A question of value

The current view is that lawyers, by nature, are not good at selling either themselves or their businesses. So how do in-house counsel and external lawyers fare in communicating to each other the services needed and available for a profitable working relationship? Caroline Poynton talks to in-house counsel at Barclays, BT and Shell, and a former in-house lawyer at United Assurance Group and Cheltenham & Gloucester, about their experiences of managing their external law firms.

A resounding message of many a Managing Partner article is the need for law firms to know their clients better and to win new business through the propitious use of know-how of a prospective client’s needs. Add to that the availability of an array of value-added services from technology expertise to training seminars, and a firm can look forward to effectively differentiating its services from the multitude of other firms offering similar technical expertise. The result will be a long-term, rewarding relationship, with client and law firm working together to better develop profitability for all. It is a golden vision, but one that may or may not reflect the reality of day-to-day law firm/client relations.

Companies such as Barclays, BT and Shell have little problem enticing potential law firms to compete for work. What do they really think of the service they are currently receiving and what should law firms be doing to better meet the needs of such potentially lucrative clients?

According to Paul Gilbert, legal director at LawBook Consulting, it is a challenging time for in-house lawyers and law firms as economic uncertainty has driven competition to new levels of intensity. “The focus internally and externally is more on cost than ever before,” he says. “All lawyers have to find ways to be valuable and be seen to add value.”

Jeremy Ogden, general counsel Barclay’s private client and deputy group general counsel, would agree. Three years ago, his legal team put a lot of effort into setting up the company’s law-firm panels. “Our model was that we wanted as few a number of law firms as possible but covering a broad range of skills,” he says. Cost became a crucial factor in the selection process, however, when the panels were reviewed this year. He says that all the firms that tendered for work scored well on their infrastructure but, as the in-house team have to explain the costs of a project and prove value to the business, the team became much more focused on competitive pricing and other value-adding initiatives. As he says: “Law firms shouldn’t think that we’re not prepared to pay for their services. We know we need quality support so the cheapest isn’t always our choice, but we have to manage external costs rigorously and we need to get value for money.”

Determining what constitutes value for money, however, is another challenge in itself. Ogden demonstrates the difficulty when it comes to billing. “We have fixed rates for certain tranches of work, while other work is subject to market rates and competitive tendering, but there is still quite a lot of hourly billing,” he says. “We would like to understand where the value lies behind the chargeable hour. We want to avoid having an open cheque book as much as possible.”

One solution might be for firms to move away from the billable hour, something that Ogden would support. However, he also agrees that a lot could be resolved through greater transparency, particularly on large projects, where changes and billing developments should be clearly and regularly communicated.

Anne Fletcher, group general counsel for BT, agrees that value is a key topic and that it is vital to get the right quality of service at the right cost. She adds, however, that value also lies in the quality of the relationship between BT and its external law firms. “The service BT receives from its external lawyers reflects directly on my personal credibility with my colleagues, so as well as being first rate professionally, it’s important that those involved in BT’s work have a good commercial understanding of our business strategy and the markets in which we operate,” she says.

Fletcher also knows that this can be a weakness for law firms, leaving her facing embarrassment if they meet her colleagues and prove to be deficient in their client knowledge. “We still get the occasional external lawyer who refers to us as ‘British Telecom’,” she says, “which is a style we haven’t used for many years.”

Taking the discussion a step further, Fletcher says that she is also keen that BT’s external suppliers work well with each other as well as with BT. “We recently held a kick-off event, which each of the firms attended and I’m looking for ideas from them as to how they can best work together.” To support this goal, she intends to arrange regular events to encourage co-operation and will be holding the first training event for external firms next month. If successful, it will surely mark a leap forward for law firm/client relations that many other companies will seek to emulate.

Richard Wiseman, UK general counsel at Shell, believes that law firms are getting better in the services that they are delivering to their clients, but rather than focusing on what law firms should be doing to win work, he points to the role of the client in ensuring top-quality service. “A lot of complaints people have are because they don’t effectively manage the external law firm or don’t tell the law firm exactly what their expectations are,” he says. “It’s a two-way process and clients also have responsibility.”

Fletcher agrees, saying that the relationship needs to be worked on from both sides. Reflecting her pivotal position at the centre of the law firm to business operation, she adds: “I always encourage feedback from the firms we work with on things that we, as a client, can do to better improve the quality of the service to BT.”

Effectively initiating and maintaining two-way communication is perhaps easier for Wiseman as he believes that a lot of what constitutes good service boils down to chemistry with particular individuals. Consequently, he says that he has often followed individuals from one law firm to another. From this point of view, a law firm’s attempts at differentiating itself and marketing a brand image would seem redundant. “I don’t believe marketing effort is very influential,” Wiseman says. “For most law firms, marketing goes straight down the drain.”

It is a contentious comment to say the least, as more law firms invest time and money in making their marketing an integral part of the firm’s core development. Wiseman believes, however, that their attempts at differentiation are failing. “Everybody who comes to you trying to get business will try to tell you that they have some point of uniqueness,” he says, “but when you cut below the surface, they really struggle.”

Gilbert also believes that law firms generally fail at differentiation saying that while two or three firms are doing really well in this respect, most others rely on their rainmakers to be the “face” of the firm. Does this really matter, however, if Wiseman reflects the general trend that success boils down to individual relationships? On the contrary, Gilbert believes such reliance on certain lawyers is a high-risk strategy that he believes will, for some, lead to high-profile failures. Perhaps there is some truth in this to the extent that individuals will always be fallible but there is still, evidently, a lot of work to be done if law firms are to be seen in the business context that their marketing activities are attempting to achieve.

Ogden represents an alternative view as a client who would like to see law firms move away from individual lawyers to “a more holistic relationship where we do business with the whole firm rather than individual lawyers”. This view is reflected in his goals for the ongoing relationship with external law firms where six-monthly meetings provide a forum for opening up as much as possible to talk about their relative businesses, including their policies, what’s coming up, IT, etc. His strategy reflects his acknowledgement of a business-to-business rather than business-to-lawyer relationship and it is a significant clue for what Barclays will continue to look for in its ongoing management of external law firms.

Unsurprisingly, in the context of the discussion, nobody rated technology as a decisive factor in their law firm selection. Perhaps this is because we have focused on the core lawyer/client relationship, where technology would be seen as an add-on feature. However, with many commentators suggesting that technology has become the crucial investment for law firms delivering a better service, it is still interesting that in-house counsel at some of the biggest client companies believe that it would not influence their selection process. Indeed, Ogden goes further to say that technology can actually prove a problem for Barclays. “Security is a really big issue for us,” he says. “Many law firms use e-mail but is it really secure, particularly for sensitive transactions?”

Fletcher probably hits the nail on the head for most clients when she says: “Use of technology for its own sake wouldn’t influence the selection process. But I am very interested to see what firms can provide in terms of information resources and training and in any technological developments that can improve the quality and cost-effectiveness of the working relationship.” Hence, as part of the ongoing service delivery, technology is something that can help a firm enjoy a more longstanding client relationship.

In the long run, the experiences of Wiseman, Ogden and Fletcher demonstrate the extent to which each client has to be taken as an individual entity with differing needs. As Gilbert says: “It is crucial to understand interests on all sides, to have a strategy for delivery and to have a communication plan.” To achieve this, firms cannot afford to take a one-size-fits-all approach and work needs to be done to pitch a firm’s service offerings appropriately.

However, there are some trends that are interesting. For BT and Barclays, there is a real suggestion that a law firm’s efforts to develop itself as a business entity rather than a collection of individuals will be rewarded as both Ogden and Fletcher talk about working to improve working relationships between external firms as a whole and in-house counsel. Wiseman’s views do not entirely refute this. While he makes the very valid point that a good relationship will often be based on personal chemistry, he also mentions that a future objective is to become more systematic. “We need to get a much closer handle on how much each of the firms that works for us on a big scale is doing for us globally,” he says, “not just in any location.” It is a point that reveals some appreciation for needing to work within a bigger picture, to get the most out of the potential service a law firm can provide.

Successfully managing an ongoing working relationship is never easy, but law firms and in-house counsel are clearly working hard to make the vision of mutual respect and co-operation an ongoing reality. For firms that are concerned with the apparently ever-increasing expectations of their clients, Wiseman and Fletcher provide some comfort as they acknowledge the importance of client responsibility and two-way communication.

In a difficult landscape, there are thankfully some handy survival tips: get to know as much as you can about the client company before you pitch for work, understand why and how they choose their law firms and then, if you win the work, remember that the relationship is organic – you have to keep working at it to ensure that it thrives.

Roundtable contributors:

Anne Fletcher is group general counsel for BT, and while BT’s legal team is partly decentralised with each line of business having its own legal team, Fletcher faces the challenge of managing the legal issues for the group as a whole, ensuring that the group takes full advantage of the customer focus, which a decentralised team brings, without losing the effectiveness of a more centrally integrated structure.
Paul Gilbert, legal director of LawBook Consulting, has the benefit of 12 years experience working as an in-house counsel, first as head of legal at Cheltenham & Gloucester and later as group secretary/legal director at United Assurance Group.
Jeremy Ogden, general counsel Barclays private client and deputy group general counsel, has a wealth of roles, including legal risk management, new product development, ensuring the bank meets its regulatory requirements and making business easy for clients. He also deals with the non-legal side of internal management in such areas as performance development.
Richard Wiseman, UK general counsel at Shell, has the considerable responsibility of managing the part of the international legal department that advises businesses in the UK. That covers everything from North Sea oil to petrol stations, the latter of which also includes an array of products from petrol to confectionary, tobacco and newspapers.