During the last two years, we’ve had the pleasure of facilitating discussions with senior in-house lawyers from the world’s leading corporations in the US, Canada, Europe and Asia. Martindale-Hubbell’s Counsel To Counsel, a program created and organized by Martindale in conjunction with ELD International, is the forum for intimate, off-the-record discussions with generals counsel and select co-hosting law firm partners. These round tables have covered topics as diverse as crisis and reputation management, corporate compliance and corporate governance, working smarter—not harder, in-house counsels’ broadening role in risk management, and managing cross-border litigation and transactions.
Below is a snapshot of what we’ve learned.
What have we learned in the US?
In August 2002, in-house lawyers were concerned and confused about what the new corporate governance regulations would mean to them and their legal departments. They were strapped for resources as it was, and faced with increased scrutiny and reporting, they feared the worst: that something would fall through the cracks and they would be blamed—or worse, liable.
Law firms, unfortunately, weren’t helping them manage the uncertainty. The regulations were widely disseminated by firms in memos and newsletters, but only a handful translated the rules in a way that provided practical, bottom-line guidance for the in-house practitioner.
Today, these in-house lawyers pitch nearly all Sarbanes-Oxley related materials that they receive from law firms. They are now well-versed in the rules, no longer feeling panicky and in many cases, comfortable that they have been doing the right things all along. Tip to marketers: focus your S-O materials on practical steps legal departments can take to best manage compliance. Don’t forget to help your global clients determine how the foreign compliance differs from the US rules, and what this means to their operations abroad.
Many corporate legal departments are resisting being "institutionalized" by their law firms. While there have been highly publicized convergence initiatives over the last decade, chief legal officers and generals counsel in the US are more likely to have a base of several firms on which they rely. This goes against law firm leaders’ desire to "get more of the client" through cross-selling new practice areas. Institutionalizing clients is a law firm strategy; it’s important to realize that the chief legal officers might be unwilling to allow their work to accrue disproportionately to one firm.
The mix of firms ranges from global, regional, local and boutique. On global matters, size and scope of firm seems to matter, but on the balance of the issues, it doesn’t. And on the most sophisticated matters, the cost of the outside advice isn’t questioned as often as it is on more routine matters.
This could spell opportunity for local and regional law firms who are seeking to upgrade their client base with larger corporations—if you can keep a lid on the cost of delivering these regional and local services.
Law department leaders are sophisticated business thinkers who often have a more realistic view of their industries and businesses than their outside counsel. Because they are on the front lines of their organizations, these lawyers are seeking short, relevant, current bits of advice that can make a difference in addressing an issue or problem. They want to "pick the brains" of smart lawyers during a phone call, without the follow up time and expense of a ten-page memo.
One Fortune 500 GC said that he "triages" an issue and very quickly assesses what needs to be done. The outside lawyer he values the most is one who trusts the GC’s appraisal and quickly identifies what steps to take next.
In-house lawyers are seeking tips, tools and technologies that streamline and speed up problem recognition and assessment.
The legal department is increasingly involved in managing crises, corporate reputation and image. In some corporations, the legal department, not the PR or communications department, are leading crisis preparedness and response initiatives. For example, one general counsel shared that his company performs formal "mock" emergency management exercises every two years, such as hostage-taking crises and plant explosions. These are very intense programs that take a full-time crisis management staff as much as six months to plan, and occasionally involve the participation of community agencies (e.g., police, fire, paramedics, etc.) as well as members of the local news media.
Legal departments are increasingly engaging in "vulnerability audits." These cover a wide range of weaknesses or areas open to attack—physical, technological, product or service related, natural disasters, terrorism, and ethical, moral, corporate or financial.
Another GC has established 10 "threat management" teams that cover each business unit and region. He views this preparation as "a normal part of business, not a sign of failure."
Where can law firms fit into this mix? By helping their legal department clients maintain the 30,000-foot view of the business, legal, regulatory and political landscape. If the in-house lawyers are climbing into the problem-solving, this big picture view is critical to maintaining perspective.
Doing more with less continues to challenge generals counsel. Some are managing costs and results by doing more in-house—and relying on outside firms only when absolutely necessary. One senior counsel handles virtually all litigation himself, regardless of jurisdiction or substantive area. He stated that the results are more consistently good, because no one knows better than he how one case ties to another, or how the result of one might affect future business decisions.
Law firm lawyers’ feathers are often ruffled by this untraditional stance. This same lawyer commissioned Altman Weil to conduct a legal department research study, which analyzed the cost of the legal department handling cases v. outside firms, plus other areas within the legal department. Company lawyers were able to prove to company management that, with the insurance reimbursement on many cases, the legal department was not a cost drain to the corporation as most are, but rather, a legal department that was becoming a center of profit.
This example shows that in-house lawyers are seeking dramatic ways to improve the impact they have on the company’s bottom line. It is wise for law firm lawyers to identify additional ways for their in-house clients to reduce cost and increase bottom line benefit.
What have we learned in Europe?
There is a high level of autonomy for law firm purchase decisions outside of the headquarters country. The larger corporate law departments internationally often are centrally managed by geographic region or line of business, but usually they also have in-house lawyers in more than one country. A senior regional counsel (General Counsel – Europe, for example) will often want to be involved in selecting outside lawyers for an assignment. It is increasingly rare that the head of legal for the entire company will influence or be involved in the choice of lawyer or firm. For this reason, law firms hoping to extend existing home-country client relationships globally should not assume that a simple introduction to the international counsel will be enough to win the relationship.
In-house counsel often report to an executive in another country and must be able to influence remotely. Many of their communications and interactions with their direct report are by email or phone, and thus render it more difficult to demonstrate the value they provide. Participants in Counsel To Counsel forums outside of the US, particularly in Asia, often say that neither management nor in-house counsel at headquarters have an understanding of the issues they face day to day. If their law firms can be attuned to the dynamics of the remote reporting relationship, and help in-house counsel demonstate the performance of their function remotely, they will have a competitive advantage.
In-house counsel internationally increasingly assign work to outside law firms based on a distinction of international firms with multiple offices and local ‘national’ firms. These counsel spend a great deal of their time on supporting transactions and business issues that involve more than one jurisdiction. In Counsel To Counsel forums globally, many comment that international firms are more expensive and, while better for managing complex multi-jurisdictional projects, are a costly option for specific local assignments.
We hear many say that the quality and expertise among various offices of international law firms is inconsistent. These in-house counsel talk often with their peers and thus tend to have very good information about individual lawyer capabilities, turnover and other local office issues. International counsel find that local law firms are usually more reasonably priced and more flexible for single-jurisdiction assignments, as long as they have the specific expertise that is needed. They also find that local firms often have better local connections. In client competitions, it is useful to understand how the target client characterizes the work and frame the value proposition appropriately.
In-house counsel internationally lament the increasing complexity of their jobs. The work is more complex due to environmental dynamics and the globalization of business today, which is exemplified by:
- Multi-jurisdictional nature of much of the work
- Complex and fast-changing regulatory environment
- Growing requirement to demonstrate understanding of the business
- More bureaucracy and paperwork involved in every assignment
- Increased role of in-house counsel in corporate governance and risk management
- More rigorous controls and checks on internal and external suppliers.
Law firms will be successful if they can cost-effectively provide structures and processes to streamline this workload and improve the legal department’s ability to respond.
The one-stop shop is not a proposition of great interest to in-house counsel globally, nor is it believable. While many say they would value and benefit from excellent project management skills of their international firms for multi-jurisdictional assignments, many consider their own in-house project management skills more advanced. The majority feel that the service and work product is often inconsistent among offices of international firms. They tell stories about working with lawyers from one firm in differing offices, where the lawyers had never met and had strikingly different approaches.
Moreover, in-house counsel appreciate the various advantages of choice—many like to work with a range of large and small firms, and do not consider it wise to ‘put all their eggs in one basket.’ When preparing marketing communications, law firms should keep in mind that seamless service is not a believable offer, and that the one-stop shop is something that the buyers do not consider advantageous in the abstract.
Leigh Dance is a management consultant focusing on international market penetration and issues for global corporate counsel. She can be reached at 631.726.5430 or email@example.com. Deborah McMurray is a strategic marketing consultant to law firms and other companies serving the legal industry. She can be reached at 214.351.9690 or firstname.lastname@example.org.