Keith Maziarek, director of pricing and legal project management at Katten Muchin Rosenman LLP, and Justin Ergler, director of alternative fee intelligence and analytics at GlaxoSmithKline, discuss the evolving nature of legal operations and management, the new face of negotiations between law firms and corporate clients, and the collaborative nature of their jobs.
Can you talk briefly about your respective roles and how they’ve evolved in recent years?
Keith Maziarek: I joined Katten Muchin Rosenman two years ago, so I’m on the law firm side of this equation. I’m the director of pricing and legal project management for the firm. It’s been interesting from an evolutionary standpoint, because I’ve seen the beginning of this journey since the creation of these disciplines during the Great Recession – trying to institute more sophisticated ways of going to market, from a financial and operational standpoint, and better ways of partnering with clients. You start to demonstrate value pretty quickly as far as the types of things you’re doing, which helps spur the adoption cycle throughout the organization. One of the things that’s different now at Katten is that the adoption cycle is more accelerated than it used to be in the early days, which has led to greater momentum internally. Within a year and a half, we grew the team from just me to now there being four of us. We’ve really seen a growing appreciation for what pricing and budgeting using legal project management and analytics can bring to the table. The current global health crisis and resulting economic and legal challenges many clients are, and will, face is likely to even further highlight and accelerate the adoption of these functions across the industry.
Justin Ergler: I’ve been at GlaxoSmithKline (GSK) for 14 years, in my current role as director of alternative fee intelligence and analytics for the last seven. My job over the last few years has been more about refinement and improvement than building something completely new. The biggest change is that I’m dealing with a lot more business folks at law firms than I ever did before. More law firms are buying in and seeing the value that people in roles like Keith’s can play. Before, I would be largely
interacting with the partners and lawyers at a law firm, and the business folks would be more in the background. Now, they’re a lot more client-facing, so I have a lot more interactions with folks that speak my language. These conversations start out at more of a business level, as opposed to being driven by the partners at a legal level then getting shifted to a business conversation later on. So the biggest change for me is not so much a big overhaul of what we do at GSK, or my role or what I’m expected to do – it’s more that externally the environment has changed. And I think it’s been a change for the better.
When a large corporation like GSK needs to engage a law firm, how does the process for putting a fee arrangement in place work?
Ergler: I look to our lawyers as the subject-matter experts in the legal work and in what needs to be done. And on the law firm side, it’s the same thing – there are partners there who are the experts about what needs to be done from a legal standpoint. So I rely on my internal subject-matter experts, our internal lawyers, who will say, “OK, here’s what we want to accomplish. We want to divest this bundle of products.” Then, on my side, on the business end, I look at it and think, “OK, where’s an example of something similar we’ve done in the past, and how did we do it? How did we structure the compensation arrangement or the plan for that work?” And Keith, or the person in Keith’s role on the law firm side, is doing the same thing. He’s thinking, “Where have we done this for similarly situated clients in the past? How did we do it? What did it look like?” So when Keith and I come together, we’ve gotten the information from our subject-matter experts about what needs to be done, and then we start comparing what they’ve said and start talking about, “OK, from a business standpoint, what do we need to do to make this work?” We are both trying to find that proverbial “win-win,” right? So I’ll come into that conversation with what I’m expecting from a proposal, what I’m expecting to pay as a fee, for that piece of work. Based on the value that we’re hoping to get from that law firm’s expertise and work product, here’s what we’re expecting to pay. If that’s not lining up with what Keith’s firm is expecting to be paid, then we can have that discussion and try to understand, “All right, what are your assumptions? What is the work that you’re expecting to have to do? Where is it not lining up with our expectations on the client side? And how can we figure out how to make those two those two worlds align?”
Maziarek: Absolutely. There’s a level of transparency and communication that has to take place to help reconcile differences and expectations on both sides of the fence. And that helps to streamline the interactions between firms and clients. Usually the business collaboration will start once a decision has been determined that this is the right client-firm pairing for whatever the work is. Up until that point, we’re involved in the process from our respective sides of the fence. We really come together and start working together once we have an internal understanding and agreement on the assumptions. But you do form these ongoing relationships, where it just becomes standard operating procedure, like “Hey, we’ve got this new thing, call Justin. Let’s figure out our part, see where they’re at, and then get things going.” So you really get into a rhythm within that relationship where you understand what the expectations are going to be. You’ll start to figure out where the disconnects tend to be, which then lets you head potential problems off at the pass. If a partner, for instance, says, “Oh, we need to get back to them with XX,” I can anticipate and say, “They don’t want XX. They’re looking for Y. Trust me, we’ve dealt with this before.” This prevents wasting time going back to the client and proposing things that aren’t aligned with patterns established in prior dealings. So that streamlining that happens is another benefit of that ongoing relationship and the collaboration that develops over time.
What’s your advice to in-house counsel who are frustrated by certain pricing approaches from law firms, and vice versa? How can the two sides really make sure they’re on the same page?
Ergler: We are extremely rigorous about financials, about what we’re paying law firms, about the way we structure our process with significant matters. For example, the way we bid out significant new matters is competitive. If firms are not able to understand their numbers and understand the meat behind them, they’re not necessarily going to feel comfortable being aggressive and competitive with their fees. The flip side of that is when they don’t understand their numbers but they are still aggressive with their fees, which can lead to problems down the road.
In a sense, we really force them to take a hard look at their numbers, because we’re not asking them to just take the old-school approach of saying, “Just give us an estimate or what you think this might cost.” We’re saying, “We’re going to have you commit to this fee up front, based on this scope of work that we’ve defined.” And that is going to be the fee unless there is a significant material change in the matter at hand. On the back end of that, there is also the management of it, and since we have committed to that fee, there’s an understanding between firm and client that that’s what we’re going to be paying you so you need to manage accordingly.
From a client like GSK’s standpoint, from the outset, the rigor that we put firms through in getting the work comes with an expectation that we will hold their financial feet to the fire, so to speak – in a fair and transparent way. If there’s a significant material change to the work, we definitely work with the firms to make appropriate adjustments. And again, that’s why these relationships, like the one Keith and I have, are so important. It really gives the lawyers on Keith’s side the opportunity to say, “Hey, there’s been a few twists and turns and wrinkles that are going to cause us a substantial amount of additional work.” And then Keith can come to me and say, “Hey, here’s what I’ve been told is going on,” and I know it’s coming from a place of good faith. Then we have that conversation: “Based on these changes, in order for this to make sense for us going forward, we’re going to need to talk about an adjustment, and the range is going to be X, Y and Z.” But there’s going to be that rigor there. It’s not just going to simply be, “We’ll send you an overage bill that’s above and beyond our quote estimate that we had told you at the outset.”
Maziarek: When I hear from clients that they’re unhappy with a pricing approach, it’s usually one of two things. One, they’re looking for nontraditional approaches that the
lawyers at the firm are not offering or seem to be tone-deaf to. For instance, if everything comes back to billable hours, as opposed to proposing alternatives – if not enough thought is being given to different ways of approaching the work from a financial perspective, in order to give that client the peace of mind that they want – which, usually, is certainty. The client wants to know: “How much certainty can you give me around the cost and what am I getting for that cost?”
Other than just being dissatisfied with the firm’s ability or willingness to think outside the box and try and put together a financial proposal that’s more aligned with what the client’s objectives and needs for predictability are, the other issue that comes up is when firms provide an estimate despite massive uncertainty surrounding the actual scope. Somebody may give an estimate like, “We’ve done a couple of matters like this. The last one was about 150 grand, so this one should be about 150 grand.” But nobody says anything about exactly what was purchased or delivered for $150,000. Then things happen that are far different than what happened in that one data point that was used. An expectation was set with the client, and then the client gets a bill for double that. And the law firm goes, “Yes, well, it turned out to be much more complicated, because a month ago we had this happen or that happen, and we weren’t really anticipating it.” So there was no transparency or consensus at the front end surrounding the basis of estimate, so naturally the client will be upset when they’ve anchored on—and budgeted—for the agreed price that didn’t take into consideration the risk factors that could make that figure inaccurate.
Ergler: Over the years, in decades past, it used to be that the balance of power was more on the law firm’s side. Basically, they would just say, “Hey, we’re going to charge you by the hour, and can’t tell you what it will cost.” But now, with the pressures of the market and with clients having to control costs and gaining more sophistication, being able to understand the fees that the firms are charging, it has really forced firms to work collaboratively with the clients to achieve more appropriate and fees. So there’s this new world, right? But a lot of lawyers grew up in a world where it would be exact opposite. Getting the lawyers who grew up in that world to adapt to this brave new world can be a challenge.
What can you tell our readers about your new venture, the Legal Value Network?
Maziarek: We’ve been involved in producing the P3 Conference, focused on pricing, project management and process improvement in the legal services industry–in different capacities over the last seven years, and during that time it gained substantial momentum within this community of business of law professionals that we’ve been talking about. The numbers increased, as did the sophistication of involvement in of members of the community’s client-firm relationships. We’ve actually seen the event quadruple in size, in terms of the number of attendees. What’s been striking too is that every year you see the type of programming and topics that are on people’s minds evolving. The content has continued to be fresh and dynamic, and more people are getting involved.
We’d been operating for many years as a subgroup of the Legal Marketing Association, which has been a really great relationship. They helped us find our footing and have always been a great partner to us. But as we looked at the growth and evolution of the conference and community, we determined that these new roles in the legal industry – roles like mine and Justin’s, which are more oriented toward pricing and operations, as well as toward the interactions and collaborations between law firms and corporate clients – this area really started to feel like it had its own identity. It’s a new segment of the market. And we wanted to create a home that was very much dedicated to that and focused on growing that community of professionals. At a certain point, we felt like we’d reached the maturity level where this could become its own thing. So we wanted to leverage the platform that we’d developed with the P3 Conference and take it to the next level, to really create a home for the broader market of folks that are involved in these business roles.
So, that’s what the Legal Value Network is. It’s really an industry organization dedicated to furthering the evolution of the business of law in the commercial legal services sector. We wanted to create an environment that’s a balanced ecosystem, where we’ve got representation from firms and clients and the vendors that are helping to support the work we’re doing and the rules that we have. We are also inclusive of people at all skill and seniority levels, ensuring that people coming up through the ranks are supported, and that veterans have a place to connect and trade ideas. We’re not looking to be competitors or take anything away from other groups. There are some other great organizations in the industry, obviously, and we want to be complementary and be very collaborative with them. And so far we’ve gotten a lot of great feedback, and people are really excited by it.