Mark Smolik, general counsel and chief compliance officer at DHL Supply Chain Americas, says the average cost of a senior member of his in-house legal team is $174 an hour. Thus, his message to hundreds of legal marketing professionals gathered Wednesday in Atlanta for their annual conference was loud and clear: “I can’t afford to pay you $800 an hour.”
Dubbed “An Inside View: General Counsel Perspectives on the Use of Alternative Legal Service Providers and Artificial Intelligence,” the panel discussion featuring Smolik and other top in-house lawyers was a plea to law firms to remain relevant amid the trend of more work becoming commoditized and going in-house. Corporate Counsel parent company ALM Media sponsored the panel, which was moderated by Richard Caruso, ALM Media vice president and general manager for legal media.
“With the incredible amount of innovation and change we’re seeing in our industry, this is resulting in fundamental business model changes for us, which should be impacting you,” said Alexia Maas, senior vice president and GC at Volvo Financial Services. At least in the compliance area, “it is no longer good enough for us and thus for you to be just a support function. We are changing so you have to find ways to change with us.”
While implementing technology and using outside vendors are a large part of the modern legal department’s evolution, all of DHL’s customer contracts are handled by trained nonlawyers, and Maas says her department is “embracing” legal tech disrupters to help with the legal compliance function. For example, the panelists echoed a familiar refrain: Take more initiative in learning our business.
“We will continue to look for [alternatives] in discrete areas like technology or document review, but the real threat for firms are other firms that become better partners with their clients than your firms,” said Will Barnette, associate general counsel at The Home Depot.
As an example, Smolik cited the firm that pitched him when a major suit was filed against Ohio-based DHL in federal court. That firm, which sent a two-page analysis of the case—covering the judge, opposing counsel, a proposed strategy as well as a budget—got the work. The document, Smolik said, was drafted by a young associate.
“That approach was very, very entrepreneurial,” he said. “That was six years ago, and I still turn to [that firm].”
To Maas, a firm’s ability to understand the business on an operational level is “what is going to differentiate the [alternative legal service providers] from the firms.”
“I feel this is where we’re still missing, where we’re not connecting on the level we should be,” she said. “Help us help you operationalize your expertise because we need that quick fast executive guidance.”
In addition to learning their clients’ business on a deeper level, Maas said firms also would be well-served to “mirror what we are doing.”
“We are embracing disrupters and working with them to find a new way forward in this new world, and I would suggest you do the same: ‘Is there something you can do together to offer to us?’”
Smolik pointed out that, even though he is DHL’s top lawyer, he is far from the only person involved in major buying decisions on behalf of his department. In fact, the new entrants in the market, Deloitte and PwC, for example, are approaching companies’ chief financial officers, whom they have known and worked with for several years first, he added.
“You’re failing to recognize that the company behind us is run by entrepreneurs, and they’re expecting us to act that way, and we’re expecting you to act that way,” Smolik said. “The law firm that speaks as a businessperson first and lawyer second is going to get more and more of our business.”