During the 20-year bull market for legal services that ended in 2008, it probably seemed to many lawyers, particularly those in BigLaw accustomed to getting their work from large corporate legal departments, that hiring and managing outside counsel was precisely the job of those departments. Even if circumstances then made it seem so, nothing could be further from the truth, especially now.
A very sharp lawyer with whom we worked when he was in private practice, who's now VP Legal at an energy company, confirmed something you've heard from us over and over again. In a meeting with his primary outside law firms, he explained that his job not buying legal services, but helping his internal clients improve shareholder value. One consequence of that job is the need to buy legal services. But it's not his primary job.
While some of the lawyers present may have smarted a bit at hearing this, the sharp ones realized that he had just done them a huge favor. They were getting a dose of tough love, and the opportunity to recalibrate their firm's and their own compasses to align with this valued client.
Over time, it's easy to get to the point where you see your clients as purchasing agents for your services, in which case the only question is who gets what share of their wallet. This was prevalent during the "law firm golden era" that ended in 2008, during which the clients' view may not have been radically different from your own, simply because they had the luxury of outsourcing tons of work to trusted outside counsel whom they liked and respected. Everybody was making money, and nobody was losing much sleep over the legal budget.
Frequently, we remind lawyers that "It's not about you." That's a basic business development reality.
During the boom, one of my former colleagues wrote, "The GC has clients, too. The GC office works directly within the lines of the organization and the C-suite to help solve their company's business problems." Now, the GC's clients are calling the shots.
Back to my VP Legal friend. In his company, every million dollars spent on outside counsel reduces earnings by a penny per share. That may not sound like much until you read the financial pages and see what happens when companies fall short of analysts' earnings projections by a few cents per share: Share prices drop. Shareholders tend not to be happy with that. As we learned as kids, "If Momma's not happy, nobody's happy." In this case, the shareholders collectively are Momma, which means the CEO and other executives aren't happy, which means the GC isn't happy, which means it will be pretty tough for you to be happy.
So, focus on helping your clients succeed at their real job. Remember this: roughly 90 percent of the legal budget is for mature categories of legal service, which means that there are an almost limitless number of capable firms to choose from, which means that the choice of law firm has little real impact. Recently, corporate clients have been exercising this flexibility with increasing frequency and alacrity.
If you could allocate the business pie any way you wanted, to whom would you direct more of it? Those focused on your success, or on their own?
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