Articles Posted in Clients

In 2005, Robert Half Legal published its Future Law Office report on “Client Service: Challenges and Strategies.” In a portion about service issues and solutions, on page 4, a startling quote appears. “The best way for a [law] firm to familiarize itself with a client’s needs is for partners and associates to discuss with general counsel the possibility of speaking regularly with key players such as department heads and the chief executive officer about a wide array of topics, from their current concerns and long-range strategic plans to pricing and billing needs.”

It will be a hot day in the Arctic before general counsel invite partners from law firms, even the most trusted consigliore, to “regularly” spend time with the general counsel’s key clients probing them on whatever they want. Fret disintermediation; worry second fiddle; sweat over being marginalized; dread loss of leverage; and dread disaster.

This statement, from Michael Shermer, Science Friction: Where the Known Meets the Unknown (Time Books 2005) at 31, should give those of us who advocate surveys of clients some measure of pause. If systemic factors distort scores downward, general counsel should account for that. Meanwhile, several other distortions bedevil client surveys (See my post of Nov. 21, 2005: “focusing illusion” warps views expressed on surveys; Dec. 22, 2005: expectations of clients rise with better legal performance; Nov. 21, 2005: surveys themselves can raise client expectations; and Aug. 26, 2006: surveys intervene and alter views.).

Some people question whether client satisfaction measures correlate with the behavior of those surveyed (See my post of April 8, 2008: unclear link between satisfaction scores and behavior as well as what creates or tipping points of changed attitudes.). Even so, what clients think must matter to general counsel and surveys are one way to find out (See my post of Feb. 16, 2007: client perceptions might as well be reality for general counsel.).

Most commonly, law departments that do so survey their clients annually, but others do so at longer intervals and a few more frequently (See my post of Nov. 20, 2006: Aviva’s two-year timing; and March 16, 2006: frequent surveys.).

I oppose tracking time in legal departments at the level of detail found in law firms (See my post of Nov. 22, 2008: internal time tracking.).

Even more I question the value of charging clients for the hours worked by inside-counsel (See my post of June 30, 2006: don’t charge back time; May 14, 2006: multiple rates; May 31, 2006: Pandora’s box; Nov. 13, 2006: three ways to encourage clients to still use internal lawyers; Nov. 20, 2006: embed costs of lawyers in business unit budgets; May 16, 2006: chargebacks to clients; and Jan. 27, 2008: selectively charge for time servicing clients.).

I know that hours can be gummed up, but mostly that allocation systems accomplish the same goal – sharing the costs of a company-wide resource and some market discipline on the use of in-house talent – without the administrative load.

Ben Heineman, writing in Corp. Counsel, Vol. 15, Nov. 2008 at 92, asks “Are the CEOs in large and medium-size international companies … willing to invest in in-house legal departments?” He views global, specialized and sophisticated legal departments with high-quality lawyers – sort of like he viewed General Electric’s department, come to think of it – as admirable counterweights to the globe-straddling, huge and powerful law firms.

My hunch, despite having spent 20 years advocating for law departments, is that CEOs do not want the legal department to be too much of a powerhouse. It has its place and that place is not to control the company. Law serves business, it does not lead it, and like all staff units it responds to and supports business decisions. GE did not reach greatness because of its legal talent, nor has its recent slump been due to inadequate legal guidance.

In terms of commercial success, the market is bigger than the law, so to speak, and CEOs who bother to think about the legal function probably want competent lawyers but not super-stars who have pretensions of being better business minds than their clients.

Three tensions stand out for me between what clients want and what in-house should provide. No solution will ever emerge for these intractable management problems, a subset of the insoluble issues general counsel face that I wrote about in my article on intractables.

Clients want an unlimited, free good; lawyers fear over-use and low value tasks. The tension struggles between “call me but don’t abuse me.” No market force allows for discrimination between what’s valuable and what’s not. Quasi-legal tasks manifest this imbalance. In-house lawyers are torn because they seek client satisfaction but they also have only so much time. This intractable puts the burden on the law department to sift through work requests and obligingly determine priorities.

Clients want counsel only when needed; in-house lawyers want early involvement to avoid legal messes, but not to be buried with premature time-wasters. A constant lament in-house is that “lawyers don’t have a seat at the table” – they are not involved in high-level executive discussions – and they don’t get a chance to offer legal advice until it is late in the decision’s day. When lawyers point out problems with a project that is near approval, clients turn on them as deal breakers.

Cartoons are sometimes no laughing matter, and one in the LA Times, Aug. 28, 2008 at C2, hurt. Scott Adams www.dilbert.com shows in panel one of Dilbert the hapless guy with the flat head and tie flipping up speaking to “company lawyer,” a bespeckled nerd, with no computer on his desk, in an oversized chair.

“Can you turn a simple agreement into impenetrable gibberish?” asks the anti-hero.

The in-house lawyer graciously accepts the assignment in panel two: “Absolutely. I can also leave a sour taste in everyone’s mouth and make you want to choke me with my suspenders.”

The general counsel of General Electric advocates doing more work within the law department than did his predecessor. Setting aside the skeptical inquiry – “How do you measure this statement?” – let’s take on the three advantages he states, very clearly, for doing legal work in the law department.

His three reasons, set out in Met. Corp. Counsel, Vol. 16, Aug. 2008 at 1, are that “you have more control over the quality, more control over the efficiency with which the work is done, and the people who are doing the work are closer to the business and the issues in the business.”

Quality means that you can assign the best person (or persons) to the issue and they can work on it until they are satisfied with the result. Law firms may find that their lawyers who know an area of law are already committed to other clients and can’t help sufficiently. Also, given high billing rates and a smidgeon of concern about costs, law firm partners may not unleash the dogs of law to bill until they are satisfied.

At the start of this summer, the consultancy of Barend Blondé and Antoine Henry de Frahan asked in-house counsel in Belgium to select their top three management priorities out of a list of ten options. Here are the six priorities that received the most votes as stated in their article.

1. Improving internal client service 68%

2. Improving leadership, communication and counseling skills of the team 40%

The received wisdom is that lawyers are by personality, training, or position quite cautious. In two words, they are risk averse (See my post of April 12, 2006: risk aversion and personality styles; Nov. 22, 2007: research findings about lawyer styles; Oct. 18, 2005: generally on lawyer on risk aversion; Dec. 9, 2005 #1: SWOT review of large legal department discloses risk aversion; and Dec. 2, 2007: contradictory messages to in-house counsel about mistakes.).

Pronounced risk aversion has significant drawbacks, such as on client satisfaction, decision-making, creativity, and trust (See my post of March 30, 2008: flip side of innovation is risk aversion; March 31, 2007: client satisfaction surveys often disclose criticisms of risk aversion; April 12, 2006: hard to develop leaders from the risk averse; Dec. 17, 2006: decision-making and Type I and Type II errors; Oct. 18, 2005: scheissenbedaurn; and Jan. 16, 2006 on risk aversion and the principle-agent problem.).