When true collaboration will be embraced by the legal profession

Illustration By Miguel Montaner
Illustration By Miguel Montaner

Despite lawyers’ continuing resistance to the idea of working in teams, there have been gradual advances on the collaboration front

Before he retired, Jeff Carr was General Counsel of FMC Technologies, a Houston-based global provider of equipment and services to the energy industry, employing 19,700 people in 16 countries.

“When I took the job in 2001, I got the bizarre idea that I had become head of the FMC Technologies Law Firm,” he says. “I made no distinction between in-house and external lawyers. When you worked for me, you were my firm, no matter what firm you were from.”

Carr, who has also run an investment banking consulting firm and spent time in private practice in Washington, DC, had long observed that private lawyers worked in independent silos. “It turned out that this was true for in-house lawyers as it was for law firms, so it was as difficult to form teams internally as it was to form teams from different firms,” he says. “Lawyers tend to be solo providers. They can also be excellent team members so long as they remain in charge of the team.”

It was a struggle, but Carr persisted. The irony was that lawyers didn’t have the time to think collaboratively and creatively because they were too busy doing the things they didn’t have to do.

“We insisted that lawyers from different firms work with one another and with our department,” he says. “We created economic incentives to encourage people to do this, to reward the team as a whole, and to reward individuals based on contribution and performance.”

Not only did Carr persist, he succeeded.

“There’s no doubt that Jeff was on the cutting edge of the collaboration movement, so much so that when he had a problem, he’d throw it into the ring and tell the six or eight law firms on his panel to figure out the best and the fastest way to achieve the result FMC wanted,” says Carla Goldstein, the Chicago-based Associate General Counsel at BMO Financial Group, who worked with Carr during her tenure at Seyfarth Shaw LLP, the innovative US law firm responsible for the now-legendary SeyfarthLean, a proprietary, value-driven client service model that combines the core principles of Lean Six Sigma with process improvement, project management and tailored technology solutions.

Despite the so-called revolution in the profession, marked by what has been variously called disaggregation, unbundling and the like, as well as the emergence of new law firm models like alternative business structures and a proliferation of legal service outsourcers, the type of collaboration espoused by Carr has hardly caught fire.

“It’s happening very slowly, in patches, and certainly not across the board,” Carr says. “I believe it will take another decade before it becomes the norm.”

 

Still, Emily Jelich, Senior Vice-president and Senior Associate General Counsel at RBC Law Group in Toronto, sees progress in law firms’ growing emphasis on client teams directed to the relationship rather than a particular matter.

“That’s been going on for some time in the larger firms,” she says. “From the in-house side, clients like ourselves and others have been looking for more diversity in the teams, and we’re also inquiring about how teams are being deployed and costed, instead of simply accepting what’s presented to us.”

No doubt that’s because, ironically, “team” can be a dirty word in the context of legal services.

“In the past, clients have seen teams largely as a crowd of lawyers duplicating each other’s efforts,” says John Morris of Borden Ladner Gervais LLP in Toronto, a firm that has received accolades for its innovative alternative fee arrangement with its client, The Healthcare Insurance Reciprocal of Canada. “They’re no longer tolerating huddles that don’t work efficiently.”

Indeed, in today’s complex legal and regulatory environment where advising on a growing number of issues involves combinations of expertise, seamlessness is more than ever a critical feature of a successful client team.

“For example, there’s no such thing as a cybersecurity lawyer,” says Parna Sabet-Stephenson of Blake, Cassels & Graydon LLP in Toronto. “Advice on cybersecurity issues can engage privacy, litigation, and industry and securities expertise, to name just a few. The trick is to make the delivery of the service seamless so the clients have to deal with only a minimum number of people and not concern themselves with what’s happening in the background.”

Needless to say, communication is critical to teamwork, whether or not third-party providers are involved. “As long as everyone knows what their roles are, they won’t be tripping all over each other and duplicating efforts,” says Susan Wortzman of Susan Wortzman Professional Corporation in Toronto, a law firm that focuses on e-discovery and information governance.

Still, it’s not as if client teams or non-traditional collaborations are the norm in the market. “There’s been more discussion than participation from law firms,” says Susan Van Dyke of Van Dyke Marketing and Communications in Vancouver. “Starting a client team can be a big investment of resources, especially if it’s not done properly or for the right reasons.”

 

What seems apparent, then, is that the law firms aren’t going to be the ones driving the collaborative trend.  “The leadership will have to come from the buy side, the in-house community, but unfortunately they’re not trained in the management techniques required,” Carr says.

Goldstein, who manages BMO’s external counsel program, agrees. “Law firms will not change their fundamental approach to collaboration unless clients force the issue,” she says, basing her opinion partly on the 25 years she spent in private practice. “There are still a lot of firms out there who have a hard time believing that someone else can deal with a matter referred to them better than they can do it themselves.”

There are exceptions, with Seyfarth Shaw as an obvious high-water mark. By way of example, Goldstein cites Nike’s experience with the firm, which arose when the sporting goods company’s head of IT procurement went looking for ways to cut the legal spend. “Some of it was high value, some of it was low risk,” Goldstein explains. “Seyfarth separated each stage of the procurement process workflow into silos and triaged it to the appropriate resource.”

Some of the work went to sole practitioners with lower cost platforms, some went to offshore or nearshore companies, some went back to Nike because it didn’t need legal review, some stayed at Seyfarth, and some went to other full-service law firms.

“It worked so well that Nike won the ACC Value Challenge award for this initiative,” Goldstein says. “What Seyfarth did is exactly what GCs should be encouraging their law firms to do: take responsibility for coordinating the resources required to deal with the client’s needs whether they have to resort to traditional or non-traditional service providers.”

Slowly but surely a growing number of in-house counsel are investigating the value offered by disaggregated providers, separately or as part of a collaborative endeavour.

“Legal departments are either doing it themselves and trying to figure out their value proposition or asking external counsel to do it for them some firms just do it for you, others wait for you to ask,” Goldstein says. “What’s significant here is that this whole issue does have the attention of the legal community, although they’re still trying to determine how open they are to it and whether they see it as helpful to the client relationship discussion or not.”

Meanwhile, resistance from traditional law firms abounds. Goldstein, for example, found that many law firms were unwilling to manage a collaboration. “In our experience, there hasn’t been a law firm that’s wanted to take on that responsibility, particularly when it involves third-party providers,” Goldstein says. “It’s going to take a significant shift in an industry that’s really struggling with change.”

At times, then, teamwork seems more a buzzword than anything else. “Many firms will talk about teamwork in their marketing brochure, but then you find out that individual lawyers aren’t on board,” Jelich says. “And law firms for the most part don’t work any better with other firms than they did in the past.”

There are exceptions. “In the last five years, law firms are getting much better at non-adversarial relationships when they’re on the same side of a project,” says Judy Wilson of Blakes in Toronto, whose practice embraces infrastructure and procurement. “I’ve been on projects with Torys, for example, where the teams have worked wonderfully together. No pushing, no shoving and no competition for face time.”

As it turns out, the slow pace of change cannot be put entirely on the law firms. “Firms aren’t going to change unless clients ask them to en masse,” Goldstein says. “Otherwise, the response is going to be ‘you’re the only ones asking for this.’ Sea change at the client level is required before law firms change their business model.”

But at the client level, non-traditional teams can be a hard sell.

“It’s a lot more difficult to convince anyone that they’re better off with a team consisting of a traditional law firm, a boutique and a legal services provider than to say I got a great firm who will take care of this,” Jelich says. “Internally, it’s always a question of how sure you need to be before you can bring a new approach forward.”

But as Carla Goldstein points out, “taking care of this” usually means that law firms will stick to the notion that they can do everything better themselves, even as they remain reluctant to take on the responsibility of coordinating a non-traditional team that might, just might, prove a better fit for the client.

When all is said and done, however, there have been concrete developments on the collaboration front. Sparse though they may be, what’s been most encouraging about the existing initiatives is that Canada’s Big Five banks are at the forefront.

In one instance, BMO joined with other banks to jointly retain a firm to manage work that was consistently repeated at each institution. “The fact that the banks have been able to collaborate in a non-competitive way in this context gives us much more market power,” says Goldstein.

Citing confidentiality, Goldstein would not disclose the nature of the work or the law firm that seized the opportunity. “I can say that it was a Top 20 firm,” she says.

The Big Five have also joined with 11 law firms in a training exercise aimed at analyzing and improving workflow efficiency on various types of transactions. “The training is focused on what should really go on in the transactions,” Goldstein says. “The things we talk about include project management and alternative fee arrangements.”

At the core of the training is the creation of a “process map” of the subject transaction. “We examine the map to see what areas can be changed and how knowledge management techniques, templates and checklists can advance the collaborative process,” Goldstein says. “There are a lot of ‘aha’ moments when people start to realize how they fit into the bigger picture.”

At McCarthy Tétrault LLP, Vancouver-based Matthew Peters, the firm’s National Leader, Markets, is spearheading a focused collaborative effort that could well portend the future of matter management.

“We discovered that we needed to tear down the walls that exist and integrate external non-traditional providers into our service offerings,” he says. “It’s meant that in some cases we are getting smaller pieces of a retainer, but it’s better for the clients and it’s better for us.”

About three years ago, McCarthys launched a relationship with Exigent Group Limited, a global legal services outsourcing organization. The partners have launched a number of successful projects, including a fixed-price lease management offering directed at the retail financial services sector that involved about 1,000 leases.

“Exigent uses Chameleon, which is excellent contract management software, and combines that with cost-effective offshore operations,” Peters says. “They use a uniform procedure to scan, insert and code the leases, and if things get complex on any particular lease renewal, it gets bumped up to us pretty fast.”

The savings to the client are “easily” in the 20 per cent range. “If you can’t knock 20 per cent off the traditional price, you’re not trying,” Peters says.

But he also observes that, much as it does for law firms, change can also create challenges for clients and legal departments.

“The new lease process we developed required substantial internal changes that really slowed the client down, and adoption was much more drawn-out than we expected,” he says. “On the one hand, clients are pushing law firms to get off the billable hour, but in some circumstances they can’t wait to get back to it.”

McCarthys’ next move on the collaboration front was in M&A. “We did a lot of number crunching and decided we could come up with a systematic M&A process for mid-market deals,” Peters says. “We couldn’t come up with a single number that would work for every deal, but we did create a system that could result in considerable cost savings and predictability to the clients. Doing the work offshore, for example, can knock 80 per cent off the traditional costs of due diligence.”

McCarthys engaged a third partner, Cognition LLP, to participate in the M&A offering. Cognition is a Toronto-headquartered non-traditional law firm that boasts more than 40 lawyers who have approximately 400 years of in-house experience. The cutting-edge firm was founded about 10 years ago on the principle that retaining a traditional law firm or hiring full-time in-house counsel is “too expensive for most start-ups and smaller companies” and “too inefficient for big companies facing budget cuts or staffing freezes.”

“We provide something that fits between full-time in-house counsel and traditional outside firm services,” says Cognition co-founder Joe Milstone.

Joshua Auslander, who engaged Cognition when he was CFO of what is now Toronto-based SAP Triversity, which provides point-of-sale software solutions, says Milstone’s team met his emerging company’s needs perfectly.

“There was a period where we both didn’t have enough work for a full-time in-house counsel and certainly couldn’t pay for one,” says Auslander, who now describes himself as a freelance CFO. “Cognition provided the answer with an as-needed solution, using lawyers who became very familiar with the company, to the point where they played a large role in the sale of Triversity to SAP.”

Cognition’s costs are lower than those of Big Law, a model made possible by maintaining rigid control over expenses. The firm claims that its fees are one-half to one-third that charged by major firms.

“Our joint venture-like arrangement with McCarthys and Exigent envisages a fixed-fee M&A offering,” Milstone says. “McCarthys does the bespoke work like cross-border tax planning, Cognition pushes the meat and potatoes of the deal and runs the negotiating and closing, and Exigent does the mounds and pounds of due diligence.”

By using best-of-breed providers, then, McCarthys and the firm’s partners should be able to deliver a compelling one-stop shop. So far, however, there’s just one problem and it points, once again, to the fact that clients must bear some of the blame for the slow pace of change. “We haven’t sold it yet,” Milstone says. “But we’ve had a lot of meetings.”

Some of the reluctance may stem from clients’ lack of conviction that parcelling out work will always be the best alternative. Ultimately, many lawyers and clients believe, the decision to unbundle or not is heavily dependent on the circumstances.

“There are certainly large cases, like the tobacco litigation, where the documents are in the millions and you have no choice but to outsource,” says Robert Anderson of Farris, Vaughan, Wills & Murphy LLP. “But law firms can certainly manage matters involving thousands of documents.”

Indeed, given the nationalization and globalization of the profession, many law firms do have internal pricing alternatives.

“There are times we can do better than third parties because we have lower costs of labour in places like Québec City,” Peters says. “It’s all a question of what makes sense.”

Ever-improving technology may also help keep work within law firms. “My belief is that law firms can do things better although they can’t always do things at a cost-effective price,” says Mark Shapiro in Toronto, who leads Dickinson Wright LLP’s Canadian practice. “But technology is catching up, and that will be an equalizer.”

 

Either way, it’s unlikely that law firms will lose their cherished positions as trusted advisors. Indeed, what has emerged from McCarthys’ efforts to market its collaborative programs is that many clients are reluctant to buy in unless their preferred law firm is running the show.

“There are a lot of clients who love this joint venture thing in principle, but only if McCarthys’ stamp is on it because of that ‘we can’t be criticized if we relied on the best’ mentality,” Milstone says.

“My guess is that things will continue to move glacially, but we’ve all seen videos of icebergs tipping,” says Peter Carayiannis, President of Toronto-based Conduit Law Professional Corporation, a non-traditional firm.

So the icebergs tip. And then they fall over the cliff. Instinct and the emerging evidence suggest that the profession is headed in the same direction. Its ultimate destination and pace however, remain unclear.