way to identify quality candidates is by asking for referrals from people you know and trust. Another potential source of candidates is industry sources. Some useful industry sources may include, for example, other firms in your industry, lawyers you heard of in the context of doing good work on an industry-related matter, or attorneys who publish relevant articles or speak at industry events. Yet another source of potential candidates is the recommendation of other lawyers. Other lawyers can be especially helpful if they have worked with you in the past or know your business well.

Consider an In-House Counsel* One act that can make a tremendous difference is hiring in-house legal counsel (or general counsel). An in-house lawyer can address a significant amount of your legal-related activities, thereby providing you with extra time to focus on other things. Further, if you have a high enough quantity of work, having legal work done in-house can save money. The benefits an in-house lawyer provides should include, among other things, improved ability to:

Select outside attorneys when necessary. Evaluate fees.

Distinguish among different firms based on skill sets (when selecting

outside counsel for discrete projects). Identify legal issues that need to be addressed.

Additionally, you may improve your firm by having an in-house attorney execute some projects you might find are impractical to execute with an outside firm. These projects might include, for example, completing a whole set of form documents (reviewed by outside counsel) or developing a firm negotiating strategy for engagement contracts.

Your in-house general counsel should be a strong generalist with an extensive set of contacts in the legal community and good general business sense. You should not expect an in-house lawyer to handle everything. For example, if the firm confronts some very large, customized agreement or transaction (e.g., a complex licensing agreement), the in-house lawyer will probably need to bring in an outside attorney who specializes in that area. The in-house attorney, however, should be proficient in identifying and retaining specialists as needed. Finally, if a general counsel is effective, it is likely that over time he or she will become more involved in firm business activities, especially administrative matters and general firm strategic decision making.

The disadvantage to hiring an in-house counsel may be cost. Ultimately, to decide whether to hire an in-house counsel, the firm must do the math. Look at the firm operating history, and try to adjust for what has traditionally been missed that would be caught going forward. Bear in mind, however, that this

analysis is complex. On one hand, the firm will probably get better advice on a more rapid and flexible basis. The in-house lawyer should be able to catch and address more legally related issues early. For example, he or she may be of assistance in identifying and resolving disgruntled employee issues, dealing with auditors, preparing for fund-raising, and so on. Also, you may end up having fewer issues that warrant legal attention, but previously had not received it, due to simple luck. For example, bringing in an in-house counsel may result in fewer contracts being signed without adequate legal review. All these matters, and whatever else is relevant to you, should be included in your analysis. The Risk Management chapter (Chapter 14) of this book discusses the process of analyzing the trade-offs around such business risks.

Managing the Relationship with Your Lawyer

Managing the relationship with your lawyer is an area where clients often fall short. In this section of the chapter, we look at some ideas for managing the relationship with your lawyer more effectively.

Defining the Relationship

Once you have selected your lawyer, you should spend some time clarifying the nature of the relationship. This part of the chapter provides some ideas for defining your relationship with your lawyer.

Engagement Letters. Many law firms require their clients to sign an engagement letter before starting work. Frequently, however, the engagement letter is focused on issues that are of primary importance to the lawyer. For example, the engagement letter is likely to discuss what the lawyer will and will not be responsible for rather than the guidelines for how the lawyer will perform. You can use the engagement letter to cover items that are of primary importance to you. It may be useful to look at the engagement letter as a master services agreement. Different professional services firms care about different things, so we are not suggesting there is a specific way for you to structure your engagement letter. We note, however, a few areas that you may want to cover.

Generally, your engagement letter should cover how the ongoing operation and communication between your lawyers firm and your firm works. Ultimately, to determine what is covered, you will have to cover what is important to your firm. One useful approach may be to start by looking at the master services agreement your firm uses with other professional services providers.

One thing every professional services firm cares about is the fees it will incur for legal advice. Thus, you will probably want to include detailed

information about your lawyers (and his or her law firms) billing rates and practices in your engagement letter. Most engagement letters contain some information about fees, but you may want to check to see whether the information covers what you want it to cover. One important issue to consider is how the billing is structured. Depending on the nature of the work, you may prefer to opt for a flat fee or retainer structure instead of being billed on an hourly basis. For example, if the lawyer performs certain activities on an ongoing or recurring basis, a flat fee or retainer may be a desirable option. If, on the other hand, the activity appears to be a one-time event, you or your attorney may prefer to use an hourly billing approach. Additionally, there are billing questions to be covered in the area of procedure and extras. For example, how often will your lawyer bill you? What will the bill contain? And what are your lawyers policies regarding extra expenses? Will the firm charge for long distance? Copies? Document delivery? There may be other concerns, depending on your situation.

Another item your engagement letter should include is the explicit identification of your primary contact. If the primary contact works at a firm, he or she should be the person who is responsible for ensuring that the work done for you is effective and efficient.

There is no special formula for covering everything. You may have any number of specific needs or concerns that you want to set out in the engagement letter. The important point is to understand the situation and cover what is important for you.

Work Order Model. To take the professional services model to its logical conclusion, a client could implement a work order model with its lawyers. Under this approach, you and your lawyer would complete an engagement letter that served as a master services agreement. Each subsequent piece of work would be set forth in a statement of work containing information typically found in a statement of work, but tailored to address your specific situation. This approach would help promote a common understanding of the relationship between you and your lawyer as well as the lawyers specific assignments.

Scope of Assignments

In addition to defining the nature of the relationship in the engagement letter, it will probably be useful to implement some measures to control the scope of each assignment. Having clarity about project scope before work starts is important to a successful completion of the project. In this section, we discuss several ideas you may want to consider as part of an effort to define each assignments scope.

Establish a Primary Contact for Each Matter. In addition to having your lawyer serve as the primary contact for the relationship as a