In March, Wells Fargo closed a deal to purchase more than $27 billion in assets from GE Capital, including $24 billion in loans: the lion’s share of a $31 billion acquisition set to finalize by the end of the year, according to Wells Fargo.
The bank’s GC James Strother said about 40 or 50 different lawyers in his department have worked on the acquisition, first announced last October. Mayer Brown has been advising Wells Fargo on the deal.
The merger brings over from GE 2,800 employees, including 25 new lawyers. Asked about the challenges of bringing in new personnel, Strother said he uses a “buddy system.”
“We just line up each new person with somebody that’s here, so that they can get questions answered, and quickly understand how we like to do things,” Strother said.
One of the largest banks in the world, Wells Fargo is ranked 27th in the latest Fortune 500 list. The company has 8,000 locations, 13,000 ATMS, and offices in 36 countries, and posted over $22 billion in revenue in the first quarter of 2016.
Last month we spoke to Strother by phone about his legal department and the larger legal industry. Other highlights from the interview: how he’s using data-driven approaches to scrutinize outside law firms, his increasing willingness to hire younger lawyers, and the need for law firms to rethink work-life balance.
Read part one of our conversation with Strother, about the perils of running a big bank legal department, here.
Below is an edited transcript of the second installment of the interview.
Big Law Business: What are the biggest challenges of integration after an acquisition like the purchase of GE Capital?
Strother: I think every company is different of course in its culture, including how the legal department approaches problems. What’s the risk tolerance that’s there? What’s the role of the law department in the organization and so forth?
In the case of GE, it’s not the biggest group ever brought in, but it’s a pretty good size. We create a buddy system. We just line up each new person with somebody that’s here, so that they can get questions answered, and quickly understand how we like to do things, and how we make decisions and so forth.
I think that’s very important, so that we don’t stub our toe somehow with somebody going in a direction that just wouldn’t be consistent with the way we like to do things. That’s going well. It’s something we’ve done a lot of, because over the years we’ve done lots and lots of M&A activity.
Big Law Business: You’ve been running the Wells Fargo legal department since 2004. How has the balance of power between inside and outside counsel changed?
Strother: There are many ways it has changed, in part because the legal profession has changed so much, and how law firms operate and have consolidated and so forth has changed.
In the very broadest sense I would say this: if I look back to 2004, and even before that, we probably thought that our individuals, our internal folks, would use their judgement to decide who to hire for what, and base it on their own experience, and they would gravitate to different firms, but they would work with people they were comfortable with.
As we’ve grown bigger, and as the cost of external legal services have gone up, and billing rates have gone up, now we really try to use a more data-driven approach, using billing information and retrospective reviews of matters, and segmenting matters by category and size and risk — a much more data-driven business-like approach to dealing with the work.
We have to be much more sensitive about the overall costs of the work. One little aspect of that is that alternative fee arrangements were basically unheard of in 2004. We’re constantly searching for new categories and types of matters where we can use them, just to get a little better predictability about things, and to create what we hope is a win-win for us and law firms.
Big Law Business: Can you elaborate on how firm evaluation has become more data-driven? Do you have dedicated professionals, or do your lawyers learn to do that?
Strother: We have a team in our operations group which manages, or helps the lawyers and paralegals manage, how they deal with law firms and with decision making and so forth.
As I mentioned earlier, one of the things that didn’t exist in the past, but is becoming more and more important is, because we have e-billing, we can get very granular about what’s going on with our legal spend. We have a team of people that does analytics for us, helps us make decisions about how we’re going to approach our law firms in the coming year, what rules changes we’re going to have, any kinds of billing constraints, etc., based on the data they have.
The relationships, however, with each firm, are held by the lawyers. The person-to-person relationship, or who owns the relationship with the law firm — it’s still our lawyers. We do have a backroom staff that does a great job of plowing through all this data that we have now to help us do better.
Big Law Business: How have your hiring practices changed? Are you hiring out of law school yet?
Strother: We are not hiring directly out of law school, although it wouldn’t surprise me if that started to happen pretty soon, because we’re moving lower and lower in the experience level. We’re more willing to hire folks that are maybe two years out of law school now, whereas, before, we rarely did that.
Our typical hiring decision will involve a position with some specialized expertise needed, and because of that we do tend to hire out of law firms and government, sometimes other corporations. That is typically what we do.
Once folks are in here, one of our challenges is to make sure that they aren’t pigeon-holed as experts, as valuable as that is. Part of our development process is to try to make people a little bit more generalist, so they can become leaders in the group. As far as the hiring itself, we probably would be very challenged to do effective training of brand new lawyers.
Big Law Business: How important is work-life balance in your department? How does it compare to law firms?
Strother: Work-life balance is important. I would say everybody in our group, in order to be successful, is a hard worker. It is a little different from a law firm in that, just culturally, for example, we would not, on a Friday at 5:00, give out a project and ask for it on Monday morning unless we really needed it.
I think in a law firm that kind of thing happens all the time. There just isn’t a lot of concern about quality of life issues. That is something the firms have really got to do something about. Our people work really hard. There’s one piece of law firm living that they don’t have to do, which is generate legal business. It generates itself here. That’s a good thing.
I think we’re not unique at all in this, but we have kind of an advantage with experienced lawyers, especially women lawyers who are reaching a stage in life where they want just a little bit less intensity. We can attract them from law firms because we can provide that. All of that is good, and I think part of the value proposition of working here.