By Cash Butler and James Johnson.
Welcome to the first installment of the ClariLegal interview series as we explore what industry experts think about value when consuming or delivering legal services. These industry thought leaders share their views and insights into the concept of value and the value exchange as it relates to the legal industry.
We had the pleasure of interviewing Carl Herstein, Chief Value Partner at Detroit based Honigman Miller Schwartz and Cohn, LLP, at his office in Ann Arbor, Michigan. Carl has been a practicing attorney since 1976, having spent his entire legal career at Honigman. Carl was previously the chair of the Billing and Collection Committee; he notes how serving on the committee taught him the importance of efficiency, understanding client goals, and fostering communication between clients and the firm.
As Honigman’s Chief Value Partner, Carl is responsible for all aspects of value delivered by the firm, including pricing, process improvement, project management, and client concerns. In his role, Carl is both a resource for the firm’s partners and proactively works to champion the importance of providing value to clients, including the benefits of legal project management methods and tools, and innovations in the delivery of value and legal services.
Carl remarks how, as a mid-sized, Detroit-based firm, Honigman had a front row seat to view downturns in the Michigan automotive industry and learned to focus on delivering value to customers, long before the legal industry woke up to the importance of value in business during the 2008 recession. Carl notes how economic downturns taught the firm “the critical importance of being focused on …clients, being focused on efficiency, and providing great value”. Carl believes Honigman’s clients understand the firm is cost- and value-conscious through being lean and focused on client goals and values, and through its innovative use of project management and preferred vendor management tools and expert service firms.
We started the substantive portion of the interview by asking Carl the big question – what does value mean to him? Carl notes how value can mean “different things to different people”, pointing out how “sometimes people say it’s all about price…some people say ‘no, it’s something else’. Importantly, Carl cited eight factors, which Honigman also lists on its website, as defining value:
Outstanding quality – a necessary, but not sufficient, indicator of value
Proportionality – the firm understands client objectives and ensures that costs are proportionate to the business problem the client faces
Efficient resource allocation – the firm assigns the right staff for the particular kind of work, keeping in mind client preferences as to the degree of partner involvement
Service and communication – we are a service business and communication is the first requirement for good service
A commitment to help – the firm understands the client’s business and is passionate about achieving the client’s goals
Price – we want our client’s to feel that the price is fair for what they receive
Predictability – the firm is committed to providing a consistent experience, and the clients can rely on the budgets provided for the work that is within the agreed upon scope
“Something added” – the firm strives to provide clients with service they didn’t expect, such as identifying and handling a legal issue the client is unaware of before it becomes a problem to the client.
We asked Carl how his firm measures the delivery of value to its clients. Carl says that the firm conducts an annual survey of its attorneys to collect feedback they’ve received from clients about the services the firm provides. Carl also notes how the firm is employing project management tools to determine what services to provide to clients and to communicate to those clients about ongoing services. Carl cites how Honigman asks its attorneys to communicate with and report to clients “not just in terms of the monthly bills but as frequently as the clients would like … doing the kinds of things that clients are asking firms to do”.
Asking Carl about his opinion of how the concept of value is communicated in the legal industry, he notes how the industry can do a much better job at communication. Carl believes improving the communication process should begin during the training of new lawyers in law school and the first few years of practice. Law schools need to adopt courses in project management, process improvement, collaboration and legal innovation, and law firms need to continue those efforts, just like the efforts being adopted at Honigman. He notes, for example, how in-house counsel, who often serve as the client’s face to outside counsel, have also been trained in the adversary model of law. As a result, they sometimes believe that it is not appropriate to be fully open with their outside counsel counterparts since there is still “a bit of that adversarial relationship, as opposed to one where people are acting more like collaborators and have a trusting relationship with one another”.
Carl believes that, to achieve the service model both law firms and clients are looking for, clients should “be more forthcoming about not just the cost of services they’re willing to pay, but also their goals, their priorities, and how they want their matter planned”, while their lawyers must be straightforward in asking those questions, prompting clients to share this information in as much detail as possible, and then listening well to the clients’ answers, responding accordingly, and making use of the information to benefit the client as much as possible. Clients and lawyers need to work together as a collaborative team. That means open communication, honest feedback, planning work together, and taking the time now to understand the goals and priorities for the tasks that they have jointly undertaken.
We asked Carl about the fact that many clients use an RFP process to help determine who to hire. Carl says RFPs can be a valuable tool, and his firm uses them selectively when it purchases services too. But Carl cautions that developing a good RFP is not an easy task. It requires the purchaser of services to provide sufficient information to potential service providers so that it can get useful answers. Usually the more the RFP discloses about the needs and objectives of the purchaser, the better the responses. Responding to an RFP is an intensive and time-consuming process, and Carl relates that he has heard many firms express frustration that legal RFPs often don’t give enough information to allow firms to respond as well or as creatively as they would like. Good pricing requires good scoping and good scoping requires a clear understanding of what is to be achieved and how.
We asked Carl about how clients can be more effective at communicating the value they want to their legal service provider.
Carl believes the key is training legal service providers, as Honigman encourages its attorneys to do, to ask the right questions of the client at the inception of every matter, particularly if the client isn’t clearly articulating how the work the service provider is offering to do matches those goals and expectations. Carl emphasizes that it is also sometimes the case that a client may not understand all the circumstances or potential ramifications of their situation; as a result, law firms can be limited in their discussion of value with clients by the information (or lack thereof) at hand. Accordingly, Carl suggests that lawyers “keep constantly coming back to … what the client’s goals are, what the expectations are … given how the matter has evolved.”
Turning the issue around, we also asked Carl how his firm communicates the value it seeks from its own service providers. Carl notes how much of a challenge there still is in communicating with legal service vendors, although there has been a good deal of improvement in recent years. Carl believes the key to communicating with vendors is to be both clear and upfront with expectations about sought-after value. Carl cites the growing number of vendor selection and management tools that make communication with vendors much easier. Carl suggests defining a common “vocabulary” for both law firms and legal service vendors to work from, because without standardized terms and common meanings, it is impossible to fairly compare the products being delivered for the price charged. Honigman has moved to a preferred vendor program; while it is a non-exclusive model out of respect for client preferences, Honigman has carefully vetted and developed contractual relationships with key vendors, aimed at insuring that clients get all eight components of value that Honigman itself seeks to provide when employing third party vendors on a client’s behalf.
Finally, Carl again suggests improvements in the training of lawyers; Carl notes how law school education can “focus on the lone, heroic [lawyer] … who without the help of anyone else is able to win the case!” But Carl points out, in reality, the practice of law is more frequently a team effort requiring administrative and project management skills in addition to legal knowledge and training.
Opening the floor for Carl’s last thoughts, he cites the trend of clients viewing law firms as just another vendor in the supply chain as clients have become very conscious of the cost of legal services. But, while acknowledging that it is perfectly legitimate to hold law firms accountable for service, performance, price, and other aspects of value, just like other vendors, Carl also pushed back a bit on that trend, noting that lawyers are unique because they have a fiduciary relationship with their clients and a code of professional ethics. Carl also notes that, from a business perspective, law firms are restricted by partnership models that can impose constraints on law firms that service vendors in other verticals don’t have, because those other vendors are corporations or similar limited liability entities. Carl urges that clients should take advantage of law firms’ uniqueness compared to other service providers, and strive to benefit from the collaborative potential of the relationship that those unique factors are intended to foster.
a routine, repetitive legal matter may value price above all else to keep costs down, or may value exemplary customer service so that the recurring matter will be taken care of without the customer needing to spend any time or thought on it – think of a business that must regularly file legal applications in the ordinary course of business.
About CLARILEGAL
ClariLegal is a preferred vendor management platform for legal services that improves business outcomes. Made for legal professionals by legal experts. We match corporations and law firms with preferred vendors to manage the work through a fast and complete RFP and bidding process. ClariLegal’s platform allows all internal client segments to improve business outcomes across the board – predictability, time and money.
About Carl Herstein
Carl Herstein is a real estate attorney who has experience in the areas of finance, tax appeals, interest/usury, and equine law. He is well known for his writings on Michigan real property law and his authoritative work on Michigan usury law, which have been cited by the courts and utilized by practitioners. He has also worked extensively on the structure and documentation needed to settle complex real estate tax appeals. As Honigman’s Chief Value Partner, he works extensively on legal project management, alternative fee structures, and matters relating to the cost-efficient practice of law.