The Changing Role of the General Counsel

There is no doubt that the global recession has had a lasting impact on the legal sector across the world. Although it was quite clear from the outset that law firms would be far from immune from the economic crisis, the long-term impact has been more pronounced than anyone anticipated. The headlines may be capturing cost-cutting exercises and reduced headcount for many in the sector, but one of the major changes of the recession is how the boundaries of the client-lawyer relationship has been redrawn ' the power now firmly lies with the client as the status of general counsel within their own organization continues to grow.

The growing status of the in-house lawyer was a key trend that emerged from our latest report ' “Law Firm of the 21st Century: The Clients' Revolution” ' that canvassed the opinions of both general counsel and law firm partners. In fact, it was seen as the factor that is set to have the most transformative effect on the global legal profession by 35% of all respondents, just behind the top factor, globalization.

But is it a short-term shift or long-term change? Will the sector revert back to the pre-recession supplier-led market as soon as the economy stabilizes?

The report indicates that this shift is set to be long-term ' of the 76% of clients and 75% of partners who thought that the balance of power now lay in-house, the majority thought this change would be permanent. Arguably, this is something that should have happened sooner, but for many law firms, this will require a significant change in mindset.

The Post-Recession Role of General Counsel

It means that today's law firm, and general counsel, have essentially seen their job descriptions change. The in-house lawyer has squeezed spend on external law firm suppliers ' no doubt this is in part due to internal pressure from finance directors. Ninety percent of clients surveyed said they were under pressure to demonstrate better value, efficiency and cost reductions ' 60% have reduced their overall legal expenditures. But it is also due to in-house teams increasing their own capability ' 55% of clients said their in-house departments would grow over the next five years and over half (52%) are actively reducing the amount of work they send to external law firms.

This reversal in position now means that the general counsel has now become a focal point in the structure of a business. The remit of in-house lawyers in business has broadened as the status of the general counsel has risen. For example, in October 2009, Mark Harding, the general counsel for Barclays Bank, was appointed to the Executive Committee ' a relative rarity in the legal market. This is indicative of the growing importance of General Counsel as a strategic partner to business.

What Does the Increased Role of the General Counsel Look Like?

Increased responsibility has seen general counsel occupy an expanded job role, with 74% saying they now occupied a far more senior commercial advisory role compared with before the recession. In some cases, job descriptions had dramatically altered after the credit crisis and, as mentioned previously, the in-house legal department is now seen as more of a business unit than a support unit. Just over half (55%) said they have assumed more responsibility for corporate governance and many have taken on more functions and new responsibilities in business.

For example, the financial crisis has reshaped the attitude of business to risk. The “back-to-basics” approach is making a return and the in-house lawyer has a crucial role to play in setting the balance of risk for their organizations. Seventy-three percent of in-house lawyers said their organizations' approach to risk had changed as a result of the crisis. Added to this, a third (33%) also said that there was a new dimension to their roles as ethics champions in business.

So what does mean for today's law firms and the future of the client/lawyer relationship? The boundaries are being redrawn ' it is the general counsel who is more likely to occupy the role of trusted adviser to the business. Although law firms still aspire to this role, they are seen by the in-house lawyer as service providers and, at best, close collaborators. This dynamic is demonstrated by a reduction in loyalty among general counsel ' 73% admitted to either changing or reducing the number of their external legal advisers as a result of the recession and over half said that as their in-house capabilities increased, they would only look to external lawyers as a source of highly specialized advice.

In short, in the post-recession world, law firms will need to focus on quality and innovation, while demonstrating efficiency in order to maintain solid ongoing, collaborative client relationships.

Maintain Quality, But Show Efficiency

General counsel are either demanding lower fee rates or are looking at value-added services. These could include free-of-charge secondees or complimentary access to knowledge management resources. The majority of clients in the report ' 87% ' said that these value-added services are a crucial factor when it comes to instructing an external law firm.

Demand for high-quality legal services will remain and simply cutting costs is not enough as this will inevitably result in a decline in this quality. The challenge for law firms will be able to provide quality, value-for-money services in the most efficient way. For many clients, technology has emerged as a way to achieve this ' and they expect their law firms to invest in new ways of working to increase efficiency.

At Eversheds, many of our clients are multinational companies and businesses with branches and interests in many different jurisdictions. To address their needs and provide a seamless service across all of our international offices, we have looked at how technology helps in managing these relationships more effectively and efficiently. The result is our online global account management system (GAMS), which we began to use with clients in 2007. This has since evolved to GAMS II, which is an advanced management tool, designed for in-house legal teams to measure success against key performance indicators.
The key outcomes for the client with GAMS II are:

• Cost control ' the system ensures that the firm will not process an invoice that exceeds the costs estimate, allowing the client to predict costs extremely accurately.
• Transparency ' the client can identify on his computer screen at the touch of a button how many ongoing matters there are on a global level, what costs have been accrued for each one and how much more there is to be spent on that matter.
• Strategic analysis ' the client now has access to invaluable management information, allowing the legal team to forecast, for example, cost of litigation over the next 12 months. The client can also pull off a report at any time to see legal expenditures, or trends in the expenditures, by practice area, lawyer, case, country or business unit.
• Risk Management ' managing risk has never been as important as during the economic downturn. GAMS II enables the client to better coordinate and manage international risk.
• KPIs ' we work with each client to develop a predetermined set of Key Performance Indicators. The use of KPIs is still relatively new in the legal world, so we pride ourselves in helping our clients meet their own internal objectives.
• Measurement ' we obtain pre-approval for the number of hours we spend on a piece of work, so the client knows exactly what needs to be done. We have a number global clients using GAMS II. The control and predictability of spend has resulted in many General Counsel receiving very positive acclaim within their own business as they can demonstrate how they have effectively managed budgets.

Collaborative Relationships

While the roles of the GC and law firm have changed, a good collaborative working relationship between the two is still important. Law firms need to be able to advise on business, as well as legal risk.The best results are achieved where GCs and their law firms find new ways of working together that recognize a reduced legal expenditures. That can include a better allocation of work between in-house and external, jointly running workshops on reducing spend by changing working practices, greater use of technology and standardization and making sure the right work is sent to the right external firm. This type of joint problem-solving can generate bigger and more sustainable savings than just reducing traditional hourly rates. A good case in point is how we currently work with global manufacturing giant, Tyco. In November 2009, we signed a third ground-breaking contract with Tyco on its legal needs across Europe, Middle East and Africa. The contract extends the relationship, first signed in 2006 when Tyco reduced its panel of 250 law firms to one overnight, by a further two years. The contract sees Eversheds advise Tyco on legal matters across 80 jurisdictions.

This ongoing partnership, first signed over three years ago, has set a new standard for the provision of legal services and client relationship excellence across international jurisdictions, that to date, no other law firm has been able to equal. The focus of the relationship is delivery of a high quality consistent international service but uniquely coupled with a drive to achieve the greatest cost control and efficiencies for the client, both in terms of legal spend reduction and also how the work is managed. To do this, collaboration and innovation between both parties has been key to ensure total satisfaction for both client and law firm.

The contract has resulted in a 27% reduction in fees for Tyco and the number of Tyco's litigation cases fell by 60%. At the same time, the proportion of high-quality work we service for the client increased by over 300%, including M&A and IP work, achieving one of the objectives of the relationship, to deliver an improved and sustainable return on investment for the law firm ' the findings in the “Law Firm of the 21st Century: The Clients' Revolution” supports this.

The Critics Weigh In

But the arrangement was not without its detractors, the traditionalists in the legal sector believed that the consolidation of law firms and the project management approach was risky, and that, given the choice, most clients did not want to work in this way. We felt then, and still do, that the combination of quality, control, value, efficiency and transparency were what clients were increasingly demanding and that law firms had to innovate if they were to survive.

How the Contract Has Changed

The Tyco contract has evolved since it was first signed, with both parties committed to constant innovation and simplification. Working with Tyco for so long means that we have accumulated a wealth of knowledge about the client and its sector around the world. This is only beneficial to a client if it translates into benefits such as economies of scale and lower overall spend. New deputy general counsel EMEA, David Symonds, worked with us to review how the relationship had evolved and whether the all the mechanisms in the original contract were still relevant. As a result, much of the original contract's demands have been changed to recognize this evolution. It has been simplified to revolve around a fixed fee for all litigation and non litigation work but leaving behind some of the previous bonus structures built in to reward certain outcomes like a reduction in litigation cases, but the bonuses are now embedded in the culture of the relationship. The real incentive in the contract is to increase the premium work awarded by Tyco. This now forms 60% of the total work we do for the client.

The Future

The “Law Firm of the 21st Century: the Clients' Revolution” report has shown that clients now have the power to not only demand value for money from law firms but to be able to demonstrate that value too. For law firms, this means developing collaborative relationships that focus on achieving efficiencies without compromising quality. With the power resting with general counsel for some time to come, and with their role as trusted adviser within business set to grow, what they want (and need) will dictate how the global legal market develops.

Bryan Hughes is chief executive of Eversheds LLP in London.

There is no doubt that the global recession has had a lasting impact on the legal sector across the world. Although it was quite clear from the outset that law firms would be far from immune from the economic crisis, the long-term impact has been more pronounced than anyone anticipated. The headlines may be capturing cost-cutting exercises and reduced headcount for many in the sector, but one of the major changes of the recession is how the boundaries of the client-lawyer relationship has been redrawn ' the power now firmly lies with the client as the status of general counsel within their own organization continues to grow.

The growing status of the in-house lawyer was a key trend that emerged from our latest report ' “Law Firm of the 21st Century: The Clients' Revolution” ' that canvassed the opinions of both general counsel and law firm partners. In fact, it was seen as the factor that is set to have the most transformative effect on the global legal profession by 35% of all respondents, just behind the top factor, globalization.

But is it a short-term shift or long-term change? Will the sector revert back to the pre-recession supplier-led market as soon as the economy stabilizes?

The report indicates that this shift is set to be long-term ' of the 76% of clients and 75% of partners who thought that the balance of power now lay in-house, the majority thought this change would be permanent. Arguably, this is something that should have happened sooner, but for many law firms, this will require a significant change in mindset.

The Post-Recession Role of General Counsel

It means that today's law firm, and general counsel, have essentially seen their job descriptions change. The in-house lawyer has squeezed spend on external law firm suppliers ' no doubt this is in part due to internal pressure from finance directors. Ninety percent of clients surveyed said they were under pressure to demonstrate better value, efficiency and cost reductions ' 60% have reduced their overall legal expenditures. But it is also due to in-house teams increasing their own capability ' 55% of clients said their in-house departments would grow over the next five years and over half (52%) are actively reducing the amount of work they send to external law firms.

This reversal in position now means that the general counsel has now become a focal point in the structure of a business. The remit of in-house lawyers in business has broadened as the status of the general counsel has risen. For example, in October 2009, Mark Harding, the general counsel for Barclays Bank, was appointed to the Executive Committee ' a relative rarity in the legal market. This is indicative of the growing importance of General Counsel as a strategic partner to business.

What Does the Increased Role of the General Counsel Look Like?

Increased responsibility has seen general counsel occupy an expanded job role, with 74% saying they now occupied a far more senior commercial advisory role compared with before the recession. In some cases, job descriptions had dramatically altered after the credit crisis and, as mentioned previously, the in-house legal department is now seen as more of a business unit than a support unit. Just over half (55%) said they have assumed more responsibility for corporate governance and many have taken on more functions and new responsibilities in business.

For example, the financial crisis has reshaped the attitude of business to risk. The “back-to-basics” approach is making a return and the in-house lawyer has a crucial role to play in setting the balance of risk for their organizations. Seventy-three percent of in-house lawyers said their organizations' approach to risk had changed as a result of the crisis. Added to this, a third (33%) also said that there was a new dimension to their roles as ethics champions in business.

So what does mean for today's law firms and the future of the client/lawyer relationship? The boundaries are being redrawn ' it is the general counsel who is more likely to occupy the role of trusted adviser to the business. Although law firms still aspire to this role, they are seen by the in-house lawyer as service providers and, at best, close collaborators. This dynamic is demonstrated by a reduction in loyalty among general counsel ' 73% admitted to either changing or reducing the number of their external legal advisers as a result of the recession and over half said that as their in-house capabilities increased, they would only look to external lawyers as a source of highly specialized advice.

In short, in the post-recession world, law firms will need to focus on quality and innovation, while demonstrating efficiency in order to maintain solid ongoing, collaborative client relationships.

Maintain Quality, But Show Efficiency

General counsel are either demanding lower fee rates or are looking at value-added services. These could include free-of-charge secondees or complimentary access to knowledge management resources. The majority of clients in the report ' 87% ' said that these value-added services are a crucial factor when it comes to instructing an external law firm.

Demand for high-quality legal services will remain and simply cutting costs is not enough as this will inevitably result in a decline in this quality. The challenge for law firms will be able to provide quality, value-for-money services in the most efficient way. For many clients, technology has emerged as a way to achieve this ' and they expect their law firms to invest in new ways of working to increase efficiency.

At Eversheds, many of our clients are multinational companies and businesses with branches and interests in many different jurisdictions. To address their needs and provide a seamless service across all of our international offices, we have looked at how technology helps in managing these relationships more effectively and efficiently. The result is our online global account management system (GAMS), which we began to use with clients in 2007. This has since evolved to GAMS II, which is an advanced management tool, designed for in-house legal teams to measure success against key performance indicators.
The key outcomes for the client with GAMS II are:

• Cost control ' the system ensures that the firm will not process an invoice that exceeds the costs estimate, allowing the client to predict costs extremely accurately.
• Transparency ' the client can identify on his computer screen at the touch of a button how many ongoing matters there are on a global level, what costs have been accrued for each one and how much more there is to be spent on that matter.
• Strategic analysis ' the client now has access to invaluable management information, allowing the legal team to forecast, for example, cost of litigation over the next 12 months. The client can also pull off a report at any time to see legal expenditures, or trends in the expenditures, by practice area, lawyer, case, country or business unit.
• Risk Management ' managing risk has never been as important as during the economic downturn. GAMS II enables the client to better coordinate and manage international risk.
• KPIs ' we work with each client to develop a predetermined set of Key Performance Indicators. The use of KPIs is still relatively new in the legal world, so we pride ourselves in helping our clients meet their own internal objectives.
• Measurement ' we obtain pre-approval for the number of hours we spend on a piece of work, so the client knows exactly what needs to be done. We have a number global clients using GAMS II. The control and predictability of spend has resulted in many General Counsel receiving very positive acclaim within their own business as they can demonstrate how they have effectively managed budgets.

Collaborative Relationships

While the roles of the GC and law firm have changed, a good collaborative working relationship between the two is still important. Law firms need to be able to advise on business, as well as legal risk.The best results are achieved where GCs and their law firms find new ways of working together that recognize a reduced legal expenditures. That can include a better allocation of work between in-house and external, jointly running workshops on reducing spend by changing working practices, greater use of technology and standardization and making sure the right work is sent to the right external firm. This type of joint problem-solving can generate bigger and more sustainable savings than just reducing traditional hourly rates. A good case in point is how we currently work with global manufacturing giant, Tyco. In November 2009, we signed a third ground-breaking contract with Tyco on its legal needs across Europe, Middle East and Africa. The contract extends the relationship, first signed in 2006 when Tyco reduced its panel of 250 law firms to one overnight, by a further two years. The contract sees Eversheds advise Tyco on legal matters across 80 jurisdictions.

This ongoing partnership, first signed over three years ago, has set a new standard for the provision of legal services and client relationship excellence across international jurisdictions, that to date, no other law firm has been able to equal. The focus of the relationship is delivery of a high quality consistent international service but uniquely coupled with a drive to achieve the greatest cost control and efficiencies for the client, both in terms of legal spend reduction and also how the work is managed. To do this, collaboration and innovation between both parties has been key to ensure total satisfaction for both client and law firm.

The contract has resulted in a 27% reduction in fees for Tyco and the number of Tyco's litigation cases fell by 60%. At the same time, the proportion of high-quality work we service for the client increased by over 300%, including M&A and IP work, achieving one of the objectives of the relationship, to deliver an improved and sustainable return on investment for the law firm ' the findings in the “Law Firm of the 21st Century: The Clients' Revolution” supports this.

The Critics Weigh In

But the arrangement was not without its detractors, the traditionalists in the legal sector believed that the consolidation of law firms and the project management approach was risky, and that, given the choice, most clients did not want to work in this way. We felt then, and still do, that the combination of quality, control, value, efficiency and transparency were what clients were increasingly demanding and that law firms had to innovate if they were to survive.

How the Contract Has Changed

The Tyco contract has evolved since it was first signed, with both parties committed to constant innovation and simplification. Working with Tyco for so long means that we have accumulated a wealth of knowledge about the client and its sector around the world. This is only beneficial to a client if it translates into benefits such as economies of scale and lower overall spend. New deputy general counsel EMEA, David Symonds, worked with us to review how the relationship had evolved and whether the all the mechanisms in the original contract were still relevant. As a result, much of the original contract's demands have been changed to recognize this evolution. It has been simplified to revolve around a fixed fee for all litigation and non litigation work but leaving behind some of the previous bonus structures built in to reward certain outcomes like a reduction in litigation cases, but the bonuses are now embedded in the culture of the relationship. The real incentive in the contract is to increase the premium work awarded by Tyco. This now forms 60% of the total work we do for the client.

The Future

The “Law Firm of the 21st Century: the Clients' Revolution” report has shown that clients now have the power to not only demand value for money from law firms but to be able to demonstrate that value too. For law firms, this means developing collaborative relationships that focus on achieving efficiencies without compromising quality. With the power resting with general counsel for some time to come, and with their role as trusted adviser within business set to grow, what they want (and need) will dictate how the global legal market develops.

Bryan Hughes is chief executive of Eversheds LLP in London.