While both corporate legal departments and law firms talk about wanting to build solid relationships, the stereotypes persist that corporate legal teams simply want the best outcome for the lowest price, while law firms want to maximize billable hours. At a recent Legaltech session I moderated, featuring a panel of both corporate legal department and law firm leaders, I threw out this statement, or the proverbial “elephant in the room.” The audience reaction – a nervous chuckle – and the large session attendance, confirmed that many understand this dilemma and are still trying to figure out how to manage it.
As it turns out, throughout the conversation that followed and in the course of the show, it was clear that a lot is changing for both sides.
The Emboldened Corporate Legal Department
In the opening keynote, the team from ALM Intelligence identified the “newly emboldened corporate legal department” as one of the biggest trends in legal. Corporate legal professionals are inspired. They are held accountable by their leaders in ways they have not been in the past. They are expected to operate like any other business unit, with measurable KPIs that help meet larger business goals. They now need to show ROI for their work.
As part of this newfound empowerment, corporate legal must serve as “global contractors” for outside legal partners, a role that requires new skills, new talent, and a growing base of technology to meet desired outcomes. One legal operations panelist remarked he needs law firms to understand the “business of law” so they could tailor their services to help meet his goals.
On the flip side, law firms are facing changes of their own. They have a tremendous and growing burden to adhere to complex billing guidelines that differ for each and every client engagement. They are responsible for meeting rapidly evolving compliance changes in areas like eDiscovery and cybersecurity, yet the training and workflow changes required infringe on precious billable hours – hours that measure their performance.
What is Needed to Achieve a Win:Win?
With this as the backdrop, what are the best practices that can lead to a relationship that is a win for everyone? Our panelists agreed that having a conversation early on to define success metrics is a critical first step. This can set up the shared responsibility needed to establish a great partnership, or strengthen an existing one.
From there, it’s important to keep the conversation going. A cycle of quarterly and yearly reviews about what is working and what is not that’s supported by data may be awkward at first, but usually turns out to be positive for everyone involved. A word of caution; I say “awkward” because many times throughout various sessions on managing legal spend, outside counsel audience members showed that they fear data might be used against them. Mistakes possibly presented as a “gotcha” moment rather than as part of a productive conversation. Keeping the goal of these discussions in mind – to improve the process – is critical to building relationships.
Law firms can initiate this discussion themselves as a way to improve client relationships. Our corporate panelists professed a desire for their legal partners to be more proactive. After all, the law firm holds most of the data about success, and corporate legal departments need that data to demonstrate ROI. The more both sides work together to assess efficacy and total cost of resolution, the better the long-term viability of the relationship.
Ideally, both partners should use these conversations and data to improve outcomes. This might mean corporate legal departments simplify billing guidelines, making it easier for law firms to follow them. It may also mean better training on those guidelines so outside counsel understands the business drivers behind them.
Opportunities for Success
Let’s look at cybersecurity as one example where law firms and CLDs can work more effectively. Both sides have a vested interest to protect sensitive data. So, each needs to consider their role in cybersecurity initiatives and work together to achieve security goals. Setting expectations for who can access sensitive data and using technology to ensure those rules are followed benefits everyone. Mutually agreeing on the levels of encryption required for sensitive data can be an easily accomplished best practice. Law firms could view third-party certifications for security protocols -- now required by a growing number of corporate legal departments and procurement officers -- as an opportunity to stand apart in their market and demonstrate partnership, rather than a burden to bear.
Alternative fee arrangements (AFAs) also offer a potential win:win scenario. When viewed not simply as a way to control costs, these arrangements can represent a tremendous opportunity to build better relationships. Law firms can get very creative with AFAs. This demonstrates the desire to add value for clients while respecting budgets. Early resolution bonuses reward law firms that bring matters to a close efficiently and successfully. Secondments, where law firm members temporarily become corporate legal department employees, help develop both mutual understanding and synergies that hold the promise for future successes.
A Promising Future
At Legaltech, it became apparent that corporate legal professionals and outside counsel are working hard to talk about that elephant in the room and move on from their respective stereotypes. Ultimately, both want great relationships. There is a lot of good, creative work underway to actively change their approach and focus on a shared goal of success. As a result, win:win philosophies and practices are finally taking hold.