December 14, 2020

 Sarah Wilson-Ward

outside counsel legal spend law department legal services outside counsel management legal spend management select counsel

It’s probably safe to say that no one thinks their law department’s relationship with outside counsel is beyond improvement. Law departments need to deliver the right results but are being asked to do with increasingly streamlined internal teams and reduced external spend budgets. And the events of 2020 can only make this worse.

At the risk of oversimplification, there are two basic approaches. Under the first, a law department can pass the responsibility of resolving these issues directly to their law firms, requiring them to charge less and “do a better job” (whatever that means). But law firms are not immune to the correlation between cost and quality. Plus, consensus on what exactly “doing a better job” means can be hard to reach.

The alternative approach begins with “looking in the mirror,” that is, figuring out what internal changes will set the stage for deriving better value from legal spend, and then making those changes. As a starting point, there are five realms to consider when taking this approach:

Standardizing how you interact with outside counsel. Without a standardized approach to defining projects, managing, and assessing the performance of outside counsel, it becomes impossible for outside counsel to develop a clear understanding of the standard they must meet. If law firms are sometimes allowed to report on active spend as a narrative email every few months, and other times a detailed excel document is required each month, dissatisfaction is inevitable. Everyone in the law department should apply the same approach when defining the tasks, deliverables, and deadlines.

Rationalizing your selection of outside counsel for panels and projects. Too often, selecting outside counsel becomes a matter of convenience, not a rational decision based on well-defined and consistently applied criteria. It may be awkward to confront an incumbent provider about cost or performance but remember that there is a real price to pay when you avoid difficult conversations.

Identifying alternatives to existing outside counsel. Many times, small and midsized firms can deliver better value than the large firms that predominate on corporate law panels. Think of the time and effort you spend on investigating alternatives as an investment in obtaining a greater return on your legal spend.

Scoping matters you assign to outside counsel. I have previously explained the benefits of scoping projects for outside counsel. Proper scoping helps outside counsel do what you want them to do and prevents time wasted on tasks that the law department doesn’t value. It also allows “apples-to-apples” comparisons on price and quality.

Instituting the use of metrics to make decisions about the use of outside counsel. As with scoping projects, it is crucial to establish ways to measure the degree to which outside counsel provides value. It is easy to know the cost of outside counsel’s services – you simply look at the bill. But it’s more important to assess the value you received – and to do that, you must establish and apply metrics so that you can evaluate what you got for your money.

For law departments, self-examination is the precursor to achieving meaningful savings without sacrificing performance. Before you take outside counsel to task, first look in the mirror!