Rethinking Legal Costs: Aligning with Client Value

1. ACC’s Law Firm Project:Re-Connecting Costs to Value Michael Roster Former Chairman of the Board, ACC Retired CLO and Former Law Firm Managing Partner Susan Hackett Senior Vice President and General Counsel Association of Corporate Counsel (ACC)

2. ACC’s Law Firm Project • The Premise / The Proposition • What we envision and how it would work • A roll-out in October of 2008 at ACC’s Annual Meeting in Seattle

3. ACC’s Law Firm Project How did we come to this place? Will corporate counsel support this effort? How will law firms respond? • Everyone complains about the billable hour: firms, practice groups, and in-house departments want change • Turnover, balance of life and professional dissatisfaction • Revenue per partner/profitability at all time highs, while in-house departments getting leaner and more efficient • Law firm rates/costs continue to rise, with no readily apparent increase in value or service • Associate and partner incomes / media coverage of them

4. ACC’s Law Firm Project • What does history tell us? • Retentions used to be simple - one page bills and law firms’ costs and strategies unquestioned • Clients invest in in-house departments: part of their function is to better manage the spend • Clients begin to demand “detail” from firms: they look at efficiencies and comparatives • The rise of alternative legal services providers: legal services increasingly are “commoditized” • Clients share responsibility with firms for the billable hour system they now complain about

5. ACC’s Law Firm Project • Law firms made billable hours into a business model • Firms became focused on profit and less aligned with professionalism or client service • The views of the General Counsel: when and why are law firm services not aligned with client needs or the value provided? • The General Counsel increasingly is asked by senior management to control costs, reconsider the purchasing methodology and/or bring more work in-house

6. ACC’s Law Firm Project Once “average profits per partner” becomes the target, law firm structures and operations get distorted: • How “average profits per partner” gets managed • How associates are trained (or not) • How associates are retained (or not) • How clients are served (or not) • How firms compete for clients, talent, reputation • How the business model functions

7. ACC’s Law Firm Project • The movement toward mega firms • The challenges for medium and smaller firms, as well as their competitive advantages • The alienation of talent and loyalty and loss of personal satisfaction

8. ACC’s Law Firm Project Audience Discussion and Questions: • Have we identified the right problems? • Have we articulated an approach toward a solution? • Who stands to gain and who stands to lose? • How can your firms consider these developments and take advantage of them? • How will the marketplace react?

9. Thank you for your time and attention.… Susan Hackett: hackett@acc.com 202/293-4103, ext. 318