The legal industry is a land of contradictions. General counsel take on the world to defend their corporate clients, fiercely negotiating on their behalf. But, when it comes to giving a lawyer in the department a lukewarm review, general counsel shy away from confrontation (HR heads will back me up on this one). Highly skilled corporate lawyers advise their clients on all aspects of complex transactions, but seldom read the partnership agreements for the law firms where they hang their shingle. Another contradiction pops up in managing legal matters – in-house counsel want to reduce costs and increase quality, but they try to do so through indifference or micromanagement, both sure ways to achieve opposite results.
The Goldilocks Problem
We all know the Goldilocks fairy tale. Goldilocks visits the house where the three bears live. There, she finds three porridges: one too hot, one too cold, and one just right. As Goldilocks tries other things in the house she finds the same pattern: two extremes and one just right. Today, general counsel seem fixated on extremes and don’t look for what is just right when it comes to working with outside counsel.
The first extreme, I’ll call the first the indifference trend. General counsel describe problems with increasing compliance and regulatory work, globalization, business model complexity, and fixed or even shrinking budgets. The “more for less” phrase dominated discussions for many years, but now it has morphed into “less for less,” “do less law,” and other variations. Through all this, one group of general counsel have maintained an attitude of indifference towards outside lawyers. “We don’t care how you do it, just get us lower costs, predictable billing, and high quality.” Outside lawyers hear that they can choose whatever path fits as long as they get to the goals.
The second extreme I’ll call the micromanagement trend. Micromanagement arises when the general counsel attempts to control much of how outside lawyers deliver the legal services requested by the client. The general counsel layers on staffing restrictions (no first year associates, no more than one lawyer may attend anything, etc.), documentation restrictions (no letters, no memos), and strategy restrictions (all ideas must be cleared through in-house counsel first). Outside lawyers are treated more like additional help hired by the law department to address staffing shortages, than strategic partners.
Both trends are quite popular right now. They represent different philosophies about outside counsel, so there is room under the tent for both to exist and flourish. But, as I will argue below, I think both trends take us further away from the goals in-house lawyers say they want to achieve. To get to lower costs, predictable billing, and high quality, general counsel need to follow the middle path.
The Trustless Industry
Before I go into why I think following the extreme trends is misguided, I will address why they are flourishing. In both cases, one of the root causes and perhaps the primary root cause driving the extreme is lack of trust between in-house and outside counsel. This lack of trust has been discussed quite a bit in recent years, but we aren’t making progress to get past it. Outside lawyers don’t trust in-house counsel. They view them as too transactional, looking for the lowest price on each matter and not thinking about long-term relationships in which both parties invest. In-house counsel don’t trust outside lawyers, who they view as trying to maximize revenue on each matter.
The indifference trend grows out of the belief that general counsel treat outside lawyers as fungible. They view general counsel demanding “Either achieve what I want or I’ll drop you and hire another firm. I’m not going to invest in you, because I can get where I want to go without doing so.” Under this view it is fair to ask why outside lawyers should invest time getting to know the client and her business, if the general counsel will drop them in a minute for a better price?
The micromanagement trend grows out of the belief that outside lawyers are okay to use if surrounded by fences. General counsel believe that by increasing the boundaries around representing their clients they can get to the point where outside lawyers’ efforts are narrowly channeled down a path leading to the general counsels’ goals. For example, some general counsel impose 20, 40, or even 100 page outside counsel guidelines, much like governments erect more and more regulatory boundaries. Why trust outside counsel to manage matters responsibly when you can simply tell them what to do with whom when?
Today, the U.S. military pushes a lot of responsibility down through the ranks, but that wasn’t always the case. There was a time back in the WW II era, when the U.S. military worked on a strict system of following the orders from above and not letting the rank-and-file react to situations in the field. Notable commanders who followed more of a “sin now and ask forgiveness later” approach included Generals Patton and Eisenhower.
If his book, Superforecasting, Philip Tetlock tells the story about a military that worked on a system different than the WW II U.S. military approach. As the world entered WW II, the German army, the Wehrmacht was one of the best in the world. Thankfully, it was led by one of the worst commanders ever (Hitler clearly made the top of the list for many other “worsts,” but right now we’ll stick to his lack of ability as a military commander).
The Wehermacht was good in part because it followed a leadership system called Auftragstaktik. Under this system, members of the German military were trained at all levels to think for themselves. It wasn’t a license to disobey orders, although that did happen. Rather, it was a recognition that leaders should set goals, but they needed to delegate down the responsibility for deciding how best to achieve those goals. A general would decide to take a town, but would instruct his direct reports simply to take the town, by when, and why. Those direct reports, following the same approach, would break the goal down into smaller pieces and allow their direct reports the freedom to determine who to achieve the smaller goals.
The result of Auftragstaktik was an empowered, flexible, fighting force capable of thinking on its feet and reacting to the changing, volatile, circumstances of war. There are many stories (Tetlock tells some in his book) about how the German army achieved success because the officers and enlisted men adapted to circumstances in the field rather than waiting for new orders from above.
Obviously, the German army ultimately was defeated. The responsibility for the win lies of course with the allies. But, the failures on the German side were mainly due to Hitler. The most famous failure was Hitler sleeping through the beginning of the Normandy invasion. His generals were not allowed to act on their own and feared for their lives if they woke him. The delay while Hitler slept cost the Germans dearly. He had constrained the Wehrmacht from doing what it needed to do as it had in the past. It wan’t the effective force it had once been.
Many years later, other military forces – when stuck in situations where the “only follow orders” approach wasn’t working – looked back to the Wehrmacht and borrowed from the Auftragstaktik system. The U.S. Army was one of them and benefitted greatly from empowering commanders in the field.
The legal industry has wound itself up trying to control the cost of legal services. But, in many cases the approaches used, indifference or micromanagement, don’t work. A better approach than what is being done in each of these trends, borrows from the concept of Auftragstaktik, and then tweaks it for legal services. General counsel and outside lawyers should work together to decide upon goals, communicate about why those goals are important, and set broader parameters (e.g. budgets) to follow in meeting those goals.
General counsel should then let outside lawyers determine the best way to achieve the goals, given the changing circumstances of the battlefield. This doesn’t mean indifference, just as military commanders can’t give an order and walk away paying no attention to how the battle plays out. It also doesn’t mean micromanagement, where outside lawyers must call and ask permission before every step.
It means that general counsel should hold outside lawyers accountable for achieving the goal on or under budget and at an acceptable quality level. How outside lawyers do that should be up to them within broad boundaries (tolerance for risk, and other characteristics particular to the client). But, by collaborating, the collective group should find ways to simplify what they do, drive down costs, and at the same time achieve better quality on the way to achieving the goals.
While this is a simple approach, it relies on a trusting relationship between the parties, coupled with clear consequences if a party (typically outside counsel) fails to perform. Over-reliance on micromanagement has drilled any inclination to innovate out of outside counsel. Yet, innovation is something most in-house lawyers would really like to see right now. Over-use of indifference has failed, because innovation in legal services delivery requires collaboration of outside lawyers and clients in the arena of corporate legal services.
Lawyers are captives of their training and experience. Most never try to escape that captivity. But, outside of law, our understanding of management, leadership, cognitive science, behavioral economics, and many other disciplines has advanced. By ignoring the knowledge these disciplines can bring to improving legal services delivery, lawyers compound the problems they complain most about today.
Rather than continuing to focus on what isn’t happening in legal services delivery, we should make use of the knowledge our colleagues in other disciplines have gained and focus on how we can use it to drive what should be happening in legal services. To follow that path, we need to avoid the extremes of indifference and micromanagement, and settle on a collaborative style. When we do, it will feel (and work) just right.