Seven Steps to Improve Law Firm Compliance With Outside Counsel Guidelines

Back in the day, law firms and clients usually set forth the terms governing their relationships in standard engagement letters. But more recently, as bargaining power has shifted away from law firms and toward clients, organizations have begun to document their expectations for outside counsel in increasingly long and detailed guidelines.

While these expanded guidelines can help businesses better predict their legal budgets, they can be a thorn in the side for law firms, given the sheer volume of stringent rules and the lack of standardization among clients. If firms make so much as a single misstep during the billing process, the client may reject their invoices, adding significant time to the payment cycle or leading to missed opportunities for collections.

Surprisingly, Firms Lack Procedures for Follow-Through

Earlier this year, HBR surveyed large, global law firms regarding their business acceptance policies, including their procedures for outside counsel guidelines. Thirty-one firms responded. Ninety percent of those firms have a centralized process for initially reviewing outside counsel guidelines. However, fewer than half — only 48 percent — of all respondents have a mechanism for maintaining those guidelines or engagement agreements within a centralized repository.

This lack of centralized access is a key gap in the guideline compliance process. In most firms, there is no standard procedure for making the client’s unique guidelines visible to lawyers and administrative staff. And, because the majority of these documents are sent to the originating lawyers rather than to the general counsel’s office or the business acceptance department, firms run the risk that no one will consider the particulars of the client’s guidelines until the client rejects the first bill.

Adopt Workflows That Keep Guidelines Visible

New technology has been released in the market to handle the standard workflow for the review and approval of guidelines. However, most firms are slow to adopt new technology. While awaiting wider market adoption of these new software tools, law firms should create workflows that ensure better awareness, compliance and, down the line, higher collections. The key to successfully managing outside counsel guidelines and alleviating this rising source of tension between law firms and their clients is to increase the guidelines’ visibility and push validation earlier in the billing cycle by implementing the right combination of people, processes and technology.

Here are seven steps that law firms can take to start improving their handling of outside counsel guidelines.

1. Designate a team — if it doesn’t already exist — to handle all outside counsel agreements from initial tracking through review and approval. 
2. Require all partners, including lateral partners, to submit outside counsel guidelines to the designated team for review as soon as they receive them, preferably in parallel with the conflicts check process.
3. Before agreeing to any representation, the general counsel should evaluate whether the client’s guidelines are impossibly restrictive, such that the firm should not accept the business. Originating partners should not make these decisions on a one-off basis.
4. Publish a copy of the approved guidelines on the firm’s intranet or in its document management system so that all lawyers involved with the client can readily locate and review them.
5. Distill the key points of each set of guidelines in a summary document. Store the summaries in a centralized repository and require lawyers working for each client to sign an acknowledgment that they have read the client’s guidelines summary.
6. Within the firm’s billing system, set up automated validation rules based on the guidelines to warn lawyers about possible guideline violations so they can address them, whether through a conversation with the client or an adjustment to the invoice, before submitting a bill.
7. Gather and report data about the number of bills rejected and amount of collections lost through bill adjustments or write-offs as the result of guideline infractions. Use these metrics to encourage investments in appropriate tools and technology that can help manage and improve your guideline compliance process.