Corporate Counsel Should Drive Innovation

Originally published for Thomson Reuters Legal Executive Institute on April 7, 2015

Last week, I addressed lawyers and law firms, with a message about their interaction with clients.

This week, I address the leaders of corporate law departments, with a message about their interaction with lawyers and law firms.

My message for corporate counsel: Take an active role in how your outside law firms are approaching innovation. The pace of change has been too slow. It is in your interest to help speed it up.

The needs of the corporate clients constitute the most fundamental driver of change in the legal profession. Almost all analysis of why a paradigm shift is underway begins with clients’ need to do “more with less.”

So far, this has translated into price pressure on the law firms, which plays out predominantly in discussions of hourly rates and demands for discounts. There has been some progress on alternative fee arrangements, which has the effect of shifting the risk of inefficiency to the law firms and, therefore, creating incentive for innovation. That is good, but we need to go deeper.

The core issues that need to be addressed to make real progress are the business and service delivery models of the law firms—how firms assemble and deploy resources. That is where the important opportunities for improvement can be found. And on that front the progress has been much slower than one would have expected, given corporate clients’ clear need for “more for less” and the possibilities for innovation available to law firms.

There are many reasons that law firms are not changing their models faster. It begins with their continued ability to generate high levels of profits, and includes the degree of difficulty in making the necessary change.

In my opinion, you, the corporate counsel, need to be a more active part of the solution. Go beyond negotiating discounts and fee caps to addressing what really matters: the way the law firms go about doing the work; the tools and methods they employ; the costs they incur. I am not suggesting you go into law firm management. I am recommending that you focus on the core issues and let your firms know you expect them to do more to consider innovations they can make.

Obviously some of these discussions go on already. Across the industry there are not enough. I am encouraging corporate counsel to do more.

I have four suggestions. One is about outlook. The other three are concrete actions.

Outlook

Corporate counsel should regard innovation in the delivery of legal service as a shared undertaking. As you do in other ways, regard your law firms as your partners.

Obviously it is in your interest to have your law firms deliver the service you need, but at a more reasonable fee. You want to keep using the firms you know and trust. They deliver huge value to you. They appear, however, to need some more pushing and collaboration from you on innovation. So, you need to engage.

Actions

Here are three actions you can take that will likely have significant impact:

  1. Ask your firms about their models. In every situation in which you ask firms to describe themselves, in RFP’s or otherwise, ask about their business and service models. If you signal to firms that you care about their models, you will see action. Law firms want your approval. Once they know that how they organize themselves has your attention, they will take it more seriously. In asking about model, you will be inquiring directly into the extent to which the firms are embracing new technologies and design concepts to improve service delivery. It bears emphasis here that innovation will mean more than lower cost; it will mean improved quality, as well.
  2. Favor firms that innovate. To make the most of your focus on model, you need to act on it. Some of the firms you use are more innovative than others. If you choose those who are more innovative, it will send a powerful message. No one will miss it.
  3. Actively collaborate on innovation. Offer to work with your outside counsel in exploring ways to do the work differently. You already collaborate in which work goes to them and which is done by your internal law department. I am suggesting you expand the collaboration to examine the whole of the engagement. How can we change the law firm’s internal teams? How might we incorporate technology? What role might third parties play? How might we modify the pricing? How might we change the definition of success?

The third action is the hardest of the three, because it requires work and inconvenience on your part. It is also the most valuable. It will put you in touch with the real prospects for innovation; it will impact your lawyers directly; and you will learn valuable lessons which can stimulate further progress.

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