Legal operations is designed to be the bad cop when it comes to having hard conversations with outside law firms over billing issues, so embrace that role, Stacy Lettie, chief of staff to the general counsel at Organon Pharmaceuticals, said in a podcast. 

You need to have those hard conversations, because what you spend on legal services is the biggest cost area within your control, she said. 

Lettie recently joined Organon, a women’s health spin-off from Merck, after heading up legal operations at other organizations and practicing law in-house for two decades before that. 

Her first task is to get outside counsel spend under control by asking law firms to discount their rate in exchange for the business they get. 

“I am constantly shocked by the number of legal departments that simply don’t ask for discounts. And when you ask why they aren’t getting discounts, they say the firms didn’t offer them,” Lettie said in the podcast, hosted by legal technology company Logikcull. “My answer is, they’re not going to offer you discounts; you need to go out and get that.”

Lettie recommends starting big. “Not just a discount of 2%,” she said. “Ask for a minimum of 15% to 20%, depending on your volume. I always say, start at 20% and let them say no.”

If they do push back against a steep discount, agree to a lesser amount but ask them to hold the rate firm for two years. 

“That will give you a little time to recoup those [lost discounts],” she said. 

She also recommends rate discounts over volume discounts, because the latter won’t kick in if your legal spend doesn’t reach a certain level. 

“A volume discount seems giant when you see it on paper, but until you reach that threshold – of $1 million, $5 million, $10 million – you’re not really getting anything,” she said. 

Start with guidelines 

Lettie includes detailed billing guidelines as an attachment to the engagement letter she sends out to the law firm at the beginning of the relationship. 

It’s typical for the firm to push back on some stipulations, but by starting the negotiations with what you have in your guidelines, you set the terms of the discussion and shorten how long it takes to come to agreement.

“The law firm will come back with some changes, but my experience tells me that we do less negotiating on our end and therefore it takes fewer man-hours to execute the engagement letter,” she said. 

After your agreement’s in place, run spot checks on the bills the firms submit to make sure they’re not billing you for items not agreed to in the guidelines. 

“A law firm charged us over $1,000 because they were setting somebody up in Relativity,” said Lettie, referring to an eDiscovery platform that she said shouldn’t be a client cost. 

Copies, meals and video calls are other costs standardized guidelines typically disallow. “Those kinds of things are what I would consider to be overhead of the law firm or administrative expenses that should be covered in the fees they’re already charging,” she said.

Disciplined review

You want to check in regularly with the people on the team that review bills to make sure they’re being vigilant about kicking out disallowed costs before paying the invoices. 

At a previous company she worked for that typically spent between $5 million and $10 million on outside counsel annually, she saved the legal team about $500,000 after getting systematic about kicking out disallowed costs. 

“It’s up to us as legal operations people to be working with our attorneys and paralegals and whoever is reviewing the bills to make sure you have good bill discipline all the time,” Lettie said.

If you use an e-billing tool, embrace its full potential by writing rules or setting up flags to catch disallowed costs based on your guidelines and then automatically flagging, reducing or zeroing them out, based on how you set it up.

“Lean into your technology,” she said. 

When there is a problem, or when you want to press the firm about giving a discount, make sure it’s legal operations that does that. Not only is stepping into that role a key operations function, but it enables the in-house attorneys and general counsel to maintain a relationship with outside counsel that’s focused on legal matters rather than money issues.

“Take this conversation out of the hands of your attorneys as much as possible,” she said. “Let them have a relationship and manage outside counsel with respect to the legal work. Suggest to your GC, ‘Let me do this for you. Let me have the hard conversation,’” she said. “It’s probably one of the number one things we bring to our GC: the ability to have these conversations with our vendors and take responsibility for making these things happen.”

Intake

Her other priority at Organon is getting an intake system in place. The goal is to provide a single, standardized way for the company’s other functions to engage the legal team. Not only does a single intake enable her to amass data that can be analyzed on what the team works the most on, and for who, and on what kind of matters, but it reduces the time lawyers spend in upfront back-and-forth getting the information they need to do their work.

“Intake is so important because it’s the place where you can create these enormous and valuable lakes of data around what your team is doing and that can then inform what other pieces of technology you need,” she said. 

One area she’s not ready to pull the trigger on is contract management, because she’s still trying to gain visibility into the volume of contracts the company has and which function area generates the most of them, among other types of information like that. 

“Everyone keeps asking for a contract management system, but I can’t really get my arms around how many contracts we’re actually doing, or whether it’s just this one little piece of the department that’s doing them,” she said.