In-house ACCess : In-house ACCess: Association of Corporate Counsel : ACC : The In-house Counsel Bar Association

ACC’s 2011 Chief Legal Officer Survey was unveiled at this year’s Annual Meeting in Denver. The annual survey and the resulting AM CLO session offered important insights for in-house counsel. I can’t tell you, though, that I was surprised by the results or discussions that followed. They included:

• CLOs are concerned with regulatory issues that put them on the front line for potential liability, but are more concerned with protecting the company by knowing all activities that could have legal implications;
• While they are typically happy with their chosen profession, they are affected by having to do more with less; and
• They want to see the value in their outside counsel relationships and improve communication there, as well as within their own legal departments.

These issues are at the core of what in-house counsel grapple with on a day-to-day basis. The findings of the survey make perfect sense to me, and here’s why:  

The increasingly important ­and changing role of the CLO

As in-housel counsel, one of our main goals (if not the goal) is to protect the company we work for from harm. Risk management is a crucial part of our day-to-day activities, and CLOs are on the front line — expected to offer solutions as problems arise, and ensure solutions are easily accessible and compliant with ever-changing regulations and laws. We can also be held personally responsible when something goes legally amiss. There was a time when the attorneys in the company didn’t have to worry about being prosecuted for the “crimes” of their employer. All you have to do is turn on the television to know those days are over.  As I said during our CLO panel at the Annual Meeting, general counsel are considered key players in government investigations, and are therefore prime targets. While not programmed to shrink from a challenge, almost a third (31 percent) of the respondents said that this increased scrutiny is actually affecting their next career move.

Up to the challenge and satisfied

Yes, CLOs are expected to do more with less, while under more scrutiny from the SEC than ever. And yes, these facts can be challenging, but in-house counsel are entrusted with finding solutions. In fact, we thrive in this role. The survey shows that 92 percent of CLOs generally like their jobs. Well, I didn’t need a survey to tell me that, having met and reconnected with many of you in October at the ACC Annual Meeting. I overwhelmingly heard your testimonials that you are engaged and enjoy what you do..  

The economy and staffing

The survey found that fewer CLOs are feeling the effects of the economic downturn (54 percent) in 2010 than in 2009, when 74 percent reported the same. Those who are feeling this crunch are decreasing staff and increasing their work for outside firms at a higher percentage than in 2009. However, despite a challenging economy, many CLOs are planning to increase staff. According to the survey, 37 percent plan to bring on new hires in the coming year. While some organizations and firms, for that matter, are cutting staff, in-house counsel are adding to their own. This, of course, has something to do with the increasing responsibility of the legal department: Three-quarters of your departments have experienced an increased workload.

Fee structures and working with outside counsel

Working with outside counsel, and getting value from those relationships, is always a key concern for CLOs. Most CLOs are currently using hourly-based fees, and 45 percent of them experienced an “increase in hourly rates charged in 2010.” However, a growing number of CLOs (63 percent, according to the survey) have implemented a form of value-based fee arrangements, with 77 percent seeing an “increase in value of work performed by outside counsel.” This is encouraging news, but there is always room for improvement, as 59 percent of those surveyed would like to see more focus on improving matter and budget management. Again, it all comes back to value.

I could go on and on about other tidbits from the survey of ACC members. For example, CLOs in the United States have increased by 5 percent in the past three years, but the growth of those located in other countries has increased by 20 percent. Similarly, ACC’s international reach as an organization is growing, as is the presence of the international in-house counsel and law department. Please view the entire CLO survey, as well as those from previous years, at www.acc.com/community/clo/surveys.cfm.

You’ve made it clear that CLOs want to add value to their organizations and legal departments by managing the risks and supporting the business objectives. CLOs are seeking value from the outside counsel they employ. And they are seeking personal value in their career choices.  

It’s all about value.

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by Martine Turcotte, CLO of BCE, and Zygmunt Jablonski, CLO of Domtar

Click here to download the French Translation (pdf) of this post.

As general counsel for two different kinds of clients, there are many things that distinguish our respective roles. One of us has a large department, one has a smaller department. One of us works in a company that is in the tech and communications space, and one of us works for a company that is resource and product-oriented. One of our clients has a strong focus on domestic work in Canada, and one is a Montreal-based Delaware company with a North American manufacturing base and a global customer network. 

But in terms of our roles as general counsel, what distinguishes us is not as significant as what we have in common — namely, that we have many varied responsibilities that require us to juggle a number of roles and constituencies every day. We solve legal problems, manage risk, coordinate brands, monitor public and governmental affairs, fulfill corporate secretariat roles — you name it, we are responsible for it. 

Today’s general counsel – regardless of the company in which he or she works – is pulled in any number of directions by the sometimes competing demands of management executives, stakeholders, board members, employees, adversaries and competitors.   We have a great deal of work that requires our immediate attention, but at the same time need to focus on long-term strategic needs for our law department and our companies. So, who has our back? Our great department team members, our management, and of course, our personal support network of friends and family outside the office.

Who is missing from that list? While we are both fortunate to work with extremely talented outside counsel, many of whom we cherish for their skills and friendship, there are still not enough firms out there who think of themselves as truly part of our teams and who “have our back” at all times. 

Many Canadian firms do not seem to understand that the general counsel’s agenda and service expectations are changing — far too many of the firms upon which we have traditionally relied are too slow to work with us using new value-based techniques such as innovative pricing, staffing, knowledge, and process-based solutions that our businesses and complex legal problems require. There are some really notable exceptions, but they are exceptions, rather than the rule.

At a recent ACC CLO ThinkTank meeting (hosted by Zyg at Domtar Corporation HQ in Quebec, sponsored by Ogilvy Renault and attended by Martine (Martine is also a member of the ACC Board of Directors), a number of Montreal’s top CLOs met to discuss law firm/client value issues: what’s working and what’s not.  

We were struck by the common experiences of every general counsel in the room. There was a strong sense of disappointment over resistance from many of Canada’s top firms when we asked them for a new approach our legal work and legal spend that will drive efficiency, and not just hours. There was also dissatisfaction with the firms’ lack of focus on process and project management skills. For the most part, we are still not seeing law firms truly align themselves with us in terms of profiting from our outcomes in a manner that is commensurate with the value of the services they provide to us.

Coming out of that ACC CLO ThinkTank, we wanted to pen this blog to help Canadian CLOs and GCs start the conversation between in-house leaders and Canadian law firms. It is important to remember that there are two sides to the story here — we both need to do better at having the “value” conversation. As in-house counsel, we need to be clear in defining what value means to each of us, and to reward firms that provide it; and firms need to improve and adjust, or reinvent their service models to accommodate the “new normal” of efficiencies and work based on results, not hours.

In concert with the ACC Value Challenge initiative, we aim to drive the conversation to get each side, clients and firms in Canada and elsewhere, focused on how we can do better, together. 

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Throughout 2010, ACC continued to take the pulse of the legal industry through its annual surveys. From the changing role of the CLO, to the evolving relationship with outside counsel, including the increased use of alternative billing arrangements, our surveys provided data to our members so they could have reliable benchmarks for their own law department management practices and insights into new legal and business trends.  Our surveys shared some themes in terms of takeaways for 2011 – a desire for an increase in value and efficiency in legal work predominated and practical methods for achieving such efficiencies emerged.

With fickle consumer confidence and a sluggish economic recovery this past year, CLOs actually showed signs of optimism indicating increased job satisfaction and plans to hire internally, according to the 10th Annual Chief Legal Officers Survey released in March. Results showed a sharper focus on reducing costs, increasing value and responding to regulatory scrutiny. Specifically:

·91% of CLOs reported that despite expanding duties, they were still satisfied with their chosen career. This is a positive data point indicating that external economic conditions did not heavily impact job satisfaction. One could surmise that internal structures, processes and rapport with management strengthened relationships and solidified job satisfaction and will play a key role in continued career fulfillment in the year ahead.

·29% (more than a quarter) of the respondents planned to hire staff for their in-house legal departments in 2010.  Despite the recession, this was up from the 23% with hiring plans in the previous year’s survey. The uptick in staffing and augmented workload will require an increased focus on efficiency in the coming year as CLOs manage their law departments, budgets and C-suite relations.

·79% of CLO respondents want to increase the percentage of outside counsel spending based on alternative fee arrangements. As CLOs face a myriad of intricate and new challenges, they are turning to business-oriented solutions. Initiatives such as the ACC Value Challenge will play an integral role in 2011 as in-house counsel seek more creative, value-based billing arrangements with outside counsel.

Another important set of benchmarks emerged in October with the release of the 10^th Annual ACC/Serengeti Managing Outside Counsel Survey. For a decade, this survey has assessed key elements of the in-house counsel/outside counsel relationship. This year’s results revealed that in-house counsel are seeking more business-oriented management techniques and more value-based fees from their firms to drive efficiency in legal costs and reduce overall legal spend.

·65% of respondents now require project budgets; 60% require risks/potential resolution strategies. Compared to a decade ago, in-house counsel now require measurable data, metrics, targets, project management tools and rigorous cost-controls to implement getting maximum value from their outside firms. This will continue to be a priority in the year ahead.

·Company resistance to alternative fees has declined by 16%; firms’ resistance to alternative fees has declined 69%. Over the past ten years, results show that law firms are “getting it,” as they are offering alternative fees more often (up 6%). In light of these results – and those from other surveys – we believe the move to alternative billing will continue to increase in 2011, even if the economy strengthens.

·28% sought input from their law firms when evaluating technologies for collaboration. The most common technologies for which law firms provided input were matter management and e-billing systems. Law firms should heed these results and offer clients useful business solutions in 2011.

A third survey in November, the ACC/The American Lawyer Alternative Billing Survey, also showed an increase in the use of alternative fee arrangements in 2010. While still a small percentage of total outside counsel spend, the increase in the number of “value-based” fees demonstrated the determination of law department managers to continue to increase the use of alternative pricing and valuation methods, even as the economy recovers.

·29% of in-house counsel reported an increase in the use of alternative fees in 2010 and 53% of General Counsel said they used flat fee billing for an entire matter. We were interested to see if in-house counsel would continue to experiment with new fee structures once the markets began to rebound and budgets were not under the same level of stress in 2010.  The fact that billing practices did not revert back demonstrated that in-house counsel were continuing the march to drive costs and value away from measuring hours alone. The needle will likely continue to lean toward alternative fees in 2011. 

·52% of GCs indicated that their value-based or alternative fee arrangements were initiated primarily by the law department, not by law firms. With increased pressure to demonstrate value and stand out from competitors, law firms will need to be more proactive, become trusted business advisors to their clients and focus on value in their relationships with outside counsel in 2011. 

·24% of survey respondents not using alternative fee arrangements in 2010, plan to try to implement them in 2011. These results show that the push for value-based fee arrangements is not a fad that will go away. These practices are now not only more acceptable, but becoming more firmly ingrained as an offering at major firms. As value-based billing options become institutionalized, we predict they will increase steadily not just this year, but year over year.

For both law departments and law firms, there is a lot to chew on in these trends and benchmarks as we ready ourselves for a new year with new challenges and we hope, new solutions. We will continue to tap into ACC’s in-house counsel community for feedback and insight to help us prepare for what is yet to come. As Albert Einstein proffered, “Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.”

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(ACC Docket — July/August)

I grew up a military brat and spent the majority of my life on U.S. Army bases. Uniforms, crew cuts and polished boots were a way of life. My dad’s boots were so shiny that you could see your reflection: To this day, I am still not sure how he performed helicopter maintenance while keeping his combat boots pristine.

An even lesser-known fact about me is that I like to watch war movies. While these movies are not my first pick (I prefer comedy or romance), if the plot is good or based on a true story, I am in. And, if the soldier falls in love — well that’s just blending two great stories.

I am fascinated with the human element of the military. What turns ordinary men and women into leaders? Other than rank and order, what qualities inspire a solider to follow a leader into the trenches during wartime? I often translate military behavior into civilian life: Am I the kind of leader who inspires foxhole followers? Can I spot a potential leader and mentor her so she can rise through the ranks? Am I creating foxhole-worthy leaders?

Identifying leaders is not an easy task. Common traits exist, but execution styles vary. Success is often open to interpretation. But one thing is consistent: one generation paves the way for the next. So, it is our responsibility to seek and develop the next generation of leaders.

This month’s cover story, “Developing Great Minority Lawyers for the Next Generation” offers diversity solutions. If you want to lead the conversation, this is an article to share because it offers solutions and tactics for corporations and firms. The next generation of lawyers and the leaders who rise to the top don’t appear spontaneously. You have to take the time to mentor them.

But even the best leaders and military officials face the reality of a finite career. “In-house Counsel’s Guide to Litigating Age Discrimination Discharge Cases” reminds us that no matter our place on the corporate ladder, we age. In our transition from mentee to mentor, we do not want to be professionally cast aside simply because of the date on our birth certificate. Learn how your company can avoid this. And if it’s too late, find tips to litigate as both plaintiff and defendant.

No matter how you slice it, lawyers are simply mortal men and women trying to accomplish their company’s mission. What kind of leadership qualities do you look for in a potential boss? Are you exhibiting those qualities in front of your staff? For those interested in the CLO career path, ACC’s CLO Community is a good place to start your research and find advice from experienced leaders. For the rest of you, remember the military trench mentality: Are you foxhole worthy?

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I am privileged to travel and meet with CLOs around the world.  I recently
participated in a wide-ranging discussion in Canada.  Some observations:

1.  CLOs just about everywhere (Europe, Canada, Australia, China and the U.S.)
face many of the same issues no matter where they are located.  How they
respond varies depending on their country’s view of in-house counsel as a profession, their seniority in the corporate hierarchy and their own corporate culture.

2.  Internal investigations raise many issues: how do you keep a balance
between due diligence and going overboard? At what stage do you decide you
cannot do it internally and need to go outside for help?  One common thread appears to be that if you potentially have a reportable offense, then you should employ outside counsel.

3.  Along those lines, whistleblowing presents cultural challenges.  For example, anonymous hotlines may work in the U.S. but they remain anathema in parts of Europe because of the connotation with repressive regimes.

4.  Law department structure and reporting lines always present food for
thought: Is centralized vs. decentralized preferable?; Do you embed attorneys within a division or unit but also have them reporting to the CLO?

5.  To what budget do you allocate legal expense? Are outside counsel
expenses charged to the legal or the business unit?  What about legal
salaries and G&A?

6.  CLOs recognize there are many alternatives available to address key issues.
Ultimately, you have to do what works best for your company and its culture.

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I'm sitting here in a meeting room set for 150 in the Seattle Convention Center at the ACC Annual Meeting praying that the fire marshall doesn't come to Room 612.  There are so many people in this room - standing in rows lined up against  the walls, in lines sitting on the floor in the aisles (in full business regalia), every single seat taken - heck, the moderator took his chair off the podium to offer it to a registrant since he's getting all the exercise he needs just passing the microphone around.   There are easily 300 people in this room.  Inside and outside counsel.

Why are they here, and why is everybody having such a good time? 

They're here for the ACC Value Challenge program to talk about the prison we're all locked in and how each of us has a piece of the key that would allow us to break out.   We are talking (r)evolution: how to free ourselves of billable hours business model, and re-discover what it was that we all wanted to do for a living when we went to law school.  How to collaborate, rather than argue over bills.  How to align what it is that we do with what it is that clients want to purchase.  There are CLOs of Fortune 50's, managing partners of AmLaw 200's and legal products vendors in this room laughing and talking about the future and how they can prepare to meet its challenge: it's value challenge, that is.  There are folks talking about how to completely re-invent and re-align what it is that we do, and they're so excited to get started, that the energy is palpable.  I wish you were here ...  if you aren't, I'm going to make it my personal mission to find ways to bring you the solutions, the passion, and the intellect that's flowing in this room.   You ready?  The (r)evolution has begun. 

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