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Read this article on LBC Wise Counsel's blog.
Jonathan Smith is Director at LBC Wise Counsel, the leading management consultancy for in-house lawyers.
Jonathan spent the majority of his career working in the in-house legal sector. A graduate of Clare College, Cambridge, he started his career with law firms in Manchester and then Oxford. He joined the European legal team of the US headquartered business
services provider PHH in 1992 before in 1997 joining International Computers Limited, later renamed Fujitsu. While at Fujitsu, he managed the ICL intellectual property function, acted as legal director for its European IT services business and was
general counsel for its UK and Ireland business.
After acting as general counsel to Berwin Leighton Paisner's Managed Legal Services business, he joined LBC in 2013.
Jonathan is a Fellow of the Society for Computers and Law, and was named in The Lawyer's Hot 100 in 2008.
There seems always to be an awful lot of (often awful) discussion about the engagement of external law firms by in-house teams. Most of it concerns the charging model adopted by law firms. However, rather than contributing yet another piece on the iniquities
and inefficiencies of the hourly rate, the mythology of alternative fee arrangements and what a bad business model all those millionaires in law firms operate, I want to look at some more qualitative aspects of the in-house / out-house relationship.
It’s tempting to look at this relationship as an antithetical one, a power struggle between an in-house team trying to assert dominance over the external lawyers and the external lawyers trying to find multiple ways to retain and grow their relationship
with their client - through, over and behind the backs of the in-house team. Seeing the in-house / external law firm relationship purely in terms of power struggles and fee battles however misses some important points.
One of the most important skills in the general counsel role is that of blending the mix of internal and external resources for the benefit of their organisation. The business’s experience of using these external lawyers (style of engagement, performance
and, yes, cost) all reflect on the GC. Handle them wisely and it enhances the GC’s standing, but poor experiences will have the opposite effect. Given the impact that good, bad and indifferent experiences of external lawyers can have on the
standing of the in-house team, it’s surprising however how little attention can be focussed on the non-financial aspects of the relationship.
I’m not sure that nearly enough focus is given to the art of giving instructions, in particular, to the challenge of telling someone outside your organisation everything they need to know about your organisation in order to be able to advise you
properly. It’s sometimes quite hard to bring to mind all of the factors affecting a particular matter which you as the in-house lawyer might take for granted if handling the matter yourself. But it’s very important to do so - any of these
factors has the capacity to make what would otherwise be totally apposite advice useless. One of the cited benefits of using the same law firms for all or a good proportion of an organisation’s legal needs is that the firm “knows our business”.
There’s some merit in that view, of course, but the reality is that the law firm in question has a number of lawyers who will be familiar with a number of characteristics of the client - there’s no guarantee that lawyers new to the account
will absorb these characteristics by some form of institutional osmosis any more than there is a guarantee that a lawyer accustomed to advising the business in one area will understand other areas to the same level. This latter point was brought home
to me a few years ago when I was handling a cross-border group reorganisation. I asked our go-to employment lawyer to look at HR aspects of the transaction and was somewhat surprised to receive a well-constructed but useless piece of advice; it was
predicated on an entirely incorrect set of assumptions about how our business was structured outside the UK (hitherto, his field of engagement with us). Of course, he was wrong not to have verified these assumptions before he started, but equally
if I had spent a bit longer briefing him on the position, we would have been right first time. As it was, I had to do some hasty scurrying around in order to get the advice directed to the correct facts and to meet our timetable, so I reaped my own
whirlwind. Lesson learned for future application - don’t assume the firm knows all they need to know, no matter how familiar you think they are with your organisation.
On that occasion the error the law firm made was one that could be corrected easily and one for which in some sense I was culpable. But like most of us I’ve experienced legal advice that was not so easy to put right and for which the law firm was
wholly culpable. The mistake I made the first time I encountered a law firm providing poor advice was to set out a well-reasoned, proportionate and measured statement of what we felt had gone wrong. As a communication its contents were unobjectionable,
but I had failed to appreciate that by putting it in writing, I had engaged the firm’s formal complaints handling procedure, as our relationship partner explained in pained tones, and as a result, I had inadvertently limited his freedom of action
in addressing our concerns. Again we were able to retrieve the situation, but I had made the situation more difficult than it needed to have been. I have been fortunate to have experienced few problems with law firms since, but my approach since has
always been to speak off the record first so that the person I am dealing with has maximum flexibility in putting matters right. All organisations err from time to time, a mark of a good organisation is how it put things right, and I have found that
indicating I know this produces much better results than taking a more aggressive approach. Another lesson learned - law firms make mistakes, it’s not just generous but it’s wise to give them the widest flexibility to fix them.
Taking account of the individual situation of lawyers in law firms can also be applied for positive reasons, and to lawyers at all levels in the firm. An example of this occurred when I was working on a cross-border acquisition; I was told by the lead
partner that they would have the due diligence report on our target on my desk by 9 a.m. on Monday morning. While I was impatient to read it, I knew both that I did not really need to see it until later in the week, and that the consequence of getting
it to me by that time would mean a weekend in the office for some of the firm’s junior lawyers. So I said I wouldn’t read it until Tuesday, whenever they sent it (a little white lie), and that I wanted the team to have a break over the
weekend. The juniors duly got their break, and knowing they had done so was all the payback I required. As it happened, the deal changed shape a month later, meaning that those same juniors had to out in some heavy and late hours for me - something
they were highly motivated to do because of the break I’d cut them previously. Lesson learned - law firms are made up of human beings and a little thought for their welfare can reap dividends.
None of these examples is earth-shattering, but they all underpin the point that relationships with external lawyers aren’t all about the bill. Relationships with the internal team aren’t conducted on that basis, treating the external law
firm in such a narrow way limits their contribution and, in the end, only serves to undermine the general counsel.
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