By Cash Butler and Jeff Kruse.
Tony LaMacchia, Director of Legal Operations and Technology, at Freeport-McMoRan, recently took time to chat with us about the meaning of value in delivery of products and services in the legal industry. Tony has been with Freeport-McMoRan, an international mining company based in Phoenix, Arizona that employs over 27,000 people, for ten years. Before becoming Director of Legal Operations and Technology, Tony was the Director of Global eDiscovery and Litigation for Freeport-McMoRan. Tony knows value. As proof, he and his team at Freeport were recently nominated and among the finalists for an Association of Corporate Counsel (ACC) Value Champion Award for litigation cost savings through technology for generating a 2.9M return on investment (ROI) in 18 months.
Delivering Value Has Been His Focus from the Start
Providing value to his clients has been a central focus for Tony LaMacchia through-out his career. Upon graduating law school, Tony went to work for a mid-size general practice law firm in New York. At this firm, he handled a variety of matters from estate planning and divorces to representing small local businesses. His diverse practice right out of law school “set the foundation” for how he would view value in legal services throughout his career.
During his time working for this law firm, Tony represented “real people with real problems.” Because of the nature of his practice, he had to be “mindful that value and cost were always a concern” for his clients. So, he recognized early in his practice that he had to “work smart and work efficiently and pay close attention to the billable hours.” Tony has carried that mentality with him through-out his career into eDiscovery and legal operations.
Start Up
After of couple of years as a general practitioner, Tony got the extraordinary opportunity to work with some software developers who were developing a business-to-business online marketplace for healthcare. Tony left the law firm to become legal counsel for this startup enterprise. After exerting a lot of sweat equity to help get the business off the ground, eBay acquired the company. Through this experience, Tony learned to appreciate the importance of being efficient and effective working closely with the business to provide legal services.
Contract Positions and Return to Law Firm Practice
After eBay bought the startup, Tony eventually took a contract position with a financial services firm in the midst of a M&A project, and Tony helped them complete the project.
Again, Tony focused on being as efficient as possible in providing legal advice for the company. Tony then helped a large inventory management software company where he handled a variety of their legal matters. As with his prior positions, efficiency and efficacy were keys to his success in that position as well.
Ultimately, Tony returned to private practice at another law firm. He practiced at that firm for a number of years before a headhunter reached out to recruit him to join Freeport-McMoRan. Throughout his journey from first year associate at a law firm in New York to going in-house at Freeport, Tony has been mind-ful of “costs and expenses,” and he “always wanted clients to see him as providing a great service at a reasonable cost.”
Cost Consciousness In-House at Freeport
When Tony joined Freeport, he took his cost-conscious approach to legal service delivery with him. Soon after he started at Freeport, Tony began looking at how Freeport’s legal expenses through the same value-based lens he applied throughout his career. He helped Freeport decrease the number of vendors providing products and services and by doing so, was able to reduce spend on litigation and litigation-related expense by over 15% in just a couple of years.
Tony also brought with him an emphasis on efficiency in the provision of legal services. Because he believes vendors need to be efficient in providing services, Tony implemented an annual vendor vetting process. He also iproved the outside counsel management process to better control litigation expenses.
Tracking Metrics to Determine and Refine Value
One of Tony’s successes has revolved around efforts to track and measure metrics to help Freeport “define and refine value” in legal services. In addition to the annual vendor vetting process, Freeport also conducts an annual audit to “look at the processes and numbers to see how it can improve.” Tony notes that being able to improve savings year-over-year is difficult because the data footprint is constantly increasing, but nonetheless, they have been successful in achieving improvements every year. To achieve continued savings, they have had to be creative with data processing and hosting, along with alternative fee arrangements with law firms.
Trust, But Verify
Several times during our conversation, Tony emphasized that he follows the “trust, but verify” model of management. He was quick to note that Freeport is content with the services provided by outside counsel and by their vendors, but through the annual audits, Freeport is able to track and measure yearly improvements.
For instance, as part of the continuous improvement philosophy, Freeport upgraded its e-billing system and an improved its legal hold preservation platform as well. Additionally, Tony’s team has recently transitioned away from multiple different external vendors and implemented a hybrid vendor/in-house eDiscovery solution. By bringing the process in-house, they save on outside hosting and processing fees.
Tony’s experiences before joining Freeport have heavily influenced how he views managing outside counsel. One part of his approach to “trust but verify” involves scrutinizing law firm invoices. But he emphasized that if you have open dialogues with outside counsel, you can avoid most problems relating to invoices and billing.
Impact of the Pandemic
As for the importance of open communication with outside counsel, Tony noted that in the early stages of the pandemic, Freeport entered an “austerity phase” in which they delayed non-essential legal work. To do so, they needed to communicate openly and clearly with their law firms and vendors. They asked their firms “to get creative in their cases” to control costs during the pandemic. By doing so, Freeport was able to reduce legal expenses on some matters by as much as 80%.
Lean Legal Department
Freeport’s incredible success in reducing legal expenses and improving efficiencies is particularly impressive given the small size of the legal department. There are only 13 lawyers in the legal department and only around 20 other legal service professionals in the legal department. Thus, the department has to run efficiently and find ways to improve continuously.
Quality Matters When Looking at Value
In Tony’s view, “value cannot be determined just in terms cost or price.” As he put it, “if they are happy with the service, whether through a law firm or a vendor, but the price was a little higher than some others, it is still valuable.” To Tony, “value includes results.” Value includes “quality representation, quality results, and mindfulness of expenses.” Tony looks at value as “great law firms and great vendors performing great work.”
Measuring Value
From Tony’s perspective, “some parts of the value equation can be quantifiable by looking at metrics like dollar cost savings or a period of time, but a large portion of determining value is not as easily quantifiable. It is subjective.” For example, paying a relatively large amount to settle a litigation could be of great value if the settlement eliminates high monthly legal fees and expenses, ends business disruption, brings closure and certainty, and eliminates an unpredictable risk. While some of that “value” could be measured by the reduction in monthly costs, there are many other aspects of that “value” that “you just can’t nail down” because those benefits are “more sub- jective but nonetheless still important.”
Aligning Value with Business Objectives
Tony was quick to note that when discussing the concept of value, you should look at it from a variety of perspectives. Value is not just “value to the legal department.” The concept of value also includes “value to the sharehold- ers and value to the corporation.” Therefore, to assess “value,” you need to “align the legal outcomes with the company objectives.” For example, Tony explained that it might be best for a company to settle a significant litigation to bring finality and end uncertainty. In doing so, the “legal outcome” aligns perfectly with company goals and shareholder objectives.
Dedication to Improving Processes and Cutting Costs
Tony is dedicated to demonstrating value to Freeport by improving processes. During one mass tort litigation, Tony refined data hosting processes and significantly reduced the monthly cost of data hosting by eliminating outside vendors from the process and brought the data in-house.
Deliver Value or Lose the Business
Although relationships still matter to some degree in law firm hiring decisions, those relationships are not enough if the firms are not delivering value. Tony noted that the company will part ways with firms, even those who have represented the company for years, if those firms do not deliver great service and great results.
As an example, he mentioned a firm that sent an invoice for over $2 million 4 dollars and 38 cents that contained no detail. It was essentially a pre-1970s “for services rendered” invoice with no descriptions of the work per- formed, the hours invested, or the value provided to the company. Naturally, the company was not pleased with a bill that size without any details. Instances like that lead to uncomfortable discussions between providers and clients and can strain relations. The law firm had obviously not evolved to meet modern billing practices.
Advice to Legal Service Providers
Tony has a lot of advice for legal service providers and law firms. First, there can be value in “client development” meetings if those are handled properly. The value in social-setting client development meetings is in getting to know each other at a deeper level than in group meetings in conference rooms.
Second, for law firms and vendors who have an existing relationship with a client, those firms and vendors need to continue to streamline processes and innovate. They also need to communicate with their clients that they con- tinue to innovate and refine. However, those providers need to communicate their improvements in a way that is “not just another sales pitch.” The communications need to be done better than the typical “e-mail overkill.” As Tony notes, in-house lawyers rarely have the time to invest in sales-pitch e-mails.
Third, the most important message a law firm or vendor can provide is “exactly what can you do” for the company/prospective client. Outside vendors and firms should summarize precisely what they can do and how they are different from the competition.
Fourth, firms and vendors need to be creative in finding additional services they can offer their clients. They need to be looking for additional value they can add that will strengthen their relationships with their clients.
Example of Adding Value
Freeport’s search for a legal hold platform served as a good example of how a vendor could show additional value without sending spam e-mails. During the search for a new legal hold platform, a large eDiscovery vendor demonstrated a willingness to add value to an existing relationship. Some of Freeport’s other vendors used that eDiscovery vendor’s data processing and hosting software. That vendor suggested that instead of simply looking at a legal hold solution, that Freeport consider bringing the database in-house. As part of that offer, the vendor volunteered to include the legal hold solution at no additional cost. By bringing that database in-house, Freeport was able to reduce their legal spend by over seven figures per year. Plus, Freeport was able to streamline processes and eliminate reliance on other vendors.
The Future of Value
Tony combines the views and skills of a businessperson who is also a lawyer. His perspective on the future of the practice of law revolves around that combination of business and legal viewpoints. From that combined perspective, over the last five to six years, the “role of big data has been evolving.” To grow and evolve, “companies, including law firms and legal vendors, have to deal with their data.” They “need to understand and use their data or they will get left behind.”
The “pandemic forced companies to focus on how employees work from home.” The new environment comes with an increased data footprint. Now, companies have more data from video conferencing, cloud data, and other new ways of communicating. All of the new data sources have increased cybersecurity and privacy risks that companies must address. For vendors and law firms to be successful, they need to embrace these changes and challenges and not “go kicking and screaming into this brave new world.”
A Career Focused on Value
Tony has focused his entire business and legal career on delivering value to his internal and external clients. His views on the business of legal value-chain have evolved over time. His early experience in private practice in New York and his work with the Silicon Valley startup shaped his view that value requires great service and great results at reasonable costs. Tony has used that perspective as an eDiscovery and legal operations expert to streamline processes, eliminate vendors, and reduce legal expenses at Freeport. Tony has been a true champion for value throughout his career.
Disclaimer: The statements of the interviewees in the Value Article Series are opinions and observations of a personal nature and do not necessarily reflect the opinions and policies of their respective employers.
About the Authors
Jeff Kruse (T) is President of Kruse Consulting and Dispute Resolution LLC where he consults with law firms and legal departments to help them operate more efficiently through technology implementation and Lean Six Sigma to improve their bottom lines. He specializes in assisting firms and companies on the RFP process. www.kcadr.com
Cash Butler (B) is the founder of ClariLegal and R3Ex, a consulting organization focused on bringing efficiency and effectiveness to legal operations. A seasoned legal technology innovator, Cash has over 18 years of experience in the legal vertical market, primarily working in expert in legal operations, legal vendor man- agement, pricing, and project management.
ClariLegal is a preferred vendor management platform for legal services that improves business outcomes. Made for legal 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. Learn more
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