As general counsel for nearly 16 years with both publicly- and privately-held companies, I have developed a clear philosophy on what I need from outside counsel, and it is this: free legal services.
To law firms, I would say this: Don’t sweat the small stuff, and it’s NOT all small stuff (contrary to the advice provided in a 1998 book by Richard Carlson, “Don’t Sweat the Small Stuff and It’s All Small Stuff”). There is plenty of Big Stuff, the business-critical work that requires specialized expertise, and that’s the billable work law firms are after. But to get that work, they should build relationships with their clients by handling the Small Stuff for free.
So what do I mean by “Big Stuff” and “Small Stuff”?
The Big Stuff. Clients understand that quality specialized counsel is necessary and worth its considerable expense for certain complex legal issues, such as pursuing or defending critical litigation, understanding the applicability of government regulations, prosecuting or defending patents, or navigating cross-border issues. These matters should be budgeted realistically and closely managed to avoid surprises, but this is Big Stuff for which clients fully expect to be invoiced. Full service and specialty law firms excel at this, with experts that can be relied upon to deliver.
The Small Stuff. But what about the myriad of basic client services that do not require a differentiated offering? While not business critical, these client services are important: learning the client’s business; understanding what drives growth and getting to know the client’s strategic and operational goals; knowing what might derail its plans; training business teams on basic governance and compliance matters; providing templates for routine and recurring contracts. My philosophy? Do these things for free and they will demonstrate a law firm’s commitment to its client. Using a football analogy, consider this the blocking required to score the touchdown.
This is partly the work of in-house lawyers, but not all clients have an internal legal department, and, in any event, it is not the exclusive purview of an in-house legal team. For outside counsel to be effective it must develop a trusting and close relationship with its client, and to do this, outside counsel must think and act like in-house lawyers. This requires law firms to provide the basics, or (continuing with the football analogy) the blocking. It’s the Small Stuff. And don’t wait for the client to ask. Ask the client for the opportunity to demonstrate your value. Bluntly, law firms can differentiate themselves by providing the following services for their clients, without charge:
- Attend meetings to learn the business, appreciate the client’s tolerance for acceptable business risk, and understand the business context within which advice is sought.
- Train their business teams to improve awareness of applicable laws and provide the tools they need to appropriately avoid the potholes that may derail their initiatives.
- Keep close tabs on industry news relevant to the client’s business, and share important developments on a regular basis, perhaps with a short, tailored explanation that contextualizes the information for its use.
- When an in-house lawyer or a business team member calls to gut-check his or her approach to an issue or to ask a quick question that can be answered without research by an experienced lawyer at the firm, take the call and provide the guidance and/or answer the question. This is what I call “water cooler talk”, the sort of discussions that might occur around a water cooler if the firm’s lawyer was an in-house colleague.
- With an understanding of the client’s risk profile and tolerances, if the client needs help with recurring contracts and the firm already has a template that the business can tailor to its use, provide it to them.
There is nothing more frustrating for the client than receiving a bill for these services – a ten minute call, a template that obviously has not been drafted at the client’s request (or simply has been redacted for the client), or for the time it takes for a partner to understand the client’s business or business initiative. These are nickel and dime matters that destroy rather than build trust, and break down rather than build a client relationship. Providing these services without charge will differentiate a firm on work that otherwise is undifferentiated. It will help establish the law firm as a trusted client partner, and it will place the firm in good position to score the touchdown, that is, to win the work it truly seeks and for which the client expects to be invoiced.
The partners at most firms insist that they already do everything I am advocating, but my experience has been different. I have had to ask for a write down of time spent by outside counsel at business planning meetings. Sure, they often agree, but by then, they have lost the value of their “lost” revenue. I have pressured firms to provide training at no charge, and sometimes the firms agree, but, again, they rarely offer. A law firm can differentiate itself by proactively offering free advice and services on the Small Stuff. And because it’s the Small Stuff, the firms should not sweat it. Yet they do.
When pressed, they will mention two concerns. The first is on them to fix. The second is up to the client.
Law Firms Are Resistant to Change. The first is rooted in outside counsel’s stubborn hold on its traditional business model. The expertise partners have developed over time and the template agreements they have drafted from application of that expertise is their intellectual capital for which they should be paid. And since time is what they sell, time spent at client meetings, providing training, or sharing relevant information tailored to a client’s business should be billable just as a manufacturer should get paid for its widgets. They fear spending hours every day on these non-billable services, depleting billable hours and draining profits per partner.
If providing the Small Stuff for free is too big a change for some firms, there is an alternative that goes part of the way.
A law firm could, for example, bundle these value-add Small Stuff services with more complex but still undifferentiated work into an affordable and budgeted fixed fee. The “more complex but still undifferentiated work” would include many of the things that a general counsel or senior in-house lawyer normally would provide the business, such as business counseling on operational objectives, corporate secretarial functions, negotiation and drafting of commercial transactions, dispute resolution, assistance on HR and IP projects, and guidance in simple governance and compliance matters.
The second concern that law firms express is more nuanced, and on the client to fix.
Clients Must Understand That With Great Power Comes Great Responsibility. Power has shifted to the clients. According to a 2018 Legal Industry Outlook prepared by Greentarget, a strategic public relations firm focused exclusively on business-to-business organizations, “the single greatest competitive threat to firm revenues is their clients” and nearly two-thirds of law firms have lost business to corporate law department insourcing (Greentarget, p. 12). My point is this: the law firm-client relationship is a two-way street, and clients bear some responsibility for affecting change in the legal marketplace.
When a law firm demonstrates an understanding of a client’s business by helping shape initiatives to mitigate potential problems, training management teams to spot and avoid legal traps, and partnering with it to save time and money, the client must demonstrate a little love in return. When Big Stuff work surfaces, the client owes some loyalty to the law firm that provided the Small Stuff for free. Issuing a request for proposal (RFP) at this juncture is not fair. If clients want to force positive change, then they must incent positive change, pure and simple.
Let me provide a few examples of firms that got it right and the client that incented the firm correctly.
- A law firm with a specialty practice in U.S. Customs compliance offered to train at no charge a potential client’s import-export teams on best practices. Several individuals who attended the training approached the GC afterwards with serious concerns. These concerns were investigated and resulted in a significant multi-year prior disclosure to U.S. Customs, which matters were handled by the firm that provided the training, resulting in a lasting and profitable client relationship for the firm.
- A law firm that assisted a client with a major real estate transaction learned that the client also managed a series of small store-front and warehouse leases across the country, and, in response, provided the client at no charge with template leasing agreements to serve as starting points for negotiations with various, small landlords. Not only did the firm continue to represent the client on large transactions, but also occasionally represented the client on smaller deals that required assistance due to particular issues that arose, or when in-house resources were constrained.
These examples give some comfort that the legal landscape is changing, if slowly. Tax laws are making it difficult to deduct traditional business development expenses, like tickets to sporting events or other entertainment costs. Firms might consider redirecting some of these efforts toward providing value-add services to their clients for free or on a discounted, fixed fee arrangement. By doing so, law firms can build a close and trusting relationship with their clients which will lead to more profitable and business critical work.
In short, don’t sweat the Small Stuff and be well-situated to win the Big Stuff.
Noel Elfant is Vice President and General Counsel for the North American operations of DeLaval Inc., a leading maker of dairy farm production equipment and cleaning solutions for the food processing industry and part of the multi-billion dollar, privately-held Tetra Laval Group.