“Nothing is so powerful to the human mind as a great and sudden change.”
— Victor Frankenstein
Thus, in melancholic tone, muses Victor Frankenstein, the eponymous protagonist of Mary Shelley’s 1818 gothic horror masterpiece. Mourning the loss of his dear Elizabeth shortly upon her abduction by Victor’s legendary monster, the shocking realization in Victor’s mind of a perceived loss of power — or in this case, control — over that which he himself created, offers an all-too-fitting lesson for a modern legal services market whose traditional power dynamic has been usurped.
Change is indeed a constant in this mortal coil. And in an era where law firm clients are widely perceived to have the upper hand over outside counsel, how today’s law firms respond to, if not ultimately anticipate, the needs of their customers is critical for firms’ survival in the current business climate. Next week, the Legal Executive Institute’s 17th Annual Law Firm COO & CFO Forum offers a comprehensive take on how the client voice is driving transformative measures in law firms today.
Perhaps nowhere is that voice heard louder than in the subject of our feature panel on Thursday morning (Oct. 25), as Forum co-chair James Jones, Senior Fellow with the Center for the Study of the Legal Profession at Georgetown University Law Center, leads a discussion of standardizing outside counsel guidelines (OCGs). Featured panelists will include Anthony Davis, a partner at Hinshaw & Culbertson and Lecturer-in-Law at Columbia University School of Law; Suzanne Hawkins, global director of client value at Reed Smith; Chaim Levin, chief legal officer & general counsel for the Americas at Tradition Group; Beate Parra, managing director & head of legal at UniCredit Bank AG’s New York branch; and Barbara Ann Williams, deputy general counsel at McGuireWoods.
The panel will take up the timely topic of how corporate clients assess outside counsel relationships, increasingly calling for greater adherence to a longer list of guidelines that some firm leaders feel may impinge on law firms’ autonomy, legal ethics, and ability to make money. As a result, law firm leaders are growing ever more adamant in their desire for a standardized set of performance guidelines to help determine who wins clients’ business.
The use of OCGs has been steadily growing, especially since 2008, Jones points out; and since that time, they have become increasingly comprehensive — some would say intrusive — with several factors attributable to that. “First, clients are now clearly in the driver’s seat, and they’re ‘feeling their oats!’” Jones explains. “Second, there has been a concerted effort by groups like the Association of Corporate Counsel (ACC) and others to try and expand the requirements of OCGs to impose more expectations on law firms, and those efforts have been openly discussed.”
Finally, he adds, in many companies, the selection and monitoring of outside law firms is now subject (at least in part) to oversight by companies’ procurement departments. “And they tend to regard law firms as just another vendor that should be subject to the same lengthy boilerplate provisions as other ‘suppliers,’” Jones says.
“Clients are now clearly in the driver’s seat, and they’re ‘feeling their oats!’”
Hinshaw & Culbertson’s Davis notes that the scope of the OCGs has expanded greatly, and that has brought them into conflict with what law firms are willing to accept as a condition of work. “And it’s not just about fee and billing arrangements,” Davis says, adding that these guidelines often include details of how the client is defined, what constitutes a “conflict” (and when, if ever, they will be waived), demands for indemnification, “most favored nation” clauses, choice of ethics rules, as well as selection and oversight of vendors and outsourced service providers.
“And these are just some of the areas that clients seek to dictate the terms of the relationship to their outside counsel,” Davis adds, noting that the upcoming panel will address the ways in which these and other outside counsel guidelines present both ethical dilemmas and other risks to law firms — and what, if anything, firms can do to respond.
Jones agrees that law firms may face an uphill battle on this one, but it’s important for law firms to make their objections known. “Whether it’s possible to get to complete standardization of these requirements is dubious,” Jones says. “But, it should be possible to get some broad agreements at least with respect to reporting formats and hopefully find some common ground on which some level of standardization might be achieved.”
Prior to that panel discussion, Jones will co-host, with Gretta Rusanow, head of advisory services in the Law Firm Group of Citi Private Bank, the annual (and extremely popular) State of the Legal Market presentation. This year’s presentation will focus on how law firms are adjusting their organizational strategy in light of ongoing merger activity, battles for top legal talent, and the ever-evolving legal customer profile.
In the later afternoon, attendees are invited to hear a valuable conversation on law firm employee compensation models, featuring candid insights from Michael Caplan, chief operating officer of Goodwin; Ora Fisher, vice chair of Latham & Watkins; Lee Miller, retired partner & past Chair Emeritus of DLA Piper; and Gregory Stoskopf, managing director of Human Capital at Deloitte. The panel will be moderated by Lisa Smith, principal at Fairfax Associates. Among the numerous topics on tap for this discussion is the immensely important question of how compensation is inextricably linked to collaboration and client service delivery.
Indeed, the idea of managing for systemic change and listening to the voice of the client will be woven throughout next week’s multi-day Forum. It will be for law firms to decide whether their strategic response will cultivate stronger relationships with their clients or will instead create a monster of their own making.