Your success is mine

From being ranked themselves on how well their external firms perform to having to justify every dollar spent, in-house lawyers face an ongoing challenge when it comes to briefing firms for work. Just what are the options when it comes to ranking lawyers? Kate Gibbs investigates

The task of ranking law firms was for years the province of hefty directories, which collected dust and came to their best use when the office fridge leaked. But a handful of corporate counsel are bravely reinventing internal systems for managing the use of external legal counsel, partly spurred on by pressure to show they are getting value for money.

At worst, people in a company brief out to external lawyers as they need them. They contact lawyers they’ve worked with before, friends of friends and, horror, just one of the big-firm switchboards. But in an ambitious attempt to take back control of all things legal in their organisations, some legal counsel are taking their colleagues on a rigorous redefinition of what it means to brief lawyers.

The methods used by some corporate counsel are cringe-worthy to others, it appears. In researching the various methods by which in-house lawyers rate external lawyers and how far they too are assessed, Lawyers Weekly discovered a wide range of systems; some more rigorous, some more shocking, than others.

Jones Lang LaSalle, leading global real estate services and money management firm, has hired a new man to overhaul the selection and use of external counsel in its Australasian offices. George Paramananthan was recently appointed as new general counsel, and he has already taken absolute control of all legal processes internally. He labels the internal systems of legal briefing when he started his job as a complete mess. “People were just briefing out left right and centre. There was no control over who we brief, why we brief and who actually does the briefing,” he tells Lawyers Weekly.

So what was a disjointed and unmeasured response to legal issues as they arose is now a rigorous and streamlined system in which all matters first come to the in-house team at Jones Lang La Salle. Paramananthan recalls the lack of structure before: “Individuals may brief a law firm but they don’t understand what it means and the cost associated with what it means. There may be something that I can really help with and I’m free; we can provide the advice for free.”

The overhaul has occurred in a number of ways, but the first key step was to put a legal panel in place. Blake Dawson , Baker & McKenzie , Gadens Lawyers and DLA Phillips Fox have been selected to do all of the firm’s external legal work.

Using legal panels is not, in itself, a new idea. Stumbling attempts to rank advisers began to emerge in the late 1990s with the introduction of panels and commoditisation in some areas of law. While some succeeded to do it before then, many found it hard to bolster company support in actual implementation, or the panel selection process was fragile in practice. But many major companies, not to mention the Government, now use panels as the core system by which they brief firms.

There are signs, though, that the approach to using panels and other processes to select counsel is changing as responsibility falls into the hands of in-house teams to manage cost and measure performance of external advice. Processes are becoming more streamlined and there is much less monetary waste. At Jones Lang LaSalle, the overhaul of law firm briefing, and the ultimate introduction of the panel, was guided very much by cost. But a second huge consideration was redefining how internal staff saw the in-house team. Paramananthan says a lot of people see the in-house team as a separate law firm and they fear roadblocks to getting legal advice. “I try to break down those barriers and one of those things is a recognition that lawyers in an in-house role are cost centres so you don’t create value; they don’t see value in what you do,” he says.

In-house counsel now have to create value through what they do, they have to become a cost centre, argues Paramananthan. In the very selection of the particular law firms chosen to work on Jones Lang LaSalle’s panel, he could prove to the whole company that his advice added value. “You have to create value through service, you have to think outside the box for service. I said, ‘well these law firms can potentially bring new business to use, these are some opportunities they can provide to us’.”

And obviously, cost becomes a huge value add for in-house teams that need to prove their worth within the organisation. When law firms pitched for the chance to sit on the firm’s panel, there were about five areas available to claim. Paramananthan asked the firms how many areas they wanted to pitch for, and whether if they pitched for more than one the company would get a discount in fees – a sort of group discount. “I also asked them to give comments on the types of fee structures they could have, like retainers and anything that fell out of the box that would make me want to rate them higher on the cost box. Some of the firms came back with substantial discounts to their fees,” he says.

Proving its own worth to the larger organisation will ultimately come down to cost, says Paramananthan, so that is what counsel must do. Once it was selected, he told the legal panel that legal spend was historically X number of dollars and that the plan was not to increase that spend but pull it in. “My plan was actually to rope a lot of the work in house and control the cost because that is another value add that I could give, as well as inspiring the service mentality for the operatives,” he says. “They think ‘well actually legal does its job, our legal spend has gone down’. So that is how I create value.”

Pressed as to why in-house counsel doesn’t just do all the work internally, Paramananthan says there is not always that expertise in the team, there may not be enough time, or he may want another firm to bear the risk.

The CSIRO, which is a Commonwealth Government agency so is bound by Commonwealth procurement guidelines, uses legal panels. It took more than six months to finalise which firms would be on the panel. It involved a lengthy process of obtaining detailed information about each of the firms, including areas of expertise, information regarding value adds, and CVs of the top people. “It was a major exercise but a valuable one,” recalls Richard Aarons, corporate patent counsel for the CSIRO. Now, Mallesons Stephen Jaques , Minter Ellison and Australian Government Solicitors are the exclusive members of CSIRO’s legal panel.

With the panel in place, the company makes decisions about which firm will work on which matter based on experience and cost. But there are those matters where counsel will select a firm and brief it and those matters where they will seek quotes from a number of panel firms and then make a decision. “Our estimate on how much the whole thing is going to cost would be relevant in us determining whether we’d even approach more than one firm,” Aarons tells Lawyers Weekly.

But CSIRO’s legal arm is now developing a “matrix” by which performance of external counsel is measured. While not willing to go into details, Aarons says it’s part of a refurbishment of the way legal advice is handled by the organisation, which started with the birth of CSIRO Legal as a function just over a year ago. His team takes very seriously its responsibility to closely manage the scope and provision of services by external lawyers, says Aarons. “We don’t just throw things over the fence.”

But Australian Corporate Lawyers Association (ACLA) CEO Peter Turner denies the existence of a trend toward rating external firms outside the use of panels and the like. He says that most of the major corporations in Australia have long-standing historical arrangements with their major law firms and says they don’t move too much outside that. “When they do they tend to follow the lawyer rather than the firm. They’re looking for individual reputations,” he says.

In fact the results of research conducted by ACLA with Beaton Consulting last year suggests pressure on in-house teams to contain costs has eased since 2005. The survey of 660 in-house lawyers nationally found that while in 2005 76 per cent agreed that reducing legal expenditure was increasingly important, in 2007 just 67 per cent agreed.

Another prominent finding in the 2005 study was that overall in-house lawyers felt a considerable burden in coordinating external law firms, and were seeking to reduce the number of external law firms they used. But fewer in-house lawyers in 2007 compared with 2005 agreed that their organisation was still trying to reduce the number of external law firms used. Just over half agreed that coordination of those firms is an increasing part of their role, compared with almost two thirds in 2005.

For the first time since the study began, fewer than half of in-house lawyers surveyed agreed their organisation was moving towards more formal tender and panel arrangements. The percentage of legal work corporate lawyers conduct in-house is still increasing, according to the ACLA research, but to a lesser degree.

ACLA’s Turner argues that the pressure to squeeze every dollar out of external legal advisers is not there is the same way it has in the past, which he attributes in part of a strong economy in recent years.

But this is not the case at eBay, where general counsel Katrina Johnson is personally assessed on the performance of external legal functions. When this model was put to other in-house counsel by Lawyers Weekly, responses included; “Hooley Dooley!” and “Oh no!”. But for Johnson, it is part of what it means to be a corporate lawyer.

“Yes, in terms of essentially getting value for money spent, spending it wisely on the right firm, getting the right results for that investment. It’s almost like a return on investment analysis,” she says.

According to Johnson, working in certain businesses that are very “matrix driven”, there is another fairly easy matrix for them to look at in terms of whether they are getting a return on the money they have spent. While she agree with Turner’s point that when there is a lot of money out there, the pressure on internal lawyers will lessen, she says peers in her own and other organisations still need to justify money spent.

“As a legal function you are competing with other business functions for the overall dollars. At the end of the day you’re still one team among many and you need to justify why you should get X amount of dollars, which may take it away from another department,” she says.

So at eBay reviews on the firms used are conducted. “We actually have a system in place where we rank the firms that we use throughout the whole world,” says Johnson. All levels of staff globally are asked to take part in the matrix, which lists all the law firms used. Reviews are done based on the law firms each person has personally worked with.

“It’s literally a rating system, basically assessing a law firm on a range of elements. It’s about value for money, expertise, how responsive they are, how quickly they get the work done,” she says. “It includes things like how commercial they are in their approach, how closely they stick to the qualitative budget, how much over do they go, if at all.” In the rating system, a more personal touch is possible if the users of legal services within the company choose. But essentially it requires a variety of different statistics, and an overall ‘how much value do you believe this firm brings to our business’ type question. Users rate the firms from ‘very little’ to ‘excellent’, says Johnson.

EBay comes up with a rating systems and firms are prioritised based on the score they get as a result of that review. Firms and individual lawyers will then receive a separate review survey via eBay’s in-house team, whereby they get feedback based on how they have been performing. Firms that are used globally are given the feedback to help drive greater efficiencies and to make sure they’re aware of where they are standing and what they could be improving.

Johnson says she is aware of anecdotes suggesting the increasing need for in-house teams to justify the dollars. “But as you fight for dollars from the company purse, you need to ensure that you are able to justify what you need that amount of money and that you aren’t over-budgeting or being conservative. You need to show you are giving a fairly realistic assessment and that the firms you are using are going to get you the best result for the amount you pay,” she says.

Despite responses from other organisations’ legal teams, Johnson says the method used by eBay is an effective one in ensuring that people throughout the legal organisation who are working with external counsel have the ability to provide input and feedback on that firm. Certain law firms do very well with their key contacts in a business, she notes, but not necessarily everyone. “This is a very good way of getting an overall assessment of the firm and not just the key players,” she says.

While the methods vary, dynamic in-house teams are now working harder to justify the work they do, and the amount of external spend they have available. From internal rating systems to panels of external firms, corporate lawyers are carefully assessing which firms they use, how many they use, and how much legal work they themselves should be doing. The question remains, however, are law firms up to the increasing awareness of their clients?

22-Feb-2008

Related Tags

in-house , Law Firm , ACLA , ebay , CSIRO , Jones Lang LaSalle

Related News

Wednesday, November 19, 2008

Wednesday, November 19, 2008

Legal community welcomes lawyer president Wednesday, November 19, 2008
Americans voted for change and change is what the legal community is likely to get, writes Angela Priestley

Wednesday, November 19, 2008

Slow market keeps local lawyers at home Wednesday, November 19, 2008
Australian lawyers looking to expand their experience overseas are finding that opportunities in international legal markets are disappearing as the world economy slows, writes Angela Priestley

E-NEWSLETTER

Browse Firms:

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

Browse News Topics:

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

News | About Us | Privacy Policy | News Archive | RSS | Advertising | Contact Us | Add My Firm | Industry Links