I happened to be visiting the Hong Kong office of K&L Gates on September 15, 2008, the historic day that Lehman Brothers filed for bankruptcy. 

Of course, this was a global event and thus a financial capital like Hong Kong was jarred and shaken by the news of Lehman’s collapse; nevertheless, it felt more than a bit surreal to be on the other side of the world when it seemed like all hell was breaking loose back home within the U.S. financial markets.

I remember returning from that trip and thinking that it would be many years before business returned to being anything close to normal. That day in Hong Kong is etched deeply in my mind because to me it represents an inexorable and undeniable shift in how companies, and by extension, in-house legal departments, viewed the world.

Jump ahead nine years, I recently had the pleasure of attending the second annual CLOC Institute, held last month in Las Vegas. CLOC is the Corporate Legal Operations Colloquium and its membership includes in-house legal operations professionals from some of the largest companies in the world. These individuals are typically responsible for a variety of critical functions within their respective organizations, which run the gamut from managing the legal department budget, to making staffing decisions for in-house lawyers and outside counsel, to overseeing the procurement and RFP convergence process, and much more. The 2017 CLOC Institute drew more than 1,000 attendees, more than double the number of people who attended the group’s inaugural conference in 2016. 

Although the vast majority of attendees worked within the legal operations function, there were also numerous legal technology companies, alternative legal providers and, in addition to K&L Gates, a handful of other law firm sponsors at the CLOC Institute. I’ve spent nearly 15 years working in the legal industry and this was as diverse a group of attendees that I have found at any conference I’ve ever attended. 

This candid dialogue seemed to me to be a natural and healthy evolution of the legal industry.

In short, the best way to describe this gathering is that it felt like a long-awaited breath of fresh air. Right from the start, I was struck not only by the level of honesty and openness from the various attendees, but also by the amount of collaboration and willingness to work with outside counsel law firms. This candid dialogue seemed to me to be a natural and healthy evolution of the legal industry. It might have taken almost a decade to happen, but here it is.

If you consider the law firm-client relationship as if it were a swinging pendulum, prior to 2008, the pendulum was weighted more heavily in favor of the law firms who were responding to what seemed like an ever-increasing demand for legal services. 

It might have taken almost a decade to happen, but here it is...

As a natural outcome of the global financial downturn (hastened by Lehman’s demise), clients began to wield more and more power in their decisions regarding pricing and the level and nature of services provided by outside law firms.

Enter RFP convergence programs, heavy discounts on hourly rates, the rise of alternative fee models, and so on. Furthermore, in a bid to improve efficiency, control, and expenses, a great deal of legal work that formerly went to law firms was now being handled by in-house legal departments. Clearly, the pendulum had swung hard in the other direction, and that is where it has inevitably rested for the better part of the past decade, resulting in a deep divide between how law firms and corporate legal departments view the working relationship. 

...CLOC has the power to help bring the two vastly different perspectives of law firm and client closer together.

All of these factors and more contributed to the overall importance of today’s corporate legal operations role, as well as to the noticeable rise in influence many of these professionals have experienced within their respective organizations. This is an exciting and important development, as the upshot is that I truly believe that CLOC has the power to help bring the two vastly different perspectives of law firm and client closer together. 

What follows are a few impressions from the 2017 CLOC Institute, which have been shaped by the wide variety of conversations I’ve had with conference attendees both during and after the event:

Some law firms are going to get it, but many won’t

It’s safe to say that law firms are not typically known for embracing change. Yet CLOC is all about embracing, indeed facilitating change, and only those law firms that are willing and able to modify their behavior or habits will benefit from this relationship. It will be those law firms that are most able to adapt to the new market conditions that will survive.

Only those law firms that are willing and able to modify their behavior or habits will benefit...

I fully believe that we will see certain firms cease to exist over time as they continue to hold on to the old ways of doing business. CLOC has been likened to a revolution, and that energy is going to continue to build momentum in the months and years to come. Firms that resist will find themselves watching on the sidelines or out of the game entirely.

Becoming more efficient and reducing overall expenses will create a long and lasting relationship with clients

 This is somewhat counter-intuitive, but law firms need to continue to come up with ways to drive down costs and perform more efficiently in order for their client relationships to thrive.

Most law firms are set up for the opposite effect to occur - for instance, as firms bill more hours they receive a larger fee, assuming they are using a standard billable hour model.  But if a firm has handled hundreds of similar matters, it makes logical sense for a client to expect that the cost per matter would decrease rather than increase over time.

...the key to a great client relationship is to be able to provide value and show that you are constantly working in the best interest of the client, even if that means reduced fees over time.

Law firms can fight this battle at their own peril, but the key to a great client relationship is to be able to provide value and show that you are constantly working in the best interest of the client, even if that means reduced fees over time. If the relationship grows stronger the hope would be that that the law firm increases their share of work from that client, an outcome which presumably represents a win-win for both parties. 

We need more law firm partners (especially managing partners) and general counsel to understand the issues involved

 The law firm attendees were mostly senior marketing and business development executives. Generally speaking, these folks already understand the current market challenges that exist between law firms and clients, so much so that they typically operate as agents of change within their organizations.

...an interesting development to watch will be the continued interaction between the heads of corporate legal operations functions and the GC

For continued progress to occur, it would be great to have more law firm managing partners as well as general counsel to connect with one another and work together to find reasonable solutions to the various issues at play. I think an interesting development to watch will be the continued interaction between the heads of corporate legal operations functions and the GC, as these two positions may not always see eye-to-eye. Having more GCs involved in CLOC events and activities could help to alleviate tensions that may naturally arise over time.

A clear and concise CLOC charter could potentially lead to greater and more rapid change

 Positive results are happening quickly and somewhat organically, but I believe that if CLOC sets forth a charter or clear set of goals and objectives, we could see change occur even more rapidly. 

In the field of law firm client development, for instance, there are more and more non-lawyer professionals interacting with clients with the intention to strengthen relationships. The feedback I’m getting from clients as well as CLOC members has been overwhelmingly positive, and most question why more firms aren’t taking this step. If CLOC were to specifically refer to this and other topics in a charter, it would enable law firm professionals to share key findings with firm leadership, potentially increasing the rate of organizational and operational change. 

I’m greatly encouraged by the open dialogue...

Groups such as CLOC serve a key role within the legal industry as a vital connection point between people and organizations with vastly different interests and perspectives.  I’m greatly encouraged by the open dialogue, positive developments, and the strong leadership of the founders and committee members on display at the recent CLOC Institute. You can rest assured that I will be eagerly waiting and watching to see what comes next - looking forward to taking that next refreshing breath of fresh air.

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[Jeff Berardi is the Chief Marketing Officer for the global law firm K&L Gates. As CMO, Jeff leads an international team of marketing and business development professionals to support the firm’s offices located throughout the U.S., Europe, Asia, South America, Australia and the Middle East. Jeff can be reached at jeffrey.berardi@klgates.com.]