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Tuesday, July 08, 2014

A General Counsel's Advice to A Law Firm - Circa 2004

Nothing promotes de-cluttering one's office like a move or new furniture.  A colleague is retiring; I bought his table and standup desk, and gave up the humungous thing they gave me when I showed up.  It meant tossing lots and lots of stuff I never look at anymore (and goodbye hundreds of reprints - may you recycle into something far more valuable).

763cf59eI found the notes from a talk I gave in Chicago to a 2004 meeting of the firm then called Piper Rudnick - a combination of Piper Marbury of Baltimore and Rudnick & Wolfe of Chicago soon to absorb Gray Cary, and thereafter to merge with Dibb Lupton of Great Britain to become the behemoth DLA Piper.

At the time I was the general counsel of Great Lakes Chemical Corporation.  Piper had done a lot of our work under the various EPA-administered statutes that regulated household and other chemicals - TSCA, RFRA (the one dealing with rodenticides and fungicides, not the one dealing with religion), etc.  It had succeeded in securing more work through a "Preferred Provider Program" our terrific Associate GC, Joanne Smith, organized.  In Chicago, I was on a panel with the general counsel of AON, a senior lawyer from Boeing, and one other I can't recall now.  I do remember it was a big room with a lot of people in the audience.

Ten years later, there isn't much here that I'd change - other than I wouldn't have notes on lined paper but would instead have used the Speeches app on my iPad.  A reconstruction of the talk from my notes follows the break.

[Cross-posted at The Legal Whiteboard and Legal Profession Blog.]

Thank you for inviting me here.   I am the Senior Vice President and General Counsel of Great Lakes Chemical Corporation, one of your most important clients.  Actually, your most important client.  (Laugh.)

Compared to the other companies represented on the panel, we have a relatively small legal staff inhouse, with four lawyers who serve on the management teams of our business units and manage our litigation, as well as two paralegals.  Based on benchmarks to other corporations our size or in our industry, we are highly skewed to outside counsel.  [Note:  as I recall, we had a budget of something in excess of $10 million per year, more than 80% of which went outside.]

I'm going to talk about "convergence" [Note: I don't know why I used that particular jargon now; maybe it was the theme of the panel. I am pretty sure it meant trying to figure out how our business interests aligned rather than competed] and firm-client partnerships.  Our relationship with Piper is an example how we create win-win out of both.  I've been on both sides of the relationship - as a big firm lawyer for 15 years and a GC for ten years - and as I told a reporter for Crain's a few years ago, "there's no gamekeeper like an ex-poacher."

As to convergence of interests:

- It all turns on leverage.  Our mutual opportunity to reduce costs increase with the volume of legal work we give to your firm.

- What are the implication of becoming one of our "preferred provider firms" (and thus "converging" with us)?

1.  It's harder to get in than to get out.  The benefit to you is that we don't replace firms willy-nilly.

2.  It's the total value and the total cost, rather than hourly rates, that matter to us.  We want you to eliminate non-value added work, like the things you do to CYA or the "partner review" that the associate really doesn't need.  We want your processes to be more productive.

3.  The old paradigm of wining and dining your clients to attract and maintain business has fallen away.  I don't want your lunches, dinners, football tickets, golf outings.  Direct all of those costs and all of that effort to adding more value to my shareholders.

4.  Look to the long-term of our relationship.

As to our "partnership," 

1.  In the time-honored tradition of consultants everywhere, I'm going to employ the classic four-box matrix of low to high on two factors.  In my case, one axis is "Client Orientation" and the other is "Legal Results."  If you are good on both, the world is your oyster.  If you are bad on both, I hope your other clients appreciate you because we've moved on to another law firm.  If you are great on results, but your orientation stinks, or if you are great on orientation, but you aren't performing, trust me:  we are looking around and our relationship is on thin ice.

2.  What does that mean for you?  

a.  There's some overlap but I've given you a handout [Note: how quaint!  Powerpoint existed, but I hated it even then.]  I have categorized the "to dos" by People, Processes, and Technology [Note:  I have a lot of material here, but I do like a lot of it.  There's a sheet giving examples of characteristics of superior performance and client orientation in each of the three categories.  Here are some of my favorites.  Under People-Performance, "Not afraid to express a business view; Doesn't lose sight of the distinction between advocate and counselor, and switches roles effortlessly, seamlessly, and clearly; Is willing to make decisions and take calculated risks with the concurrence of the client."  Under People-Client orientation, "Answers own phone, returns calls promptly, uses voice mail appropriately; Speaks the language and understands the concepts of modern business (lean enterprise, Six Sigma quality, etc.); Delights the client with unexpected expertise, client sensitivity, self-confidence, unfailing honesty and directness, and panache.]

b.  I will focus on my particular bugaboo, which is our ability to forecast.  

(i) We are financially-driven organizations.  Love it or hate it, we are measured by the earnings we report on a quarter-by-quarter basis.  After Sarbanes and the Enron-WorldCom debacles, it's clear that the world isn't as tied as it once was to making one's numbers to the penny, but there's still a substantial tension between what a company reports and what the securities analysts expected.  We are a multi-billion dollar company with over 4,500 employees.  Notwithstanding that apparent size, I repeat over and over again that the math is easy - every [high six figure number in dollars] equals a penny a share in reported earnings.  So what we pay your firm every year is a significant percentage of our earnings.

(ii) I understand there are problems that it is going to cost money to solve.  I also understand that we (and you) don't control all the timing of all the problems all the time.  But generally speaking, we can deal with it if we can predict it, and the longer lead time of prediction, the better off we are.

(iii) Hence, we DEMAND as a condition of your retention that you enthusiastically and accurately participate in our quarterly reforecasting process.  I have just completed my run through our anticipated 2005 budget.  For outside counsel, we itemize matters line by line.  We don't put in a lot of slush for contingencies.  But we know the budget will be obsolete shortly after the beginning of the year.  Hence, every three months we review every item and ask you for your best estimate of the costs expected for the remainder of the year.

(iv) There are implications of this budgeting and reforecasting process.

(A)  It's not a second chance for you to recoup a forecasting mistake.  It's our process for recalibrating on account of uncertainty and contingency.

(B)  Lags in your system being doing the work and billing for the work can cause me no end of grief, particularly if the amounts are big.  I'm not promising you we'll pay you any sooner because your lawyers are timely in submitting their time sheets (I mean on a daily basis!) or you get your bills out on time.  But I want to be able to call you on any given day and know to the penny how much work has been done through the preceding day.  

(C)  In other words, garbage in, garbage out.  Your senior partners are going to love the fact that what I'm saying is that it's a condition of working on our business that you submit your time EVERY DAY into a system that is capable of telling me EVERY DAY what costs you've incurred on our behalf.

* * *

At this point my notes, the last two pages of which are scrawled on the back of Yahoo Maps directions from Midway Airport to 230 N. Michigan Avenue, end abruptly.  No doubt the talk did as well.

Posted by Jeff Lipshaw on July 8, 2014 at 05:53 PM | Permalink

Comments

Jeff, was it good advice to tell them to cut out the client-relations lunches and golf outings? The literature on complex service delivery tells us these kinds of things, although they look wasteful, also help to develop the trust that relational contracts often require. You didn't need to build relationships because you already knew the principals at the firm well. But what about the deputy GC who you hired and who replaced you?

Posted by: BDG | Jul 9, 2014 3:47:30 PM

Brian, as somebody who believed that relationships were at the core of complex service delivery, I can tell you pretty categorically that the lunches and football games don't really build working trust as to the delivery of those complex services, at least not in my experience. Relationships build trust. Going through fire (or at least a trial or an acquisition) with somebody builds trust. Getting a result builds trust. Giving wise advice builds trust.

As to the literature, I'd have to see it. That a wasteful thing that happens to put you in close contact with somebody could "help" develop trust seems like stating the obvious. Also seems like it could create an agency cost or out and out corruption, but we also looked to our people to have good judgment.

Having said that, did I let one of our firms treat us to the luxury box at a Colts game? Sure. As long as it was the entire staff invited (including paralegals and admins), but in that case it was a firm whose principals had earned our trust many times by way of performance.

BTW, the BEST perk not directly related to a pending matter that a firm could provide us, because we were in a mandatory CLE state, were programs that our in-house lawyers could use to satisfy their requirements on things that actually helped them. I'll put in a plug for Baker & McKenzie. A couple times a year it held a General Counsel Symposium in Chicago. Perhaps twenty of us - all chief legal officers - would sit around a table and discuss problems of mutual interest. (I met Christine Lagarde at one of those.) We had several concerning Sarbanes-Oxley, and in particular the internal controls audits under Section 404. Jack Coffee was the lunch speaker at one of them. And I got to submit for however many hours I was permitted for the Indiana Bar.

But lunch? Maybe I'm just not a lunch person. When somebody would insist they wanted to take me out, I'd have them meet me at the Starbucks in Broad Ripple at 7:30 in the morning.

Posted by: Jeff Lipshaw | Jul 9, 2014 4:47:45 PM

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