Collaboration has become a buzzword as progressive GCs press their advisers to parcel up work between them. Legal Business asks if such an approach can deliver the value its supporters claim
The battle to secure panel work is arduous for any law firm partner. With the threat of reduced panel slots and clients seeking more innovative examples of what separates firms from the competition, collaboration is increasingly becoming a buzzword among the more progressive general counsel (GC). As a condition of getting one of those coveted places on a major corporate’s panel, more firms are being asked to collaborate with all the other firms on the roster. They must communicate frequently, swap data and even, in some cases, pitch together for future pieces of work.
There is some debate over the appetite for collaboration from both in-house teams and law firms, with detractors on both sides suggesting that to force firms to work together blunts their competitive edge, leading to sub-standard service. However, this alternative approach is emerging as a priority for some in-house teams that are consistently looking for ways to reduce legal spend, while others are adopting variations of the model. ‘Welcome,’ say some clients, ‘to the new normal.’
The social network
Take US pharmaceutical giant Pfizer: led by chief counsel Ellen Rosenthal and former GC Amy Schulman (whose departure was announced in December 2013), the multinational’s in-house team has been running its Legal Alliance programme since 2009 – an initiative that requires its 19 panel firms, including DLA Piper, Clifford Chance, White & Case and Skadden, Arps, Slate, Meagher & Flom, to work together on a collaborative basis across many areas of Pfizer’s legal work (see ‘The Pfizer project’). The panel firms each receive an annual fixed fee regardless of how the work is distributed. This, Rosenthal says, results in ‘cost savings, better legal services for the company, more engaged lawyers and more engaged in-house counsel – that comes from closer relationships from our outside counsel’.
‘In-house counsel expect value from their law firms, understanding of the business and a way of practising law that incorporates business goals,’ she adds. ‘But the big word is value. It needs to be driven by the client in collaboration with the law firm. We see it as a collaborative venture, not an antagonistic relationship. We’re building the value together.’
In the UK there are similar, albeit less ambitious, variations of the Pfizer alliance. Carillion’s company secretary and director of legal services Richard Tapp is always keen for law firms to demonstrate innovation and external advisers working together for a single client is one method he actively encourages. Tapp has been operating a legal network – he calls it a network deliberately – for the last decade, where Carillion’s panel firms are ‘expected to work together seamlessly’ and pass instructions between one another. The 12-strong Carillion roster of firms appointed in September 2012 for a two-year term (two less firms compared to 2009) are a mixed group of international and regional players, including Ashurst, Clyde & Co, Clarkslegal, DLA Piper, Kennedys, Linklaters, Pinsent Masons, RPC, Slaughter and May, MacRoberts and FBC Manby Bowdler.
‘Financially, it’s very successful – it allows us to contain the costs of this kind of business very well,’ Tapp explains. ‘In terms of developing know-how, it’s very useful – we have an online portal we use to communicate between us all.’
‘We are challenging their competitive streak differently to an extent. Initially, people found it quite strange. It’s not how they deal with most clients. But because we’ve been doing it for a long time, they got used to it and it’s beneficial to them because they have a stable relationship.’
Similarly, Vodafone actively encourages external legal advisers to explore means of working together, as GC and company secretary Rosemary Martin has faced pressure to cut costs and headcount internally since becoming responsible for the 350 professionals in 24 countries who form the company’s global legal team. Law firms sitting on its corporate advisory panel include Field Fisher Waterhouse, DAC Beachcroft, Linklaters, Slaughter and May, Herbert Smith Freehills, DLA Piper and Norton Rose Fulbright, alongside Olswang and Axiom. The UK panel comprises Osborne Clarke, Doyle Clayton and Shakespeares.
Vodafone has further underlined its commitment to encouraging firms to work together with an annual conference that brings together its advisers with senior members of its legal team.
The event was relaunched last year as a one-day event with more than a hint of TED-style discussions, dubbed ‘Vodafone Un-conference’ – an event deliberately structured as a means of fostering dialogue and networking in an informal setting. So informal was the approach that the conference, held on 13 November, drew professional comedians to handle some of the hosting duties, as well as contributions from outside the legal industry to underpin a series of wide-ranging debates, covering areas as diverse as privacy, talent management in law and NHS reform.
Vodafone’s head of legal, technology and outsourcing, Steven Jebb, says there is always the possibility of large and small firms working with each other. Jebb has frequently been in talks with advisers over ways in which they could innovate or bring value, the results of which, he says, led to a surprising number of panel firms offering to work with each other.
‘There was no particular rhyme or reason,’ says Jebb. ‘It comes down to whether a particular firm is progressive or not. They sometimes need prompting to think of ways they can collaborate together. The challenge for the in-house team therefore is to take a step back in appropriate cases and ask their panel firms to think of ways to add value or create efficiencies by collaborating. Not all transactions will lend themselves to this approach, but many will.’
And, he warns, external counsel shouldn’t expect to rest on their laurels for long, particularly in an environment where alternative business structures and legal outsourcing providers are increasingly becoming part of the profession. ‘The panels will have to evolve in a way that reflects the market going through segmentation,’ says Jebb. ‘You’ll see traditional firms on the panels and alternative service providers working together.’
Passing the baton
While collaboration doesn’t come naturally to many traditionalist City firms, the phenomenon of inter-firm relationships isn’t new. Hogan Lovells, for instance, pioneered the Mexican Wave model more than a decade ago. Established by former head of real estate Bob Kidby, it came about at a time when legacy Lovells was looking to pitch to M&G Investments. The initiative involves outsourcing lower-value property work to UK regional firms Cripps Harries Hall and Knights Solicitors, and goes against the grain of the now more commonly used offshore outsourcing arrangements.
‘We wanted to see how we could make an impact and increase the amount of business,’ comments London real estate partner Jackie Newstead, who succeeded Bruce Parmley and Michael Stancombe as global head of real estate at the start of the year. ‘We thought that some of the work doesn’t have to be done at City rates, so Bob [Kidby] proposed to M&G: ”How about you give us all of the work and we will manage it, but when it comes to lower-value work, we’ll send it to one or two firms you can approve? They can then do it at lower fees than we could.”’
DLA Piper corporate partner Jon Hayes alludes to a similar experience: ‘Clients do expect meaningful collaboration between firms on the same panel. On several of the panel relationships that I lead, we participate with other multinational firms and the GC treats all the law firms as one large faculty – think of it as one extended centre of excellence. Depending on the circumstances, GCs are entitled to expect panel firms to be happy to collaborate with each other in order to share things they have learned on the job, for example about the client’s preferences and priorities.’
Hayes says panel firms could also be required to brief each other on a particular piece of work. ‘In my experience this is still relatively rare, but it means that when you and other panel firms attend offsite meetings with the client, you have a much more mature networking opportunity; there are fewer sharp elbows and the ongoing collaboration means that the client receives a better service. You might do two or three jobs for the client during the year, but you might have the benefit of insight gained from ten jobs. That helps you pitch to the client for the next time. It’s a way of everyone improving their game and everything becomes a bit more focused over time.’
Those who have experienced leading international firms spreading the goodwill include national players and Legal Business 100 firms Shoosmiths and TLT. TLT’s managing partner David Pester says the firm has been successfully collaborating with other firms for a long time. ‘[TLT] has a strength in challenging existing ways of working and resourcing innovatively to deliver a better result for the client,’ he says.
‘We have developed a model of collaboration with other service providers, including Magic Circle firms as well as LPOs and a whole range of other service-delivery stakeholders to ensure we’re able to provide the best commercial outcome for clients.’
Shoosmiths managing partner Andrew Tubbs says that the firm has worked with a City-based US firm that focuses on cross-border transactions, while Shoosmiths subsequently provides the technical legal support for real estate, commercial and employment work.
Referring to the pressure faced by in-house to reduce panels, Tubbs says: ‘Part of that reduction is the client driving the need for law firms to work in similar ways. Out of that will come pressure to report in similar ways and then comes initiative to share data and the natural result is a full-blown collaboration. We have quarterly review meetings with the client and also with other firms on the panel. All the data is shared. We are actively encouraged to bid for work on a collaborative basis.’
The Pfizer project
The wider impact of the Pfizer experiment remains uncertain. Though widely publicised, there have been few examples of comparable initiatives from other major US corporates, a lack of progress that one US managing partner claims has frustrated Pfizer’s high-profile GC Amy Schulman, who strongly supported the approach. With Pfizer announcing Schulman’s departure in December – to be succeeded by internal appointment Doug Lankler – there will be much attention among advisers on whether the pharma giant will persevere with its pioneering approach to collaboration.
Slow on the uptake
If collaboration works so effectively, it raises the question as to why the concept hasn’t been more widely implemented by clients and why, when sourcing examples of it for the purpose of this article, some interviewees weren’t quite so convinced. Many cited the heavy workload involved, while others alluded to the competitive culture of law firms dissuading them from the model. ‘It’s an awful lot of work,’ says one in-house lawyer. ‘Managing it and putting it together is a complex and time-consuming task.’
For all the talk of innovation and the role of collaboration, by consensus, such concepts remain more talked about than practised if you are looking for concrete examples of more than basic professional courtesy within a panel framework. By a similar token, the contractor/outsourcing model developed by Lovells with the Mexican Wave has hardly swept the market over the last ten years, despite a clear benefit for clients and the global downturn.
‘Some are amazed at how prepared we are to be collaborative,’ adds Hogan Lovells’ Newstead. ‘Some others do take that competitive approach. Maybe the times we’ve been through don’t help that. Everyone has been aggressive at getting that bit of the pie and many organisations are trying to reduce the number of firms on their panels. While you want to secure as much work as you can for your firm, you can’t be exclusive – you’ve got to be realistic. If the client wants you to be willing and able to work sensibly with other panel firms, it’s up to us to make that work.’
And with underlying forces supporting the long-term growth of in-house teams, traditional external counsel are realising that they need to be more flexible in how they offer their services. Results from Legal Business’s annual in-house survey in October showed that GCs acknowledge the need to explore more imaginative means of handling high-volume tasks such as contract review or due diligence. The pressure to provide a better deal shows no signs of abating. And with that, law firms would be wise to consider the idea that in some instances, they may be better off together.
DLA Piper’s Hayes concludes: ‘If you trust the client to give you work and to value what you’re contributing, then you realise there are intangible, social benefits to the experience of collaborating with other people and being open to discovering how other people do things. That’s valuable and fosters a better, more enduring relationship with the client. Of course, you can’t measure it directly in billings, but you can measure it in reinforcing your sense of difference, your confidence in what you do and just casually picking up bits of best practice here and there. But, in short, it comes down to trusting the client and backing yourself.’ LB
sarah.downey@legalease.co.uk