A 3-person panel of GCs made a noticeable impact on attendees at the 2015 LMA Conference. In many ways it proved to be a focus group of sorts for the very people charged with helping law firms win new business, which originates with the corporate legal department.
If we were to summarize what we heard from a panel in a 140 characters, it would boil down to four key points, which we’ve expanded on here:
1. Corporate legal is taking more work in-house.
Joe Otterstetter, managing counsel at the 3M company noted during the panel that in 2012, roughly two-thirds of the company’s legal spend was on outside counsel (and mostly for litigation). Today, that split is about half and half. Indeed, a survey LexisNexis published late last year found that 54% of corporate legal departments plan to bring more work in-house.
2. GCs are consolidating law firm panels.
The panelists seemed to unanimously agree that the widely covered trend of law firm panel consolidation is quite valid. Similarly, the CounselLink team has analyzed some $17 billion in legal invoices and found 54% of corporate legal use 10 or fewer firms for 80% of legal work.
3. Efficiency and the metrics to prove it matter.
The conundrum GCs face is straight forward: budgets are flat, they are expected to remain flat and yet they still have to reduce risk for their organizations. As a result efficiency and metrics matter at least as much as relationships. As D. Casey Flaherty recently explained, metrics strengthen inside and outside counsel relationships.
4. GCs are willing to pay for value.
“There’s comfort in the safety of hourly billing,” noted one panelist as an obstacle to progress in value. The challenge is the hourly billing model inherently incentivizes activities not outcomes – and is a beacon for scrutiny amid flat corporate legal budgets. Some advocated rebranding the “alternative fee arrangement” to “value based billing” in an effort to quell discount chatter. The net sum of legal services rests on value versus cost.
Bits and Bytes from a Panel of GCs
- Diversity matters to GCs. Consensus among the panel was clear: diversity matters. One GC explained her company had moved work to National Association of Minority and Women Owned Law Firms. There has been a groundswell on this front, for example, diversity came into focus in the 2015 survey of chief legal officers conducted by the ACC.
- Cost per hour of in-house counsel. One of the panelists cited research finding the average cost per hour of an in-house lawyer is $211 – he said he can’t get a paralegal for that amount in an outside law firm.
- RFPs must answer the question. RFPs were a key point in the session and the GCs on the panel seemed to agree that law firms who answer “the questions the law firm wished the GC had asked” as opposed the questions actually posed, faced an immediate disadvantage. Those RFPs are subject to dismissal early in the legal services procurement process.
- Digital content rising in importance? Clearly relationships still matter to corporate counsel, and old fashioned networking earned a plug. Murmurs in the hall were audible when the panel noted attorney quotes in the media had little influence, but websites and blogs are “important factors in when vetting outside counsel.”
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Did you attend the session? What points have we missed but should be added here? Please feel free to sound off in the comments.
Related recaps of the session from other blogs:
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