Contract lawyer businesses have hugely expanded in recent years with law firms increasingly entering the market. But are clients getting what they want?
Inevitably, it was a late epiphany for law firms when it came to offering contract lawyer services. Having belatedly realised that their clients’ post-recession demands for reduced costs and flexible resourcing were not a fad, top 50 UK law firms have spent the last few years playing catch up.
Having lost ground to contract lawyer providers such as Axiom, Obelisk, Halebury, SSQ Interim Solutions and Lawyers On Demand (LOD), which was launched by Berwin Leighton Paisner (BLP) in 2007, firms including Eversheds, Allen & Overy (A&O), Pinsent Masons, DAC Beachcroft, Simmons & Simmons and Addleshaw Goddard have all launched their own varying contract lawyer models.
The first to follow BLP was Eversheds, with Eversheds Agile in October 2011, a service that now has over 200 lawyers on its books and 55 lawyers out on placements with clients across a number of sectors. Pinsents’ Vario followed in February 2013, while DAC Beachcroft’s The People Pool began life in July that year.
But it was in November 2013, when A&O announced that it was to launch its own high-calibre flexible resourcing division Peerpoint that major clients really took note.
Since then, other significant players have joined the bandwagon. Addleshaws is in the early stages of setting up a contract lawyer arm unveiled in February, while Simmons’ Adaptive was announced in October 2014.
For law firms, the logic of setting up such operations is clear. It shows willing to clients; takes pressure off the largely unpopular secondment model that has become strained as the economy recovers; builds a relationship with the client; and means more work stays within the firm.
However, both traditional and more innovative non-law firm contract lawyer providers question whether the law firm offerings in this sphere are of real benefit to the clients themselves.
Interim recruitment agencies say law firm contract lawyers are more expensive – sometimes twice the price of an agency contract lawyer – and that what clients get for that extra cost is misleading. Misleading in the sense that lawyers will quite often have been hired from outside the alumni – even from an interim recruitment agency itself – meaning clients could get the same person cheaper elsewhere. What clients get for the extra cost – support and training – does not, according to some providers, always materialise, or is not required.
At Taylor Root, partner Julian Stone says: ‘The in-house market has reacted extremely favourably to the law firms’ re-thinking on cost-effective legal advice but in many cases without realising that the lawyers they are getting are the same interim lawyers that some of the larger specialist legal recruitment firms are providing at a fraction of the cost.
‘They are often swayed by the fact that the lawyers are “law firm branded” and in some cases are placing too much emphasis on the softer benefits that the firms are offering, such as PI insurance, which again can be provided by a recruitment firm.’
Compared to genuinely flexible models such as Obelisk Legal Support Solutions, which enables talented ex-City lawyers to maintain a legal career around other caring responsibilities and has hundreds of lawyers on its books, the model stands accused of being a case of the emperor’s new clothes.
Obelisk chief executive Dana Denis-Smith says: ‘We don’t have the tyranny of law firm strategy to worry about. We have the freedom to go in the direction of client service, which has allowed us to shape the firm and grow.’
What’s on the label?
It is true that some law firm flexible resourcing models, including Peerpoint and Agile, are using outside recruiters to some extent as they grow. Pioneer LOD did the same up until around 2011/12, but is keen to emphasise that it no longer does so.
According to Eversheds Agile head Richard Hill, using recruiters is ‘pretty rare’, particularly as it receives mostly organic referrals, and this happens only if recruiters have people on their books the firm considers to be exceptional.
Richard Punt, Peerpoint’s chief executive who was brought in from Deloitte in September 2014 to drive the business, says the flexible arm works only selectively with recruiters and is able to attract its own people, given the A&O brand. At Vario, which has around 160 lawyers on its panel, Pinsent Masons partner and Vario head Alison Bond categorically denies using any external recruiters at all.
For clients, knowing a lawyer’s background is undoubtedly important. But most clients interviewed say the issue of whether an Agile lawyer has a connection with Eversheds, or whether a Peerpoint lawyer ever worked at A&O, is missing the point. What is important is that they are chosen following a rigorous selection process, with the recommendation and backup of a respected firm, with which the client often has an existing relationship.
One organisation that has used Agile is Essar Energy, where general counsel (GC) Sheena Singla found herself needing extra short-term resources very quickly. She comments: ‘Eversheds Agile was recommended to me by a partner at another law firm. I ended up looking at candidates from Lawyers On Demand, Axiom and Agile.’
For Singla, it was the suitability and strength of the candidate that made her choose Agile, but having an existing relationship with Eversheds made a difference. She adds: ‘As a client you know Eversheds is trying to support you and will go that extra mile. Even if the lawyer has never worked at Eversheds they have the back up.’
Chris Vaughan, GC and chief corporate officer at Balfour Beatty, says he first experienced contract lawyers through his relationship with BLP, using lawyers from LOD. However, having entered into a single-supplier relationship with Pinsent Masons in April 2013, he now uses Vario lawyers to help with Balfour Beatty’s legal resourcing.
Vario lawyers are seconded to the engineering giant as part of its arrangement under which Pinsents takes care of all outsourced day-to-day legal work. However, additional Vario lawyers are also taken on during busy periods or to help with discrete projects.
Vaughan says: ‘We have a very good relationship with Pinsent Masons. Vario is a flexible service at a good rate and with the Pinsent Masons badge, so if I had a problem I could ring my relationship partner. The Vario lawyers have been very good and it doesn’t matter if they aren’t Pinsents through and through.’
Standard Chartered, which has 70 lawyers including contractors and secondees across Europe, is currently using a contract lawyer from both Agile and Peerpoint (see box, ‘Flexible working’, opposite). While secondees are provided as part of Standard Chartered’s panel arrangements, according to Kurt Crommelin, European head of legal for corporate and institutional clients and products, the bank uses agencies for additional help in tasks including streamlining legal documentation.
While some banks already outsource significant chunks of their legal function to the likes of Axiom, Crommelin says Standard Chartered isn’t there yet and the current arrangement with Peerpoint and Agile is a gentle introduction to taking on additional resources. ‘We are just beginning to look at what we can credibly outsource while keeping a firm grip on how that impacts our clients,’ he says, adding: ‘We’re grateful to have secondees, but everyone recognises it puts a strain on the law firm, especially in the regulatory space where they are so busy.’
At Vodafone, meanwhile, which uses a range of flexible resources, including Axiom, Obelisk and LOD, group GC and company secretary Rosemary Martin comments: ‘We often need skilled, experienced lawyers at short notice for defined periods of time. It helps us manage our resourcing needs flexibly to be able to source the people we need for short assignments from law firms that we admire and trust.’
Flexible working: contract lawyers on location
Alison Canning – Agile consultant at Standard Chartered
Alison Canning has been working for Standard Chartered since the end of July 2014, her first assignment since joining Agile.
Originally a real estate finance lawyer, Canning trained in the UK and qualified in 2008 but after two years moved to Australia. When she returned to the UK last year, she didn’t see her long-term future in private practice and a friend recommended she spoke to Agile. ‘I thought it would be a good option to give me some in-house experience and see if it’s what I want to do,’ says Canning. ‘I’m really enjoying it. It’s a great way of finding out what it’s like working with an in-house legal team and what the organisation is like.’
Canning is currently looking at Standard Chartered’s Foreign Account Tax Compliance Act policies and is enjoying a change in focus. ‘It’s a very different experience to what I was doing in private practice,’ she says, describing it as ‘very refreshing’.
She also feels the support from Eversheds. ‘I’ve been in contact with people at Eversheds and if there is something I need in completing a task they have been really helpful.
‘It makes the transition from private practice so much easier and I can see why it’s of benefit to clients.’ Agile has also supported Canning in terms of giving admin advice on setting up as a contractor, rather than an employee.
Canning says it is a positive that the legal profession is recognising the need to make changes to the traditional career model, commenting that as a contract lawyer, ‘you can exert a degree of control, which is difficult to do when you’re in private practice’.
Amit Sharma – Peerpoint consultant at Standard Chartered
Amit Sharma is a former Allen & Overy (A&O) finance lawyer who went on secondment around nine years ago into a non-legal banking role and left to become a banker in the structured finance department in an investment bank.
He left last year after speaking to Peerpoint’s chief operating officer Ben Williams about combining his banking and legal skills and now supports Standard Chartered’s leveraged finance team in Europe, Africa and India.
‘My banking experience has been really helpful,’ Sharma says. ‘Peerpoint’s expertise is about having very senior people and bringing that skillset into the client’s team.’
Sharma joined Standard Chartered for a year-long placement in May 2014. He adds: ‘My area is complex and often GCs would outsource a lot of this work but this gives them an extra resource they wouldn’t otherwise have.’
Having A&O’s backing is important. He comments: ‘You have the fall-back that if you need data, you have that through Peerpoint.’ While he has to be mindful of confidentiality, he has spoken to A&O’s Paris and Dutch offices for assistance.
Sharma says there is a clear mutual benefit for the in-house team and law firm. For the law firm, the consultant is likely to bring them in on as many deals as possible. For the client, having someone come in with new ideas can be a breath of fresh air.
Adam Drew – Agile consultant at a well-known building society
Now working for Agile at a building society, Adam Drew’s transfer into contract work began when he was made redundant in 2012, having headed up Zurich Life’s UK dispute resolution team. A brief return to private practice confirmed to Drew that it was, in his words, ‘not for me’, after which he took on a position with DAC Beachcroft’s The People Pool as a senior interim lawyer for Vodafone, helping to cover maternity leave.
After a further four-month interim role through The People Pool with health and dental insurance group Simplyhealth, Drew joined Agile in his current commercial role in June 2014. He says: ‘Being backed by the Agile brand has made a massive difference to just working in the interim recruitment market. It is a very slick operation and they have really supported me. They are very keen to ensure that not only is the fit right for the client but it’s right for me. They are interested in me and how I want to develop my career.’ He adds: ‘Being backed by a full-service law firm means you can bounce things off other lawyers and they probably have a relationship with the client.’
One factor that sets Agile apart from some rivals is that it pays contractors when they present their invoice. ‘With others, they wait for clients to pay before they pay their consultants,’ says Drew.
Guarantees
For many GCs, the fact that a law firm is able to provide their contract lawyers with professional development support and professional indemnity (PI) insurance is key.
At Balfour Beatty, David Mercer, GC for construction services in the UK, says: ‘I’ve looked at different options and my concern is maintaining professional training. In a law firm you’re constantly being updated and trained, so I can be confident in the quality of what they are doing for me.’
According to Hill and Punt, consultants are given a significant amount of support and assistance from lawyers inside the firm, as well as precedents, knowhow and professional support lawyers – an assertion backed up by the consultants themselves (see box, ‘Flexible working’).
‘This is a softer component but they can feel the weight of the firm behind them,’ argues Punt. ‘The challenge of being a consultant is that it can feel a bit lonely but they have access to training and support, which can give them a confidence boost whether they need it or not.’
A clearer advantage is that contract lawyers working for law firms are covered by comprehensive PI insurance. According to Hill, some clients won’t use an interim lawyer if they are not covered by PI and at Standard Chartered Crommelin says: ‘It could influence my decision. It is definitely material to us given the nature of the work we do.’
However, it is not a selling point for all clients. One GC of a FTSE 250 company says: ‘It’s not important. I’ve been in practice for 30 years and never had a claim, it’s something people hide behind.’
Significantly, in response to the new wave of competition from law firms, in February recruiter Taylor Root announced it is rebranding its 12-strong interim lawyer division under the banner Fluid Resourcing and will be offering, on top of an ongoing assessment and reference process, its own insurance cover.
Comparing the real cost of using different flexible providers is very difficult. The relationship law firms have with their clients mean they sometimes give them favourable rates or even provide a contract lawyer for free.
Clients also cite examples of where there is little to choose on costs between the newer law firm models and the likes of LOD and Axiom. Singla says: ‘The prices are not that different between any of them.’
Nonetheless, many clients say they are happy to pay a certain premium for a law-firm contract lawyer, given the time they save and the fact that they come with a defined quality guarantee.
However, at BT, which uses a suite of flexible resource providers, including Obelisk, Axiom, Halebury and SSQ Interim Solutions, GC for UK commercial legal services, Chris Fowler, believes in cutting out the middle man, commenting: ‘I struggle with the concept of paying a law firm a margin to make me feel better when I can get the quality straight from the source.’
Evolutionary theory
If the goodwill of the clients who use it is an indicator of success, then the contract lawyer model could go far.
‘The model could evolve,’ says Vaughan. ‘Think about what Axiom does in terms of being able to organise lots of short-term contract lawyers. It’s an interesting model and it works well for both parties. Law firms manage their cost base and Vario lawyers work within the business.’
Mercer adds: ‘It’s a great opportunity for lawyers. People these days aren’t as interested in making partner. They are looking for more balance and want to work part-time while we struggle to control costs and manage through the peaks and troughs. It’s a win-win.’
A&O executed a soft rollout of Peerpoint in Hong Kong in February 2015 and is looking at other opportunities in Asia, while at Agile, where former Eversheds London head of banking David Boyd transferred in October 2014, Hill says they are ‘very aggressively growing’ and ‘looking at international plans’.
As organisations grow they will need to make sure they are pitched at the right level. At Barclays, employment, incentives and pensions legal director Brona Reeves has used LOD for around a year and says: ‘Some organisations pitch it too high. LOD is very pragmatic and understands what you need – a really good, pragmatic, practical, roll-your-sleeves-up lawyer.’
It is still early days. Peerpoint has just over 50 senior lawyers on its panel and is only currently working with around seven or eight clients, although Punt says its target is to have 150 lawyers approved in 18 months. Many other law firm offerings are yet to properly get off the ground in any meaningful way.
By comparison, LOD has now completed over 500 assignments with clients and has 230 lawyers registered and working, of which more than two thirds are currently out on assignment. That number could be higher but practice development director and former FT GC Tim Bratton warns: ‘It’s taken us seven years to get to 230 lawyers and you can’t just ramp up unless you compromise on quality. Once you have that we also put a lot of work into ensuring that our lawyers have an ongoing sense of pride in being an LOD lawyer.’
It is worth noting that the US-based Axiom now has 900 lawyers globally, of which 200 are in the UK, where it generated £30m in the last financial year. LOD, meanwhile, currently earns more than £10m a year.
Increased competition is a good thing, creating an increased awareness among clients of the different flexible staffing options. Major financial institutions that do not already use contract lawyers from law firms have expressed an interest and appreciation that law firms are showing willing, with a spokesperson at Deutsche Bank commenting: ‘We welcome developments like these – innovative thinking by law firms, identifying and responding to clients’ needs – and would certainly consider these types of initiatives as options in the appropriate circumstances.’
But whether law firm offerings remain embedded within the firm or spin off entirely is yet to be settled. Vario’s Bond says: ‘We have no plans to spin off – part of the benefit is that clients see we are part of Pinsent Masons.’
However, LOD’s Bratton comments: ‘Compared to some of our competition which are embedded in the mothership we took the view that it’s not the right model for us. My own take is that it makes us more agile.’
Agility certainly has become the buzzword for such providers. Law firms are currently still finding their feet as existing client relationships change but as those clients become comfortable with using different types of flexible resourcing and alternative providers continue to raise their game, they will need to ensure their offering is compelling, not just comfortable. LB
caroline.hill@legalease.co.uk