What General Counsel Want (and Need)
From Their Law Firms and Other Legal
Service Providers
What General Counsel Want (and Need) From
Their Law Firms and Other Legal Service Providers
“That men do not learn very much from the lessons of history is the most important of all the lessons that history
has to teach.” - Aldous Huxley, Collected Essays
“History is a gallery of pictures in which there are few originals and many copies.” - Alexis de Tocqueville, Old Regime
Pressures and priorities driving what general
counsel want
Many aspects of the legal industry have remained largely
unchanged for decades. The industry is still based
primarily on billable hours, a system that traditionally does
not differentiate between high- and low-value work. Many
law firms continue to focus on personal relationships and
history in promoting their firms rather than on other value
attributes. In its work with general counsel and law firms,
Huron Legal sees a number of firms that are steadfastly
tied to the hourly rate structure and reluctant to move to
other service delivery models, as well as law departments
that continue to operate just as they did ten or more years
ago.
General counsel consistently identify similar business and
operational priorities in survey responses: these priorities
relate to risk management on the one hand, and to cost
control and operations efficiency on the other.
Among the top pressures general counsel face are
the regulatory environment and resulting ethics and
compliance challenges,1 as well as data privacy and
data security.2 These priorities emphasize the current
importance of risk management issues. General counsel
today practice in a world of fast-paced global change,
where regulations proliferate, the information explosion
must be managed, and privacy and security concerns
must be addressed.
The old way of doing things, however, no longer comports
with today’s reality and the needs of today’s general
counsel. The world in which corporations do business
and in which general counsel practice has changed
considerably, and general counsel have correspondingly
different desires and needs for relationships with their
internal clients, law departments, and especially outside
counsel and legal service providers. In this first article
of a two-part series, Huron Legal discusses the pressures
and priorities driving general counsel’s needs and
what they want from their external service providers,
in particular law firms. The second article will address
what general counsel want and need from their internal
constituents – their business clients and the law
departments that support them.
At the same time, a competing priority is the need for cost
control and efficient department operations. While some
law departments’ budgets have increased,3 others have
continued to experience cutbacks,4 which many perceive
as increasing the company’s risk.5 Law department
leaders want to meet the demands on their in-house
services within their resource constraints by reducing their
external costs, reorganizing and restructuring the in-house
legal function for higher performance and productivity, and
improving their departments’ knowledge management
capability.6
These competing pressures – the increasing importance
of risk management versus the need to control cost
while increasing efficiency and productivity without
increasing risk – drive what general counsel want and
need from their internal and external constituents. From
their clients, they want a seat at the executive table. From
the departments they lead, they want people, processes,
and technology that can support their strategy and adapt
to change. And from their law firms and other service
See ACC’s Chief Legal Officer (CL0) 2013 Survey at 3, available at www.acc.
com/CLOsurvey; Global Agenda study Report: Issues & Priorities for Senior
In-House Counsel Worldwide, a study conducted by the World Law Group in
conjunction with LexisNexis® Martindale-Hubbell® (World Law Group, Autumn
2012) at vi; Beyond the Law: KPMG’s global study of how General Counsel are
turning risk to advantage (2012) at 15-17.
1
2
ACC at 3-4; KPMG at 15-17.
3
ACC at 4.
4
World Law Group at 13.
5
Id. at iv.
6
Id.
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2
What General Counsel Want From Their Law Firms
providers, they want a service delivery model that better
balances price and value. There has been progress in the
first two areas, but progress has been slowest from the
last-mentioned group.
service delivery model.”8 Recent media reports regarding
alleged law firm bill padding encourage that skepticism
and data may support it as well. A Huron Legal analysis of
historic billing records revealed that throughout the five-year
period 2007-2011, law firms billed an increasing proportion
of partner hours relative to other timekeepers.9 While use
of more experienced resources is certainly more efficient
for more complex work, as an overall trend it reflects a shift
of work to timekeepers who are typically billed at a higher
rate than others, which is not necessarily in the clients’ best
interest.
General counsel want different service delivery
models
General counsel want their law firms and other legal
service providers to offer their services differently. This may
mean different fee structures or different ways of staffing,
delivering services, or sharing knowledge, but regardless,
the new model must support the general counsel’s
overriding priorities of cost control balanced against risk
management.
Many law firms seem to be missing the point about their
clients’ views on fees. In a recent study, almost half of the
managing partners surveyed were concerned that clients
will continue to push for discounted fees.10 In fact, it is quite
likely that their clients will continue to push for lower fees,11
but merely “discounting” fees will never resolve the inherent
conflict in a way that is beneficial to both law departments
and law firms.
The right price for the right work
There is an inherent conflict between a general counsel’s
goal to obtain the best business outcome for legal matters
at the lowest cost and a law firm’s goal to increase profits,
when doing so depends on billing more hours or raising
hourly rates. Of course, general counsel recognize that all
businesses, including law firms, must make a profit but,
given the pressures they currently face, getting “the most
bang for the buck” is an imperative. This is not a new
concept. Law departments have been telling law firms for a
number of years that they must change how they operate.
Initiatives such as the Association of Corporate Counsel’s
Value Challenge, for example, were designed to promote
dialog between outside and inside counsel to reconnect the
value and cost of legal services.7
A different value proposition
To be successful in the long term, law firms must reevaluate
how they work and the way they charge for it to develop
models that balance their clients’ needs with their own need
to make a profit. This may require a fundamental shift in
how law firms think of themselves – from subject matter
experts who must do everything possible to address the
legal issue presented, to service providers who must give
the clients what they actually want. One general counsel
recently told a group of Huron Legal consultants that when
he hires outside counsel, he looks at it as a business-tobusiness transaction. He is not necessarily looking for the
best lawyer or the best legal advice – he is looking for the
best value, which includes a balance of price and quality.
He is not alone in this view. Law departments continue
to refine how they choose and manage outside counsel:
consolidating the work to a manageable number of firms;
matching the specific work with the best firm for that work,
whether based on nature of the work, jurisdiction, or other
matters; and even managing more closely how the firms
perform the work.
Unfortunately, many general counsel do not believe law
firms are getting the message. According to one survey,
while general counsel are putting pressure on law firms to
change their value proposition, they “continue to express
deep skepticism about law firms’ willingness to change their
7
See http://www.acc.com/valuechallenge/about/index.cfm.
8
2012 Chief Legal Officer Survey (Altman Weil) at ii, 20-21.
Huron Legal and TyMetrix Legal Analytics, The IMPACT® Analysis Series:
Staffing Allocation (June 2012) at vii, 3.
9
Law firm managing partners confident about economy, concerned about
discount pressure InsideCounsel (March 19, 2013). available at http://www.
insidecounsel.com/2013/03/19/law-firm-managing-partners-confidentabout-economy?eNL=5148913bca9f808b030000fd&utm_source=ic&utm_
medium=email&utm_campaign=icscoopenews&_LID=99979843, citing Citi
Private Bank Law Watch, Managing Partner Confidence Index.
10
Law firms that work with their clients to determine
clients’ real needs and plan how to do and price the work
accordingly will have an edge over their competitors.
History can be a good starting point for this process. Law
firms can review staffing, resolution time, and other data
regarding similar matters. With this knowledge, they can
look for efficiencies in how work is performed and then
According to one survey, most common among the law firm service
improvements CLOs said they’d like to see were greater cost reduction,
non-hourly based pricing structures, more efficient project management, and
improved budget forecasting. 2012 Chief Legal Officer Survey (Altman Weil)
at 23.
11
3
share the cost benefit of those efficiencies with their
clients. This might mean developing specialty teams,
developing staffing models so that the right level work is
assigned to the right level resources for particular types
of matters, outsourcing aspects of the work when it is
appropriate and cost-effective to do so, or making use
of past experience and work product through effective
knowledge management. Because an understanding of
the factors that went into past representations can help a
firm identify reasonable risk parameters, law firms can use
the same history to develop alternative fee arrangements
such as fixed fees with or without collars, capped fees,
and other creative alternatives. They can make longterm, sustainable changes to their business models and
how they deliver services. Fortunately, there are some
progressive firms that are working to make these changes,
and hopefully others will follow their lead.
When law firms take these steps proactively rather than
waiting for their clients to ask or “pressure them for
discounted fees,” they demonstrate not only that they
understand their clients’ challenges but, perhaps more
importantly, that they understand their own operations and
have made them as efficient as possible.
The continuing importance of relationships
It has been suggested that when firms are heavily
focused on reducing fees and lowering cost, the
relationship aspect of the old model gets lost and firms
become reluctant to provide service or advice that has
not been directly solicited. This does not have to be and
should not be the case. General counsel want law firms
that understand their industries and their individual
businesses.12 When law firms develop a strong grasp of
their own business operations and are able to confidently
offer different service delivery models without fearing
financial disaster, they are better positioned to secure
long-term business from and build stronger, more trusting
12
partnerships with their clients. Preferred provider panels
and similar structures where companies rely on a relatively
small number of firms for the majority of their work offer
law firms the opportunity to gain in-depth knowledge of
their clients’ businesses, including their risk tolerances
and pain points so that they are better positioned to know
when to offer advice. Many law departments also promote
cooperation and information-sharing among their outside
counsel networks. In the most symbiotic relationships,
law firms become essentially an extension of the law
departments they serve, with the combined legal function
being stronger than its parts.
Other legal service providers
The message is similar for other legal service providers,
although the history is not as long and there are a range of
available pricing structures. Those who develop innovative
pricing and service delivery models, understand their
clients’ needs, and deliver value will be most successful.
Conclusion
The time has come for a real transformation in the legal
industry. The second article in this two-part series will
discuss how that transformation has begun in general
counsel’s relationships with their clients and in their law
departments. As for external legal service providers,
however, for far too long most changes have been
incremental and generally not sustainable. The legal
industry should forge a new supply chain with new service
delivery models and new financial and risk-sharing
models, without forfeiting the relationship of the old
models. As the major buyers of legal services, general
counsel are in a position to drive this transformation and
they can do so with the help of progressive law firms and
other legal service providers.
See Id. at 24 regarding factors influencing law firm selection.
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Huron Legal provides advisory and business services to assist law departments and law firms to enhance organizational effectiveness and reduce
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