Law firm of the 21st Century: strategies for overcoming the economic crisis

Law firms need to embrace change, participants at a recent Iberian Lawyer forum
heard, to look at their working practices and how they deliver their services

Iberian Lawyer’s annual Law firm of
the 21st Century debate, held this year
in Barcelona, heard lawyers from both
private practice and in-house talk about
the need, perhaps enhanced in the
current economic climate, for law firms
and legal departments to continue to
search out new and innovative ways of
working with and alongside each other.

The Forum was sponsored by IT
solutions and support services provider
Tikit alongside the hosts, ESADE Law
School.

Opening the debate, Ramón Mullerat
OBE, from KPMG in Barcelona,
summarized the new economic order
after Lehman Brothers failure and how
it impacts the legal profession, and
spoke of the need for law firms and
business lawyers to look on the current
economic challenges as an opportunity,
albeit veiled , to reassess and rethink
some traditional or perhaps now even
outdated working practices.

‘To maintain better relationships
with clients we have to become more
open and more transparent and above
all more innovative. In addition law
firms and clients have to be able to
clearly differentiate the difference
between work that may be
commoditised and that which
demonstrates or requires real value
added expertise – through the use of
new technologies this may be
increasingly possible.’

Law firms clearly face new and
different challenges, agreed Fernando
Rey, Managing Partner with Garrigues
in Barcelona. ‘Firms face new client
issues – some no longer exist while
others need greater support – but also
management challenges around billing
and pricing, and the varying demands
placed on different practice areas, which
of course also leads to talent and
retention issues and the need to
maintain the motivation of all our
lawyers.’

Charles Coward at Urí­a Menéndez
agreed. ‘Law firm models are being
challenged. Some traditional
assumptions may no longer apply, while
perhaps what some may have thought
as outdated business models – such as
the need for firms lawyers to have
broader rather than more specialist
expertise – are now back in fashion.’

Alongside the need to focus on
ensuring firms have the right practice
and talent mix, Alvaro í‰cija, comanaging
partner of í‰cija, focused also
on the need for lawyers and law firms to
embrace new ways of working, and
specifically the role technology can play.

His firm, for example, has sought to
package ‘out of the box’ and online
software and legal solutions, intended to
help companies, including those
without dedicated legal expertise,
manage recurring data protection,
management and compliance needs.

‘The ability to reduce costs, on both
the company and law firm side, is
fundamental in the current
environment. We find that many law
firms appreciate a company’s ability to
pre-empt their needs and where
appropriate, help them find ways to
more cost-effectively manage their
technology issues with the necessary
additional support where required’,
adds Carlos Garcí­a-Egocheaga from
TIKIT solutions.

Demonstrating value

Cost was a recurring theme for the many
General Counsel present. With legal
budgets under pressure, in-house legal
departments are inevitably looking – in
some cases they say thay have no choice
– to reduce both their internal and
external legal spend. General Counsel
are not able to hire more lawyers but
they are under pressure to bring greater
control over companies legal work.

‘Legal departments will always face
issues as they are perceived essentially
within companies as a cost centre, and
potentially an expensive one at that.

There is clearly an onus on the lawyers
to demonstrate the value they bring to
the business – by helping to avoid
unnecessary expenses, or recovering
funds – but essentially the day-to-day
focus comes down to reducing the legal
spend,’ says Miguel Griñó, Legal
Director at Grupo Hera.

‘Added value’ may be an over-used
phrase, say some in-house lawyers, but it
is fundamental that law firms are able to
offer a level of service and expertise that
matches their cost. Clients know that in
some instances and for some matters
there will be a high price to pay for deep
expertise, and urgent matters, but
nonetheless are looking for more
financial certainty and more flexibility in
pricing, through the adoption by law
firms of fixed costs, blended rates and
where applicable, discounts.

‘The debate should not focus purely
on issues such as the billable hour. The
intention is not to reduce costs just for
the sake of it, but to be able to
demonstrate that the legal department is
getting value for money,’ said Jochi
Jiménez, General Counsel and
Compliance Officer at Barcelona-based
insurance agency HCC Global.

In order for firms to maintain strong
client links, they have to therefore
demonstrate an understanding
and empathy with them, agreed
Natalia Berenguer Mora, Legal Director
at Danone. ‘A sense of value comes with a law firm
knowing your business, by being proactive and
perhaps even highlighting issues or needs before
you even know you have them.’

A recurring theme was the spending freeze now
placed on many legal departments – but client
demands have clearly not fallen, if anything general
counsel realise there is now a buyers market for
legal services.

‘We are not increasing our budget for external
advisors and at the same time we are facing more
issues, some of them quite complex. But even with
cost and pricing constraints we cannot reduce the
quality of the services we require, their efficiency of
delivery and so the value for money we receive,’
added José Marí­a de Paz, Legal Director at Aguas
de Barcelona (Agbar).

Intangible

Clients also however placed emphasis on those
aspects of law firm service that are not price
sensitive. ‘The main element of any business
relationship, along with quality of service, is the
trust you have in one another, and good
management, which is perhaps especially true in
the legal profession,’ suggested de Paz. ‘But it is
also about communication, while there may be
debates around the best billing or fee method,
ultimately there should be no surprises.’

Mark Willis-Jones, Barcelona based Deputy
General Counsel responsible for international at
Armstrong World Industries, agreed. ‘There should
be a symbiotic relationship between clients and
their external law firm advisers; they are not
opposing sides. With open communication between
them they should be able to develop a work process
which is to their mutual advantage.’

An element of this, some also acknowledged, is a
greater need to balance the risk and rewards
inherent in transactions in order to meet law firm’s
desires to ensure revenue levels and clients
demands to fix costs – for clients to reward firms
when they go ‘the extra mile’ and contribute
significantly to the success of a deal and for law
firms to reward loyal clients.

Talent

A clear issue that also impacts on both private
practice and in-house legal departments is the
continuing demand to ensure that both attract and
retain the best talent. In times of economic stress, and
perhaps increased (or even decreased) work levels,
both need to maintain emphasis on continuing to
attract, motivate and retain the best lawyers.

For some law firm managers, the key remains
attracting the most interesting and challenging
types of work, being
flexible in work patters, while also continuing to open
up genuine development opportunities for junior
lawyers.

‘The question always is how to identify the best
lawyers. For law firms this means those that have the
dedication and commitment to take on the challenge
of becoming owners of the firm,’ said Jaime
Velázquez, co-Managing Partner of Clifford Chance in
Barcelona.

‘It is however a two-way process, even in the
current environment. Law firms have to be flexible to
the personal needs of the new generation of lawyers,
but who themselves have to understand what practice
means – learning your profession and being available
for your clients.’

For some lawyers there is also the potential to gain
synergies from the skills of the new generation of
lawyers, the increasing emphasis on technological
tools, and the onus on better understanding clients
businesses and industry sectors.

‘Clients want proactive law firms who are not
afraid of trying something new, they want to reduce
costs and looking for more efficient ways of service. If
young lawyers don’t know this, then we can teach
them, while also accepting that they may be more
comfortable with using new technologies to do so,’
said Agustí­n Bou, partner at Jausas in Barcelona.

Iñigo Igartua, managing partner of Gómez-Acebo
& Pombo in Barcelona, agreed. ‘There will of course
always be an emphasis on excellent legal knowledge
and skills, but the challenge is how to apply them in
the new context – to embrace technology where we
can, to determine what is high value work and what
is not, and to find new ways of working.’

Richard Susskind’s book, The End of Lawyers? some
suggest points a way forward (see Panorama, p22) –
and that those firms that fail to prepare for the future,
in terms of the way they deliver their services, their
approach to clients and even their structure, must
inevitably prepare to fail.

Whatever the future, one lesson the current
economic and business situation has demonstrated,
believes Miguel Roca Junyent, President of Roca
Junyent, is that lawyers regardless of how they deliver
their services and expertise will have to place a
continuing emphasis on the ethical side of the
profession.

‘These are times to also reconsider our own ethical
positions. In part, the global economic crisis has been
the result of too much of an emphasis on risk-taking
and the pursuit of profit above all else. The legal
profession must continue to stand for something
more, and law firms continue to place emphasis on
promoting shared values and good practice.’