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As tiers go by
Pic: Cian Redmond

15 Jul 2019 / Law Society Print

As tiers go by

Getting and demonstrating value for money was the theme of this year’s In-house and Public Sector Panel Discussion, which took place at Blackhall Place on 16 May.

When dealing with external counsel, attendees heard that they need to think carefully about which level of the market they should approach for advice.

Speakers also cautioned against chopping and changing external counsel too often, but also against penny-pinching and seeking to renegotiate rates downwards at payment time.

There are huge savings to be had by reaching for a mid-tier rather than top-level firm, the attendees heard, but if your job requires ‘expensive thinking’, then don’t hesitate to seek it.

Potential pitfalls

The challenges of forming and managing external legal panels were also on the agenda, with potential pitfalls flagged.

Merits

External panels are a necessary support to the general counsel, since one lawyer can’t provide all the services needed by a large commercial entity. A panel does not guarantee that cost effectiveness will happen automatically. The in-house counsel will have to work to ensure this.

Eamonn Kennedy (former director of legal affairs at RTÉ) suggested that ‘fit’ was very important for complex, non-standard work. Intellectually demanding complex work commanded higher rates. “Work should be done on the basis of what it is worth – not which firm is doing it,” he said. Each set of instructions needed to be judged on its merits.

Ongoing monitoring of firm performance is also important, particularly where your business sends out a lot of work. Regular reviews using set criteria help to identify service issues that may require remediation or could be helpful in future panel selection.

Harmonisisng rates

AIB group general counsel Helen Dooley said that there were various reasons for needing a legal panel, such as harmonising fee rates with the same terms and conditions agreements across the board.

Another reason might be that your business typically has had a relationship with a law firm that has become too ‘cosy’.

“If you are proposing to set up a panel, go into it knowing the reasons you are doing it,” she advised, “because setting up a panel can become a burden that doesn’t yield the expected benefit.” This can happen when an external firm feels ‘put through the wringer’ as regards fee negotiations, but isn’t subsequently chosen for the work.

Three pillars

Patrick Ambrose (chief legal officer at finance company DLL) said that the in-house and public service sector delivered value through three pillars – service, sourcing, and delivery. He said that ‘providing legal advice’ was not a sufficient description to cover the breadth of the general counsel’s role.

It was always important to ask the question: “Are we being asked for legal advice or commercial advice in the context of the regulatory framework?”

A general counsel might have a team of generalists working for him or her, he said, but they also required specialist services when the situation demanded it.

The most important thing you have as an in-house lawyer is your reputation, so guard it carefully, he warned. “Friendships based on good business are always better than business based on good friendships.”

Smart working

Emer Durkan (legal and compliance director at Johnson Hana International) contends that technology in and of itself is not sufficient to drive efficiencies or demonstrate value, but that technology used in conjunction with smart business models can.

She commented that she had witnessed an uncomfortable attitude to technology and innovation while in private practice, with a view that technology wasn’t really for the lawyers, but more for the support staff.

Durkan moved to a job at the KBC compliance function where there was no choice but to embrace technology. At KBC, she analysed the case-management, diary and workflow technology available, and saw how useful online training platforms were in replacing the requirement of face-to-face training to upwards of 900 people.

However, she cautioned that the misuse of technology could lead to inefficiencies and time-wasting.

She recognised that resource allocation was a key challenge for companies, especially where there was an unexpected event that required massive and immediate reallocation of resources.

Pinch points

Durkan warned that if workflow ‘pinch points’ and long hours became the norm, then these could lead to a high rate of staff attrition.

She said that she had moved to Johnson Hana, which is a legal process outsourcer, having had three children in 16 months, knowing that she couldn’t commit to long hours on a regular basis.

“Our business model focuses on disaggregating legal services, between legal advisory work and volume-heavy process work,” she said. “We also provide our consultants with flexibility and, more importantly, certainty of hours.”

Consumers of legal services were getting disillusioned with the cost, she observed, and lawyers were frustrated with increasingly demanding legal workloads that forced them to “deprioritise life”.

Time of plenty

David Rowe, of consulting firm Outsource, told the in-house practitioners: “You need to be smarter and more inventive to find value in the current market.”

He observed that, during the financial crash, in-house counsel bought in legal services at very competitive rates. There has been gradual improvement for law firms since then but, while firms were getting bigger, they were not necessarily becoming more profitable. Often, they continued to operate tender rates that were set six to eight years previously.

David Rowe commented that work volumes have been stronger than ever in recent years, albeit at much lower profit margins due to sharply rising costs and a competitive market. But while there is more work on desks, there is a huge difficulty in finding staff to do the work.

The focus has now changed to recruiting staff and getting the work done and ‘out the door’ in reasonable time. However, cost-base pressures have eroded profit margins, he said, with salary increases significantly above inflation in some sectors of the market. 

High-end work

Fee improvements have been best for the ‘big six’ firms doing high-end work: “The big six are not pitching for unprofitable tenders,” he said. “We’re in a time of plenty at the moment, and law firms are refusing work they don’t want, or filtering out what is non-remunerative.”

In addition, due to resourcing issues, work was getting pushed down the ‘expertise chain’, while some junior and mid-level people were refusing to do work for particular clients because of the unrealistic targets being set.

Greater flexibility

He suggested that mid-sized firms could offer greater flexibility and were happy to discount for large batches of work. “However, they get very upset if asked for further discounts at the payment stage,” he observed.

As for companies inviting tenders for legal work, Rowe advised against an annual tendering process, favouring a three-year period instead. This is due to the work involved on both sides – for those submitting as well as those reviewing tender documentation, and the associated filtering process.

Rowe warned that law firms were likely to get upset if they won a tender, but subsequently got little or no work – echoing Helen Dooley’s earlier point.

In addition, firms disliked overly onerous reporting requirements. Also regarded as unfair was inflexibility in relation to payments, where there was clearly more work involved than originally anticipated.

He suggested that in-house lawyers should pay close attention to which tier of the market they should be looking towards for different streams of work: “There are five tiers to the legal market, and that market intelligence will literally save you thousands.”

Rowe advised that the top six firms offer specialised expertise, but general counsel don’t always need to pay €450 an hour. However, certain types of work required “expensive thinking” and “top-six prices”. The skill lay in knowing when such advice was required.

Trusted provider

Building relationships with a trusted provider was important, Rowe said, but general counsel should be looking at the market every three years: “However, if you get a fair price with your current firm, then renew,” he said.

“If you shop around too much, you will run out of friends.” And too much discounting is demotivating and results in a deteriorating service.

Also, firms have ways of telling you that they don’t want your business: “They will quote a huge margin, because they don’t want you, except at high rates,” he said.

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