and evaluating metrics practices and programs would be “really try to capture the entire cost of an in-house counsel hour of time. And that’s not just salary; that’s not just benefits; that’s fully loaded costs. It’s the cost of the support staff, all office supplies, and all rent, because it’s only if you capture the complete cost of an in-house lawyer hour can you fairly compare it to hourly rates you’re being charged by outside counsel.”

The other piece of advice would be to place due emphasis on the results of internal client surveys. Every three years, the Authority’s law department distributes around 100 surveys to the business units it has supported, based on a list of the employees or officers its members have worked with most frequently, seeking feedback not only on the law department as whole but also specific feedback on particular matters or issues or in-house lawyers. “The results of those surveys have been very informative to us; and honestly, clients are really happy to be asked the questions. I would strongly encourage other law departments to do those surveys because the results can be very telling,” concludes Mackey.


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I. Shell International B.V. Royal Dutch Shell PLC, is an English company which in fiscal year 2012, reported a net revenue of US $27 billion.

The Legal Services Global Litigation (LSGL) group is the litigation arm of the Global Legal Services organization that supports Royal Dutch Shell PLC and its various subsidiaries. LSGL lawyers are located in fifteen countries around the world and manage all litigation and alternative dispute resolution matters worldwide for Shell. The department achieves its focus on driving value from outside counsel through metrics that rely on a global matter management system for litigation management. ACC spoke with Bradford Nielson, General Counsel for Global Litigation, about the litigation group’s successful implementation of metrics to measure both outside and internal counsel performance and department efficiency.


Litigation management at Shell relies on an innovative Litigation Objective Realization Process (LORP) designed both to determine desired outcome objectives with input from the affected business unit and to develop and execute a resolution strategy. Imbedded within the strategy step is preparation of a detailed, line item budget.

As part of the LORP process, internal counsel complete a Case Management Plan (which includes an early case assessment), to establish a framework by which a strategy and budget may be effectively developed and implemented. The first part of the Case Management Plan is completed before engaging external counsel, and in no event any later than 30 days from the initiation (or anticipated initiation) of an arbitration, litigation, or regulatory proceeding. The second part of the Case Management Plan is required to be completed no later than 90 days from the commencement of an arbitration, litigation, or regulatory proceeding or an anticipated arbitration, litigation or regulatory proceeding. Each matter is monitored by the LSGL team through the use of a matter management tool called Team Connect.

Shell’s in-house litigation counsel also conduct an After Action Review (AAR) at the conclusion of each case. One of three components to the AAR is the Case Closure Evaluation, which is completed in all cases within 30 days of resolution and case closure (with input, as needed, from external counsel). The primary purpose of the Case Closure Evaluation is to identify lessons learned that may be valuable for the handling and management of future cases and to supply the affected business owner with any recommendations for modified business practices to reduce or mitigate future litigation risk. To the extent they apply to other attorneys, lessons learned are also shared with lawyers on other teams within Shell’s larger legal organization.

In addition to capturing total external counsel fees, amount of settlement/judgment, amount originally claimed, and length of dispute, the Case Closure Evaluation collects information on objective and strategic lessons and dispute management.

A second component of the AAR is the External Counsel Performance Review. This Review is completed within 60 days of resolution and case closure, with input from the affected business unit. The purpose of this review is to provide candid feedback on outside counsel performance



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and a recommendation on future referral of work to the same firm or attorneys in subsequent cases. Actual spend is tracked against the budget, and adherence or deviation from the budget is one of the metrics against which performance is specifically evaluated.

LSGL rates performance under an external counsel review system, using the following criteria: Exceeds Expectations (for consistently exceptional performance), Meets Expectations (for consistent performance), Needs Improvement, or Unsatisfactory (for failing to perform at expected levels to a material extent).

Shell’s outside counsel performance ratings evaluate the following 10 performance categories :

§ Quality: Achievement of desired legal outcomes; knowledge and ability to adequately prepare, organize and advocate legal positions in written work product and court appearances;

§ Accessibility: Accessibility and responsiveness of External Counsel to attend scheduled and impromptu meetings and calls. Easily contacted through email or telephone and returned messages promptly;

§ Developing and Implementing Case Strategy: Identifying and setting an appropriate approach for the dispute at hand; employing innovative ideas to dispute resolution; collaborating on strategy development with in-house counsel; developing strategy consistent with business objectives;

§ Business Focus: Learning and understanding business drivers and objectives impacting the dispute; willingness to employ dispute resolution strategy which supported business objectives;

§ Efficiency: Value delivered and success with budgeting/forecasting; successful, cost-effective fee arrangements; innovative staffing ideas (and assignment of highly qualified lawyers and paralegals); efficient and cost-effective handling of discovery/disclosure and document production; effective participation in settlement negotiations and alternative dispute resolution processes; use of technology to manage projects and budgets;

§ Partnering: Confers with Shell in-house counsel and other third parties involved in dispute; collaborating with in-house counsel as unified team; sharing of work product or staff; willingness to do work commensurate with Shell’s risk tolerance (i.e., less work on lower risk matters); ability to effectively communicate and provide substantive assessments of matters, strategic plans, and routine status advisories;

§ Professionalism: Willingness to discuss handling of conflicts; alignment of firm’s view of conflicts with Shell’s; meaningful roles for those with diverse backgrounds; overall perception of sincerity; overall perception of openness (forthcoming with information, examples, suggestions);

§ Compliance: Demonstrates good understanding of Shell’s General Business Principles,


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Policies and Guidelines and complies with same;

§ Recommendation for Future Retainment: Would you recommend using this firm again and, if not, state biggest concern. Would you recommend using the individual attorneys again and, if yes, list names of attorneys you would recommend for future work.


Shell’s Legal Services Global Litigation team also measures and evaluates internal performance against three key performance indicators (KPIs):

§ Operational Excellence (Financial Discipline);

§ Thought Leadership (Creative Solutions to Litigation); and

§ Disciplined Delivery (Effective Execution of Systems and Processes).

With respect to each of these three metrics, a series of sub-KPIs is used to measure and evaluate the performance of the Shell in-house litigation team. The financial sub-KPIs include year-on-year external spend for all matters (whether or not they proceed to trial) and average external spend per matter from engagement of the LSGL team to final resolution of the matter (excluding matters that proceed to trial); ratio of external spend versus amount recovered or paid through an award, verdict or settlement; and number of matters where actual external spend was less than the amount budgeted. When considering litigation costs, Nielson’s group considers the cost of settlement to the affected business groups/business owners. “Once we decide what the ultimate business objectives of each litigation matter should be, we evaluate how to resolve a dispute in the full context of what’s best for our overall group and the company,” he explains.

The creative solutions KPI considers the yearly ratio of new versus closed matters, statistics relating to elapsed time from engagement to resolution, number of matters voluntarily using alternative dispute resolution processes, and number of matters in which the total external spend is less than the sum paid to settle or satisfy an award. Additionally, the creative solutions KPIs track the number of matters closed within the first six months after engagement, and the number of matters in which the final result is equal to or better than the litigation objectives agreed to with the affected business unit.

The effective execution KPIs measure LSGL’s preparation of a case management plan and budget for each litigation matter. They also measure whether the team entered the plan and budget accurately into Team Connect and demonstrated efficient use of internal Litigation Information Group resources to reduce the average discovery/document production costs per matter. Nielson credits the development of these KPIs and use of the Team Connect matter management system as among LSGL’s best metrics practices. “By gathering that information in the same format year-on-year, going forward we will be able to compare results and be better prepared to evaluate how we’re doing down the road,” he explains.

If appropriate, a Client Satisfaction Survey, the standard survey used for all syndicates in Shell



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Global Legal, is also circulated to the business unit that received support from LSGL for feedback to optimize LSGL’s performance. This Legal Services Performance Review, which is completed in selected cases, requires the assignment of ratings (very strongly agree; strongly agree; agree; partially agree; do not agree) to the following statements:

§ The Legal support I received demonstrates that Legal Services is a true business partner;

§ The Legal support I received demonstrated efficiency, expertise and experience;

§ The Legal support I received demonstrated the five behaviors: (1) Commercial Mindset; (2) External Focus; (3) Delivery; (4) Speed and (5) Simplicity; and

§ Overall, how would you rate the business value of the support you received from Legal Services?

Leading Practices

When asked to describe which elements of the global litigation group’s metrics process he considers to be leading practices, Nielson highlights the team’s focus on the three critical KPI metrics areas of financial discipline, creative solutions and disciplined execution of systems and their sub-performance factors as among the group’s top metrics practices. In addition, the newly developed Litigation Objectives Realization Process’s disciplined use of the TeamConnect matter management system, which is populated with valuable information that assures good results and top notch tracking data, are other best practices for the group. “This disciplined execution by our lawyers to make certain that we manage each litigation matter in order to achieve agreed business objectives and maintain accurate, up-to-date information in that matter management system helps us pull out the information we need to read these metrics and compare our actual performance against them.” This process, and the integrity of the data it ensures, is a key component of Shell’s best metrics practices.


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Key Performance Indicators and Their Role in Non-Profit Management

In profiling the metrics programs of institutions across a range of industries and services, ACC sought to provide a perspective on the value of metrics to non-profit organizations. To do so, we spoke with an emerging non-profit member organization who asked not to be identified by name, to understand the process of incepting measurement strategies within the organization and in the legal function.

The organization interviewed (hereafter, the “Center”) is an independent non-profit research institution headquartered in the Middle East. The Center’s General Counsel has been working in tandem with other leaders of the organization to develop key performance indicators (KPIs) that will enhance the measurement and evaluation of the institution’s performance in delivering value as an energy research body to its diverse stakeholder population. Many of the KPIs will be tracked through an enterprise-wide application that will generate periodic reports, while other KPIs will require manual tracking and reporting.

For the General Counsel, whose in-house legal practice focuses largely on transactional matters, the most relevant KPIs for the legal function are those that measure and evaluate corporate governance, compliance and delivery of legal services. KPIs that help her track compliance with regulatory laws, governance, and performance indicators of key importance to its board of trustees (including legal compliance, strategy, risk management, productivity and sustainability) are crucial. To that end, the General Counsel is devising metrics that align with the strategic goals of the organization’s research and administrative divisions and provide meaningful data on the number of contracts and other matter files started, advanced, and completed monthly.

Although the design of the Center’s metrics program is in its infancy and outsourced work has been billed by the hour, the General Counsel is exploring alternative billing with the small number of outside law firms that currently provide the bulk of outside legal support. In addition to analyzing external spending, the General Counsel is leading implementation of metrics practices that will aid in assessing qualitative measures of performance by these outside law firms. Of particular interest for her is the ability to evaluate the individual attorneys with whom she works. “Once all key performance indicators and the metrics program are fully implemented, I expect that the process will enable me to fully align internal and external legal services with the strategic objectives, workflows and management practices of the entire organization,” she explains. This alignment will ensure the legal function is fully supporting the Center as it strives to make its mark as a premier independent energy research institution.

The Center’s metrics objectives are consistent with best industry practices of other non-profit organizations. Liz Marenakos, Director of Product Management at Blackbaud, often speaks about KPIs and their place in nonprofit management. In a recent interview with Sageworks, Marenakos suggests that when selecting metrics to watch over time, NPOs should remain focused on the mission of the organization and determine how to best quantify that mission. Other important principles to remember in selecting KPIs for a nonprofit organization are to:

1. Have a definition or calculation to find the KPI, and do not change it over time. In order for your longitudinal analysis to be of value, you need to compare X today to X tomorrow and isolate other variables.

2. Set a target for the year, and back solve to determine what your KPI must be month after month to hit that annual target.

3. Set the target according to industry benchmarks. KPIs should be content-specific, so it is important to review how similar organizations are performing on each selected KPI.

For more discussion of Marenakos’s points and Sageworks’ valuable benchmarking recommendations for NPO’s please see, Libby Bierman, Analysist, Sageworks, Inc., Key Performance Indicators: Nonprofits Need Them, Too!, http://www.afpnet.org/files/ContentDocuments/AFPInfoExchange_KeyPerformanceIndicators_Sageworks.pdf



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V. Policies, Templates, and Guidelines

A. Top Metrics For In-House Legal Departments Unlike other business departments, legal departments have traditionally not busied themselves with tracking graphs, charts and metrics on their department’s performance. This has been changing in recent years as the complexity of running a legal department and the scrutiny legal departments are under from the executive level has increased. The question then becomes, what metrics are the most valuable to manage a legal department and show its value to stakeholders in the company? The below list provides a starting point of metrics legal departments should be tracking.

1. Spend to budget

This metric, indeed most the metrics on this list, pre-supposes that a more basic metric, overall legal spend, is being tracked. Based on my experience consulting over two hundred legal departments, tracking budgets is the single most effective way to predict and control costs for legal departments. A department cannot determine if expectations have been met if there are not budgets to benchmark the spend against, period. Budgets control costs because law firms know that their spend is being tracked and if they exceed their budgets, they will need to explain why. Tracking budgets and spend over time also provides benchmarks as to what certain types of matters should cost so the legal department can set its own budget on matters based on how much they cost in the past.

In addition to tracking budget for matters, tracking budgets per law firm is also a useful tool for measuring a law firms’ ability to accurately estimate budgets. This allows the legal department to keep on top of the firms that are not keeping to their budget (whether under or over budget), so that spending will be as predictable as possible and surprises will minimized.

2. Staff workload metrics

Effectively measuring the workload of an in-house staff is an important metric to track so that a department’s resources can be efficiently allocated. Tracking matters, outside spend, average spend for a matter type, and spend to budget per in-house attorney are important metrics to determine the overall workload of in-house staff and whether each attorney is effectively managing outside counsel costs.

Another metric that is useful to measure cycle time of matters, or how long a matter is open. By measuring cycle-time, legal departments can determine how long an average matter of this type is open (like a contract review matter, for example), red-flag outliers early and show how cycle-times for these matters types have come down over time to demonstrate a legal department’s increased


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efficiency .

3. Spend by matter type and business unit

These metrics helps answer a basic question: From where is a department’s legal spend being generated? Determining legal spend by practice area (IP, Employment/Labor, Litigation, Transactions) can help determine: 1) Is there a practice area that has a surprising amount of legal spend, and if so, why? 2) If there is a great deal of spending in a certain practice area, it is more cost-effective to hire another in-house attorney to do the work?

Determining from what business unit the legal spend is being generated by can help red-flag divisions or subsidiaries that need certain training or greater focus to keep their costs in check. In addition, there are now reporting tools that allow legal departments to benchmark their legal spending against comparative companies overall spending and spending my matter type. These tools can raise red-flags for a legal department if spending patterns differ from the norm in that industry.

4. Outside counsel evaluations

There is one principle behind this metric: work should be given to outside counsel that provides the greatest value. How is the value of your outside counsel measured? Leaving aside bet-the-company litigation, where outcome is the only measure, value can be determined by a variety of factors such as cost, performance, knowledge of the company culture, and responsiveness, among others. To operate as efficiently as possible, more work should be given to those attorneys that provide the most value. Evaluating counsel periodically (at the close of a matter or at set intervals such as every six months) will allow a department to build of repository of data on the outside counsel so when a new matter comes up, finding the best outside counsel to work with is as easy as looking into that evaluation data and picking a highly rated attorney.

5. Outside and inside spending as a percentage of company revenue

This metric is interesting to track because it calculates the entire cost of your legal department, both internally and externally, rather than just on the outside legal spend. This is another valuable data point to measure a department’s efficiency. First, this is a more accurate measure of a reduction in legal costs than the absolute legal spend in dollars - legal spend could go up in a given year and still represent a reduction in legal spend as a percentage of company revenue. Reducing this metric over time would be a powerful selling point to stakeholders looking for proof of the value that the legal department provides. Second, tracking this percentage over time helps a legal department find the ideal mix of in-house counsel and outside counsel that provides the greatest value to the company.

6. Invoice savings

This is a metric that can be broken down into more detailed categories such as expense guideline reductions, timekeeper rate guideline reductions, and hours billed reductions. Much of these savings represent low-hanging fruit – it’s simply enforcing your company’s billing and expense guidelines. That said, it is surprising how many legal departments fail to adequately review bills for simple guideline violations. Reviewing line items and hours billed can be more time-



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consuming for in-house attorneys, but is necessary to catch mistakes and over-billing. If these reductions are subtotaled by in-house attorney, a general counsel can determine who is reviewing bills properly and who is not. Furthermore, this is a metric that can be used to show stakeholders the efforts of the legal department to control costs.

7. Track and benchmark timekeeper rate increases

There are several reasons to track and benchmark timekeeper rate increases over time. Tracking rate increases over time allows a legal department know whether this year’s rate increases (and yes, there sadly are almost never decreases) are abnormal or in line with historical averages. Many legal departments will have a cap on rate increases for their firms or have a rate freeze for the years or for certain matters, so tracking actual rate increases is vital for enforcing these requirements.

Accurately benchmarking timekeeper rates has long been on the wish-list of legal departments. Rate surveys are useful data-points, but they suffer from the same problems of all self-reporting surveys – sometimes the data is reported inaccurately, those that choose to report are self-selected and thus biased, and by the time the data is compiled it may be out of date. Recently, software as a service solutions that track timekeeper rates have launched real-time timekeeper rates benchmarking and analytics as well. This knowledge is power when negotiating rate increases with outside counsel. For example, if all San Francisco patent attorneys’ average increase is 2% this year, you may be less willing to except a 7% increase from your San Francisco patent attorney. If your legal department is above the average rates, this raises a red flag that perhaps you’re paying too much. If your department is below the average rate, this is a data-point to provide to stakeholders as evidence of your department’s value and cost savings efforts.

8. Litigation exposure over time

Nobody, from the board of directors, the general counsel or corporate counsel, likes to be surprised by a bad outcome. Within a legal department’s litigation matters, tracking exposure (at least for the larger cases) is an important metric for corporate counsel to be able to manage and reduce that risk. Tracking maximum and minimum exposure, along with likely outcome, allows the legal department to keep key stakeholders apprised of potential risks and avoid embarrassing surprises. These are numbers that boards of directors and other stakeholders often will ask for as well, so better to answer the question before it’s asked then be caught flat-footed when it is. Furthermore, tracking this number over time allows the legal department to be able to once again demonstrate their value to its stakeholders by showing how the department has reduced the company’s exposure over time. Neolithic

9. Internal trainings vs. ethics complaints

This is another metric that allows the legal department to manage risk and show value. Tracking ethic complaints and HR violations by business unit allows the legal department to target training to those departments with the most complaints. Showing these trainings and complaints over time shows the effectiveness of the trainings and cost savings by reducing these types of claims.

10. Lessons learned by matter

Like tracking outside counsel evaluations, tracking lessons learned in legal matters allows a legal


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department to build up a repository of information on the types of matters they deal with regularly. Whether it is certain types of contracts that a legal department regularly negotiates, common types of litigation cases or dealing with regulations specific to your industry, collecting an sharing knowledge learned makes for a more efficient and effective legal department. This also is an invaluable resource when there is turnover in a department (the proverbial ‘hit by a bus’ or ‘win the lottery’ scenario) so that hard won knowledge is not lost when experienced attorneys leave.



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B. Capital Power Corporation:

1. Client Feedback Questionnaire

{Law Firm Name} PERFORMANCE EVALUATION: CLIENT FEEDBACK QUESTIONNAIRE

{Law Firm Name} and the {Company Name}Legal Department each value your input with respect to the quality and performance of the external counsel with whom you work and interact. We would appreciate your feedback in the form of the attached questionnaire. When you have completed your responses, please return the questionnaire to {name} Please provide your name on the questionnaire. Only consolidated (not individual) results will be provided to {law firm}. You are encouraged to provide detailed comments or feedback by attaching an additional page or pages to this questionnaire.

Your Name: Contact lawyer(s) at {law firm}:

____________________________________________ _____________________________________________

_________________________________________________________________________________________

Legal Service Quality Measure

How would you assess the following statements regarding {law firm}? How would you rate their importance?

Satisfaction 5=Very Satisfied 4=Somewhat Satisfied 3=Neutral 2=Somewhat Dissatisfied 1=Very Dissatisfied

Importance 5=Very Important 4=Somewhat Important 3=Neutral 2=Somewhat Unimportant 1=Very Unimportant

A. Quality

I think….. Satisfaction Importance

They have the breadth of experience we need 5 4 3 2 1 5 4 3 2 1

They assign lawyers with appropriate levels of experience

5 4 3 2 1 5 4 3 2 1

Their work is thorough 5 4 3 2 1 5 4 3 2 1

They help identify business problems 5 4 3 2 1 5 4 3 2 1

Their work activities are well documented 5 4 3 2 1 5 4 3 2 1


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Their communication is free of jargon 5 4 3 2 1 5 4 3 2 1

They provide regular process updates 5 4 3 2 1 5 4 3 2 1

They notify us about changes in scope 5 4 3 2 1 5 4 3 2 1

They offer clear explanations 5 4 3 2 1 5 4 3 2 1

They do not jump to conclusions quickly 5 4 3 2 1 5 4 3 2 1

They inform us about technical issues affecting our business

5 4 3 2 1 5 4 3 2 1

They achieve the results we require 5 4 3 2 1 5 4 3 2 1

Please see reverse…

B. Service


They are accessible 5 4 3 2 1 5 4 3 2 1

They have the geographic scope we require 5 4 3 2 1 5 4 3 2 1

They meet our deadlines 5 4 3 2 1 5 4 3 2 1

They provide fast turnaround when requested 5 4 3 2 1 5 4 3 2 1

They comply with our billing practices and policies

5 4 3 2 1 5 4 3 2 1

They listen to what we say 5 4 3 2 1 5 4 3 2 1

They relate well to us 5 4 3 2 1 5 4 3 2 1

They appreciate our business 5 4 3 2 1 5 4 3 2 1

They are easy to do business with 5 4 3 2 1 5 4 3 2 1

They use appropriate and compatible technology 5 4 3 2 1 5 4 3 2 1

They address any relationship problems 5 4 3 2 1 5 4 3 2 1



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C. Value


They show creativity in proposed solutions 5 4 3 2 1 5 4 3 2 1

They try to anticipate our needs 5 4 3 2 1 5 4 3 2 1

They make sure they understand our company 5 4 3 2 1 5 4 3 2 1

They stay current with our industry 5 4 3 2 1 5 4 3 2 1

Their assistance has made us more effective 5 4 3 2 1 5 4 3 2 1

They share knowledge and resources 5 4 3 2 1 5 4 3 2 1

Their fees are reasonable 5 4 3 2 1 5 4 3 2 1

D. General Perspective


I received good value from {law firm} services 5 4 3 2 1 5 4 3 2 1

Overall, I would rate {law firm} very highly 5 4 3 2 1 5 4 3 2 1

Thank you for your time. Your feedback is appreciated.


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2. Metrics Scorecard

Legal & External Relations L&ER (Roll Up) Annual Metrics Threshold Target Stretch Actual

Effectiveness

Service Recipient Opinion of our Overall Effectiveness 4/7 5/7 6/7

Service Recipient Opinion of our Business Acumen 4/7 5/7 6/7

Service Recipient Opinion of the Quality of our Work 4/7 5/7 6/7

Service Recipient Opinion of our Solution Orientation 4/7 5/7 6/7

Leadership

L&ER Voluntary Turnover Rate ≤5% ≤4% ≤3%

% of L&ER Staff with Career Development Plans in Place (S2+) N/A 100 N/A

Attainment of Employee Career Goals Set Out in Career Development Plans 30% 50% 75%

% of Effective Succession Plans in Place (S3+)

Quarterly Metrics Annual Target YTD Target YTD Actual Forecast

Efficiency

L&ER Budget

Total L&ER Expense per $BB in Total Corporate Overhead

Average L&ER Employee Cost per MWh Produced

Average External Counsel Rate Paid <$350

Average External Consultant Rate Paid <$300

Proportion of External Spending on Non-‐Hourly Rates >40%



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Total Legal Spend

Risk Management

Number of Service Recipient Training Sessions Conducted 25

Number of Unexpected Risks Materializing 0

Number of Alerts Issued on Emerging Material Risks

Culture & Communication

Internal Communications Readership

# of Positive Media Coverage

Employee Morale Ratings

Knowledge Management

% of Required Corporate Training Complete 100%

Number of Documents Contributed to Corporate “Rec Room”


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C. FMC Technologies

1. ACES Summary, Availability and Service Package

Alliance Counsel Engagement System Summary, Availability and Service Package

We put you first

And keep you ahead

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Alliance Counsel Engagement System

The ACES Model

FMC Technologies has developed a fee structuring model which seeks to align the client’s interest in rapid, successful, and cost effective delivery of legal services with a fair compensation model for the outside law firm or legal services provider. This proprietary system, known as the Alliance Counsel Engagement System or the ACES Model, is now available to Law Departments and to Law Firms. In 2002, the ACES model received the Lexis-Nexis Distinguished Legal Service Award. In 2004, the Corporate Legal Times included the program in its “CLT 10.” In 2011, the Financial Times identified FMC Technologies and the ACES model as one of the most innovative tools used by in-house counsel. In addition, the model has been featured often in legal and non legal publications such as:

• ACC Docket• ACC Value Challenge• Benchers’ Bulletin• CFO Magazine• Corporate Counsel Magazine• Crain’s Chicago Business• Corporate Legal Times• Counsel to Counsel• Financial Times• In-House Texas• Inside Counsel• Inside Litigation• International In-House Counsel Journal• LA Daily Journal• Law 21• Law Firm Inc.• Law Office Management and Administration Report• Lawyers Weekly USA• Legal Thought Leader• Legal Week• New England In-House• Texas Lawyer

The ACES model consists of the following elements

• ACES – This base case is used for matter specific engagements such as litigation or projects – approx20% of fees at risk – bonus of 0-300% depending upon success & efficiency

• ACES LT – for long term retainers or projects; 20% of fees at risk, 0-200% bonus based on “report card”• ACES2 – Team-enabling model to share savings below benchmarks• Inside ACES – Bonus for in-house counsel; 0-20% of base salary in light of “report card”


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(for Litigation)

This base case model is used for litigation or engagements where there is a definable outcome and where time is of the essence. This model seeks rewards the firm for efficiency and for success achievement of the client’s engagement objectives • Client must define the success criteria – if success is achieved, a bonus is paid to the firm. If we can’t define the

objective, we shouldn’t be hiring outside counsel • Client and the firm develop a case/matter budget where the activities in the matter are grouped into four to five time

based phases. Since our objective generally is to resolved matters quickly and to reduce litigation cycle time, the default model is aggressive (e.g., 0-90, 91-180, 181-270, 270-365, >365). For each activity a “target budget” is developed. Normally, the target for the initial case assessment is $15K and for appeal is $0.

• The aggregate of the 5 phases total matter target. We generally use “all in budgets” where all expenses from local

counsel (if any), third party vendors and legal support services are included in the phase target and therefore the total budget.

• Within each phase, the firm bills Client at its normal hourly rates (subject to Client’s billing policies and procedures).

Until the target is reached for any particular activity group, Client pays the firm a percentage (normally 80%) of the billed fees. The unpaid fees (normally 20%) are placed in an “at risk bucket”.

• Once a target is reached for a phase, the proportion of payment to “bucket” is reversed. Thus, the firm will recover

those fees if success is achieved, and will forfeit these fees if success is not achieved. As such, 20% of the fees are paid to the firm and 80% of the fees are placed in the bucket.

• If success is reached, a bonus is paid. The bonus consists of the amount in the bucket plus a multiplier. The

amount of the multiplier depends upon the point in time when success is achieved, starting at 125% and declining to 25 for the last phase. This declining multiplier has the effect of paying higher effective hourly rates for early success and lower rates as a matter drags on before resolution – but always provides a premium to the firm’s “normal” rates.

• A second level bonus is paid by adding 1% to the bucket multiplier for each 1% of total matter target saving. In

other words, if the firm had expended only 40% of the total matter target, there would be an additional 60 percentage points added to the applicable bonus multiplier. Conversely, if the total matter target is exceeded, this becomes a point-for-point penalty, reducing the bucket multiplier by 1% for each percentage point of total matter excess.

• A third level bonus/penalty may be used to reflect the deviation from the expected value of the case (based on a

mutually agreed decision tree) for any settlement or judgment. • Budget targets are flexible and can be revised to reflect truly unanticipated events; however, the firm must identify

its baseline assumptions. The firm may request budget target adjustments but these must be agreed and accepted by the client.

A Microsoft Excel spreadsheet contains the model for the firm’s use and experimentation. The variable values are comprised of the following: targets for each activity; the billing/basket percentage split; the point-in-time bucket multipliers; the expected value. These

variables will be subject to revision and refinement.



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LT (Long Term)

• Used for retainers or projects where a task-‐specific objective may be difficult to define or where the primary objective is high quality service in a specific subject matter area or over several projects

• Recognizes that acceleration of resolution may not be appropriate

• Billable hour rate, fixed project fee or retainer amount agreed between the firm and client at outset

• Firm bills in accordance with agreement, however, client pays 80% of bills, and withholds 20%. This withheld amount is the amount placed “at risk”

• The firm may earn a performance-‐based bonus of 0-‐200% of “at risk” amount based on the “report card” provided by the client on a periodic basis.

• Evaluation periods agreed with firm (e.g., quarterly, semi-‐annually, annually, project mid-‐point, project end)

• Evaluation criteria agreed with firm (e.g., understands goals, expertise, efficiency, responsiveness, predictive accuracy, and effectiveness). Performance is “graded” for each criterion on a five point scale. The grade for each criterion can be used in a strictly formulaic fashion to provide an overall score or grade which is then translated into a bonus level.

• In-‐house counsel should perform the evaluation no less frequently than annually and in any event, when the matter is closed. This system may also be incorporated with an on-‐line, electronic billing system to ensure contemporaneous assessment as well as capture time-‐based performance data. For example, In-‐house counsel might be required to provide the performance assessment before any approved invoice is paid.

A Microsoft Excel spreadsheet contains the model for the firm’s use and experimentation. The variable values are comprised of the following: amount billed, amount of holdback, evaluation for each criteria. These variables will be subject to revision.


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2 (a.k.a. ACES for ACES)

Variant 1 -- Multiple law firm team incentive structure for use in multiple cases of a similar type or a project where several law firms are engaged for delivery of various substantive capabilities

• Permits inclusion of other legal service providers (e.g., legal research providers, temporary attorney

providers, and graphics and presentation experts). Use of these providers encouraged as a way to reduce overall cost of team provided service

• Benchmark performance target developed (e.g., 20% less than matter-weighted average for a portfolio of matters, successful conclusion of a matter below a specified level)

• “Ring the bell” by achieving the target and team members share each additional dollar of savings (e.g., 60% of the savings to the client, 40% percent split among the law firm team members).

• Incentivates fact and substance sharing, lowest cost legal research, etc.

• Note: firm may receive a bonus without handling a case that year

Variant 2 - This model may also be used to manage a combination of similar cases by one firm. Another possibility is to use the standard ACES model for such a combination but to have a single budget for the entire portfolio as opposed to individual cases within the portfolio. Under this approach the firm has an incentive to manage the portfolio efficiently and may focus on one or a few cases and simply keep the others in a holding pattern.



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Inside

• Teamwork-‐based bonus for inside counsel

• May continue use of individual performance criteria for annual salary reviews

• Specific teamwork-‐driven bonus of 0-‐20% of base salary based on “report card” to the in-‐house counsel

• Criteria same for all team members (e.g., understands goals, expertise, efficiency, responsiveness, predictive accuracy, and effectiveness).

• Performance “graded” for each criteria on a 5 point scale. The grade for each criterion can be used in a strictly formulaic fashion to provide an overall score or grade which is then translated into a bonus level...

• Budget should be based on assumption of paying 100% of Inside ACES bonuses to ensure funds “available”


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License Terms and Conditions

FMC Technologies to Provide:

• ACES Model

o Non-transferable, non-assignable license to use the ACES model. Law firm licensees may use the model for any client of the firm. Corporate law department licensees may use the model for the engagement of any firm for the corporate parent, as well as subsidiaries and controlled affiliates.

o Excel templates for ACES model

Additional Terms

• Royalty free license

• There are no representations or warranties of any type with respect to this license.

• Licensee will refer to ACES as a registered trademark of FMC Technologies Inc.

• Licensee acknowledges that this is an FMC Technologies proprietary model and that Licensee will not transfer, sub license, or otherwise assign the model to third parties without the consent of FMC Technologies

• This limited use license will include any improvements to the model devised by FMC Technologies and FMC Technologies will make any such improvements available upon request or through public web posting.

• Licensee will promptly disclose any improvements to the model devised by Licensee which shall be the property of FMC Technologies but shall be included in the limited use license

• Licensee, its partners, employees, consultant and affiliates, shall be bound by this limited use license and Licensee shall be responsible for any unauthorized use of the ACES model by such parties.



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2. Counsel Evaluation and Feedback Form

FMC Technologies

Counsel Evaluation & Feedback Form

Name: _______________________ Evaluator: _________________________

Date: _______________________ BU/Firm: _________________________

Instructions: Categories are consistent with Serengeti Tracker evaluation tool. and FMC Technologies Core Values. To be completed by Company managers, inside and outside counsel regularly and at the conclusion of a project for use in connection with the ACES performance evaluations. A normal score is a 3 reflecting expected performance meeting requirements. A score of 1 or 5 for any category should not occur rarely and a score of 3 or 4 for any category should not become a default. All categories are weighted equally.

Scale: 1 – Does not meet most requirements

2 – Meets some requirements

3 – Meets requirements

4 – Exceeds some requirements

5 – Consistently exceeds most requirements

UNDERSTANDS GOALS Score 1-5: _________ • e.g., business and legal objectives

EXPERTISE Score 1-5: _________ • e.g., knowledge and expertise about issues and substantive

EFFICIENCY Score 1-5: _________ • e.g., staffing and time spent, use of technology and prior work product, reasonableness of overall

fees & expenses

RESPONSIVENESS Score 1-5: _________ • e.g., to deadlines, client policies, communication

PREDICTIVE ACCURACY Score 1-5: _________ • e.g., reasonableness of budget, performance to budget and predicted results

EFFECTIVENESS: Score 1-5: _________ • e.g., strategy, execution, results

Total:


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3. MPR Legal



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D. Rockwell Collins

1. Guidelines for the Initial Conversation with Outside Counsel

Purpose: This guideline serves as a tool to assist in efficiently selecting outside counsel that will be able to meet the performance objectives set by the Office of General Counsel (OGC). You should review the OGC dashboard and lessons learned input for the firm or attorney. This will help you address any concerns or recommendations for best practices from previous engagements as part of this conversation.

Selection of the right outside counsel for a given task is a multi-step process that begins with a first screening of several potential law firms. Whether a firm makes it through the initial screening and on to a more detailed scrutiny depends on the answers to some basic, high-level questions. Prior to having this discussion, the firm should be provided with some basic documentation to assist the attorney with having a robust conversation with outside counsel, such as a copy of the complaint (or equivalent), relevant underlying documentation (emails, interview notes, checklist of bid assumptions, etc.) any historical data that has been assembled, and a copy of our Company’s terms and conditions of engagement and billing guidelines (if the firm has not already accepted the terms).

§ Has the firm run a conflicts check?

§ If the firm has not previously agreed to our Company’s terms and conditions of engagement, explain that our Company has a standard set of terms of conditions of engagement. Explain that our Company does not grant blanket forward looking waivers and requires a full disclosure of any conflict and our General Counsel must grant the waiver. Will this be an issue for the firm?

§ Does the firm have sufficient experience with the subject matter? The answer to this question will depend on how it is asked. Many areas of law can be subcategorized into smaller, more specialized areas of practice in which the firm may not be experienced.

§ Does the firm have sufficient experience with this court and this state and/or district? Having experience in certain states, court rules, or particular judges may be beneficial to the case.

§ Can the firm staff the matter with a proper level of talent? Having enough depth in the firm will ensure the case can be staffed at the right level and with the proper skill sets and experience.



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§ Does the firm have experience with opposing side’s counsel? It can be helpful to have a feel for the strategy a firm might have for a given matter.

§ What is the firm’s record of success in the subject matter and in the court/state?

§ Billing rates and experience and willingness to use a form of AFA? See the OGC Teamspace for guidance on the acceptable or preferred alternate fee arrangements.

§ Does the firm have some suggestions with regard to bid assumptions if our Company decides to provide a SF-RFP to the firm? Discussion may focus on the checklist of bid assumptions in this regard.

§ Does the firm employ Lean principles, Six Sigma and/or related processes?

2. Checklist for AFA Discussion with Outside Counsel

§ Has outside counsel engaged in AFAs previously?

§ What types of AFAs has outside counsel used?

What percentage of the firm’s matters are handled as AFAs? o

Has the proposed lead counsel for our matter used AFAs? o

§ What types, and in what percentage of lead counsel’s matters?

§ What kinds of experience has outside counsel had with AFAs?

Successful? o

Unsuccessful? o

As perceived by the firm? o

As perceived by the client? o

§ Why were outside counsel’s previous AFAs perceived to be successful or unsuccessful?

By the firm? o

By the client? o

Is outside counsel able to provide client referrals for us to speak to? o

§ Is outside counsel willing to engage in an AFA for this matter?

If not, why not? o

If so, what kind of AFA matter would your firm recommend? o


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§ Does outside counsel have historical data available reflecting average costs for this type of matter?

For the matter as a whole? o

For specified projected phases of the matter? o

Is outside counsel willing to share such data? o

§ Does outside counsel recommend that any particular factors be used for determination of “success” in a success fee arrangement?

If so, why would those factors be appropriate? o

3. Success Fee Insert – Litigation

1. Services. Counsel will advise Company with respect to [describe the litigation matter – whether all or a portion of a matter; describe in detail what you want the Counsel to do and when it is to be done].

2. Success Fee. [Twenty percent (20%)] of the hourly rates that would otherwise be payable to Counsel will be held back by Company from each invoice submitted by Counsel in connection with this matter (“holdback”). For example, if $100,000 in legal fees is incurred, the holdback will be $20,000. Company will pay between 0 and [xxx]% of the holdback to Counsel at the completion of the matter as follows:

Achieves Desired Results

§ [200]% of the holdback will be paid to the Counsel if [describe an optimal result, e.g., Counsel obtains dismissal of complaint with prejudice within budget or other definitive early resolution favorable to Company; it is important that the optimal result be very clearly defined].

§ [NOTE that an agreement to pay a fee in excess of 100% of the Counsel’s billing rates for actual time billed must be warranted by the cost savings anticipated by the optimal result.]

Other Factors

§ Alternatively, if the Counsel fails to achieve the early resolution of this matter favorable to Company, described above, 0 to [150]% of the holdback will be paid to Counsel based upon the responsible Company attorney’s assessment of the Counsel’s performance. In assessing the performance of the Counsel, the responsible Company attorney, in his or her sole discretion, will consider the Counsel’s overall performance, including, without limitation, the following factors:



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Results obtained o

§ Obtained a result that was favorable to Company

Strategic thinking o

§ Developed a practical and cost effective strategy for resolution of the matter

§ Proactively suggested modifications of the strategy, as necessary, to address unanticipated events

Execution acumen o

§ Effectively executed the strategy adopted for the matter

§ Demonstrated “ownership” of responsibilities and met them in a timely manner

§ Proactively executed “course corrections,” as necessary

Responsiveness/communication o

§ Communicated openly, honestly and with sufficient frequency to keep Company adequately and promptly informed of all material developments

§ Promptly and adequately responded to feedback and requests

Cost/schedule performance o

§ Performed all discovery and other services on schedule and within budget, as adjusted during the course of the matter by Company and the Counsel, as necessary, to address unanticipated events

§ Provided invoices on a timely basis

§ Promptly informed of any recommended schedule or budget adjustments due to unanticipated events

§ Obtained approval to perform services or incur costs in excess of the budget

Efficiency/Lean o

§ Consistently employed Lean, Six Sigma and/or related processes

Diversity and inclusion o

§ Consistently used diverse personnel and demonstrated diverse thinking and inclusion


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4. Success Fee Insert – Non-Litigated

1. Services. Counsel will advise Company with respect to [describe the non-litigated matter – whether all or a portion of a matter; describe in detail what you want the Counsel to do and when it is to be done].

2. Success Fee. [Twenty percent (20%)] of the hourly rates that would otherwise be payable to Counsel will be held back by Company from each invoice submitted by Counsel in connection with this matter (“holdback”). For example, if $100,000 in legal fees is incurred, the holdback will be $20,000. Company will pay between 0 and [xxx]% of the holdback to Counsel at the completion of the matter as follows:

[Achieves Desired Results]

§ [200]% of the holdback will be paid to the Counsel if [describe an optimal for your matter, as applicable; it is important that this optimal result be very clearly defined; if these criteria don’t apply to your matter, skip this section and begin the next paragraph with “0 to [150-200%] of the holdback will be paid to Counsel (see below)].

§ [NOTE that an agreement to pay a fee in excess of 100% of the Counsel’s billing rates for actual time billed must be warranted by the cost savings anticipated by the optimal result.]

Other Factors

§ Alternatively, if the Counsel fails to achieve the early resolution of this matter favorable to Company, described above, 0 to [150-200]% of the holdback will be paid to Counsel based upon the responsible Company attorney’s assessment of the Counsel’s performance. In assessing the performance of the Counsel, the responsible Company attorney, in his or her sole discretion, will consider the Counsel’s overall performance, including, without limitation, the following factors:

Results obtained o

§ Obtained a result that was favorable to Company

Strategic thinking o

§ Developed a practical and cost effective strategy for completion of the matter

§ Proactively suggested modifications of the strategy, as necessary, to address unanticipated events



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Execution acumen o

§ Effectively executed the strategy adopted for the matter

§ Demonstrated “ownership” of responsibilities and met them in a timely manner

§ Proactively executed “course corrections,” as necessary





§ Performed all services on schedule and within budget, as adjusted during the course of the matter by Company and the Counsel, as necessary, to address unanticipated events




Efficiency/Lean o








§ Performed all services on schedule and within budget, as adjusted during the course of the matter by Company and the Counsel, as necessary, to address unanticipated events



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Efficiency/Lean o






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5. OGC Lean Workflow – Selecting and Engaging


93



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VI. Additional Resources

A. ACC Resources

1. Leading Practices Profiles

Legal Department Leading Practices for Adding Value and Moving Beyond the Cost Center Model, (September 2010), available at http://www.acc.com/legalresources/resource.cfm?show=16804

Leading Practices in Knowledge Sharing and Management: How Companies and Law Firms Manage Knowledge (August 2010), available at http://www.acc.com/legalresources/resource.cfm?show=16806

Leading Practices in Electronic Billing: A Technological Tool for Corporate Legal Departments (March 2009), available at http://www.acc.com/legalresources/resource.cfm?show=168911

Leading Practices in Providing In-House Legal Support for Corporate Governance Initiatives and Compliance and Ethics Programs (September 2010), available at http://www.acc.com/legalresources/resource.cfm?show=1007531

2. InfoPAKs

Managing Value-Based Relationships with Outside Counsel, Aug. 2011, available at http://www.acc.com/legalresources/resource.cfm?show=19673

3. Annual Meetings – Program Materials

Metrics that Matter, 2012 Annual Meeting,

Session 109, available at: http://www.acc.com/vl/membersonly/ProgramMaterial/loader.cfm?csModule=security/getfile&pageid=1322613&page=/legalresources/resource.cfm&qstring=show=1322613&title=Metrics%20that%20Matter

Metrics and Concrete Measures to Demonstrate Increasing Tangible Legal Value, ACC Europe, 2012 Annual Meeting, Session -- , available at http://www.acc.com/legalresources/resource.cfm?show=1310888

Metrics – Business Intelligence that Works!, May 2012, http://www.acc.com/legalresources/resource.cfm?show=1310884

4. Quick Counsels

I’ve Seen the Numbers: Know What? An Action-Oriented Look at Legal Benchmarks, QuickCounsel, October 2011,

http://www.acc.com/legalresources/quickcounsel/aaolalb.cfm

Improving Value Through Analytics, August 2012, http://www.acc.com/legalresources/resource.cfm?show=1316431

5. Top Tens

Patrick Johnson, Top Ten Metrics That Your Legal Department Should Be Tracking, March 4, 2013, http://www.acc.com/legalresources/publications/topten/ttmtyldsbt.cfm

6. Value Challenge

ACC’s Value Challenge is an initiative designed to support law departments in aligning value with cost in the delivery of legal services. The initiative promotes the adoption of management practices that allow


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all participants to achieve their value objectives. In doing so, the ACC Value Challenge initiative offers a library of online resources along with opportunities for communication and learning in management areas that include value-based fee structures, budgeting, data management, staff and training practices, and metrics. Among the 30+ resources dedicated are evaluating performance and metrics are the following:

How Tomorrow Moves: CSX Uses Scorecards to Help Outside Counsel Stay on Track, October 2011, http://www.acc.com/legalresources/resource.cfm?show=1296905

First What, Then Who: Optimizing Workload Allocation and Resource Management, October 2011, http://www.acc.com/legalresources/resource.cfm?show=1296928

Managing Outside Counsel: Checklist of Conversations, October 2011, http://www.acc.com/legalresources/resource.cfm?show=1305740

ACC Guide to Managing Outside Counsel, August 2011, http://www.acc.com/legalresources/resource.cfm?show=1334135

Sample Approved Counsel Program 5-Star Rating Process-Nationwide Mutual, September 2010, http://www.acc.com/legalresources/resource.cfm?show=1043711

Viacom: Using Dashboards and Matter Management to Apply Business Rules to Outside Counsel Spend – Plus Budget Training for Lawyers, September 2010, http://www.acc.com/legalresources/resource.cfm?show=1000941

Sample Matter Management Dashboard Screen Shots – Viacom, September 2010, http://www.acc.com/legalresources/resour

ce.cfm?show=1000856

Mozilla Corporation: Maximizing Efficiency and Capturing Meaningful Process Metrics Using Matter Management, August 2010, http://www.acc.com/legalresources/resource.cfm?show=988404

51 Practical Ways for Law Firms to Add Value, June 2010, http://www.acc.com/legalresources/resource.cfm?show=939328

How to Utilize Metrics, November 2009, http://www.acc.com/legalresources/resource.cfm?show=745892

7. ACC Docket

Todd Silberman, Wisdom of the Crowd: General Counsel Bonus Structure & Metrics, Part Two, June 2013, p.96, http://www.acc.com/legalresources/resource.cfm?show=1339852

Frank Cerrone, “Acing the Legal Department Performance Review,” May 2013, p. 23,

http://www.acc.com/legalresources/publications/accdocket/upload/F-Cerrone.pdf

Edward T. Paulis III, “Best Practices for Leading Change in Your Law Department,” March 2013, vol. 31, no. 2, p. 26

Domenick C. Di Cicco Jr., “What is the Price of a Gold Star Law Department? “ March 2013, vol. 31, no. 2, p. 58, http://www.acc.com/legalresources/resource.cfm?show=1330280

The Role of Governance (Vantage Partners) http://www.acc.com/legalresources/resource.cfm?show=1300184

8. Forms & Policies

Sample Performance Metrics Chart, October



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2012, http://www.acc.com/legalresources/resource.cfm?show=1318510

Categories and Examples of Metrics, September 2012, http://www.acc.com/legalresources/resource.cfm?show=1316787

9. Other ACC Resources

ACC’s Chief Legal Officers 2013 Survey: http://www.acc.com/legalresources/resource.cfm?show=1327148

Metrics and Concrete Measures to Demonstrate Increasing Tangible Legal Value, ACC Europe, May 2012, http://www.acc.com/legalresources/resource.cfm?show=1310888

B. External Resources

2011 Law Department Metrics Benchmarking Survey (ALM Legal Intelligence), excerpts available on LexisNexis, article about the survey here: http://www.law.com/corporatecounsel/PubArticleCC.jsp?id=1322409834601&slreturn=20130107123317

Daniel J. DiLucchio and Darren R. Guy, Effective Management of Outside Counsel: Tools of the Trade, Altman Weil, Inc. , June 2009, http://www.altmanweil.com/dir_docs/resource/b73ce0b6-6dd1-4679-ba42-ee04baa3f700_document.pdf

Alternative Fee Strategies: Transparency and shadow billing: http://adverselling.typepad.com/how_law_firms_sell/2010/10/alternative-fee-strategies-part-3-of-3-transparency-and-shadow-billing-.html

Patrick J. McKenna and Derek E. Patterson, Defining Your Performance Metrics,

http://www.patrickmckenna.com/pdfs/Defining%20Your%20Performance%20Metrics.pdf


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VII. Endnotes 1 A useful reference for categories of legal metrics and sources of data is found in the 2009 ACC Value Challenge Tool Kit Resource, “How to Utilize Metrics,” at: http://www.acc.com/advocacy/valuechallenge/toolkit/loader.cfm?csModule=security/getfile&pageid=745892&page=/legalresources/resource.cfm&qstring=show=745892&title=How%20to%20Utilize%20Metrics 2 For this bonus, which would be in addition to the success bonus, 1% would be added for each 1% of total matter target saving. If the firm had expended only 80% of the total matter target, an additional multiplier of 20% would be applied to the amount at risk (i.e., the amount in the bucket) to derive the efficiency bonus. Conversely, if the total matter target is exceeded (i.e., above target) by 20%, this becomes a point-for-point penalty (i.e., 1% for each percent of total matter excess), and this multiplier of 20%, applied to the amount of risk (i.e., the amount in the bucket), would reduce, rather than increase, the total bonus (success + efficiency bonus) paid. 3 This expected value adjustment would not apply in the first 90-day period. “So if the total budget for the case for all five phases is a quarter of a million dollars, and you actually spent half a million dollars in phases one and two, you’re in phase two, so the multiplier would be 100%, but you’re 100% over budget so guess what? Your multiplier is now zero and you get only what’s in the bucket basically; you don’t get any upside at all,” explains Jeffrey Carr, Senior Vice President, General Counsel and Secretary. 4 Pursuant to this model, a firm that never handles a case in a given year may receive a bonus for the successful conclusion, below a specified level, of a matter. 5 Although a single budget for the portfolio of matters is typical with ACES for ACES, the standard ACES model for the portfolio of cases may also be used. The only difference is that there will be a single budget for the entire portfolio, as opposed to individual target budgets for each of the cases comprising the portfolio. Under this approach, the firm has an incentive to manage the portfolio of cases efficiently and may choose to focus on one or a few cases/matters and simply keep the others in a holding pattern. 6 If the performance score is 4 across the board, the firm recovers 110%; for 5’s across the board, the firm recovers 120%; for 2’s across the board, the firm recovers 90%;

1’s across the board, the recovery is 80%; 3’s across the board, 100%. 7 For additional information about the Rockwell Collins law department metrics program, see, “Metrics that Matter,” ACC Annual Meeting 2012, at: http://www.acc.com/vl/membersonly/ProgramMaterial/loader.cfm?csModule=security/getfile&pageid=1322613&page=/legalresources/resource.cfm&qstring=show=1322613&title=Metrics%20that%20Matter