The GC Powerlist Summer Reception in association with Eversheds Sutherland | Autumn 2018
Nailing the issue of what makes a high-performing in-house function, with the emphasis on operational sophistication, has become the Holy Grail for general counsel. Following the launch earlier this year of the 2018 GC Powerlist – which highlighted 50 leading in-house teams – we teamed up with headline sponsor Eversheds Sutherland to assemble an audience of more than 70 in-house counsel at The Ned for an informal discussion between our panel of senior lawyers and operations staff working at some of the biggest multinationals. The debate covered the introduction of legal operations specialists, the advance of technology and widening the skills of in-house functions, all geared towards creating more effective and nimble teams.
Alex Novarese: What impact has the operations community had in refining, upgrading or rebooting legal teams?
Alison Gaskins, Barclays: The big focus is to take control of our cost base and what we can do to drive that down in supporting the business and its own cost-management agenda. Historically, it was an area that the bank did not feel comfortable to challenge, and lawyers were frequently in pursuit of the perfect product and not the most efficient outcome. So in the first 18 months we put systems into place that would give us the data to find out where we are spending the money, so we can change what we do. We have had great results.
Michael Shaw, The Royal Bank of Scotland: One of the things we have been able to do is have metrics and processes to show what we are doing to the CFO or CEO. That has led to great professionalism in the way lawyers go about delivering. It definitely makes us better at producing the right goods for our organisations, which is how we will be measured. That is our value.
Alex Novarese: AI is a term that induces a mix of interest, fear, boredom and excitement. Where on that spectrum are you?
Klaas Evelein, Unilever: At the beginning of 2017 we thought: ‘We need to be there. We need AI.’ 2017 was the year of frustration because, in the end, nothing really happened. I spoke with a lot of law firms and they have big teams looking at technology – sometimes 40 or 50 people in Belfast or Manchester – and my team is me, myself and I. We needed to look outside; we cannot develop it ourselves. Sometimes we cannot be at the front. The moment you see something – we then step up.
Alison Gaskins: There are so many vendors and so much consolidation in the marketplace before we know where to place our bets. We do not have endless pools of money, so putting our money or our investment against a solution that will satisfy the need of 50 people in a 700-person department does not do it for us. We are looking for those one or two solutions that will have material impact across the function.
Alex Novarese: Which single initiative has had the most positive impact in making you more efficient?
Peter Farrell, BBC: Technology has not had a massive impact in our business; it is the way our people have developed and the amount of training that we put into our people and how they are now much more multidisciplined. They are serving all sorts of different parts of the business. Our competitors are changing and have changed significantly over the last ten years, so the legal skills you need to compete in terms of where the market is are changing so fast.
Ian Gray, Eversheds Sutherland: I agree on that people point. There are 140,000 qualified lawyers in the UK, and 30,000 are in-house. That has been a massive shift. One of the things that we are hearing more about is the demand for those people to see a clear career path. Previously, it was easier for people to plot their way. Now, the challenge for some of the very big teams is to identify structures that allow people to develop. As technology then comes into the in-house world that is going to create some interesting pressures as in-house teams are going to have to restructure and look at the seniority of some of their people for what is being delivered.
Klaas Evelein: We tried to have a better overview of our external spend, also just to show our colleagues – and our finance colleagues especially – what we are earning. We started by rolling out Legal Tracker from Thomson Reuters, which is a very nice, user-friendly tool. The challenge within Unilever is that two-thirds of our legal function is everywhere, so it is always difficult to roll something out globally. That tool really helped us to show what we can do.
Michael Shaw: We are implementing a system right now that gives us instantaneous information on both internal and external spend. You can drill down to an extraordinary degree. I was playing with it the other day and I could not believe it. I am not the most numbers-driven person, although I have got a hell of lot more that way in the last few years, and I was getting excited, I have to admit.
Alex Novarese: I can sense law firms getting nervous across the City. A lot of what we are talking about involves behaviour change. Is the cliché that lawyers are resistant to change true?
Alison Gaskins: I can say they are, without a shadow of a doubt, the most change-averse, risk-averse and procrastinating population I have ever worked with but they are also, very often, the smartest people in the room. If you want to get a lawyer to do something they do not want to do, you need to be at the top of your game to get them to do it.
Klaas Evelein: At Unilever, we always use the words ‘end-user input’. For every new IT project, we start by asking who our end-users are going to be. In every cluster and every region, we have people who say: ‘You are going to be our end-user and you are giving your input at the outset. If we are going to develop something, you are the people who are going to use it.’ In the end, you bring them along the whole journey. If you forget them, they think that the people in London are just arrogant.
Peter Farrell: I can understand how a business gets frustrated because lawyers do not like making decisions. They like having a good debate. When we go and meet a client that wants to do something that has a 95% chance of success, the lawyers are looking at the 5% that could go down wrong. Clients think: ‘The lawyer is being a real arse here because they cannot see the benefits.’ You have to get the lawyers thinking about that 95% benefit the business is trying to achieve.
I am going to go slightly leftfield here. It has occurred to me that everyone on the panel is saying that they are making great savings, but why are all the law firm profits doing so well? They do not seem to go down and they are still working on the billing-by-the-hour models.
Alison Gaskins: I would take issue with that because the best type of pricing arrangement is one that incentivises the firm to be efficient. We are very supportive of [law firms] being profitable. Profitable law firms attract the best lawyers but there is nothing to say that they cannot be efficient in being profitable. It is about something that is beneficial to both, but the hourly rate does not feature in that combination at all.
Alex Novarese: How far do you think Barclays has weaned its advisers off the hourly rate?
Alison Gaskins: We have a number of law firms that did not necessarily meet all of the expectations we had and, therefore, any work we do with them going forward will never be on an hourly rate. For others, it is used only in very select circumstances, and it is quite a headache to get approval to engage a law firm on an hourly rate, so we make it very difficult and uncomfortable for us to use them. We are much more interested in those efficient arrangements, not just an alternative arrangement that is a calculation of hourly rates with a cap and collar applied, because that is not an alternative fee arrangement – it is just a capped rate. When our law firms give us an alternative arrangement, they have to tell us how they calculated it – and they love it, by the way.
Ian Gray: I chaired a panel last week at our partners’ conference in New York, and we had a US-based GC from a technology company of equivalent size to some of the organisations here tonight. He threw me when I was asking him about the procurement of legal services when he said: ‘I really like the billable hour.’ He talked very lucidly and convincingly about transparency and about how his business did not have any other supplier where they could drill down to every six minutes of what that supplier was doing and assess whether it was valuable or not.
He also made the point that the billable hour had been around for a long time and had not been killed off. He said the reason it had not been killed off was maybe because it worked as well for the purchasers as the suppliers.
Frances Coats, The Ardonagh Group: We have started time-recording internally. I agree that you can drill down, because, in my engagements with external firms, one of my red lines is that everyone has to provide the timesheets that back up the invoice, and I do look at them. I wonder whether the answer is not to get rid of the billable hour but to get rid of the billable-hours target. That is where I find fat. You see associates chucking time on because they have an hours target to hit.
Klaas Evelein: That is true. What is interesting in terms of the data from Legal Tracker is you can make those comparisons. For example, you have two M&A deals that are similar and you are working with two different law firms. It is interesting to see how many associates Law Firm A is using and how many Law Firm B is using, and to look at those rates. You can see that Law Firm A is much more efficient than Law Firm B, and you can go to Law Firm B and say: ‘What is happening with you?’ If you do not have any data, you cannot have that discussion.
Alison Gaskins: We do something very similar on our biggest matters, where we plan that for a quarter in advance. We will sit down, look at the hours intended, who they are with and what the rate is for that individual lawyer, and have that negotiation, so that, when the invoice comes in, there is no surprise because we agreed a quarter ago what that work was going to look like, who was going to staff it and to what level. However, you are absolutely right the biggest blocker to unlocking this whole piece is the funding mechanisms and the economic model of the law firm. As long as that is predicated on utilisation and rates, we are working against a different force.
Alex Novarese: Is the answer much more efficient benchmarking between clients?
Alison Gaskins: I do not know that it is. Benchmarking across law firms is useful to a point, but the reason you have different firms is because they all bring something different to the table. I just do not think it is that one size fits all, but it is about thinking, at a more strategic level, about what we are all trying to achieve and what efficiency looks like for all of us.
Alex Novarese: What do you think will be the biggest single driver of change in blue-chip legal teams over the next five to ten years?
Alison Gaskins: The products and services our business offers are unrecognisable from five years ago, and that is going to happen again and again. You have fintechs now operating in the banking space and open banking – and even algo-trading in the investment bank – it is completely changing the face of banking. As long as the bank itself keeps having to reinvent itself, our lawyers will have to do the same.
Michael Shaw: What will the legal function look like in five or ten years? Will we even have a legal function per se? My prognosis is that it will not look like it does today. All the things that people have been describing are definitely going to come to fruition but our lawyers will not just be lawyers anymore. They will be risk professionals or other things, and a lot more tech savvy than they are today.
Klaas Evelein: They will have knowledge of product management and change management. There is an article on the ‘T shaped lawyer’, so you can see the skills are definitely changing. They also need to be more dynamic. You cannot say: ‘This is my role and this is what I am doing for the coming years.’ It will be much more about having to have general skills and being more flexible.
Peter Farrell: One of the things that lawyers are going to have to be better at is managing projects. Amazon is competing with most of our industries in this room. It is into retail, pharmaceuticals, television and books – it is into selling anything. Ultimately, all our businesses are into selling things. I would not be surprised if there was an Amazon Bank soon. We have to be able to adapt to that environment, where a company can sell anything; therefore, a lawyer has to be able to adapt and live in a company that can sell anything.
Angelique de Lafontaine, Bupa: What good initiatives have you seen to help your lawyers develop to become more agile and open-minded to learning new skills?
Michael Shaw: In individual teams, we have always had the problem that people only knew what they knew in their area and, when you were talking about succession and career-planning, it is hard to promote people if you are not growing, as functions were, say, five, six or seven years ago.
By creating greater insight and collaboration across the different teams, you break that. In terms of how you achieve that, we came up with the idea of gig-resourcing. We are all living in a gig economy. Why not just create a noticeboard, effectively, which we have done on SharePoint and other sites, and say to people: ‘Here is a particular project. Here is a particular piece of work. Please just volunteer.’ We can create the environment where volunteering for extra activity is seen as being a good thing, not just for the organisation but also for your own development. That dynamic has grown very well and better than I thought it would.
Alex Novarese: Is that led from the legal team or is that across the entire business?
Michael Shaw: No, we started it and other areas are going: ‘Blimey, the lawyers have stolen a march on us. How awful is that?’
Alex Novarese: The thin end of the wedge. Thank you for your time.
- Klaas Evelein, general counsel, Unilever
- Peter Farrell, head of legal, BBC
- Alison Gaskins, chief of staff to group general counsel, Barclays
- Michael Shaw, general counsel, The Royal Bank of Scotland
- Ian Gray, chair (Europe), Eversheds Sutherland
- Alex Novarese, editor-in-chief, The In-House Lawyer