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From an advisory board of a Magic Circle firm, contract costs and SLAs

The UK-based law firm Eversheds posted on Legal OnRamp a document about its Advisory Board. The Advisory Board consists of senior members of legal teams and, apparently, the firm convenes it every now and then to share ideas on various topics. For example, one general counsel “went around the company and totaled up the costs of making penalty payments and settling disputes with suppliers and customers where the legal department had not been involved or had cleared up the mess because there no written contract.” Amazingly, that general counsel found that “these costs considerably exceeded the total cost of the legal team.” I too am amazed, unless there was one contractual penalty that was huge.

Another law department set up Service Level Agreements, specifying among other things the response times of the law department. “Far from putting added pressure on the team, as might have been expected, the SLAs in fact made their lives easier. The SLAs made the rest of the business aware of what was realistic in terms of response times and the team found that they were no longer called in at the last minute and asked to approve something 30 minutes before it was being printed.” If you have time and joint commitment with clients to hammer out Service Level Agreements, they can be useful (See my posts of May 14, 2005: standards of service; and July 9, 2007: example of Koch Industries.) and even with law firms (See my post of Nov. 24, 2007: levels of support promised to law firms who agree to accept a set fee.).

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