The relationship between General Counsel and their external advisors is key to the success of any legal project whether it be contentious or non-contentious work.

There needs to be a mutual professional respect and understanding from both sides and an understanding of exactly what role each is to play in the project at hand. There is no one size-fits-all in this regard. Sometimes the in-house counsel wants the external lawyer to take the lead and run with a matter, sometimes the external lawyer is more of an advisor fulfilling a supportive 'second chair' role – a variety of factors are at play and clarity around what the relationship will be is crucial to success.

Winmark's Looking Glass Report 2018 produced in partnership with Clyde & Co considered, among other things, the internal/external relationship in the context of the changing role of the in-house General Counsel, focusing on what, from a GC's perspective, is driving change in the role of external counsel.

Perhaps unsurprisingly, cost pressure was the main driver of change. 82% of the 100 in-house legal leaders surveyed identified costs and the main driver for the change in the internal-external relationship. It would be overly-simplistic to interpret this as meaning that in-house counsel must spend less on external lawyers. More, it is a question of efficiency. Is there capacity and expertise for the work to be done in-house instead? Can a better way of working with the external lawyers produce a more efficient process? This may be achieved through exploring different fee structures, perhaps working closely with one external provider in order for them to better understand the business or some other mechanism that creates efficiency, and most likely also reduces cost.

The Winmark report identified four key relationship types between internal and external counsel:

  • The insurance policy – most relevant for strategic, high-risk issues where GCs want to minimise the chances of anything going wrong. Price will be low on the list of GC priorities as the focus is on getting the best possible advice
  • The bucket – addressing peaks in in-house counsel workload or drops in staff capacity that need to be 'filled' – the GC requires speed and flexibility from their external advisor
  • The commodity sale – here the external counsel are suppliers – not differentiated in the market by a particular skill GCs are looking for efficiency and value
  • The friend in need – this requires external counsel to be a trusted advisor who knows the GC's business including its attitudes and appetites. The external provider is then able to provide both legal and commercial advice standing side by side with the GC.

While law firms would like to be the sole service provider to any client, often GCs will rely on a panel of providers for specific pieces of work and key individuals for specific needs.

As a part of the report, Winmark asked GCs what advice they would give external counsel aiming to become a 'friend in need.' The key advice was to understand the client's business including its appetite for risk and not charge for the effort. External counsel are also encouraged to have both legal and business skills in order to be relied upon for their good judgment.

This report highlights the key relationship between internal and external counsel and can assist GCs in analysing their relationships and ensuring they are working with the right people in the right ways.

Read full report here

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