Re-cap of ALM's Law Firm Marketing & Business Development Leadership Forum: The Changing Nature of the In-House and Outside Counsel Relationship

On Wednesday, May 12th, I was fortunate enough to attend a couple of sessions at American Lawyer Media's Law Firm Marketing and Business Development Leadership Forum.  The ILN was a marketing partner for the event, and I spoke on a panel called "Going, Going...Global? The Worldwide Marketing for Legal Services."  Unfortunately, I have not yet mastered the art of tweeting from a panel I'm participating in (and so don't have comprehensive notes for a re-cap), but the first session of the morning on the changing nature of in-house and outside counsel relationships was full of great takeaways for law firms and their marketing departments.

On the panel were ILN member, Martin Beirne, founding and managing partner of Beirne Maynard & Parsons LLP in Texas, Anne Chwat, General Counsel and Corporate Secretary for Burger King Corporation, Kenneth Handal, Former Executive VP and General Counsel and Head of Global Risk and Compliance for CA, Inc (retired), Bob Robertson, Chief Marketing Officer for Greenberg Traurig, LLP, and moderator Anthony Paonita, Editor-in-Chief of Corporate Counsel Magazine. 

While there was a lot that came out of the panel, the overwhelming sentiment, from Ms. Chwat especially, was the importance of relationships.  She let the audience know that although she does go to well-known large firms for some work, she's not going after name brands anymore. She wants a good relationship with a good lawyer, which broadens the competitive landscape for law firms.  

In terms of re-capping the panel, they started with a fictional scenario of a new general counsel coming into a company and being told that she needs to significantly cut her legal budget.  The GC invites in her top 12 law firms of the 100 that the company uses (which the panelists commented was on the low side for most companies), and asks them how they can work with her to reduce fees. Immediately, two of the firms say that they don't do alternative fee arrangements and leave.  The panel then addressed some questions that might come up and how outside counsel can better serve their inside counsel in this situation. 

Ken Handal said that it's the job of the GC to try to preserve the choice of outside counsel that they make in this new cost-cutting environment, which can be difficult because as Chwat pointed out, non-lawyers at major companies see in-house counsel who are purchasing legal fees as a cost center.  Chwat advised law firms to start thinking of themselves as competing for business, because they are. She suggested that they ask themselves "how can I help my client? How can I be their partner and help them through this?"  Bob Robertson agreed, saying that the attitude should be that firms need to do all that they can to help their clients.  If a firm gets a letter from their client about cutting costs, they should reach out to have a conversation with them.  Chwat confirmed this, saying that outside counsel build loyalty and trust with the attitude of "what can we do to help you," and this keeps in-house counsel coming back.  She said that firms need to make themselves part of the team and show they're willing to work with their clients.  She added that in-house counsel are "not trying to steal from you," they just want value for their dollar and help in dealing with the cost-cutting pressures that their companies are putting on them.

Chwat did caution that a need to cut costs doesn't mean she will compromise on quality. She wants her attorneys to think like businesspeople, to be thinking about how they can help their clients to save money.  Practically, this can take the form of more efficient staffing on legal matters.  She used outsourcing to India as another example of how firms can help to cut costs, though she admitted that Burger King has yet to do this.  Marty Beirne agreed, saying that firms are in the service business, and some firms forget that. He said that they need to have a budget that works and has some predictability for their clients.  Robertson added that when lawyers have done a lot of one type of work, they know what things costs and can estimate fees for fixed arrangements or budgets.

Chwat said that if a firm comes in and says that they want to work with you and they know your business, the client will keep using that firm.  She told the audience that she never pays full price for anything, and for any legal services that she purchases that cost over $50,000, she automatically requests an RFP.   An audience member asked how involved her non-attorney colleagues are in the decision to purchase legal services, and Chwat responded that they're not usually involved.  She generally chooses the pricing structure that BK goes with, but she has to be prepared to defend it and will sometimes talk on a case by case basis with the CEO.  She also talked a little bit about relationship-building, relating a story about when she first joined Burger King and a number of the attorneys in her department were out on maternity leave. She said that she seconded attorneys from an outside firm, and the firm sent her great attorneys, not the ones they just wanted to get rid of, and they didn't charge their full hourly rates.  Because of this, she was not only very happy that the firm was willing to work with her, but she also developed relationships with these attorneys and now reaches out to them when she needs assistance.  She emphasized that companies are willing to expand the work that they give a firm based on their relationships (so lawyers, get out there and build your client relationships!).

Another audience member asked about the role of a firm's reputation. Chwat answered that it gets them in the door, but that's it. After that, the firm has to be able to show how they're different.  She echoed what we've been hearing a lot lately in the legal industry - by the time a company wants to talk to you, they already consider you talented and high quality. They want to know what else you can offer them.  She focused a lot on firms being flexible in terms of fees, and said that even at the RFP level, firms must be willing to discuss them.  She added that many times, she's made the point of asking about alternative fees in her RFPs, and firms will come in to talk about the business and either won't be willing to talk about alternative fee arrangements or won't be prepared to talk about them.  Alternative fee arrangements are not going away, Chwat emphasized.  

Someone in he audience asked Chwat about the importance of diversity and she said that it's very important to her that not only is the firm diverse, but that her matters are staffed by a diverse group - she considers women to be a part of the minority group she looks for.  Another audience member asked about outsourcing some work, and Chwat admitted she's a little nervous about taking legal work to India, but said that the more GC roundtables she participates in, the more she's hearing that other companies are doing it and finding value in it.  She cautioned firms again about overstaffing and Handal agreed with her.  Chwat added that the more efficiently a firm staffs a matter, the more engaged the attorneys working on it are, and the more loyal they are to their firm.  Another audience member asked her about recent statements by a GC that companies don't want to pay for first year associates and that they're totally useless, and Chwat said that she considers first year associates to be in training to be good third and fourth year associates. She doesn't have many staffed on matters for her, but doesn't mind it. She did point out that she will not pay $300 an hour for a first year associate, and believes that firms should look at paying their first year associates as a training cost that should not be passed along to their clients.

Paonita asked the panelists if they felt the new relationship between in-house and outside counsel is permanent or if it will go back to the way it was.  They all agreed that it's permanent and said that 70% of law firms interviewed believe that the change in billing and fee arrangements is similarly permanent.  This was the point at which Chwat emphasized that she's not going after name brands anymore, but that she just wants a good relationship with a good lawyer.  She said it's about asking what it is about your firm that's going to make you a good part of her team. It's about chemistry.  She advised firms to do their homework before meeting with a client and said that one constant that will always help a firm to get hired is when a firm is able to set themselves apart.

An audience member asked how much legal rankings mean to her when choosing a firm. She answered that they don't mean much; she cares more about relationships.  The panel finished up with a final audience question about how useful GCs consider client alerts. Chwat said she does read and archive them. She told a recent story about being surprised with a piece of litigation that she didn't know much about - she had a member of her team search through their files and saw one firm's name come up in connection with that area of law, in a client alert.  Because they set themselves apart as experts in that area, she called that firm and gave them the business. So client alerts do help to set firms apart as experts in certain areas.  

The lessons of the panel were overwhelmingly clear: work at the in-house/outside counsel relationship by showing how you can be a business partner for your clients and show your understanding of the cost-cutting pressures they're under by offering real, valuable solutions, whether in the form of alternative fee arrangements, more efficient staffing, discounts, or outsourcing.

LMA 2010 - General Session: What We Love Most About Our Lawyers - A Client Panel

The client panels held during the LMA conferences always provide a wealth of useful information for legal marketers to bring back to their firms.  This year's panel was no different - moderated by Michael B. Rynowecer, President and Founder of The BTI Consulting Group, the panel featured Eric Hilty, Senior Vice President and Assistant General Counsel of Apartment Investment and Management Company (AIMCO), Carmel Gill, Corporate Counsel, Legal Department of Level 3 Communications, Jeffrey K. Reeser, Vice President and Secretary of Newmont Mining Corporation, and Julie DeCecco, Associate General Counsel and Director of Litigation at Sun Microsystems, Inc.  The session was titled "What we love most about our lawyers," and the panel started by saying that in order to stand above the competition and become a prefered provider, firms need to step up partner engagement and have a proactive knowledge of their clients' business.  The clients listed a few of the law firms that they consider top of their lists, and one included ILN member, Holland & Hart.

So what gets a firm "on the list?"  One of the panelists counseled that lawyers shouldn't make them jump through legal hoops, but should do as much for them as they can, so that they don't have to do it themselves.  Another said that lawyers should identify the obstacles for their clients, think two steps ahead to the solution and articulate it.  Their impressions of firms come from their experiences with the attorneys of that firm, reinforcing the theme that it's all about relationships.  The panelist admitted that she thought saying service was the most important thing to her might offend the audience, but as Kate Haueisen said via Twitter "we influence service too!"  The panelists suggested that firms have a dialogue with their clients about their expectations for communication, workflow, and sharing the work burden and they agreed that they are trying to isolate the firms that they have good relationships with and save some money. 

The panel moved on to talk about alternative fee arrangements (AFAs), and a few of them admitted that they were skeptical of them at first.  One panelist said that she wondered who would end up with the short end of the stick, but after using AFAs for a while, she can now see the value.  Another panelists said that she also feels more satisfied with the value after using AFAs for a few years.  DeCecco commented that almost all work being handled for Sun Microsystems is now done on an alternative fee basis.  A panelist added that firms proposing alternative fees are automatically seen by clients as trying to bring value from the start of their relationship.  They appreciate the predictability and proactive nature of these proposals.  When alternative fees haven't worked, it's because the client can't tell what the firm's motivation is, and trust is not there.  The panelists felt that alternative fee arrangements work best with firms they do a lot of business with, and therefore have established relationships where there is trust and a "safer" risk. 

The panelists said that when they're reviewing whether to use a firm or not for a piece of work, they first get referrals and then go to the firm websites.  Because of this, they warned that if an attorney doesn't list all of their areas of expertise in their bio, they assume that they don't handle that type of work and move on.  They also agreed that because they're spending time to check the firm's website, they don't need "marketing slicks with the same content."  Instead, they want to know how you'd approach a matter.  Another panelist comment that she thinks there's "nothing worse than a cheesy bio" and doesn't want "flowery language," like "cases are not won on luck alone."  A client's hiring criteria is 1) expertise, 2) do they have the time, 3) cost, 4) likeability/do they care about me, and 5) politics.  A GC commented "It's almost like speed dating...we want to like the attorney." 

In terms of formal RFPs, the panelists advised putting a lot of work into customizing them - and they emphasized a LOT of work - and reflect on how the firm would approach the case.  They don't want firms to just mention that they're open to working with a client on alternative fees, but to actually tell them what the firm has in mind.  The panelists admitted that firms competing in the RFP process might get knocked out for not including a budget, though there are some cases in which if the skills and chemistry is there, the client might ask them for more instead of immediately dismissing them. 

Another interesting takeaway that came out of the panel was that clients don't think that firms are less qualified because they discount rates.  Bills were also a point of contention, with a couple of the panelists talking about how they've had surprises on their bills, which indicates to them that their relationship partner at the firm isn't reviewing them first.  The clients said that they like law firms that help them in other ways too, such as inviting them to conferences or introducing them to their counterparts at other companies.  Since many law firms don't do this, it's a way to set yourself apart from other firms.  They suggested that firms take the time to talk to their clients about what's going on, without charging them.  They appreciate when their lawyer asks them questions outside the scope of the matter being handled, and clarified that this doesn't mean small talk, but discussing what else is going on at the company.  However, they did caution that when a firm "stalks" them with too much repetition of what they've seen in the news about them or on their website, it does make them uncomfortable. 

Rynowecer then asked the panelists to give one piece of advice to law firms.  They said the following:

• Develop long-term relationships at the partner level and come to the table with creative fee structures
• Don't just show the "hoop;" show how to get through it, or better yet, get through it yourself without involving the client.
• Give legal marketers a raise. Put yourself in the client's shoes - envision what they're going through and how to meet their needs.
• Relationships are key - meet people, but not for the purpose of selling. Find out where clients are and be there. 
• Partners should be thoroughly reviewing all briefs and bills, despite any time crunches imposed by the client.  

LMA 2010 - Recovery: Refocusing the Inside Counsel/Outside Counsel Partnership to Maximize Profitability

For the first session of the day, I was in Track One - the Business of Law: Recovery: Refocusing the Inside Counsel/Outside Counsel Partnership to Maximize Profitability.  Presenting was Harris E. Berenson, Esq., the Assistant Vice President/Chief Counsel for Liberty Mutual and Senior Counsel for Liberty Mutual Insurance Company.  His presentation focused on the idea that inside and outside counsel have a partnership, and he started by saying that a partnership, at its core, is nothing more than a relationship.  However, although this is a simple concept, the challenge comes when trying to execute it.  Relationships, both personal and professional, must be built on trust, support, consideration, respect, caring and the mutuality of responsibility.  Inside counsel are looking for a long-term partnership - similar to what people are looking for in a relationship as they get older.  They don't want someone who just wants to be "on the list;" they want a true business partner who knows their business and understands industry issues.  Because of this, they'll often go with their gut instinct and recommendations from trusted friends and colleagues.  Berenson said when looking for outside counsel, he checks with his counterparts, industry peers, and internal teams - when later asked, he emphasized that he does not look at directories and rankings lists for outside counsel and said "they don't matter."   

Once the decision is made to work together though, how do both sides get the most out of the relationship?  Berenson said there needs to be a "mutuality of expectations."  As an example, he said that if the client needs the firm to be available 24/7, the firm needs to be able to articulate how they will do that, not just that they can.  He said there must be "mutual hand-holding," similar to being in a romantic relationship, but he clarified that by "hand-holding," he didn't mean constantly taking people to lunch or asking for their business, but showing the client that you're a valuable business partner.  He also said that lawyers should show their clients that they can do what they said they could do, to suit up and show up, and to keep their promises.  Berenson said that each side comes with their own baggage, and it's up to each side to figure out what that is, and how they can learn from each other. 

A key takeaway that Berenson emphasized is something that I've heard from inside counsel over and over again: "I hire lawyers; I don't hire law firms."  Because of this, he recommended that firms market the people, because that's who builds the relationships.  Along these lines, he cautioned that firms should think about who they're putting forth, because that's who inside counsel look to as the face of the firm.  What "wows" them is an understanding of the business - this is not limited to what the client says to his lawyer, but what his lawyer has proactively researched about his business.  Berenson took it one step further, adding that outside counsel not only need to know their own clients, but also need to know their client's clients, and show a willingness to partner.  Inside counsel want a commitment from their lawyers and for them to be a counselor, not a lawyer. Berenson said that even in this economy, if a firm is giving him service, value, and a good relationship, he doesn't mind paying top dollar. 

He talked a little bit more about his expectations for outside counsel, saying that his main concern is whether an attorney can get the job done, not whether he likes them.  He advised that lawyers should be accessible, respond promptly, learn the business, never say no, and listen to feedback - in Berenson's opinion, outside counsel are just like any other vendor: if he doesn't like you, he'll find someone else.  Because of that, he expects nothing short of excellence from his attorneys.  Like with every relationships, the inside-outside counsel relationship takes work on both sides and doesn't end when you're on the list.  The overwhelming theme I got from Berenson's talk is this: it is even more essential in this economy for outside counsel to sit up and take notice that you need to work at your client relationships or be replaced.

Berenson then took some questions from the audience.  Someone asked how many firms come to him with client satisfaction surveys, and he admitted that it's not as many as he would like.  He thinks that surveys show an interest on the part of the firm in how they're doing and he appreciates that.  There was a final question about what challenges he faces in today's economy, and Berenson said that the cost of legal services is a big challenge, so many of the attorneys he works with are doing more work in-house than before.