A power shift means law firms have to rethink their interaction with general counsels of major companies and governments, writes Trish Hyde*.
You would have to have had your head in the sand for over a decade to have missed the fact that businesses and governments are viewing their legal operations differently.
General counsels have evolved into trusted advisers with a seat at the executive table and are increasingly savvy purchasers of legal services. Given the growing strategic and influential nature of the role, more sophisticated in-house legal function practices have emerged. In this article, I explore the changes that are taking place and what this means for private practice based on the findings of the 2012 In-house Counsel Report: Benchmarks and Leading Practices.
With 75 per cent of GCs under pressure to reduce or minimise overall legal spending in the coming year, there is a compelling reason for firms to assess today how their strategic plan fits with the GC of tomorrow. The status quo will only work for a short period as GCs continue to evolve the practice of in-house legal work. Firms currently benefit from a high degree of inertia when it comes to switching firms. However, driven by the successes that GCs, chief executives and boards are seeing in other organisations, the evolution will soon become a revolution of strategic legal management and resource allocation.
This statement is based on the statistically validated findings of the aforementioned Australian Corporate Lawyers Association report. In the survey, GCs were asked to rate their main firm on some key attributes. From the table you can see that it starts well, with 78 per cent of GCs agreeing that their main firm provides commercially applicable advice.
However, looking at this figure in reverse, it means one in five GCs believe the advice they receive is not commercially applicable. More startling is the feedback related to price and value. With less than half the GCs believing they receive advice at a reasonable price, it is clear the value proposition from firms is wrong. And, despite all the hype, alternative billing is not necessarily the answer.
Table 1: Percentage of GCs agreeing that their main law firm delivers on the attribute
|Main firm provides commercially applicable advice
|Main firm is upfront and transparent about pricing
|Main firm provides realistic quotes
|Main firm provides advice at a reasonable price
|Main firm offers alternative billing methods that work
Keeping in mind that this is the firm that the GC currently and willingly uses as their main provider, the results show an alarming disconnect between law firms and in-house. Add to this the pressure for GCs to be accountable for legal spending and you can see that the gap between firm and GC expectations is widening.
This gap has led to five in-house practice trends as companies and governments seek to create maximum value for the organisation with limited resources.
Quite simply, GCs are bringing on specialists and additional people to undertake work that was previously outsourced, and to better manage work that is outsourced, across an array of providers.
It is not uncommon for litigation specialists to be hired to manage matters and determine which pieces of work get outsourced and what level of external resourcing is appropriate. Smaller teams are also insourcing. For example, a GC hired a law student as a part-time legal assistant to cope with massive contract workflow. Insourcing is also supported by a growing talent pool of contract in-house lawyers that can parachute in for a period. These are not isolated cases; 48 per cent of GCs plan to increase internal resources in coming years.
What better way to rid yourself of very basic routine workload than to train colleagues and provide the tools so they can do the job themselves. Increasingly, GCs are providing basic templates such as non-disclosure agreements to business units as a self-service toolkit, or training departments on basic law to help them recognise issues. While it can be time-consuming, the benefits are worthwhile and free up the GC to be strategic and proactive.
3: Outsourced value
There are more options now available for GCs in the work they outsource. Regardless of the actual assessment tool used, the basic equation is the strategic value of the work versus the effort required (special knowledge or large volume).
According to where the matter sits on these axes, the work will be insourced or outsourced, with the aim of internalising high-value strategic work and outsourcing highly specialised or highly routine work. The options for outsourcing are many – top-tier firms, mid-tier firms, boutique specialists, legal process outsourcing, crowd-sourcing (working with others with the same needs) and directly briefing a barrister. With such choice comes greater control of spending.
4: Informed purchasing
Gone are the days of the GC being the mailbox between business and the firm. Like others in their organisations (finance, HR, marketing), they are required to be accountable – and that means managing.
Increasingly, in-house counsels are managing legal work as projects: scoping the work; deciding how to resource it; managing to price, quality and time expectations; managing exceptions to scope; and evaluating the project outcomes for future learnings. Seventy-four per cent of GCs see project management as an important management practice of the future.
This broad concept is at the heart of any good relationship. But what does it mean for firms and in-house? It is simple – a mutually beneficial relationship. From an in-house perspective, a partner worries more about the in-house counsel and their organisation than billings. A partner has honest conversations and seeks the best value outcome for the in-house counsel. A partner shares the burden. Partnering is two-way.
In return, the firm can create a relationship that goes beyond a single partner, where margins can be maximised by delivering true value and helping the GC demonstrate that value to their organisation.
Recognising the shifting paradigm is the first step. Understanding notions of value is the second step. For this, firms need to consider the value proposition they offer and what is valued by in-house counsel.
The Australian Corporate Lawyers Association is unashamedly for in-house lawyers. But we recognise that to bridge the gap requires firms and in-house to work together. The 2012 In-house Counsel Report: Benchmark and Leading Practices is the first step as it provides in-house with peer information, while giving law firms insights into the changing practice of in-house.
Our next step is to start the dialogue. In May, ACLA will be starting a series of invitation-only workshops titled ‘Meet, Think, Act’ where leading senior GCs and senior partners will come together to discuss how to create mutual value in this new paradigm. The outcome of these workshops, we hope, will be a thought-leadership piece that starts to bridge the gap.
*Trish Hyde is the chief executive officer of the Australian Corporate Lawyers Association.
Article sourced from the March 2013 edition of the Australasian Law Management Journal.