In finding value for money, in-house lawyers rate quality of service very highly. Here we assess their attitudes to overlawyering, offshoring and global networks.
The devil is in the delivery. While the cost of external legal advice is a priority for general counsel (GC), how that service is delivered to clients is no less critical. Fundamental issues such as using the appropriate level of resources; offshoring parts of the job to cheaper jurisdictions; offering proactive advice; and managing projects effectively across borders all have a knock-on effect on the value of law firm advice. With this in mind, we asked our survey participants to give us their thoughts on how strong law firms are at service delivery.
The first major gripe is perennial: law firms either putting too much expensive partner time on a job or, conversely, using the ‘bait and switch’ technique – fronting up a tender with a star partner only to have an associate running the project once the work is won. However, there is a danger of overplaying this as an issue. The overwhelming majority (67%) of respondents are satisfied with how law firms resource their work but the fact that overlawyering remains a concern for a third of respondents is alarming.
Some GCs are particularly frustrated with law firm behaviour as far as overlawyering is concerned, even more so when it shows up on the bill. As one in-house lawyer points out: ‘There are many occasions where I have seen duplication charged for, such as where associates have handed over to others. When I was in private practice, this was not something we did.’
‘I think that I know a padded timesheet when I see one. When I was in private practice, this was not something we did.’
Others say their law firms are too well marshalled to risk it. ‘If they do – I will tell them. I think that I know a padded timesheet when I see one,’ says another eagle-eyed GC.
However, others are more phlegmatic about overlawyering on a matter as long as the law firm bears the cost, not them.
Deborah Prince, head of legal at the British Heart Foundation, says that how a law firm resources a project does not matter as long as there’s a quality result. ‘All I want is the right answer, properly contextualised, on time and for a reasonable fee,’ she says.
Niamh Pollak, GC at Canadian company Digital Payment Technologies Corp agrees. ‘Depending on the project, if it’s delegated to an associate, I’m fine with that. But if a large bill comes back with tonnes of names on it, I’d go back and ask why there are so many people involved.’
In response, one law firm partner says that clients should be specific with their instructions as well as reasonable: ‘If a client sends you an eight-point size document with double columns, and you spend ten hours analysing it and then they say, “Oh, I only wanted you to spend two hours on that” – that isn’t a realistic expectation and that’s something that I run into a lot.’
To get the best service from their law firm, the partner says transparency should come from both sides: ‘Don’t set artificial deadlines, be truthful. Don’t make your lawyer work all night if you don’t need it tomorrow.’
On the other hand, a poor service can stem from sloppiness on the part of the firm, according to Martin Bowen, group general counsel at Dyson. ‘When I look at a bill I sometimes cannot physically reconcile the time it takes to do a task,’ he says. ‘I have even seen “do not charge client” written before on a timesheet and still been charged for it! I’m very insistent that all lawyers draft precise instructions so that we get the precise answers – rather than throwing problems at a law firm and featherbedding the advice.’
One in-house lawyer at a healthcare investment fund prefers to only use a partner for external advice. ‘We use firms that deliver on promises of being partner-led, where that is required,’ they say. ‘We do lower level work in-house, so outsource for the expertise of using a partner.’
This is an increasingly popular approach – in-house teams electing to keep all day-to-day legal work in-house and only going to a law firm for valued-added, ‘rocket science’ advice which requires the expertise of a partner. This type of approach is putting the squeeze on associate ranks at law firms as clients show an appetite for partners to see the job through. Senior associates are an expensive resource if clients prefer partners on the job.
Another partner says that associates will often help senior people on a project but firms should avoid duplicating work: ‘Clients don’t want to see that a partner reviewed the agreement for four hours and John Smith reviewed it for ten hours. They will ask why they got billed for it twice. But it’s okay if you can show what value you brought to the table.’
Ultimately, clients feel that they shouldn’t have to keep tabs on their law firms but often do. ‘GCs should be able to trust their firms but I have had to deal with this myself,’ says one GC. ‘I am quite happy to pick up the phone and ask firms why two people are on something rather than one. I talk through any issues, I don’t make assumptions and at the end of the day it is up to the firm to take a view on how to provide a service to us.’
Going offshore
Given the proliferation of offshoring agreements signed by international law firms in the past five years and the use of ‘northshoring’ (the practice of London firms using cheaper locations elsewhere in the UK) it is surprising just how lukewarm clients are on the topic. Nearly two-thirds (65%) of respondents said they did not think offshoring/northshoring was an effective way to deliver cost-effective legal services and only 8% said that they had encouraged their law firms to explore offshoring or northshoring as a way of delivering value.
Most GCs seem disinterested in the entire concept, which suggests that offshoring has a more profound effect on law firms’ bottom lines than it does on GCs’ legal spend.
‘I think firms will need to offshore more in response to competitive pressure from their peers’
Some of the comments from in-house specialists about law firms’ offshoring arrangements ranged from the scathing: ‘They should cut their UK costs – who needs an atrium?’; to the ambivalent: ‘Up to them’. Many GCs are not against offshoring in principle however, and feel that it is down to the firm unless it affects them directly.
However, Edward Davis, group GC at AXA UK says the rise in offshoring is inevitable. ‘I think firms will need to offshore more, in response to competitive pressure from their peers,’ he says. ‘The costs of their services need to reflect their customers and respond to the market.’
Others make the distinction between northshoring, which is essentially a UK firm farming out work to other UK offices and offshoring, which involves outsourcing their work to a specialist independent provider overseas. ‘I think northshoring within a law firm is fine as there is usually more control in place, overseeing what work is being done,’ says an in-house specialist. ‘I have issues with offshoring, particularly the accessibility of personnel and quality.’
Pollak says that although she is not a fan of offshoring, there may be some benefits. ‘It’s like the “Made in China” model,’ she says. ‘If you get something made in China of the same quality at a cheaper price than in California, of course you’re going to get it made in China.’
Lisa Hart Shepherd, chief executive at legal market intelligence provider Acritas, says that overlawyering and offshoring are both responses to the same problem – huge overheads at major law firms.
‘Overlawyering will remain a problem, given the high leverage of firms. It’s also linked to the issue of offshoring/northshoring as there are a lot of lawyers that probably don’t need to be sitting in expensive offices in London. For example, a lot of accountancy firms – the Big Four particularly – really leverage their national networks. Obviously many City firms don’t have those national offices, but it does give an advantage to firms like DLA Piper and Pinsent Masons, which have those cheaper offices that they can leverage work into.’
Global pretensions
The survey produced mixed results for proponents of globalised legal services. Just 7% said that they used global law firms exclusively, with 30% preferring local law firms in each jurisdiction. The majority (63%) said they used a mixture of both. So, while global law firms are used frequently, it appears that clients have not bought into the concept entirely. There are still plenty that prefer to use local firms for certain services or, in the words of one European GC, adopt a ‘horses for courses approach’.
‘We find that because GCs are under so much pressure, the international option is the easiest option,’ says Hart Shepherd. ‘Often it’s about markets which they have no knowledge of so it’s hard to find a new firm that they can trust. If they don’t know or have a preferred firm in that market then they are more likely to go to an international firm.’
‘I don’t care if you have an office in every city in the world. There has to be a relationship between me and the lawyer I’m dealing with.’
As for the ability to provide a more coherent service to clients across borders, the response is underwhelming. In all, 35% of in-house lawyers surveyed said their company had received bad advice from the local office of an international firm. Of those that had suffered from poor advice, 46% wouldn’t instruct that office again, while another 46% said they haven’t used the offending firm again. Over half (56%) said that firms needed to keep better control of their international networks. Attitudes to global law firms are mixed at best.
‘I don’t really care if you have mass-produced legal services,’ says one in-house counsel. ‘I don’t care if you have an office in every city in the world. There has to be a relationship between me and the lawyer I’m dealing with.’
There is overwhelming evidence to suggest that it is the individual not the brand that dictates law firm selection, particularly as regards multijurisdictional work. ‘It is not a given that a firm which is of a certain standard in one country is equally good in another. Ultimately, it is largely down to individuals,’ says another respondent.
However Sheena Singla, GC at Essar Energy, argues that global firms work because clients can use their relationships with a firm to ensure it delivers, but using individual firms in a number of jurisdictions makes it harder to monitor good delivery. Ideally an international firm would be honest and tell her where their strengths and weaknesses lie in their international networks. ‘Unfortunately, it’s up to the client to dig a little and be comfortable that they are still getting the best advice overseas where it is being provided by local firms,’ she says.
Even a lawyer at a global investment bank has mixed feelings about consistency across networks: ‘Getting consistent quality within the London office can be difficult, let alone globally – it is a challenge. I have found that there are law firms who say “we are very strong in this country but recognise we need to do more work in this region”. You respect this more, rather than them failing to deliver and losing credibility that way.’
‘We think firms should be measuring the quality and experience in each of their offices,’ says Hart Shepherd. ‘We do a lot of client feedback for firms and it astounds me how little that kind of activity is happening in a proper systematic and measured way. The risks are so high they should be making sure that all the offices live up to the brand.’
Pushing the envelope
Delivering a truly quality service is not just about sticking to the brief either. While a third of GCs prefer their external legal advisers to simply do what is asked of them, 65% like their firms to go beyond the call of duty and offer commercial, proactive business advice.
Comments from GCs on this issue are variable, with one in-house counsel saying: ‘It’s not their job to extend the brief and we certainly won’t pay for it’, while another says ‘they should do this as a matter of course’.
Whether they encourage law firms to go the extra mile or not, most GCs we spoke to think the ultimate responsibility for providing proactive advice on business concerns should rest with the GCs themselves. Being the GC means you are also the risk manager, says Tom Keevil, group GC and company secretary for Barratt Developments.
Prince says that over the course of her legal career (she was previously head of legal affairs at Which?) she has never had cutting-edge advice from a law firm that wasn’t experimental, and firms need to take a less academic, risk-averse approach. However, she warns: ‘The GC has to be aware that if they take an experimental approach this is a big risk that could end up costing them a fortune.’
A healthy 68% of GCs also say that firms are generally proactive in updating them with information that is critical to their business (in the form of news bulletins, information and seminars) but these areas could generally do with improvement. Several respondents even admitted reading the bulletins of rival firms rather than those of the one they deal with.
‘Rather than drive down law firms’ profitability, at the end of the year companies need to ask themselves whether the firm delivered what they needed.’
The attitude of the firm is important, according to Gareth Williams, legal head at Countrywide, who cannot abide firms that sit on the fence with their legal opinions. ‘I expect someone to put their neck out. Broadly the firms I use are those with whom I have very good relationships, we know each other well, and we’ve been doing this for a very long time.’
Ultimately it is up to the GC to communicate their needs clearly and effectively in the first place. ‘You need to be able to talk shorthand to people, and be specific about what you want,’ says Prince. ‘You need to say “this is the budget” and manage it. If you want to pick a plumber for your bathroom how do you choose them? Just because it’s the law, it’s no different.’
A GC for a major international investment bank suggests voting with your feet on a regular basis: ‘Rather than drive down law firms’ profitability, at the end of the year companies need to ask themselves whether the firm delivered what they needed.’