As corporate developments around ESG and regulatory changes prompted by Brexit sweep across executive boardrooms, general counsels have never been closer to the highest ranks of their companies.
The very role of the in-house lawyer is changing. “I’ve never seen such a time with so much change happening constantly,” says EY transactional partner Claire Scott-Priestly.
“The role of the in-house lawyer is becoming more strategic and business-enabling as opposed to the traditional risk-based approach the function had in past. If you add to that tech, data and new resourcing models, the current situation presents opportunities for the in-house function to reshape its ways of working internally and with external counsel.”
However, the delivery model in law firms has not changed to keep pace with the evolution experienced in the GC community.
This discrepancy was explored during a roundtable attended by a group of senior in-house lawyers hosted late last year by Scott-Priestly and EY’s UK head of legal transformation Jan Thornbury. The discussion was part of The Lawyer’s In House Counsel as Business Partner Conference.
The question posed by EY to the attendees was: Is the service from external law firms still fit for purpose? “In our conversations with GCs, we sensed frustration due to the fact that law firms are not delivering what is required,” Thornbury explained.
The GCs agreed. During the discussion, participants mentioned some of the challenges they are facing when it comes to the assistance they get from external advisers. A common complaint was that often lawyers don’t understand what in-house lawyers do in the context of their specific companies and the sectors in which they operate. The GC of a sports company said on this aspect: “Sports is a niche area of activity, particularly from a private practice perspective. Our external counsel has rarely ever been in a situation where they fully grasped what is involved – specific terminologies, logistical concepts and cross-boundaries nuances. We spend a lot of time and energy educating external advisors on what we do.”
This lack of knowledge around the in-and-outs of an industry means that the advice provided by lawyers is often difficult for the in-house lawyers to apply to the realities of their jobs. The head of legal at a Japanese pharma company said the support from her law firms is gold-plated, but she often needs to rework the advice in a bid to better communicate the content to her business and provide what she described as a “more grounded risk assessment”.
The fact that in-house lawyers are working side-by-side with the management of their businesses means that their mindset is increasingly commercial, Thornbury noted. “And so should be the advice you receive from your lawyers,” she added.
This dissonance around the understanding of the business and the practicality of the advice extends to other elements of the relationship between in-house and private practice. GCs at the roundtable said that the promises made by law firms in the context of panel reviews frequently turn into shortcomings when it is time to advise the client facing a challenge. The GC of a bank said: “We set up our panel 18 months ago, and had people providing tender documents saying they supported us in certain areas. When we later got them in a room for a problem related to this area, they said they were not able to advise – so why did you fill the tender with that? It is disappointing.” To avoid unpleasant surprises, some GCs have learnt to rely on informal recommendations from their peers before signing formal engagements.
Another challenge in this relationship is the staffing strategy adopted by firms for mandates. “Lawyers will stick six fee-earners from their pyramid structure who then need to be trained; I’d rather go for the hourly rate of the partner and a shorter engagement than finding an enormous bill with six less qualified individuals on it. The expertise pretty much disappears,” said one attendee. Another GC concurred: “Sometimes for cost-effectiveness I am happy with junior members doing the leg work. But they should not take over the relationship. I need to know they will chat to the partner and get a steer- that someone senior is actively providing input to the work of juniors.”
Over the past few years, firms have invested in ancillary services and alternative delivery arms providing document automation and matter management services. But these offerings are not always what an in-house lawyer would classify as “added value”. “Who wants to review NDAs?” said a GC when he referenced firms coming up with automated review services. “They are extremely important, but you never ask for that.”
One GC said that firms should do more to ensure effective capabilities when it comes to international advice. She explained that the local service they get from global firms often is not nuanced enough and falls under “legalistic and academic” approach that does not really speak to the challenges she faces.
GCs suggested ways for firms to improve. First, one noted, there needs to be more “proactivity” from external counsel in understanding the business and its risk profile — and adapting the advice to the specific context faced by the client. “It is clear that law firms should get more under the skin of your businesses to be able to serve you more effectively. There is room for improvement,” Scott-Priestly said.
Another participant highlighted the need for better collaboration between the specialist law firm departments assigned to a client. “I get the sense that sometimes things are passed from a commercial associate to a tax associate who don’t speak with each other. Better touchpoints are needed,” he noted.
Most of all, more transparency is still among GCs’ biggest needs at a time when the workload is increasing and there are high stakes for their companies. The attendees noted that law firms should be better at estimating their own resources, time and fees when new mandates arise. “Sometimes you’ll start with lower fees only to be hit with a high bill later,” one GC said.
It is a matter of trust, possibly the biggest element of the relationship between GCs and partners at their external law firms. “Failing to be transparent is a short-sighted move on the part of law firms. The advice is a commodity, but it needs to be sympathetic to my business. Trust is built over time and if I sense the behaviour is not right, I would never use a firm again,” one GC concluded.
Sponsor’s comment: EY Law UK&I head Philip Goodstone and legal transformation head Jan Thornbury
A key theme from the conference was the changing role of general counsel (GC). We have focused below on the areas highlighted for improvement. It should however be noted that there were a number of positive examples about the services delivered and the way that certain providers had adapted through the pandemic.
Many of our delegates said that they needed their service providers to better understand that the GC’s role is not just a lawyer but also a business executive, providing recommendations and influencing decision-making. They complained about how some law firms’ overly legalistic approaches and unwillingness to come forward with commercially relevant solutions can hamper them in this role. Some also commented that while in-house lawyers have had to become much more agile over the pandemic, their providers have not always kept up.
Delegates told us that legal service providers must invest in relationships, and make more effort to get to know their clients. They debunked the myth that face time with partners is vital, saying it is more important to have relationships with the most appropriate individual, not necessarily the most senior. Pastoral care is also key – examples include providing training, knowledge resources, a sounding board and friendly voice on the phone. Similarly, some GCs said law firms need to be more mindful of burnout in the sector and work to more social hours. One asked: ‘Why do deals always have to close in the middle of the night?’. Perhaps the biggest frustration was with the way some law firms still display an arrogant, ‘we know what’s best for you’ attitude towards their clients. A better culture of service and improved customer experience is needed across the sector.
Another area of discussion was around fees and specifically, a desire to move away from the billable hour to arrangements that allow for more transparency and certainty. Some GCs expressed exasperation that in spite of their experience on previous, similar engagements, law firms are often not good at giving accurate estimates. They suggested that lawyers might do well to learn from management consultants and adopt more fixed fee pricing and shared risk models.
We asked why, when there is so much frustration, things are slow to change? Our delegates responded that while the traditional model might be showing cracks for clients, law firms continue to thrive and therefore have little incentive to change. That may be true at present, where there are too few alternatives to traditional law. However, as the need for change builds, the legal services market may only be a few successful disruptors away from having to reinvent itself.