In the 12 years Canadian Lawyer InHouse has been conducting its annual general counsel roundtable, we have routinely put questions about external law firm relationships and managing resources internally on the agenda for discussion.
This year, we wanted to cover those basics but also get into what today’s changing business world is demanding of in-house departments to spark disruption and change how they look and function differently. What skillsets are they looking to add to their in-house teams given the increased need to have data feeding decisions and inspiring the next business move?
Today, it’s not just about answering the constant barrage of legal questions; it’s about legal advisers playing a role in where the next acquisition target will be or how the strategy for the year is mapped out. They work closely with the operations and risk teams of their organizations and are, therefore, better positioned than ever before to lend their legal knowledge to how the business can best move forward with the right plan of execution.
That is, therefore, with some progressive legal departments, also influencing the role of external counsel. As Peter Nguyen, general counsel for Resolver Inc., a cloud software company with big global expansion plans, said, he recently brought his main external law firm partner in to discuss with his executive team their plans for the year. That discussion will help shape what work gets done and how.
Another strong message these general counsel emphasized during the discussion was the need for solo in-house counsel especially to have a trusted external partner they could reach out to for advice without concern that every call would end up on a bill. They are more than happy to pay for advice, but they want a service model where in their rapidly changing worlds they can call and get the help they need almost instantly. The paid work will inevitably come, says Nguyen and Megan Vesely of Sigma Analysis & Management who talk about the expansion plans their companies have. As Nguyen said, “Anything lawyers and law firms can do to re-think the relationship” is important to him.
If anything, law firms should welcome the approach Nguyen is fostering, which is about having quarterly reviews that aren’t about fees — it’s about the quality of the work, responsiveness and setting him and his expanding team up to be successful. In his case, it means giving him basic tools he can use without having to call each time he needs it. “It’s no longer one-way,” he said. “It’s an ongoing dialogue.” He referenced a small firm in Cleveland, Ohio that set up a portal for its clients to access commonly used documents and information to be used and readily accessed online. “Ease of use and accessibility” was highlighted as the primary appeal of that kind of service offering from a law firm relationship. As Vesely said, “Being a legal department of one, you need someone you can call who isn’t just going to start running the clock on you. You need someone who will walk you through things and then you will pass the work to them. That’s been critical for me.”
Andrea Cotroneo of Capital One echoed that sentiment, saying she is encouraging a model where after every significant matter a review is conducted with external counsel on how things went and how they could have been managed differently.
For Cotroneo and Pinar Ozyetis of Air Miles, their larger in-house team of between eight and 10 lawyers gives them more immediate expertise that they are developing. They are charged with problem solving and finding efficiencies, not just providing legal advice.
This is also the first year I have heard general counsel really getting specific about the kinds of talent they are looking to hire in the future. Vesely in particular referenced an intern she recently worked with who has a masters degree in mathematical finance and is now applying to law school. He codes, knows the financial markets and can articulate his position on a matter. For Nguyen, the type of people he wants to add to his team are not necessarily lawyers — they are people who have certain skillsets with strong operational capabilities.
Increasingly, we are seeing that those who can take information and make it speak to critical business decisions with a legal lens will be those who will own the future in both law firms and corporate legal departments.
I was joined by Terra Rebick who is the new chief counsel for Thomson Reuters Canada, and Neil Sternthal, managing director, legal and tax at Thomson Reuters for Canada, Australia and New Zealand who also posed questions to the GCs.
I hope you find the discussion informative. Watch for the video coverage of the roundtable at www.Canadianlawyermag.com/inhouse.
This year’s participants are Pinar Ozyetis, General Counsel Air Miles Canada/LoyaltyOne, Andrea Cotroneo, VP, General Counsel Capital One Bank (Canada), Peter Nguyen, General Counsel, corporate secretary and privacy officer Resolver Inc., Megan Vesely, General Counsel and corporate secretary Sigma Analysis & Management Ltd., Terra Rebick, Chief Counsel for legal and tax business for Canada Thomson Reuters.
NEIL STERNTHAL: Obviously we’re in a period of tremendous transformation in the legal profession where everyone is being asked to do more with less. We’re hearing persistently that the in-house bar is increasingly capable to do more and more tasks and you also have increasing pressures including regulatory and compliance pressures. We’re honoured to have you here today from the in-house bar.
INHOUSE: Considering all of your day-to-day challenges, what is your No. 1 challenge in-house right now?
NGUYEN: It’s the growth of the business and everything that comes with that. When I started with the company, we had 80 employees and we have now grown to 120 with an expectation of growing organically and through mergers and acquisitions. All the issues such as pressure on budget, regulatory issues, staffing — it all comes from the growth of the business. As we expand into the U.S., Middle East and New Zealand, I need to start thinking about how does my legal budget grow with that and align with our financial expectations to be financially prudent for shareholders while also meeting the needs of the business. The growth of the business really drives all my calculations.
OZYETIS: The loyalty landscape is changing a lot and so my biggest challenge is keeping an eye on that. With the passage of the changes to the Consumer Protection Act in Ontario that took place in December, there’s a consultation process that’s underway with respect to the regulations under it so in terms of the scope and how much that’s going to change how loyalty programs operate is the one challenge we have our eye on. As well, because the Air Miles program is a national program, it remains to be seen what other provinces will effect change in that area and how the changes will impact the program in that area.
COTRONEO: Leaving aside the constantly evolving compliance landscape, I think my greatest challenge and opportunity is really keeping up with the challenges of our digital transformation. We are growing our tech capability in Canada exponentially. We are extremely digitally focused and keeping up with the pace of that transformation is a great opportunity for us as lawyers and business partners. It is about how to best partner, be agile and bring creative solutions to our business partners.
VESELY: I have three main challenges and they are not dissimilar to what anyone here has already talked about. One is growth of the business. We’ve been around for just shy of 20 years and there is still something very early stage about the company. We’re looking at all the ways to grow and the challenges that come along with that. Regulation is a huge issue. Cost is a huge issue. I think we’re well poised to deal with that because we have deep quantitative expertise in-house and technology has always been a part of what we do. But learning how to leverage that particularly with our client base is something that we struggle with.
INHOUSE: Peter, is growing a legal team going to be part of Resolver’s own growth?
NGUYEN: Absolutely, that’s certainly the plan for 2017 and beyond. As we add new businesses and entities to the organization, there is a strong point being made by me to our CEO that we need to add additional legal professionals. The ultimate plan is to try to have a legal department that is very operational in nature that can turn out documents and meet the needs of the business in a purely operational manner. When I think of the type of people I want to add, they aren’t necessarily lawyers — they are people who have certain skillsets with strong operational capabilities. As we try to scale, we want to automate as much of the legal work as possible and certainly understanding that there are some things that can’t be automated, but we want to turn out our customer agreements as quickly as possible and try to use technology as much as possible and use different skillsets as we grow our business.
INHOUSE: For now are you still sending a lot of work out to external firms or experimenting with different service providers?
NGUYEN: I’ve done a bit of both. We do certainly rely on our external counsel for work that is beyond the realm of my core competency whether that is labour and employment, intellectual property, prosecution of trademarks. I’ve also worked with alternative service providers and started thinking about how we can leverage their skillsets. As we do M&A, is there a way to have due diligence done by professionals other than lawyers? I’ve certainly had conversations with professionals as to how we might do that. I’m always interested in new ideas and leveraging technology. We are a technology organization and like to work with organizations that think about issues in different ways.
INHOUSE: Pinar, how are you approaching what work you keep in-house and what you send out?
OZYETIS: I identify a lot with what Neil said about doing more with less. That is the one pervasive theme I deal with on a day-to-day basis. I think our routine work actually needs to be kept in-house because it requires such a familiar knowledge of what our standards are. For us, we’re always balancing the different interests of our partners and that of our consumer-facing side — the collectors in the program versus the program itself. To get to that place where you have that balance takes some time and that’s before getting to the heart of whatever particular legal matter there is. For us, the more specialized work will be outsourced to external counsel, but we have very tight relationships with those external counsel and they’re intimately aware of what we’re aiming to achieve with any particular project.
INHOUSE: You mentioned Intellectual property work that you manage. Are you using IP firms or full-service firms?
OZYETIS: Our trademarks strategy, for example, is an interesting one and we’ve taken a mark that is fairly generic, which is the Air Miles family of trademarks, and made a fairly recognizable brand out of that. It was a challenge and involved a lengthy and ongoing trademark strategy. For something like that we’d have to consistently use the same firm and same strategy to effectively execute that. So that’s an example of where there is always good depth in our relationships and I think that benefits us organizationally as a whole.
INHOUSE: Andrea, at Capital One, is the way in which the business is growing changing how you are staffing or sourcing help externally?
COTRONEO: It definitely changes the composition of the talent I want to bring in and retain. My personal philosophy is that I want the most interesting and strategic work to be kept in-house, and that is for a number of reasons. I think my team is certainly closest to the business, to its objectives and can more effectively execute due to that role. I tend to engage external counsel in highly specialized areas. I think we all probably do that. Employment is one of those, and complex litigation because we do have a whole litigation portfolio in-house. Those are trusted relationships. They are highly specialized. I am much more focused on keeping the talent in-house interested and engaged and that tends to be around the technology-based work.
It also allows me to create opportunities for my team. I have a fairly large team of lawyers and it’s about creating opportunities and career paths for them.
Because I do have a few different areas of risk and other areas I manage such as government relations, I’m also giving them cross-functional opportunities. We also partner with our colleagues in compliance to effectively find opportunities to grow sideways now rather than grow up all of the time. It’s my personal philosophy to keep that most interesting work close so we can do that and partner with not only my colleagues in Canada but across our other jurisdictions across the U.S. and U.K. to find opportunities for my team.
Like Peter said, it’s not necessarily about adding lawyers but it’s about where the work should reside, whether it’s a paraprofessional, a junior lawyer, a more specialized subject matter expert or compliance expert. We are constantly evaluating how that work is divided within my team and trying to push out the low-value, high-touch work and find the better opportunities to create job satisfaction.
INHOUSE: As Capital One is a larger global organization, do you have access to or have you tried alternative service providers?
COTRONEO: We have done a lot of it, actually. We have tried alternative legal providers and some of those established legal service providers. Today, I have an employment lawyer who sits with my team three days a week. In the past, we’ve had the same model for contract overflow two days a week. This is about highly specialized work that doesn’t warrant a full-time lawyer. We are about to embark on a new arrangement for a two- to- three-month project that is essentially document review. We’re about to try a new provider on that who will provide qualified lawyers to sit with my team and complete that project. We are constantly looking at getting the right balance of external and internal. When a full-time employee isn’t warranted, it has been a good solution for us. We are using a different provider for document review and it was very driven by fees and I did go out for quotes on that work. I’m very interested in project management work. I have no experience with it, but I would be interested to learn more about project management.
INHOUSE: Megan, do you think about trying to make the case to bring in another lawyer?
VESELY: For sure, I think that’s certainly where we’re looking. For me, it’s certainly created an opportunity to be a real generalist across disciplines and functions as well as across jurisdictions. We manage hedge fund portfolios and most of the hedge funds we oversee are in the U.S. or Europe and the regulatory regime in both is something we have to be conscious of; not to mention what’s happening here in Canada. I work very closely with the operations team as well as the risk team and the overlap between those groups is extreme. I sometimes wonder where the one stops and [the] other starts.
REBICK: I think it’s the great opportunity and great thing about being a GC or in-house counsel now is the fact the roles are changing and integrated with the business and that you are such a key part of the decision-making. I learned this about five years ago when I started in-house that sometimes you have to teach people you work with that you aren’t there to say here are all the reasons why you can’t do it — here are all the things I think will make it better. It’s given GC and lawyers a great opportunity and, hopefully, that will just continue.
OZYETIS: It also adds a whole new functionality to the role. Now it’s about problem solving and finding efficiencies. Historically, I wouldn’t have identified that as part of the role, but I think it is very much part of our day to day.
STERNTHAL: What are some of the specific skillsets you’re looking for in terms of lawyers you’re hiring? Is it project management or data scientists? What sort of things are you looking for from lawyers and non-lawyers?
VESELY: This has actually surprised me. I just had an intern who is going through a Masters program in mathematical finance and is about to graduate and is applying to law school. This guy blew me away. He could code, he knew the financial markets, he could write. His ability to articulate himself and argue and problem solve was just incredible and he is a 23- [or] 24-year-old kid. I thought, man, this is exactly where the profession is going — you have to be that rounded in order to succeed. I think even in the last two years what I’ve learned in terms of what the regulators are focused on and we see it in the financial services sector in terms of algorithm review and trading review — the level of sophistication is so extreme now. It’s certainly not where it was 10 years ago when I started practising.
COTRONEO: I have had the same experience. We are a highly data-driven company built on data analysis and we have teams of data analysts. I am looking for team members who can interact and communicate with those folks. I have a lawyer on my team who is an ex-data analyst from Capital One who came back after law school. I am certainly seeing a very different skillset in my younger team members in that ability to interpret, to understand our use of data and our technology evolution is becoming absolutely critical.
NGUYEN: For us, as I start to think about the type of role I want to bring on, certainly business acumen is important to us. Like everyone else is saying, being technology-savvy is important. We currently have a product I’m using from our own internal product that I’m trying to build an application on and I would expect anyone from our team would be able to do that and be very comfortable with not just to be a lawyer and review or draft documents — I would want him or her to be open to all sorts of things.
OZYETIS: I think that’s a critical soft skill now. In addition to having the technological background and ability to understand data and privacy and all the surrounding issues, the ability to change track quickly is critical and knowing your day to day is going to be very different.
STERNTHAL: I think it’s an area where lawyers are particularly well trained to adapt to continuous learning and that we, being former lawyers in private practice, possess.
COTRONEO: At its base I think we’re looking for real intellectual horsepower but also the ability to work in that area of ambiguity and in a less structured environment than it ever was before. Capital One is a bank so you wouldn’t think that would necessarily be the case, but we have adopted management practices that are very agile and lean based. As business partners, we are required to function in that environment at a very high level. It’s that ability to cope with change and be agile that I’m really looking for.
VESELY: Approach matters. The ability
to problem solve and get across the finish line in a polite way — you need people
you can get along with.
INHOUSE: What challenges do you have with your external counsel?
COTRONEO: I require them to be an extension of my own internal team and to effectively do that I need them to have a deep understanding of our business priorities, of our culture, of our history, of our clients. That requires time and investment. My biggest challenge is finding that time and making that investment, certainly with a new provider, so they can most effectively provide what we need in a quick and efficient way.
OZYETIS: It also creates a challenge for the external service provider because quite frankly there are so many now. Especially in an environment when you’re looking to explore a new provider, it’s difficult for external providers to differentiate themselves. For us, it’s the reason we draw upon the good relationships we have with external providers — it makes the trajectory of building a relationship that much easier.
REBICK: Does that make you more likely to stick with your traditional relationships as opposed to trying new things?
OZYETIS: I think for us it does. As Peter said, we are always exploring ways to doing things more efficiently, and when it comes to things like technology, I’m receptive to that, but when it comes to new relationships, it takes time and effort to be meaningful and that’s the commodity that’s not easily available, that time to do that initially.
REBICK: Are you finding the external firms taking on that cost investment themselves?
NGUYEN: I certainly am. I used to see the law firm relationship as traditionally being very much one-way. In the past year . . . [we] have worked it out with our new counsel who is very much open to change and we’ve worked out a plan for them to work with us to better learn our business. He will come in and sit down with all our key executives and map out a strategy rather than me telling him directly: “These are my priorities for the year. How are you and your firm and associates going to get there?” It’s not a conversation about fees at all, it’s about how is the relationship going and quality of the work and setting me and my team up to be successful with a standard set of documentation so I don’t have to call them for very basic things that I have immediate access to it. I attended a conference in March where a CMO talked about putting all their materials up in a portal — standard agreements and closing books are there — very self-service oriented. A small firm in Cleveland had set up a portal for their clients. That’s very appealing to me. Anything lawyers and law firms can do to re-think the relationship is certainly appealing to me; it’s no longer a one-way dialogue. For us, assuming data security issues get taken care of, the tradeoff for ease of use and accessibility is really, really appealing.
It’s something I had always thought about doing and to his credit he was willing to do that — come in and go through that exercise with us.
VESELY: I spent most of my career in private practice in New York and San Francisco — I think being a legal department of one you need someone to call. You need someone you can call and say, ‘We’re thinking of launching a fund in Luxembourg and I don’t know the first thing about Luxembourg.’ You need someone to walk you through it and then you’ll call him or her when the work is there. I find those kinds of partners can be an ear for you and you can learn from them. One of the partners we use on all our margin agreements I’ve learned a ton from her and she doesn’t charge me for it. She walks me through it. That’s been critical for me.
STERNTHAL: For those of you with larger departments, do you have experience with the procurement departments wanting to manage the law firm relationships? We’ve seen that in the U.K. to the frustration of both law firms and legal departments.
COTRONEO: We have a hybrid model. Our procurement third-party provider management — they do manage certain law firms for certain work. We have a slew of collections work — that is the type of legal work they would manage with great success and great expertise. In the legal team, we manage the more specialized legal work and anything that requires a higher-level approach.
INHOUSE: DO you have to go to RFP? Do you have a panel?
COTRONEO: I have a panel right now and it depends on the scope of the work. It depends on the type of work I’m looking for.
OZYETIS: We don’t have a process like that. It’s simpler for us to execute against whom we wish to engage.
INHOUSE: Megan, what is your major challenge with external counsel?
VESELY: Because most of my counsel are U.S.-based, I’m very cost conscious of the exchange rate. Fees are a huge thing. Growth is our No. 1 topic and growth for us is in a highly regulated space. We sit and wait to see what the Trump administration is going to do, is the SEC going to have a budget, what is the new chair going to do and you can only trust yourself so much, so I really rely on calling these outside firms and asking what they think. It’s the same here for the regulatory environment, but I don’t want to be billed every time I pick up the phone.
COTRONEO: My challenges are how to get external counsel to be that extension of my team and how do I effectively have that deep understanding and we need to know how [to] pivot as the business is changing, how do you most effectively get that information to them to use it for the right level of advice for us?
OZYETIS: I find our firms proactive in what they do, they reach out and feed information or resources that [are] relevant.
INHOUSE: When it comes to fees, how are you handling that challenge these days? Do you see discounts as an AFA?
VESELY: I’m significantly obnoxious. You’re always asking for a discount and you learn to be bold and not shy about that; you want to feel you’re getting something. I find less and less I am asking for a memo, I’m calling up and saying ‘Tell me what’s what.’ I’m not shy about asking for cuts. With a couple of firms, we are on a retainer and I think that a good part of our budget this year will go to a compliance consultant. And as we look to register in various jurisdictions, we really do need someone to come in and give the mock exam.
INHOUSE: Are U.S. firms ahead of Canadian firms in terms of fee structures?
VESELY: Absolutely. I think that’s true. We’ve been preparing in the U.S. for my entire career for these kinds of arrangements. I don’t know if that’s because 2008 really hit us hard, but it’s also very competitive. I work with a woman who serves hedge fund managers and she’s had to be very creative with her fee arrangements.
COTRONEO: I’ve found our external firms very open to it. The tide has changed fairly recently in the last 18 months to two years. We have a combination of arrangements — some caps, some volume discounts. We have alternative providers that aren’t external firms. To get this right, it is about making that investment and setting expectations at the start of a relationship and then circling back and constantly evaluating. Did we get this one right? Could we have used a different model? We really do require that evaluation of arrangements to make them stick.
REBICK: How much pressure do you feel from the business in terms of your use of and spend on external counsel?
NGUYEN: Not a lot, actually. The CEO defers to me, but I exert the pressure on my external counsel in that regard. I want to make sure we are getting value. To Megan’s earlier point, I’ve had a different experience with U.S firms. We’re in the process of selecting a U.S. firm and two have come back with north of $1,000-an-hour billing rate and wasn’t prepared to have a conversation whereas a third firm said they were prepared to help out on a fixed-fee basis and do whatever it takes to get it done. They said, ‘We understand you’re a growing business and we want to grow with you.’
I had a really interesting experience with a U.K. firm where after an hour conversation the partner said should I bill you for this time because I want to make sure you’re getting value for this conversation. We understand you are new to the U.K. and for us this is bread and butter advice. I said, ‘Absolutely, I’m prepared to pay you for your time because your advice is valuable to me’ and I thought it was a fresh approach. I hadn’t seen anyone else approach it that way before.
VESELY: I find that jurisdiction matters, too. I transferred from our New York office to our San Francisco office when I was in private practice and I thought the San Francisco market was very geared to startups. I was on the phone constantly and you never billed those guys, but they will come back to you when they are ready and that’s something younger lawyers need to learn in terms of building their practice through these relationships. I’m also finding a guy I used a lot in New York just went home to Michigan to a smaller firm and I called him immediately because his billing rate is going to be about a third of what it was. Finding those relationships and where people sit — whether Philadelphia or Tallahassee — it matters.
COTRONEO: Waterloo, Hamilton, here. I absolutely agree that jurisdiction matters.
NGUYEN: I was speaking to the managing partner of a smaller boutique firm yesterday and he was saying he has no billing targets for his junior lawyers. I thought that was really interesting. He said he just wants his junior lawyers to focus on doing good work and giving good value and not worry about billing. I thought that was really refreshing.
STERNTHAL: I remember meeting with a large U.K. firm and their ethos was that they knew they would be on short list for bet-the-farm litigation, but the thought was to stay engaged in the short term and, when they submit their bills for the big litigation, their clients would think about the other things they did along the relationship journey. Do the firms you deal with do the same?
VESELY: I like when I see lawyers who are writing on my area of business. I think these become calling cards and some firms give you credit for business development and some firms don’t.
COTRONEO: I think some of my external counsel’s advantage has been in training some of my junior lawyers or training new executives. We just brought on a new CCO and just getting the value and wisdom of someone who has had decades of experience in the regulatory framework is invaluable. In particular, they are adding a lot of value in training to me and my team and their willingness to come on site and meet one on one with the executive team, I have found tremendous value in that.
OZYETIS: I think a lot of firms employ that same approach — it’s a competitive means of using any touch point. I think it does get firms to the top of the list when you have a significant matter.
INHOUSE: Do you think firms are getting better at budgeting and reporting into you on matters?
COTRONEO: I do not think they are getting better at it. It is almost a project management skill I have found to be lacking with my external providers. It is something I would like to set my expectations about at the beginning of a particular project. I am looking for constant feedback, just as we do in the business on projects and priorities and that is not something that has come easily. I think there are two streams here — it’s about fees and how we’re tacking on that front and how is the work being done? Is it efficient and at the right level? I want to hear from them about, certainly, how we are achieving our financial targets but also how we are getting that work done and whether the model is correct. There are a number of dimensions I’m looking for a dialogue on and I don’t feel we’re there yet.
We use financial tracking software that allows law firms to upload invoices, but we don’t use it as project management with external providers.
REBICK: Are you looking to use common technology with your law firms? Such as the same messaging system or a portal?
NGUYEN: I would love it if our external providers were on [messaging system] Slack because it’s so pervasive in our organization. I’d love to be able to do that externally. I’m looking for the convenience of communication.
VESELY: All of this gives me a heart attack because the regulators are requiring more and more that the financial sector maintain all communications from voicemails to tweets to WeChats, but as you work with the Asian client base, that’s what they want you to use.
INHOUSE: Is anyone using offshore services? If not, is it because you’re choosing services here at home?
OZYETIS: I think that’s probably right, it’s pretty competitive right now and there are a wide range of resources available so [offshoring] is not as top of mind for people as it once was.
NYGUYEN: Yes, I would agree. As I start to look at alternative service providers, I’m not looking offshore, I’m looking near shore. But I talked to a friend who did a large transaction and used an offshore for the amount of documents involved. It really depends on scale — the type of work we do is smaller. Probably better to keep it home.
INHOUSE: What about managing risk in your organizations?
NYGUYEN: We are a risk management company, so risk is part of our DNA. We do an annual risk assessment. Across the executive team, everyone thinks about risk and we follow it through and use our own software to map out our 10 key risks for the year. I manage the traditional items of IP and litigation risk. I am responsible for the insurance portfolio in the company. A related matter is privacy — we operate a global business and everyone is concerned about GDPR and its coming into force and how it affects us as a Canadian provider with European customers. I’m starting to turn more of my time to that and what we need to do as an organization.
OZYETIS: Each lawyer has a different visibility and insight into our enterprise risk and that means tons of accountability and input. Cyber and IP as well as litigation and reputational risk are big ones for us.
COTRONEO: We are highly focused on CASL and regulatory requirements and brand and reputation in market. We’ve been very proactive on cyber and where it’s residing. We have the benefit — being a multinational organization — to learn from colleagues in other jurisdictions. We’ve got those learnings. Cyber is at the top of the house in terms of how we’re
managing our risk.