Optimising the in-house counsel/ law firm relationship

Helena Samaha and Mark Chidley – DLA Piper

Having both worked as senior in-house counsel to major corporations, DLA Piper’s Helena Samaha and Mark Chidley have a rare insight into the best way to manage an in-house counsel/law firm relationship. Mr Chidley, who trained at the UK’s Slaughter and May, previously headed the group legal services function at the Royal Bank of Scotland. In that position, he led the project to establish group-wide legal panels at RBS. Ms Samaha previously worked at Virgin’s head office for seven years, where she was the group’s legal director. During her time at the company, she implemented a new panel structure and launched the group’s legal extranet.

How can law firm panels assist the in-house counsel/law firm relationship?

Having both been responsible for establishing law firm panels at their previous employers, both Mr Chidley and Ms Samaha agreed that panels are a very good way to manage relationships with private practice advisers. For Ms Samaha, establishing panels has become the de facto business model for many in-house legal departments. Using this model, a company’s law firms must actively cooperate with each other, as a condition of remaining on the panel. “The panel structure was particularly important at Virgin, because it is such a diverse group of businesses,” she says. To insure against one of her panel law firms being conflicted out or monopolising any particular type of work flow, Ms Samaha ensured that at least two of her law firms were able to cover every legal specialism or transaction. In addition, although the scope of the panel was the UK, the UK panel firms were often the first port of call for overseas transactions. This was either because they had offices offering relevant expertise in other countries, or because they could recommend a "best friend" they had tried and tested before. For Mr Chidley, the panel structure offers the in-house legal function three key advantages: firstly, it clarifies and delineates the responsibilities of each law firm. Put simply, it makes clear to law firms that they are expected to perform certain legal functions, but not others. Secondly, as Ms Samaha has already indicated, it helps manage risk by creating greater transparency. If one firm is unable to perform a task for whatever reason, it is clear for all panel members that another firm is available as a replacement. Finally, it puts value at the top of the agenda. And, while value does not necessarily equate with cost, a panel should lead to lower overall legal costs by creating greater efficiencies. In this way it encourages firms to leave behind the outdated "cost plus" model, and become more imaginative in their approach to fees.

The temptation to cross sell

Modern marketing techniques suggest that it is easier to obtain new work from existing clients than it is to bring in new work from new clients. For law firms, the temptation to “cross-sell” additional services – at the expense of other panel firms – is therefore immense. Yet, while both Ms Samaha and Mr Chidley understand this pressure, both believe that clumsy cross-selling risks damaging a firm’s relationship with its client. “If you’re invited to join a panel, it usually means you've been chosen because of your ability to provide specific legal services,” says Mr Chidley. “Trying to cross-sell could be a dangerous path to follow, if the firm's capability in other areas is less strong or well-recognised.” Instead, he suggests that firms should be more imaginative when cross-selling. “If you are aware that your client is expanding into a new jurisdiction in which you have an office, or that your client is entering a new industry sector where your firm has significant experience, it may be appropriate for you to pitch for that work in those circumstances,” he suggests.

Understanding the client’s needs

Having thoroughly researched a potential client’s business during the “pitch” process, the temptation for many firms can be to sit back and watch the work come in. This is, of course, a mistake. In-house clients always appreciate a firm who understands their business, and can offer “commercial” legal solutions relevant to their sector. This learning is a continuous process, which should not be neglected by law firms, once they have won their place on the panel.

However, this may lead to a misunderstanding by some law firms as to what commercial advice actually means. “Being commercial doesn’t mean that firms should try to make commercial decisions on behalf of their client – they should only aim to give them sufficient legal input to allow them to make the decision for themselves,” says Mr Chidley. To achieve this balance, both Mr Chidley and Ms Samaha suggest one very simple solution – pick up the phone and ask what is required. “A sophisticated client shouldn’t expect their lawyers to try and second guess the commercial imperatives of the business,” says Helena. “Without being on the inside of a business it is very hard to do that. How well an external adviser gets to know a client's business is a function of how close the client, particularly the in-house counsel, allows them to become.”

Another key issue that law firms must grapple with is the delivery of their advice – in what format should it should be delivered? As discussed above, neither Mr Chidley nor Ms Samaha advocate law firms offering “law free” commercial advice – lawyers are, after all, engaged for their legal expertise. But Mr Chidley also warns against offering clients a “one size fits all” form of advice. While it is true that some clients may prefer a brief PowerPoint presentation, others may require a more in-depth legal analysis. “A single client may ask for their advice to be delivered in several different styles, depending on their internal audience,” he says. “But, if you are asked to provide a lengthy legal opinion, my advice is always to put your conclusions at the top of the document. Private practice lawyers have a tendency to put their legal analysis first and conclusions at the end. No other corporate adviser would give their advice in that way.”

The concept of “giving the client what they want” should also be extended into other matters, such as billing arrangements or technical support. Ms Samaha says: “Some US clients in particular have incredibly detailed requirements that they expect their advisers to adhere to. These requirements can range from travel arrangements, to precisely how their bills should be presented, and how to interface with the business. If law firms want to continue working with such clients, they must comply with these policies,” she says. She goes on: “More generally, a law firm may think one of their new services is a good idea, but it might not be what a client needs. For example, some of the law firm’s technological innovations have a low take-up or usage rate. Sometimes, in-house counsel have their own clear ideas of what they need from technology. When I was working at Virgin, I decided to build an online tool to manage the relationships with the panel law firms. DLA Piper’s chief technology officer advised me on the functionality, and helped me understand how my idea would need to work from the technology point of view. It was very helpful of the firm to allocate a qualified IT person, as opposed to a lawyer, to that project.

Maintaining the relationship

Many in-house legal departments prefer to operate through a single relationship partner, who co-ordinates the firm’s relationship with the client. Using this system means that both parties know exactly what advice is being given by the law firm – and what advice is being charged for. However, both Mr Chidley and Ms Samaha warn against assumptions, which law firms can also often make, as to who is the best person to perform the relationship role. “Providing legal advice remains a people-focused business,” says Mr Chidley. “Sometimes the relationship between the relationship partner and the client just doesn’t work. For the good of the firm, that partner should be replaced.” Ms Samaha agrees. “Some lawyers are best at marketing, some are better at delivering technical legal advice and some are better managers,” she says. “Law firms should, but generally don’t, allocate those responsibilities in a weighted manner according to a particular individual's strengths. I know of one firm who thought their relationship with their client was ticking along quite nicely. However, when their relationship partner was replaced, the firm’s revenues from that client tripled. That just goes to show what a difference personal chemistry makes.“

When it comes to providing feedback to law firms, both Mr Chidley and Ms Samaha advocate a full debriefing after the conclusions of all major matters. “Nothing improves with keeping,” says Mr Chidley. “Unlike accountants, for example, law firms don’t have the opportunity to meet with their clients on a regular basis.” However, having obtained valuable “face time” with their clients, Mr Chidley expresses his surprise at how many law firms then waste it. “Law firms should make sure they have something worthwhile to say when they meet their clients,” he adds.

Last updated -23 January 08

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