‘Everything changes. Nothing remains without change’
– Shakyamuni Buddha
The legal profession that Professor Richard Susskind OBE has been observing since 1981 is ‘on the brink of fundamental change’. He predicts that the practice of commercial law in particular, will be almost unrecognisable in 15 years from what it is today. Inevitably, in-house counsel teams are not immune. But with change comes opportunity and, according to Susskind, the importance of the in-house counsel role in the future will be very much self-driven and self-determined. In the following extract from his new book, Tomorrow’s Lawyers, chapter 7 ‘The shifting role of in-house lawyers’ – published by Oxford University Press, exclusive to ASIAN-MENA COUNSEL – Susskind illustrates how in-house counsel need to change their way of working and provides examples as to how they can adapt and profit from this shifting landscape.
 Legal risk management Most General Counsel (GCs) tell me that their principal job should be that of managing risk; that ‘legal risk management’ should be the core competence and service of in-house lawyers. They often contrast this with what they actually do, which is fight fires. In-house lawyers are faced, on a daily basis, with a barrage of requests, problems, and questions from across their organisations. And they usually feel they have to respond helpfully. In reality, while some of these inquiries merit serious legal attention, others assuredly do not. The hope of most GCs is that they can organise themselves to become more selective; that they can move from being excessively reactive to being proactive. In other words, their job should be to anticipate problems before they arise. The focus should be on avoiding disputes rather than resolving them. Legal risk can be managed in many ways, but the emphasis is usually on preventing non-lawyers in businesses from inadvertently exposing their organisations to some kind of liability (such as might flow from a breach of some regulation or of an agreement). This control of risk can be achieved, for example, by increasing legal awareness, by introducing protocols or procedures, by using standard documents, or by involving lawyers more directly in the affairs of organisations. Legal risk management can also involve the conduct of audits, risk reviews, and health checks to assess, for instance, an organisation’s processes for managing regulatory compliance or its preparedness for litigation. There is little question that tomorrow’s in-house lawyers will become increasingly systematic and rigorous in their management of risk and will require sophisticated tools and techniques to help them. Strikingly, very few law firms have yet recognised the commercial opportunities here. Another risk-related trend will be towards the greater sharing of risk between in-house lawyers and law firms. If deals and disputes do not conclude satisfactorily, some General Counsel believe that the law firms involved should suffer some of the down-side, by reducing their fees. With some justification, law firms retort that this should cut both ways, so that the successful conclusion of a legal project should surely then result in an uplift in fees. No doubt, these debates on fees and risk-sharing will intensify in years to come, as economic pressures increase. New ways of allocating risks will evolve, in attempts to incentivise law firms in different ways. One arresting example of this is when in-house lawyers pay law firms bonuses if they help them avoid litigation. Knowledge management The use of standard documents, as said, is a well-established technique for reducing legal risk: non-lawyers and lawyers alike are required to use (and only then with permission) fixed form agreements that have been carefully crafted in anticipation of well known legal problems and pitfalls. Business people can be constrained in their negotiations by imposing the use of agreements with terms and conditions that cannot be altered without sign-off from lawyers. The actual preparation of these standard documents belongs to the world of legal knowledge management. This is the process of capturing, nurturing, and sharing the collective know-how and expertise of a group of lawyers. The motive here is to avoid duplication of effort and to build an institutional memory that is superior to the recall of any individuals, no matter how talented. Knowledge management is one of the central jobs of professional support lawyers, a key group of legal specialists who work in major law firms, especially in the UK. Significantly, in-house legal departments rarely employ knowledge managers and professional support lawyers. There is a paradox and inconsistency here. It would clearly be in the interests of in-house lawyers to secure the efficiencies that knowledge management would bring. By contrast, for law firms that charge by the hour, the incentive to become more efficient through knowledge recycling is less than immediately obvious. Why, then, do in-house lawyers generally hold back from recruiting knowledge managers whereas major law firms have invested heavily? For in-house lawyers, the deterrent seems to be the expense of employing professional support lawyers – it is difficult, I am told, to make the business case to Chief Finance Officers for employing lawyers who do not advise directly on disputes or deals. As for law firms, they know that their clients (in the UK if less so in the US and Canada) expect their external advisers to have substantial bodies of templates and precedents; and knowledge managers are the people who specialise in maintaining this kind of know-how. In summary, most in-house lawyers like the idea of knowledge management but would prefer law firms to pay for it. This will change. Before long, in-house lawyers will recognise and be able to quantify the benefits that professional support lawyers can bring and will manage to convince their boards that it makes sense to invest in people who will bring savings through IT-enabled legal knowledge sharing (within legal departments and between organisations too). Expecting more from law firms The more-for-less challenge The collaborative spirit |
 The power and responsibility of in-house lawyers I often find, somewhat surprisingly, that in-house lawyers betray a lack of self-confidence when contemplating the future. Frequently they ask me if I expect law firms to revert to their old ways of working when the economy picks up. I invariably respond that it is almost entirely up to them, as the customers, to shape the answer to that query. If in-house lawyers do not want reinstatement of bad past habits, they must send that message very clearly to their external advisers. They can be assured that, in the current buyers’ market, such a message cannot be ignored. Most in-house lawyers will concede, in principle, that change is necessary and that they should run a tighter ship and drive a harder bargain with their suppliers, but most also claim that they do not seem to have the time, energy, or competence to introduce efficiency or collaboration solutions. When I probe more deeply, it transpires that many GCs would prefer off–the-shelf answers developed by law firms. However, and this is something of a vicious circle, there is, as noted, little incentive for law firms themselves to support either the efficiency or the collaboration strategies. Why should law firms destabilise their current businesses with potentially disruptive innovations when clients often seem indifferent and competitors themselves are inactive? In-house lawyers must also remember that they are likely themselves to come under the microscope within their own organisations. It will not be plausible for them simply to complain ad infinitum about law firms’ unwillingness to change. As it becomes widely known, for instance, that it is possible to source legal work in different ways, Chief Executives, Chief Finance Officers, and Boards will inevitably ask their General Counsel whether their departments are adapting and exploiting the opportunities afforded by these new ways of working. To help focus in-house lawyers’ minds, I express this likely demand in terms of what I call the ‘shareholder test’: when a costed proposal for the conduct of a deal or dispute is being considered, would a commercially astute shareholder, who was familiar with the growing number of alternative ways of sourcing legal work, consider what is contemplated as representing value for money? If in-house lawyers allow law firms to return to pre-recession billing and working practices, they will plainly fail the shareholder test. Soon in-house lawyers will have little choice but to overhaul their departments and working practices: the more-for-less pressure will build to an almost intolerable level and they will have to re-calibrate if not re-engineer the way they work internally and how they source external legal services. In-house lawyers will flourish only if they can add relevant value that cannot be delivered by competing sources of legal service. The genuinely expert and trusted in-house legal adviser, who lives and breathes the business, should always be an invaluable resource, but unless General Counsel are also prepared to drive the efficiency and collaboration strategies within their own departments and across law firms as well as other providers that serve them, then their future is far from clear. I advise in-house lawyers not to wait until their platform is burning. Now is the time to prepare for the challenge. They should remember (although many do not seem fully to grasp this) that they have immense purchasing power. Today and for many years to come, for major clients especially, it is likely to be a buyers’ market. I struggle to understand why General Counsel have not driven external law firms much harder. The world’s leading 100 law firms are sustained very largely by the world’s top 1,000 businesses. If and when General Counsel become radically more demanding, they will have it within their power to urge a re-shaping of this top echelon of firms and, in turn, redefine the entire legal marketplace. Tomorrow’s Lawyers by Richard Susskind is available to buy on Amazon: |
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