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Outside Counsel Guidelines: The Key Issues Faced by Today’s Law Firms in Managing Billing Compliance

Posted by Gaby Isturiz on January 11, 2019 at 11:23 AM

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Bob Karau is the Manager of Client Financial Services at Robins Kaplan LLP. In the following post, Bob explores the topic of Outside Counsel Guidelines and how today’s firms are challenged with addressing volume, complexity and technology in order to achieve compliance.

Outside Counsel Guidelines(OCG) have been standard practice in the agreements between law firms and their corporate clients for quite some time, however in recent years, they have grown in both scope and complexity, making the task of managing them both overwhelming and elusive.

There are a number of issues that come into play when considering the task of successfully managing OCG and client relationships. Recently, I met with a number of colleagues from other firms to discuss this topic and it was evident that most firms are facing these challenges. Of course, with any challenges, there are also opportunities - and we’ll get to that. As the landscape for managing compliance changes, one thing is certain: if we truly desire to serve our clients in the best possible manner, we need to be able to comply with current client expectations as well as position ourselves for success in light of these emerging trends that are just beginning to take hold.

Discussions within the industry suggest that managing compliance is only going to become more of an issue as malpractice insurance carriers have begun to investigate and understand the problems that exist when firms agree to the terms of OCG without a clear understanding of everything that is included within the guidelines. There is a tangible danger for breach of contract and associated malpractice claims, undue exposure to potential costs and possible civil and criminal penalties to firms. Therefore, you need a policy, practices and processes to mitigate this risk and meet client expectations. Plain and simple, it’s a must.

Contrary to the consequences that can exist with non-compliance, there are also plenty of opportunities that can arise from proactively and successfully managing OCG. I have heard of one instance where a firm was actually given a premium discount, by their malpractice carrier because of the great work and risk mitigation that they had implemented in the area of OCG compliance and related risk management.

Now that we understand a bit about what is at stake for law firms in managing OCG and billing guidelines, let’s explore a few of the most pressing issues surrounding OCG today:

#1: Volume

OCG and billing guidelines are here to stay and it is likely that you will continue to see more of them moving forward. Our firm has definitely seen an increase in the number of guidelines, the frequency of OCG updates and the differing terms and expectations that various clients express through their guidelines. Aside from the proliferation of these documents, there is also an increase in client sophistication in the ability of clients to effectively monitor these guidelines.

#2: Complexity

In addition to the increase in volume of OCG, there are several other trends in the legal industry that add additional complexity to managing OCG. For example, many firms are faced with different types of guidelines for each practice area that they work in, in addition to the unique guidelines for each client. Additionally, some firms are beginning to define requirements based on the type of work that firms can do with other clients. For billing staff, it’s nearly impossible to manage compliance, let alone understand where the firm stands in managing it.

#3: Technology

Both an increase in ebilling and greater use of artificial intelligence (AI) and related machine learning technologies are issues faced by today’s firms. Depending on your point of view, these technologies either present a large challenge to firms or a great opportunity for firms to excel. If a firm has world-class talent, they also should have world-class support systems including billing and client services. From my perspective, the invoice that is sent to a client is like a report card that shows how we are performing on the client’s behalf (before we complete our work for the client and hopefully achieve what the client needs, of course). If we do not follow client billing guidelines and therefore produce an invoice that does not contain the information which the client has requested through the terms that have been mutually accepted, then we have already begun to fall short of client expectations. That’s never a good thing.

Despite these challenges, there are plenty of opportunities for firms to take a proactive stance to managing OCG and achieve billing compliance (and experience all of the rewards that come along with it). Stay tuned for more discussions on what’s stopping firms from better management of OCG and what can be done.

Managing Outside Counsel Guidelines 

Topics: compliance, billing guidelines, outside counsel guidelines

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