Articles Posted in Outside Counsel

This post scrapes the bottom of pessimism. Still, the mismatch that must happen between relatively uninformed lawyers and the savvy partners they presume to direct deserves comment. So did the Emperor’s clothes.

We make three assumptions about inside lawyers who have retained outside counsel to give advice in an area unfamiliar to the inside lawyer. At the most basic level we assume the lawyer can direct and assess the value of the service provided by the firm. If you are a novice, how can you? The blind lead the sighted (See my post of May 1, 2006: inexperienced inside lawyers can’t assess value of outside counsel.).

As for the next challenge, we assume that the inside lawyer, often a generalist in a small department swamped with demands, can make sound decisions on legal strategy. If you have never been down the tangled path, how can you foresee the full walk? The blind try to be farsighted.

Lisa Hart, the CEO of Acritas, shared research on what law departments find effective when law firms solicit business from them. These five attributes of pitches come from her presentation at the Georgetown University Law Center’s Center for the Study of the Legal Profession conference three weeks ago. Acritas surveyed hundreds of in-house counsel and ask them to rank these characteristics. Many departments could use this as a checklist and evaluation tool.

Understood our business (14% chose it as most important)

Understood our needs (12%)

One of the most profound conclusions I drew from Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance (Princeton Univ. 2010) concerns the ageless debate: should a law department base retentions on the law firm or the individual partner. The iconic strip serves as a useful metaphor.

Groysberg’s fundamental point applied to this debate would be that law firm partners with big books of business, who pride themselves as portable because they themselves are the brand and the brains, are misguided. In fact, to a degree they typically do not recognize, their success comes from and depends significantly on the team and firm they belong to.

Like the famous one-sided helix, neither the firm nor the partner holds the upper hand and all the labored debates over which enjoys primacy will eventually merge in recognition of the other side.

Change comes so hard between a law department and a law firm because they have to be in reasonable synch. Their respective champions of change need to be in roughly the same psychological space.

Imagine two bell curves of willingness to embrace change, one for law departments and one for law firms. At the top of each curve we find willingness under the right circumstances to move forward with something new. Off to the left we find reluctance, a general sense that what we have going works pretty well and that the risks of upsetting the status quo just aren’t worth it. Off to the right of the bell curve, with fewer and fewer firms or departments – depending on which curve you look at – as you move right, are those that see promise in change and want to explore something different.

When you superimpose the bell curves and plot the specific department and specific firm on them, you need both sides in roughly similar positions of change acceptance for there to be a hope of, shall we say, a ringing endorsement.

When a British newspaper obtained an enormous pile of receipts from politicians who might have filed bogus personal expenses, it put them online and invited the public to help spot abuses. A clever app let anyone look at a receipt and flag it as dodgy. The paper honored those with the most finds and published the best so the “game” attracted widespread participation. “In less than four days, some 20,000 players analyzed a stunning 176,000 pages,” according to Wired, March 2011 at 52.

Now, take a deep breath. Assume a law department could anonymously post online invoices that have been redacted of identifying details. Assume participants could flag billing practices that deserve review. Or imagine if online reviewers were asked what value they would assign to the work or how the firm might have staffed and managed it better. With some recognition to those who pored over the bills, maybe even cash rewards, there could be a crowd-sourcing “game,” with serious intent, for invoice review and outside counsel management.

Don’t everyone FLAME!! me at once. Harmful disclosures, too much work, risk of attorney-client privilege, embarrassment all shout out to be addressed. “It will never work.” Yet, while not initially for the faint hearted, to unleash many minds in a competition to ferret out better legal services practices may become a practice when entrepreneurs iron out the impediments. Perhaps only disbursements would be scrutinized, or perhaps only certain reviewers would earn the right to take part. Software may speed the process and increase security.

Consultants love to recommend comprehensive processes through which law departments tell their key law firms how the firms are doing. In an ideal world, such full-scale evaluations need training, software, databases, forms, number crunching, meetings, roll-out plans, post-mortems, interviews, and complicated activities galore. Consultants thrive on all that hustle.

The trouble is, the value produced for the department too often falls far short of the investment. For all kinds of reasons, all that energy expended leads to tired results. Law firms don’t improve enough to justify the constant reminders, delay, time and money. The idea of law firm evaluations has obvious, intuitive appeal; execution torpedoes it.

So, let me propose a modest alternative.

An experienced marketing consultant, Dan Ross, said something worth pondering. He spoke about law firm brands at the conference two weeks past at Georgetown University’s Center for the Study of the Legal Profession. Ross said that customers often choose a brand because of how that brand helps define the customer’s self view. You mean, Dan, I subscribe to the Times Literary Supplement because that flatters my self-image as erudite and cosmopolitan?

Perhaps so. On this reasoning, a general counsel might retain a name brand firm not just because it has excellent lawyers with much experience but because it bolsters how the general counsel feels about herself: “I’m a Bigge, Goóde, & Branded type of GC!” It stokes the GC’s amour proper” “BG&B’s impressive reputation rubs off on me!”

Fragile egos can purchase a bolster. Our emotional drives influence us much more than we acknowledge even as we invest our time and money in what outwardly looks like a rational choice. One could expect larger companies to retain larger firms, therefore, and not just because their legal issues are more knotty or their global reach more stretched. It may be that deep down in the individual lawyer’s psyche there glows pleasure that rubs off from mingling with stars. My Bentley is me.

Practice groups in law firms make sense for both them and their clients. If you are a law department lawyer, however, and a partner from a law firm touts the firms “[Fill-in-the-blank] Practice Group,” what should you find out about to determine the Group’s value to you and your client? Let me suggest some questions to ask, diligently.

Knowledge capital. “How would you describe and quantify the knowledge capital that the Group has codified?” This question goes to their efforts to memorialize experience in guidelines, samples, annotations, flow charts or whatever makes tacit knowledge more explicit.

Breadth of Knowledge. “What have you done, if anything, to combine the insights of third parties?” Some practice groups focus exclusively on the law, and quite logically, but others draw on business people, researchers, and consultants to complement the legal knowledge.

Much was said about law firm brands at an excellent conference organized by Mitt Regan of Georgetown University’s Center for the Study of the Legal Profession. As summarized memorably by one speaker, a law firm’s brand is its “promise to clients,” in the words of several law firm marketers and researchers. Its implied or explicit promise needs to be credible, memorable, and useful to clients.

Despite the logic of branding as described, I don’t recall any general counsel I have consulted to who think of law firms they use as “brands.” They don’t say, “X firm is a global leader,” or that “Y firm puts clients first,” let alone that “Z knows Canada.” My sense is that inside counsel amalgamate impressions of the style and ability of individual partners they have dealt with from the firm mixed in with fragments of articles read or conferences spoken at by the lawyers of the firm all combined with some ads they have fleetingly glanced at as well as remarks made by peers and colleagues. The pastiche doesn’t rise to any level of “brand” clarity. Other than size or “AmLaw 100 I think” they don’t store impressions as overall brands.

When pushed, a general counsel can always dredge up broad impressions of a firm: “A has uneven quality,” “B litigates aggressively,” or “C mostly does patents,” but those are scattered attributes, not an overall, let alone distinctive, brand, and they are secondary.

At the recent conference of Georgetown University’s Center for the Study of the Legal Profession, Lisa Hart, the CEO of Acritas, shared research data on why law departments retain the law firms they do. In the course of her remarks she said that Acritas has observed “an increasing focus on corporation-to-law-firm connection as compared to inside counsel to individual law firm partner.”

Since ultimately a human being speaks and gives counsel, I believe that most inside lawyers think in terms of a specific partner as their trusted advisor, not the incorporeal firm. But Hart makes a different, probably valid, point. If a law department chooses preferred counsel, it chooses firms and bases the relationship on each firm as a whole. If a law department intervenes in the firm’s delivery of services, be it with outside counsel guidelines or budgets or staffing constraints or tiered discounts, the interventions apply across the board at a firm. To the degree a law department needs coordinated services around the world or several legal disciplines to resolve a problem, it is the firm that is the locus, not any single partner.

So, with panels and management tools, as a consequence of legal complexity, global issues and volume discounts the leverage and negotiation rises to the firm-wide level, above any single partner in the firm.