Most companies that I’ve worked for have tried to avoid arbitration clauses. Some felt that with arbitration companies would be too quick to file for arbitration rather than try to resolve the issues internally. Others were concerned that the results wouldn’t be strictly on the facts. If we ever did agree on one, and that was very infrequent, it could only be used after the results of a full escalation failed to reach agreement and it would not exclude the parties ability to litigate it (meaning non-binding arbitration).

This is a compelling idea. Next time you are in a negotiation and don’t have enough bargaining power to excise an arbitration clause, consider adding a dispute resolution clause as a way to inoculate your client against the risks of a bad arbitration decision. Invoking the structured settlement discussion and escalation process in this clause might just be the ticket to avoid an unhappy outcome.

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An Interview With Deborah Gordon, Law Firm Efficiency Expert

Today we are interviewing Deborah Gordon, a health law expert and partner at the full service law firm, Seyfarth Shaw. Deborah is one of the most innovative law firm attorneys I have met, and is on the cutting edge in using advanced management techniques taken from the non-legal corporate world to spur efficiency in the legal arena.

Please tell me a bit about your firm and your practice area.

Seyfarth Shaw (“Seyfarth”) has approximately 750 lawyers practicing in Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Sacramento, San Francisco, Washington, D.C., and Brussels, Belgium.  As a full-service law firm, Seyfarth provides a broad range of legal services, including Labor & Employment, Employee Benefits & Executive Compensation, Corporate & Finance, Tax, Real Estate, Intellectual Property, and Litigation.  I am the Vice-Chair of the Corporate Department and I Co-Chair the firm’s Health Care Practice Group.  My practice is focused on general business transactions, such as finance transactions and acquisitions, as well as regulatory and compliance matters.

Your firm is the only one I am aware of in the legal field that boasts substantial experience in Six Sigma, Lean and process improvement. Why is this the case?

About five years ago, Seyfarth invested in learning about and integrating Six Sigma and Lean principles at the encouragement of a few clients.  We invested in training and were impressed with what we learned.  We decided that Lean Six Sigma was the best approach for our firm and realized it could have significant impact for our firm and our clients if we applied it to our service delivery model.

We also understood that the traditional application of these principles was not something that easily applied to the legal services delivery model.  We spent several years tailoring the approach to fit legal services, an approach we now call SeyfarthLean.  Today, we have 75 in-house certified Green Belts and we have applied SeyfarthLean in every practice throughout the firm to deliver quality and efficiency that also delivered client cost savings ranging from 15–50%.  I received my Green Belt in 2006 and have utilized Lean Six Sigma principles in both internal and client projects.

What are some examples of how you’ve assisted clients in their processes that one does not normally find in the typical legal representation?

One is process mapping.  Process mapping is a critical exercise in our SeyfarthLean approach that lays the foundation for increased efficiencies, reduced costs, and other desired outcomes.  A process map lays out, step by step, the process followed in handling certain types of matters.  Each stage is broken down into individual tasks.  Using historical matter data, we take a look at the typical timekeepers and estimated time taken to perform tasks.  We then critique that process, and identify ways we can be more efficient and cost-effective.  Areas that are driving the wrong results—inefficiencies, higher costs—are re-engineered and a new process is created.   We have applied process mapping throughout our practice areas to develop best practices for the benefit of our clients.  Most typical legal engagements are not as data and process driven.

The second is project management.  We worked closely with a client to develop an extensive and detailed plan for organizing, structuring and approaching the project.  Leveraging the skills of one of Seyfarth’s client-facing project managers, our team partnered with the client to review organizational structure, critical path and resource accountabilities while establishing effective reporting protocols.  We then participated with the client in presenting the project plan, goals and the implementation strategy to multiple team leads across many different workstreams.

What initiatives are going on at your firm in the area of knowledge management and associate training and development?

As we apply SeyfarthLean, we continually seek ways to improve our ability to collaborate with and enhance communication internally and with our clients, as well as more efficiently provide services.  One outcome of that is advanced knowledge management tools, including SeyfarthConnect, our internet-based client services information system.  Through SeyfarthConnect, clients gain real time access to information that is pertinent to our work, including documents, budget, correspondence, calendars, schedules, discussions and almost anything related to specific clients or matters.  Furthermore, our team relies on it as a robust knowledge management tool that helps them access information more quickly and effectively to more efficiently work on client matters.  We have employed similar, internal databases of documents and resources to aid in knowledge management.

With respect to training, we are in the process of training all of our attorneys and staff on SeyfarthLean in 2010.  Many of our attorneys have already been trained.  The training includes an overview of Lean Six Sigma and the DMAIC process (Define, Measure, Analyze, Improve and Control) that we use to drive efficient, high-quality solutions for our clients.  We also regularly engage in practice development training and CLE programs for associates.  In the Corporate Department, for example, we are concluding a year-long program of the anatomy of a deal, providing a detailed focused of an M&A deal.  We are planning a continuation of that program into 2011 with the focus on financing transactions.

Do you find that your unique approach better positions your firm in the new alternative fees environment?

SeyfarthLean provides us a unique platform on which to provide alternative fees.  It allows us to base alternative fees on a true understanding of the costs involved in providing services in the most efficient manner, through extensive data analysis and our historical experience providing those services.  Additionally, it provides clients the assurance that when we offer them a flat fee, we are not simply pushing the work down to the most junior staff available.  Our flat fee offerings, for example, are based on right-sized staffing models that drive the greatest result and value for our clients.  Because of this, we have had success with predictable alternative fees.

Thank you, Deborah.

I think one key method of evaluating who the high performers are within a procurement organization is to use contract metrics. It is important to be able to determine the quality of deal provisions for key procurement concepts over and above simple savings measurements. This approach provides a much better picture as to who is truly excelling in their work. Provisions to measure that immediately leap to mind are:

• Budget Certainty Pricing
• Implementation Deadlines
• Price Growth Controls
• Escalator Clauses
• Compliance with Specifications
• Deal Cycle Time
• Apples to Apples Comparisons (i.e., for the same type of legal service performed in the past, measure the cost savings on a per project basis)

Individuals who consistently excel in these areas are of tremendous value to a company.

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1. Goods/Services: What is actually being sold? Do we have a clear description on paper?

2. Cost. What is the fee? Have we worked out the payment schedule, expense reimbursement, and invoice issues?

3. Timing. When does the good/service need to be delivered and completed?

4. Customer Work. What does the customer need to do to allow you to be successful?

By establishing clear expectations as to these issues up front, you can speed up cycle time and close more sales deals faster while ensuring a long term, happier customer for future repeat business.

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Another problem is “Self Confirmation,” where we ignore data that does not support our fear, and only embrace data that does back our contentions. A good example would be the failure to think about the greater number of people who die from normal flu outbreaks instead of the swine flu.

Finally, we often engage in “Confirmity,” meaning that we go along with what everyone else is concerned about, following along with the mass hysteria as part of the chain reaction.  Listening to nonstop reports about swine flu is certainly causing this confirmity error.

All 3 of these cognitive errors happen all the time when we contract.  Let’s consider a few examples:

Contrast: We might not care about focusing on the riskiest contract terms, like the goods/services description, and instead focus on less risky terms, like limitation of liability, because in all of your past deals you focused on less risky terms each time.

Self Confirmation: In this vein, we might only think about what kinds of damages the other side might sue us for, so we again only hone in on limiting our liability, even though a dispute is much more likely to occur over whether or not the goods and services met expectations (which can be prevented through an excellent goods/services description in the contract).

Confirmity: Moreover, we might be focusing on the contract’s limitation of liability clause because we were trained to do so.  We are simply following along with how more senior negotiators handle agreements, and, matching their approach, we fail to focus on other issues of greater importance.

Try looking for Contrast, Self Confirmation and Confirmity in your daily life.

Do you see it happening?

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(1) Insufficient Understanding of Customer.  Do not fail to take the time to understand the customer and the specific business needs the customer has, in particular, focusing only on explaining your products and services without trying to guide the customer as to how a particular product/service can solve her problem.  As TechCrunch recently pointed out, make your sales explanations simple.

(2) Focus on Customer’s Budget, Not Customer’s Needs.  Do not focus on how much the customer has in the budget or wants to spend.  Instead, focus on the customer’s pain, and explain how your good/service will alleviate her business suffering.  This will do a much better job of motivating the customer to meet your price.

(3) No Hard Deadlines.  Do not show an unwillingness to agree to hard deadlines for delivering products and completing services, making it likely that the customer’s project will not come in on schedule.

(4) No Clear Fees.  Do not show hesitance when asked to agree to a definite price that can’t be increased at a later date, making it likely the customer’s project will come in over budget.

(5) Unclear Customer Responsibilities.  Do not do a poor job of explaining what the customer needs to do to be able to incorporate and fully use the goods/services (such as necessary platforms or site preparation).

(6) No Access to Key Stakeholders.  Provide access to everyone on the seller’s side who needs to sign off on the deal.  If you are missing your key people, this results in unnecessary emails, numerous contract versions, and fruitless meetings.  The best situation is where all necessary stakeholders on both sides get on the phone, review the contract language, agree on revisions, and close the deal.

(7) Long Contracts.  Do not send unnecessarily long contracts which mean more work for everyone in reading, revising and negotiating the language.  Even the most complex deals can usually be covered in a relatively short number of pages.

(8) Unclear Contract Language.   Do not send contracts full of ambiguous language which are not clear as to exactly what is being purchased, at what price, following what deadlines, and specifying the customer’s duties, if any.

(9) One Sided Contracts.  Do not send contracts heavily weighted in favor of the seller, so that time has to be wasted and legal fees spent negotiating a compromise version.

(10) Not Moving the Ball Forward.  If you send a customer an email, it should only be to elicit specific, necessary information, or to fully respond to a customer’s request for information.  That’s it.  Any other email wastes the customer’s time.  If you have a conference call, you should have a prepared agenda acceptable to both parties and you should have everyone on the call ready to accomplish all agenda items.  Too often, a key person is not available, or an essential stakeholder is unprepared to discuss and execute a key topic.  Avoid this.

These mistakes make negotiations interminably long, or cause them to fail, mainly because the seller spends so much time creating complexity that the seller is unable to clearly describe the deal.  By not answering key questions at the outset, the transaction costs for deals end up being too high.  In particular, legal fees are greatly increased because the lawyers have to spend so much time tunneling through the complexity.  Also, the more complex you are in describing your deal, the more you give the lawyers to argue over, which means more time and more money.

Instead, focus on keeping everything simple.

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Web 2.0 for Contracts: Where to Go, What’s Free, What Costs Money

Get up to date on cutting edge web sites in the Law 2.0 world.  Jason Mark Anderman, President of WhichDraft.com, will provide an overview of some of the latest and best document, contract, and matter management sites for your use, as well as a demonstration of how they can be used in the course of your day to make you more productive.

Now people in Silicon Valley may be amused by me saying “Web 2.0,” given that the term seems to be gasping for its last breath, but in the legal world we’re a bit behind the times when it comes to technology.  After all, for us lawyer types, Web 2.0 is still trying to take off!

So here are the sites I recommended during my presentation (somehow WhichDraft.com magically landed first on the list).  Read ‘em and weep:

Free Sample Contracts and Contract Creation Tools

WhichDraft.com

First Draft 

Free Sample Contracts

JDSupra

ScribD – Contracts

DocStoc – Contracts

Social Media

Legal OnRamp (Want to hang out with the most cutting edge lawyers around?  Legal OnRamp is the social media web site for lawyers and legal professionals)

Premium Contracts

MyLawyer (this is an impressive site, contracts and legal service integrated in one package with a flat fee; sadly, only offered in the UK; the owner is a company named Epoq that does offer a virtual law firm platform in the US called Direct Law)

Practical Law Company (tremendous resource for contract knowledge management)

Premium Matter Management

Mumboe (great Software as a Service (SasS) matter management premium site)

Premium Confidentiality Agreement Tools

BaselineNDA (Pretty amazing application, with some limitations, it can read and mark up a confidentiality agreement for you)

Not Web 2.0, But Free and Useful Sample Contracts

OneCLE

The Electric Law Library

YourFreeLegalForms.com

David directs the Ascendant Consortium, a group of elite, independent consultants with an unmatched record of success helping individuals and companies achieve their goals.  Prior to being tapped by the Ascendant Consortium, Mr. Fields was the lead partner at a national management consulting firm where his work included optimizing growth strategies and moving companies into new markets.

During the call, we covered the following topics:

I. KEYS AND PRINCIPLES: BUY, PAY, GET, DO, TRUST.   The key business issues that need to be clearly spelled out in a contract are “Buy, Pay, Get, Do, Trust.”  David speaks about the sales concepts of “Getting to No” and “Net Preference”.  You can learn more about these concepts in the “Insight” newsletter.

1. BUY – What Is Being Bought/Sold?

The Discovery Phase: Vendors often use unclear terms such as “Solution” or  “Server”.  Customers should either know exactly what they want, or set up a low price initial phase where the vendor works with the customer to design a specification.  Vendors should, based on their own internal sales constraints, use a discovery phase to be able to focus in on what the customer cares most about.  Remember, at the end of the day, the only possible things to sell are a good/product/deliverable, or a service.

2. PAY – What Is the Price?

Clear Budgeting and Forecasting Is Essential. Vendors often demur on providing an exact price, often because there is lack of clarity as to what is actually being sold.  The price often ends up being a “moving target” during negotiations and even after the contract is signed, which causes internal budgeting problems for the customer.

3. GET – When Will the Deliverable/Service Be Provided for the Customer’s Use?

There Must Be a Clear Due Date for Performance. Vendors often don’t provide a clear completion date, or will provide a date at which point some of the work will be done, but not all, so the customer is still not ready to go, dashing customer expectations.

4. DO – What Must the Customer Do So the Vendor Can Hit the Deadline and Not Add More Charges?

Clear Customer Responsibilities Must Be Spelled Out.  Avoid vague language such as “Customer will provide all reasonable and necessary resources” and focus on clear language such as “Customer will provide a 10 foot by 10 foot room with a temperature maintained between 50 and 80 degrees at all times, and provide electric service and a T1 Internet connection.”

5. TRUST - Is the Contract Clear as to the Above Issues?
A Clear Contract Prevents Disputes. If not, the negotiation can take a great deal of time, involving the exchange of many versions and many meetings, ultimately resulting in a contract with language that involves a series of compromises.  A contract that is clear prevents disputes and creates trust because if, at a later date, one party makes an unreasonable demand of the other, the parties can then review the contract and find that the unreasonable demand is not allowed.

II. MANAGING YOUR LAWYER: NEGOTIATING BUSINESS TERMS &  CONTRACT VERSIONS.

1. There Is Nothing New Under the Sun – The Salesperson and Customer Need to Know Ahead of Negotiations:

1.1 Buy, Pay, Get, Do and Legal Positions: What Are Your Positions on What Is Being Purchased, at What Price, for What Delivery Date, What Do You Need to Do, as well as What Are the Legal Positions?
1.2 The Lawyer: Discussions Should Involve The Lawyer or a Way to Manage the Lawyer if Legal Approval Is Necessary.
1.3 Backup Clauses: Backup Positions Should Also Be Decided, Leaving the You Prepared for Almost all Negotiating Possibilities.

2. Take the Lead: The Client Should Take the Lead on Negotiating Business Terms Issues, Not the Lawyer.

3. Decide Level of Risk: The Client Should Ultimately Decide Legal Terms Involving Risk Such as Limitation of Liability and Indemnification.

4. Too Many Versions, Too Much Time: Once the Client Sees Many Contract Versions Exchanged, or Too Much Time Has Elapsed, the Client Should Ask for a Negotiation Conference Call With All Stakeholders to Try and Agree on Final Language and Close the Deal.

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