Canadian Lawyer InHouse

29 CANADIANLAWYERMAG.COM/INHOUSE JANUARY/FEBRUARY 2018 can bring?" One of his biggest challenges is how to leverage the law firm relationship — "pretty much building deeper supplier relationships," he says. Denis says some firms are getting good at leveraging AI and analytics to better understand trends legal departments are seeing in terms of lawsuits and having a discussion on how to predict and prevent adverse effects, for example. "That's really what keeps me up at night — how do we go beyond just spending and being a cost centre?" he says. While some respondents were succinct with their reasons for going with certain firms — "I choose lawyers that are reasonable, practical and do not bill me to death with time/billings," said one — 68.3 per cent of those who took the survey said they choose firms based on specific lawyers, up by 2.7 per cent over last year. While Cullen says he's not surprised in- house counsel choose based on individuals — after all, "you don't hire a company or a firm, you're hiring people you work with, human beings" — for him, it's more about building a long-term relationship with a firm as a whole. But he notes that if you are a client of sufficient influence, you can ensure a particular partner or associate is getting good work and is involved in strategic discussions. "I put my own skin in the game to ensure to [the] best of abilities they're happy with what they're doing — I continue to provide good opportunities," Cullen says. For Denis, too, it's more about the firm as a whole. He looks for innovation above all else, noting that while all firms might say they're innovative, he checks things such as if e-discovery is done the old-fashioned way or whether they have the capacity to leverage AI and predictive coding. "I'd rather focus on a firm's capacity in terms of efficiency, productivity and innovation — real innovation," he says. Carrying over from the last few years is a decline in the use of alternative fee arrangements — 3.2 per cent said AFAs were the billing arrangement they had with their primary law firm/external service provider, which was a slight drop from 4.9 per cent last year and a considerable drop from 12.7 per cent in 2015. The billable hour came out on top again, with 50.5 per cent — essentially unchanged from 2016 and up from 46.8 per cent the year before. The combination of billable hours and AFAs was second with 44.7 per cent. "The discussion is amongst all circles — that conversation is continuing," says Slonosky, noting that looking for counsel who truly understand business issues is more important than how services are provided. When asked if they were interested in engaging firms in AFAs, 77.4 per cent of respondents said yes. Cullen says the disconnect between the overwhelming desire for AFAs versus those who say they're actually using them stood out to him. He says there's too much of a focus on fee structures and that "sets you off on a much narrower path than you need to be on." The Pfizer Legal Alliance, a group of around 15 law firms globally, makes use of flat-fee structures based on anticipated work for the year, but the main drive is long-term value creation. "It goes beyond 'How do we reduce billable hour to X.' That isn't rocket science; that's not the magic," says Cullen. "The magic is in the relationship." Denis says "we sign 15,000 engineering services contracts every year — it's a given we're going to be sued" — but they're similar suits, so he's trying to isolate tasks that can be grouped together and price them reliably. "Three years from now, I'd like to say the vast majority is AFAs — we're being very aggressive about this." In question 25, respondents said one of the top things a firm can do to improve working relationships with their company was be more proactive, and in a highly regulated industry such as pharmaceuticals, Cullen appreciates a heads up to regulatory changes or new legislation that might impact his business. "Bad is receiving nothing, good is getting periodic updates that are relevant to my industry and company, but all the way at the other end of the spectrum at great is customization for my organization," Cullen says. Decisions at Pfizer are complicated, and they're rarely based on dollars alone — it's about people's lives. Cullen says he likes outside counsel to see what they struggle with. Slonosky identifies diversity as another way firms could improve, saying he'd like to see the results of question 23 — do you ask firms you do business with to provide a diverse roster of lawyers to work with? — reversed. Less than 20 per cent — 17.8 — ask, and the vast majority — 70 per cent — don't. Another 12.2 per cent of respondents indicated they were thinking about it. But in the followup question, 71.4 per cent said firms are happy to provide a diverse roster if asked. "We're not asking the right questions sometimes, that's what that tells me," Slonosky says. "Pfizer as a whole is alive to the issue," Cullen says, adding that companies have leverage with their firms and that's how things change — when customers, clients and users of services demand it. "If I were to categorize, we're further along on the spectrum than most I think. Are we at the point where it's where I'd like it to be? No, but it's definitely a discussion item. I'm a firm believer that in-house legal counsel and GCs in particular need to be at the forefront of this issue — it's a professional obligation." More than 80 per cent — 84.4, compared to 87.8 per cent last year — of respondents reported firms don't request feedback. Cullen says that's a missed opportunity, and in-house counsel could say proactively, I'm willing to invest my time. Last year, Cullen offered to meet with a firm and they flew out from Calgary. "That spoke volumes," he says, adding he'll also go to their primary firm and educate young associates about the business and its challenges "so five years from now they can serve us better." "That's a competitive advantage that is difficult to replicate. We're creating a system that will better serve us. If competitors aren't doing that, then I win." Denis says his company also has very "deep-dive reviews" twice a year with the firms that get most of its volume. "It's extremely helpful," Denis says. "There's a lot they can bring us as well — the dialogue goes both ways." IH

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