Intelligent Diversification

One of the greatest challenges in managing a legal department involves coordinating multiple law firms to generate the best outcomes at the lowest cost. Finding your company's solution to this problem may begin with a simple question: Fewer firms? Or more?

The trend is toward convergence--drastically reducing the number of outside firms and networking or "partnering" them into a cooperative framework. Common sense suggests that at least some convergence is an obvious path to efficiency. However, we benefited by moving in the opposite direction.

Represented as late as 2005 by only three principal outside firms, Career Education Corp. now has strong relationships with 20 firms, and the resulting improvements in efficiency and performance have been significant.

There's still something to be said for free-market competition among law firms. The competition may be frustrating for each firm, but corporate clients benefit from it. Diversifying your legal representation and promoting healthy competition among firms can actually lead to fresher perspectives from your outside counsel, which will treat matters as if they are courting your company's business for the first time.

Although partnering with a limited number of firms creates an opportunity for volume discounts and alternative fee arrangements, diversifying firms increases competition in fee arrangements and in other competitive areas, such as efficient staffing of matters.

By diversifying outside counsel, we also ensure that we get the best subject-matter expertise available. Moreover, with our expanded law firm network, we are rarely stuck trying to find local counsel at the last minute.

Making diversification of counsel work requires a few key benchmarks, though. First, we practice "intelligent diversification," which means we consistently weigh the benefits of institutional knowledge and relationships against the need for additional expertise and local networks when making the decision to add a firm to the mix. We look first for the expertise we need within our existing network. If it's simply not there, we won't try to fit a square peg into a round hole, and all of our outside attorneys are aware of that. In fact, several have significantly strengthened our relationship with them by being forthcoming when they don't have the best expertise for the job.

Being open to diversification doesn't mean we are looking for a one-night stand. We look for firms with which we can build a relationship and for ways to prevent that relationship from becoming stale. Rather than putting out an RFP, we have a set of criteria we consider carefully before hiring a firm. Those include such things as our history with the firm, its areas of expertise and track record on diversity.

Handling more law firms, albeit with smaller teams, can be a juggling act. We manage our network by insisting each firm assign a relationship manager to work with us, requiring monthly summaries of legal matters from each of our outside firms and conducting regular meetings with outside counsel. We build a partnership with that individual, who becomes a stakeholder and enforces efficiency and promotes diversity within his or her own operations.

Regular meetings, preferably in person, are critical to build the trust that keeps the relationship on course. These meetings give us the opportunity to evaluate the style of the individual attorneys who represent us. By sharing the company's vision with our outside attorneys and providing a forum for airing any concerns or issues, we accomplish the equally important mission of ensuring that our outside attorneys are capable and willing to represent us in a manner that is consistent with our company's values.

Although diversifying outside counsel requires us to spend more time managing relationships, the payoff in responsiveness, creativity, expertise and efficiency is well worth the extra effort.

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Janice L. Block is senior vice president, general counsel and corporate secretary for Career Education Corp.

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