How can GCs drive value and innovation?
A move away from the traditional law firm delivery model may be necessary, writes Dana Denis-Smith
Nearly half of general counsel (GCs) say they may end their relationships with law firms this year due to underperformance, according to the latest Association of Corporate Counsel (ACC) Chief Legal Officers Survey.
I certainly have some sympathy for GCs: the obvious pressure to do more for less against a backdrop of increasing regulation and a widespread recruitment freeze means they inevitably look externally for assistance, yet continue to be poorly served by the legal services market.
Despite claims to the contrary from law firms that make regular pronouncements about their ‘value-driven propositions’ or ‘innovative solutions and transparent approach’, it often amounts to nothing more than a new iteration of SharePoint or another knowledge-sharing application.
I recently attended a FTSE client’s law firm panel meeting where I was the only ‘alternative’ provider in attendance. The meeting focused on how law firms could help the client improve what they do and become more innovative in their delivery of legal services. Perhaps they might consider not asking law firms. How can real innovation be delivered by firms whose structure puts self-preservation above all? The first question asked will never be, ‘How can I drive real efficiencies for this client?’ Instead it will always be, ‘How much can I bill?’
While at this meeting I also did a straw poll of around 14 firms to find out how they report to their clients, what their KPIs are, and how these are monitored. The consensus was that they give their clients what they want. That’s not exactly an approach aimed at delivering value and innovation, as GCs look to law firms to tell them what to do and law firms look to GCs to tell them what they want.
Therefore, it was refreshing to hear Sean Thomas, a corporate counsel at Hewlett-Packard, recently saying that ‘the biggest threat to law firms are the in-house teams’. He explained how HP’s corporate legal team has developed its own contract automation tool and that it didn’t shy away from introducing basic tools – such as time recording – to get more clarity on the metrics it should track.
This is all good stuff and certainly something the IT sector and alternative legal services providers have been doing for a while. So, when one of the other speakers – Rory O’Keeffe of Accenture – said he wished that law firms had the same, up-to-date version of Microsoft Word, it brought home the size of the gulf that exists between the in-house teams and the law firms.
Tim Steinert and his 250-strong legal team at Chinese online sales company Alibaba Group are among the few showing real innovation in legal services. A recent Financial Times article described how the Alibaba legal department mirrors the values of the company, which in the case of Alibaba means making it easy to do business anywhere.
One such example of this is how the business’s entire litigation process can now be done online, from the initiation of proceedings to the hearing and final decision. The team is also engaged in a related initiative in co-operation with China’s Zhejiang province to build a platform for an online court for ecommerce disputes. Once this is fully up and running, it will not only benefit Alibaba by making it easier for customers to resolve disputes, but it will also allow the legal team to collect an array of data which can be used to identify, and then prevent, future litigation.
The likes of Alibaba have shown that value and innovation can be driven by GCs, but for many that will require a change of mindset, and, dare I say it, possibly a move away from the traditional law firm delivery model. Otherwise there is a real danger that GCs will continue to get served up more of the same, with law firms delivering what they have always wanted to deliver.
For many, a good starting point should be around transparency. This is a commercial imperative for clients’ businesses and therefore more could be done to force firms to price their work on each stage of delivery, realising that some jobs cost more than others. Price shouldn’t be dictated by the seniority of those doing the work but, with proper scoping in place, by the value it achieves for the business. Adopting such an approach paves the way for unlocking greater value and more innovation. Otherwise, it is difficult to know how the sector moves away from this chicken-and-egg game – where everyone expects the other to drive the change that is so needed.
Dana Denis-Smith is founder and CEO of Obelisk Support and the founder of The First 100 Years