Managing Legal
The Point
An earlier generation was raised on the saying: “Nobody ever got fired for choosing IBM”.
It still holds sway among too many general counsels I’ve known in their strong prejudice favoring AmLaw 100 or AmLaw 200 law firms as a hedge against second-guessing if something goes wrong on their watch.
Ben Heineman, Jr., legendary general counsel of GE from 1987 to 2005, disagrees. While careful to avoid a simplistic, sweeping endorsement of boutique law firms and condemnation of BigLaw, Heineman cautions against the opposite error — a widespread prejudice among general counsels.
This Matters to Your Business
I recall talking with the general counsel of a household name public company in my industry (transportation and supply chain) about the merits of boutique law firms outside the AmLaw 100 and AmLaw 200. He spoke enthusiastically about their legal sophistication, lean and cohesive teams, and lower all-in costs. “These boutique law firms are as good or better than” their BigLaw counterparts, he observed.
Naively I asked: That’s really innovative of you, when did you start hiring them? “Oh, no, I’ve never actually hired them”, he replied.
He then confided that if litigation or a major deal turned out badly, he would need the backstop of a BigLaw firm’s reputation in the event his superiors were to question his judgment about the lawyers he had chosen.
Because …
Ben Heineman, Jr., the legendary lawyer credited with pretty much having invented the role of general counsel in its 21st Century form, and who literally wrote the book about it (The Inside Counsel Resolution: Resolving the Partner-Guardian Tension), expresses major doubts about the conventional BigLaw choice:
“I won’t say absolutely you have to use smaller boutique firms — for something such as the AIG bankruptcy you may need 300 bodies — but you can still have a smaller, elite firm in the lead — riding sidecar with the GC [general counsel]. In my view, big is bad — with very few exceptions.”
For the entire time I served as Vice President Business Development (an M&A role) at GE Rail, Ben Heineman, Jr. was General Counsel of our corporate parent, GE. He was uncompromising in his demand for professional excellence and ethical conduct. Here’s how he puts his beef with BigLaw:
“There’s a wide array of choices in how you allocate resources; it’s not just big law firms. The big firms and their equity partners have a cockeyed view of productivity. It creates all sorts of problems. Even with very good firms, there’s a huge mediocre middle. Corporations do not trust the law firms because they’re under so much pressure to pursue their own economic interests. It’s a perpetual concern in the relationship.”
This is not a screed against BigLaw, or a call to hire small firms just to save money. It’s a call for self-confident allocation of resources. As Ben Heineman, Jr. put it: “The critical thing is segmentation, which inside lawyers don’t do well enough. You have to first decide how to allocate resources along a spectrum ranging from low risk — low complexity work, to high risk — high complexity work.”