Legal Leaders Exchange - Podcast episode 21

How DHL is using data, annual reviews, and billing guidelines to tackle rate negotiations

Jennifer McIver of Wolters Kluwer ELM Solutions spoke with two of DHL’s key legal operations professionals — Tiffani Hamilton-Huynh, Director of Legal Innovation, Analytics & Technology, and Catrine Frazier, Legal Operations Specialist — about how DHL manages law firm costs when the industry is facing steadily increasing hourly rates. They discuss DHL’s approach to law firm collaboration, as well as the importance of billing guidelines in legal spend management. This episode was recorded live from the CLOC Talk Studio at the CLOC Global Institute 2024 in Las Vegas.

In this episode, you will hear more about:

• Using data to inform negotiations with law firms and arrive at rates that are fair for both the legal department and firms
• Conducting periodic law firm reviews that give firms the information they need to improve the service they provide
• Change management processes that build trust and help attorneys adjust to new or evolving processes
• The role of benchmarking and internal reporting in managing law firm relationships
• Implementing and updating billing guidelines that help meet organizational goals and ensuring that law firms understand them fully

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Transcript

Greg Corombos

Hi, I’m Greg Corombos. Welcome to “Legal Leaders Exchange”. This podcast series was created to deliver insights on optimizing legal operations for corporate legal and insurance claims professionals. For today’s episode Jennifer McIver, Director of Legal Operations & Industry Insights at Wolters Kluwer ELM Solutions, invited two legal operations professionals from DHL —Tiffani Hamilton-Huynh, Director of Legal Innovation, Analytics & Technology, and Catrine Frazier, Legal Operations Specialist. Together, they will be discussing how DHL is negotiating rates with their law firms in a world of steady rate increases, and how the company is performing annual law firm reviews and implementing billing guidelines to effectively manage legal billing and rate increases. Recording live from the CLOC Talk Studio at the CLOC Global Institute 2024 in Las Vegas, let me welcome Jen, Tiffani and Catrine.

Jennifer McIver

Thank you, Greg. It's incredible and energizing to be recording on site here at CGI 2024. And I'm honored to be sharing the mic with two veteran CLOC attendees and legal ops professionals, Tiffani and Catrine. Thank you very much for being here today.

Catrine Frazier

Of course, pleasure to be here.

Tiffani Hamilton-Huynh

Yeah, thanks for having us.

Jennifer McIver

Before we get started, I think it'd be really great for those listening to know a little bit more about you, the company that you're with, as well as your role within the legal operations team. And also a little bit about the structure of your operations team and your legal team. So, I'll start with you, Tiffani.

Tiffani Hamilton-Huynh

My name is Tiffani Hamilton-Huynh. I am the Director of Legal Innovation, Technology and Analytics at DHL Supply Chain. I've been with a company for about eight and a half years now.

Jennifer McIver

That is awesome. And what is your legal ops team look like? How big is it?

Tiffani Hamilton-Huynh

For my team, we are over the Americas region. There are about 12 of us. Some are fully dedicated, others are partially dedicated, just depending on the country, within the region we're really supporting.

Jennifer McIver

And how many attorneys do you support?

Tiffani Hamilton-Huynh

We have roughly between 80 and 85 attorneys.

Jennifer McIver

That's a pretty large team and a lot of folks to help out. And how about you Catrine?

Catrine Frazier

Catrine Frazier, I have been with DHL for about four years. My title is a Legal Operation Specialist, we also support the Americas region. And I would say maybe we have 60 to 65 attorneys that help support the different countries.

Jennifer McIver

So, you guys are both part of DHL. But you're doing stuff a little different, but also a little the same. So that's why I'm really excited to talk to you today, about what I think is one of the big buzzwords at CLOC. Or buzz topics, I should say. But before we get there, because you are CLOC veterans, I do want to take the time to ask you what is your favorite part of CLOC?

Tiffani Hamilton-Huynh

Yeah, so for me, I think my favorite part of CLC is really the networking. It's interacting with all of your other legal ops, peers, having those conversations. Figuring out, do you have the same issues? Do you guys have common solutions in place? That's one of the biggest benefits.

Catrine Frazier

I agree. It's definitely the networking. And it's, it's good for me because you begin to realize that you're not alone with the issues that you're facing. And you always really come back with so many different ideas on how you can solve some pain points, or really get certain projects up and going.

Jennifer McIver

Are the attorneys you work with scared for you to come back from CLOC because you have new stuff?

Tiffani Hamilton-Huynh

No, I think my team actually loves it. I always come back full of new ideas. We kind of sit around discuss them, really figure out what's a good use case. What may not be useful to move forward with now we just kind of put over here on this little this little reference list that we keep and we always revisit.

Jennifer McIver

I love that.

Catrine Frazier

Yes, I agree. It's always coming back with those ideas and really trying to see how they fit into your current roadmap. So, I think my team was always supportive when I come back with all of my great ideas.

Jennifer McIver

That's so great to hear. Well, I mentioned before, there's been a lot of buzz, at least in my opinion, the conversations I've been having ,the sessions I've attended about rate negotiations, a lot of conversations about rate increases. Now at Wolters Kluwer we do have our Real Rate Report, we did look at rates and from 2022 to 2023 it was about a 5.1 increase. And I'm talking about a working rate. Right, so that's post discount. It's the actual rate that was invoiced on the invoice. Other studies, potentially up to 6.4% for 2023. There's a lot of indicators that 2024 might be a little bit more. So, I'm curious, just initially your take on that. What are you seeing right now in 2024 with those proposed increases?

Catrine Frazier

Well, I think on my end, it really depends on the country and also the city. Like, if you look at Canada, particularly Ontario, the inflation rate has increased dramatically over the past year. So, I'm seeing the rates that are coming in a little bit higher than normal rates, compared to maybe the United States, where – I would agree with you – it's about 6% that we're seeing. Yeah, I think that's what I'm seeing.

Tiffani Hamilton-Huynh

Yeah, and to add to that, it really does come down to the practice area. For us, we always know in certain practice areas, we're going to see higher increase requests coming through. I think, something also to consider when we're talking about these percentages, we heavily negotiate our rates. So, what we land on is not what they initially proposed.

Jennifer McIver

That is perfect because that's exactly where we're gonna go today. So many folks are talking about negotiations and wondering how they should handle [them]. I've even heard some folks saying, we're getting 10% increase and we're trying to push back. And it's not working, we're just being told that is what it is. But I think the two of you both have employed some really great tactics for rate negotiations. So, Catrine, I'm gonna start with you, because you are the self-proclaimed data nerd. And so with that, let's talk about your use of data during rate negotiations.

Catrine Frazier

So, I really take it from the standpoint of what data we have available in our matter management system, using that to leverage it on like the Wolters Kluwer Real Rate Report, taking some of those key benchmarking data and comparing it to what we have in our system. And really just creating a grid of those different benchmarks and coming to a conclusion on what we think the benchmark should be. And just putting it in a real easy way that it's easy, not only for our relationship manager internally to digest, but also for the law firm to digest as well. And just really having that transparency to have that conversation.

Jennifer McIver

Now, I think you've actually went maybe with your relationship managers or have worked with them to go to the law firm and do those negotiations. How is the data received?

Catrine Frazier

So, it's received pretty well. For our law firms, this is a new process for them. So, it's almost a shock that now we're having these conversations and we're coming with this data. And now we're asking to, you know, negotiate a rate, where before it was not like that. It was more so this is what our increase is, and this is what we're asking for. So, a lot of our law firms have really received that information really well. I want to say, so far - we've done about six - I had one law firm telling me this is the most transparent and easy-to-follow negotiations with the data that we presented to them. They actually thanked us for coming to the table with a strategy on how we're going to maneuver these negotiations. And at the end, we were actually able to meet with our proposals. It wasn't a 5% increase, but it was something that we thought was fair on both sides.

Jennifer McIver

That’s great to hear. And I think collaboration across the entire ecosystem, and transparency, is a common theme we're hearing with rate negotiations these last couple of years, as well as here at CGI 2024, whether it's vendor engagement, whether it's working with your in-house team, so I love to hear that you guys are employing those tactics. Tiffani, let's talk a little bit more. I think you're doing a lot of the same with data. But you're also adding a little bit more of a layer to it when you're looking at those increases, and a little bit more on performance for the law firms.

Tiffani Hamilton-Huynh

Yes, so we do follow the same process that Catrine outlined with pulling in that information that we have, looking at both our internal benchmarking and the benchmarking we received from Wolters Kluwer. On top of that we also have yearly performance reviews that we do on all of our panel firms specifically, and then other firms over a certain threshold. We take those reviews into account when we are negotiating these rates. If the firm is not performing to the expectation that we have outlined, then we are less likely to grant them the increase that they're asking for. And if we're granting it, it's probably not going to be quite the percentage that they're wanting if they're an underperforming firm. Sometimes we do have to make the decision that we're going to cut ties and so we'll have those difficult conversations as part of this process.

Jennifer McIver

If possible, can we dive deeper a little bit into the performance reviews and what are you looking at? What are some of the key criteria to say they're performing or underperforming?

Tiffani Hamilton-Huynh

I will say our current process is under evaluation internally. So, we are looking at specific data points that we may want to change, but currently we look at a couple of them. How is the firm communicating with us? Do we think that they're effective? Are they proactive? Who are they communicating with? How are they performing to budget? So, we do pull some of this information in, in reports - that's part of the surveys - Do they understand our business values? Do we feel like they're a true partner? Some of these are based on metrics. Others are truly like getting the feeling from our attorneys in these different areas. But we kind of gather all of the information back together, we have a report. We do share this feedback with the firms and have those conversations, where there's potentially areas for opportunity, outlining what it is that we do feel like is going well. And we really have this as a driving factor in how we manage our relationships with our firms.

Jennifer McIver

That's great. And I think it makes me want to take a step back. We talked about your roles on the legal operations team. We didn't talk about how long you've been on the operations team. And I think this is really key because you guys have been working through a progression. And you've been now working the processes out and working with your in-house legal team. I want to talk a little bit more about that collaboration and how it's received from your in-house legal team as you're bringing in these new processes. So maybe if I could, ask either of you, or one of you to talk a little bit about how long you've been with your team, and how that's progressed with this type of a process?

Catrine Frazier

I've always been in the legal operations team with DHL, but I will say that for our team, the evolution of legal operations has been dramatic in the past couple of years. I always think it's the change management aspect, right? I think one of the main things when we started this journey was to develop that trust because you're really changing what they're used to doing. And we've had attorneys that had been with the company 25 plus years. So, you can't just say overnight, okay, this is what you need to do now, or this is something you may not be doing correctly. You just have to be open minded, listen and establish the trust, and really celebrate the wins. So that way, as you incorporate more changes in the legal operations space, it's easier for them to adapt to that change because they've seen the value, it's actually demonstrated.

Tiffani Hamilton-Huynh

I’ve been on our legal operations team for about eight years. So, it's been pretty much since the beginning of legal ops on our team. And we have put a lot of processes and systems in place over the years, so we have been in a state of constant change, I feel like, but it has been really well received. One of the things I really try to focus on is not just putting something in place or implementing something in a silo. I really do make sure that I'm communicating with my team the entire time. Very early on, I may have an idea, or something comes up maybe that I've learned at CLOC. I'm like, this is great, we should do this, I bring it back. And I really do get the feedback from my team, it but I also make sure to position it in the space of, here's not why it's useful for me or for our leadership team, but this is what you're gonna get out of it. And you kind of get those champions to work with you on these projects. And that's where I think I've seen the most success on the changes that we've put in place over the years.

Jennifer McIver

How do you handle the pushback? We're talking, going back to rate negotiations, and you bring the data to the table, and you suggest as a legal ops team, what maybe that increase really should be? Do you have pushback? And how do you address the pushback from maybe members of your in-house team saying, no we're not going to touch that firm, we're good here? I'll let you go first.

Tiffani Hamilton-Huynh

Yeah, I think initially, when we first started this approach a few years ago, there was more pushback than there is now. Some of it was just, over the years, building out that trust and getting the attorneys comfortable with legal ops really owning most of this process. But what we have done is to really use the data, like Catrine has said, to show, this is the benchmarking. And so, we look at both internal benchmarking and the Wolters Kluwer benchmarking. And they have a really hard time coming back and saying, or disagreeing with what I'm saying when I can show them those metrics, because just because he may be your buddy from law school doesn't mean we should agree to this, you know, double digit rate increase, just from last year when nothing has changed.

Jennifer McIver

Absolutely fair. How about you, Catrine?

Catrine Frazier

I agree with Tiffani and how I position it is that I am giving you this data as a tool. You're the relationship manager with the law firm and my role is just to provide you guidance. So, they really, they're more acceptable when you position yourself that way as a partner with them and you're collaborating with them. You're not telling them that this is what you have to do. And when you come with the data and you can actually support it, it's well received. And that's how you continue to build the trust. Because if you come back next year, when another increase comes through, they're more likely not to have that resistance. And they understand that really, at the end of the day, it is up to the relationship partner to say we're going to negotiate this rate, or maybe we won't give this person a 22% increase. It'll just be a smoother process as you continue that journey.

Tiffani Hamilton-Huynh

One thing I just wanted to add, and I think it's really crucial, is, you know, my CFO has really empowered me and has really communicated this out to the rest of our team, that this is the process. You need to rely on your legal ops resources to do their job. And I think that's really important. Without that support, I think I would have had a much harder time when we initially made this change.

Jennifer McIver

I'm so glad you brought that up. That's exactly where I was gonna go. As we both speak, I'm curious, even if you have your CLO is taking it further, to have any specific KPIs or any metrics around making sure that those increases are staying in check.

Tiffani Hamilton-Huynh

Yeah, so we do have internal reporting that we look at, it's kind of all bundled into one. So, when we're looking at our benchmarking, and then really seeing, not necessarily the savings, but kind of making sure that we're seeing in a certain a certain percentage range when the increases do come in. And then in addition to that, part of what I think has made it so successful for our team is everything that we've implemented internally, we've then made sure it's externally facing. We have pieces in our guidelines that clearly outline how we're going to assess these rates coming in. So, it's not a surprise for the firms, we're very clear that this is our process, this is what we will be doing, so this is what you can expect. When you're requesting increases, there's a very clear set of guidelines that we put out there for them to be familiar with.

Catrine Frazier

Yes, yes. And I think for my CLO, it's almost as if also leading by example, because he actually had to go through this process with a law firm where he was the relationship manager. So, he was able to be that champion and say yes, this is our process and I can actually tell you guys that it works. And the data is sufficient, and we can rely on legal ops support in that area.

Jennifer McIver

I think that's phenomenal. Tiffani, you put a phrase in there, billing guidelines. I mean, I've been in the industry for 12, 13 years now. And I remember that even then it was do you have billing guidelines, what should they be, what should be included? And quite often it was really, we want to make sure that they're billing on the six-minute increments, we want monthly invoices, we're not going to pay for certain expenses. I'll be honest. And then in the in the beginning, I don't remember even seeing rate negotiation type guidelines. I think you guys are both working on your guidelines right now, really revisiting them. Obviously, we shouldn't set and forget guidelines. Do you want to chat just a little bit about how you're incorporating those guardrails with rate negotiations?

Catrine Frazier

Really what we're trying to do, because both Tiffani and myself support the Americas region, there are some law firms that are shared amongst our teams. So, what we're really trying to do is align our outside counsel guidelines. So that way, there is a clear process on how timekeeper rates are to be submitted to us. But we're also really trying to establish a fair way on how to apply these guidelines. Also taking a look at some of our invoicing, and what we will pay for and what we won't pay for just to make sure those are clear, because you can always send it through an offer, but do they really understand? So, one of the goals that we have is once we do finish updating or outside counsel guidelines is to actually then bring it to our law firms, and have a conversation with their billing team to say, hey, these are guidelines, let's go through it, I want to make sure you understand what the expectations are. So that way when we go to next year, it's not a shock that, okay, this is now in place, we are really holding you to these guidelines. And you know, we've already had the conversation. So, it's easier acceptance.

Tiffani Hamilton-Huynh

Just to add to that quickly, another thing that we do on my team, I think Catrine you're getting ready to start doing it, is we actually have our outside counsel sign our guidelines and send them back to really make sure that they have read and understand. Because an attorney is not going to sign something without reading it, right.

Jennifer McIver

Okay, for those listening. I'm kind of shaking my head going “um…”

Tiffani Hamilton-Huynh

In this instance, how they're getting paid, I would hope. But we started this a few years ago and it's been really useful because, initially, we did have a few firms come back and say, you know, I don't agree with this and like, will you sign this? So, we are using our guidelines as a type of an agreement between us. So, this is what we have stated, you didn't come back with some suggested edits on certain things. So, this is how we're managing our relationship. We're free to open it up for future state and have these conversations, but for anything else that has been handled prior to this discussion, this is what it implies. Clear communication of expectations.

Jennifer McIver

Yes. And I think tying it back, Tiffani, you started talking about it a moment ago about the rate negotiations, rate increases? Going back again, to guardrails specific to those increases, what type of rules or guidelines are you putting into place for that?

Tiffani Hamilton-Huynh

For my team, specifically, we have a timeframe for when firms can submit their rate increases. So, it's a very specific time of year, it's a very specific window. It's so that we can anticipate when these are coming in, so we can plan internally, because we know it's just not a quick conversation. We know there's a lot of work for the legal ops team to put this analysis together. So, they have that window to submit those rates, we have a window that we're telling them we'll review them in, and then we have a clear expectation of when they'll have the responses by. An initial thing is we do lay out expectations of a certain cap, we would expect to see the rate increase not to exceed. And if it does, we will 100% reduce it down to that.

Jennifer McIver

I think that's great. Do you have some as well, Catrine?

Catrine Frazier

Yes, they are similar to Tiffani's as well. Once again. We're really trying to align our outside counsel guidelines, but to the point with the cap on the amount of the increase: if it is above that amount for us, it's not an automatic reduction. What we do say is we will review it thoroughly to see the justification on why the increase is higher than normal. Because there may be reasoning, like maybe you went from a regular attorney to a partner, or maybe it was a change in the area. But we're making it known that if it's above that percentage, there will be a thorough review and a conversation to be had, before we decide if we will agree or disagree,

Jennifer McIver

Yeah, putting a little bit more justification around the increase and I think that's really great. What about timing? And when we say when, I'm saying timing, not so much this time of year you can submit but how often do you guys accept rates once a year? Or do you try to also help hold in those costs or manage those costs by limiting that?

Tiffani Hamilton-Huynh

So, we do try to lock them in. For us. It's two years, so when your rate is approved, it is to hold steady for two years. We will not entertain an increase within that timeframe without some justification for what Catrine mentioned, you know, maybe they moved from an associate to a partner or something like that, then we can talk, but otherwise, no, we will not entertain these increases.

Catrine Frazier

Catrine Frazier

Yes, I agree. I actually had a conversation with one of my lead attorneys a couple of weeks ago, where he made an example that it might not be fair to, you know, look at it every two years. He tried to use an example of an employee. And I'm like, well, a law firm is not an employee. This is a business relationship. And we have to find a way to manage our cost. So, we're not saying that you you're granted a certain percentage rate every year, but we'll only look at it every two years. We're not stating that we're going to hold you to the old rates. And there's only a certain amount we're granting you that percentage of increase, but only on an every two year basis.

Jennifer McIver

We're not funding their salary increase from year to year. That's fair to say. You know, this is amazing talking data, clear, transparent communication, setting expectations, enforcing those expectations, but building in that relationship aspect building in the people, I think, the humaneness and, and being able to have some exceptions as well as some flexibility. So that way, it really is a partnership. Do you guys have any closing remarks just on rate negotiations?

Tiffani Hamilton-Huynh

Just do it.

Catrine Frazier

I mean, for me, it would be don't be afraid to challenge your rate increase. Start wherever you are, if you use what data you have available on your system, use whatever benchmarks that you have in your system. But don't be afraid to negotiate because I mean, when you're buying a car, if you're buying a house, the first thing you're thinking is okay, what can I do to negotiate this down? Timekeepers? It's the same thing. Do not be afraid to challenge the increase.

Tiffani Hamilton-Huynh

I would say, on top of just do it, data is key You know, it's really hard to have these conversations without that support to go along with it. So if you're not yet really focusing on this type of data, or you aren't sure how to get it out of your system, or you know what types of benchmarking exist out there, I would definitely encourage anybody to kind of have some of those conversations with their peers, and figuring out how to structure it so that they can kind of go down this path.

Jennifer McIver

This is all, everything has been amazing insights. I really appreciate you for taking the time, especially considering there's a lot of opportunity of learning here at CLOC. So, thank you for sharing the learning with our audience. I'm gonna wrap up now and let us get back to the networking and let us get back to the CLOC sessions. And again, I can't thank you enough for your time.

Greg Corombos

Those were the words of Jennifer McIver, Director of Legal operations and Industry Insights at Wolters Kluwer ELM Solutions and DHL’s Tiffani Hamilton-Huynh, Director of Legal Innovation Analytics and Technology and Catrine Frazier DHL’s Legal Operations Specialist. This podcast is hosted by Wolters Kluwer ELM Solutions, the market leading provider of enterprise legal spend and matter management, contract lifecycle management, and legal analytics solutions. For more information and additional guidance, please visit wolterskluwer.com or call 713-572-3282. Please join us for future podcasts on optimizing legal operations and achieving your legal and business goals.