Law Firm Partnering - A Personal Perspective

Tuesday, May 1, 2007 - 01:00

Prelude

Partnering relationships are long term and based on trust. However, in practice they rarely develop from an existing law firm connection. Partnering arrangements usually develop from a desire to create a new relationship for such reasons as reducing the number of law firms used; greater geographical coverage; better quality; greater collaboration and knowledge sharing and most frequently reducing cost. The cost equation can be express or implied but it is always an essential component especially when the procurement department is involved. Whatever the motivation, partnering relationships are generally preceded by an RFP and a beauty parade. In some cases they begin with an RFD - a Request for Discussion - when the company seeks ideas for its project from a number of law firms, before issuing the RFP.

In practice, around 10 firms are sent the RFP and are invited to tender. Some fall by the wayside very quickly. Some firms are simply not interested in the notion of "partnering" with an in-house legal department. The fundamental difference in approach of law firms can be characterised in various ways: traditional and modern; transactional and relationship driven; the client visits us or we visit the client. I liken the difference to the sun and the planets. You either believe that the clients revolve around the firm or the firms revolve around the client. I have heard many GCs report that they have asked some of their longstanding firms to tender on a partnering basis to be told that that is not the way their firm does business. One Managing Partner of a law firm recently said that when dealing with clients, the firm preferred a "separation of powers" between the firm and its clients. To use another analogy, I firmly believe that the client is at the centre of the wheel and it is for the firms to understand and support the business.

The firms submit their responses to the RFP. In reality, their responses look very similar. Most firms promise much the same and differentiation is difficult. Quality is no longer a differentiator - that just gets you to the table. Most marketing professionals can make the firm sound good in a few pages. Based on these presentations, a shortlist of firms is prepared who are invited to attend the beauty parade. Firms fall at this stage for a number of reasons. Often it is because however hard they try, they cannot bend the offering they have into the shape that the client wants, be it legal expertise, geographic coverage or strength in depth. Firms fail because very often they simply do not adequately answer the questions in the RFP. Clients want some consistency of approach with the answers to make some meaningful comparisons. Some firms do not even answer every question in the RFP which can be fatal, especially when the process is being led by procurement. Some responses list everything the firm is famous for whether relevant or not. As a generalisation, in the U.S. there is greater emphasis on individual resumes whereas in the UK, the responses tend to stress the firm and its brand. Also in the UK there tends to be more scoping of the clients' needs in discussion with the client before submitting the tender than in the U.S.

The final list of firms who attend for the beauty parade ranges from 2-6, to meet with the client's team. Often in procurement led pitches there is a negotiation with the final two firms seeking to get a final proposal which combines the best of both offers and the best price. It is difficult for a firm to know the true dynamic because within the client there are competing interests as to what the various members of the legal department want, what procurement wants and what the business clients want and where the balance of power is to be found.

The respective teams from the firms and the client meet to plan their strategies. The big decision for the firm is who to put on the team. Some pitches demand senior representation from the firm and some demand technical experts and some require both. In Europe, the process is more challenging as it's usually necessary to have different countries and languages represented. As a general tip, always rehearse, discuss in depth as a group the key issues that the client is likely to raise, rehearse some more and always work with people from the firm you have worked with before. Taking an associate and not just partners is good. Also agree who is to be the team coach and leader at the pitch. For the client team, they can compare the similarities and differences between the various firms. They decide the issues to raise, plan the difficult questions, probe for weaknesses and ensure that the needs of their business clients are paramount.

The Pitch

The pitch is where the partnering relationship is consummated. For clients, the chemistry with the individuals from the firm is vital. The proposed Client Relationship Partner has a key role. It is vital that the client trusts that person with what in effect is a large piece of their business which they are outsourcing. Will that person work well with the business clients? Do they have a track record of implementing similar projects? Do they have sufficient influence within the firm to mobilise the brightest and best? Will they be skilled trouble shooters and will they get to understand our business?

The reality is that people buy people. How the questions are answered is key. At our pitch to DuPont we were asked what the culture of our firm was. We replied, "friendly and open door." A competitor firm replied, "commercial and aggressive." DuPont preferred our answer. People are the real differentiator between firms.

Props such as PowerPoint are not helpful to winning pitches. They restrict the ability of the team to be flexible and responsive to the issues the clients raise. A discussion is always better than a series of talking heads. Reading the body language is essential. Always return to address a point that a client seemed to view negatively. Don't keep talking when they look at their watch. As an anthropological observation, why is it that the person with the most negative body language sits on the far left?

Usually, the decision is made as soon as all the firms have been seen. Clients often use a scorecard to rate certain aspects of the presentations, e.g. geographic coverage, legal expertise and diversity. However, I once had to wait for over 10 days to hear back from the client as it took them all that time to contact every one of the 14 referees I gave them at the presentation!

Post-Pitch

Often there is a little further discussion around price and then there is a signed Letter of Intent followed by a detailed Memorandum of Understanding. The issues covered are service levels, what is in scope and out of scope work, fees, billing and reporting protocols; discounts; respective client and law firm team contacts; provision of additional services such as training and extranet provision. A public announcement is then made about the appointment and the in-house legal team has the job of convincing all its business clients about the arrangements with the new firm. There is inevitably some resistance from some quarters when the business client discovers that they can no longer use their brother's firm or their buddy at the golf club.

In these early stages, it is important that the in-house legal team, the business clients and the external lawyers meet to establish the relationship. Joint briefings and training are an excellent way of achieving this. Another important component is the annual legal meeting of in-house and external lawyers. I attend a number of these each year. The most successful ones are when senior business clients attend and talk about the company's strategy and their new products. Such talks help the external lawyers understand the business and feel connected with what is going on. At one recent meeting, a business client said that his expectation was that the external lawyers would quickly "look and smell like in-house such that the business client couldn't tell the difference."

The greatest threat to an ongoing partnering relationship is complacency. It is essential to invest in the relationship and to be devoted to continuous improvement of the service. Tyco has regular client feedback via extranet. DuPont have their annual Benchmark Survey recording dollars saved, new initiatives pursued, increased diversity of staffing on their matters and greater use of technology.

Partnering relationships provide great rewards for both parties. For the client, it is easier to manage a few firms than hundreds. A more joined-up service can be delivered to the business client and the compliance function made more simple. There is also the demonstrable benefit of reducing legal costs. For the firm, they can invest in a long term relationship knowing that they will receive a substantial slice of the client's legal work. Partnering relationships are not for everyone but the trends in the legal market are undoubtedly towards greater compliance, reducing legal spend and reducing the number of firms. But as Tom Sager of DuPont once famously said in relation to partnering: "Only optimists need apply!"

Paul Smith is the Client Relationship Partner for DuPont and Tyco at the London office of Eversheds LLP. He is a member of the firm's Board of Directors and Chair of the firm's Regulatory and Compliance Group. Paul also provides consultancy services to in-house legal teams in relation to convergence and partnering programmes.

Please email the author at paulsmith@eversheds.com with questions about this article.