In CLO Survey, In-House Counsel Challenging Firms on Value, Service

Catherine Dunn

Corporate Counsel

2012-11-07 00:00:00.0

For in-house counsel who wish law firms were more gung-ho about delivering outside counsel value to legal departments, a new survey shows they aren't alone.

The 2012 Chief Legal Officer Survey [PDF] from Altman Weil polled more than 200 general counsel on how they approach cost control and efficiency, along with how they view their relationship with outside counsel. Asked how serious they think law firms are about changing their model for service and fees to provide greater value to clients, the respondents weren't impressed.

"CLOs continue to express deep skepticism about law firms' willingness to change their service delivery model, rating firms' seriousness about change at a median 3 on a 0 to 10 scale for the fourth year running," according to the report.

In turn, the CLOs identified a number of service improvements and innovations they'd like to see from outside counsel. Prompted to select three, their top picks included: greater cost reduction (according to 58.9 percent of respondents); non-hourly based pricing structures (53 percent); more efficient project management (53 percent); and improved budget forecasting (following closely with 52.4 percent). 

Top legal officers also said they have become more proactive on cost control matters during the past year. The vast majority of respondents—71.1 percent—said they negotiated with outside counsel for price reductions, and nearly 63 percent said they have improved the efficiency of internal procedures.

And it's not just about making adjustments to the existing in-house/outside counsel relationship—according to the survey, many in-house counsel have been moving work away from firms:

"In addition, 47 percent of law departments shifted work from law firms to in-house lawyer staff; 41 percent shifted law firm work to lower priced firms; and, 36 percent reduced the total amount of work sent to outside counsel. Ten percent of CLOs reported instituting a law firm convergence program."

Within legal departments, CLOs addressed internal costs not only by improving procedures, but also by shifting work to paralegal and other paraprofessionals (36 percent); using contract attorneys (35 percent); and outsourcing work to non-law-firm vendors (25 percent). 

In terms of staffing, many CLOs said they plan to hire more in-house attorneys: "Thirty-eight percent of law departments report that they plan to increase their in-house lawyer workforce in the next 12 months, compared to only 7 percent of departments that plan to decrease the number of in-house lawyers," the survey found. 

Outside lawyers should not count on being so lucky, going by the 2012 figures. While 34 percent of CLOs said they increased their outside counsel budget this past year, 39 percent said they decreased it. 

"This is the first time in three years that the survey has found more departments decreasing than increasing their law firm spend," the report's authors note.

So, outside counsel, as we've pointed out here and here, now might be a good time to tune into what in-house counsel say they want. CLOs included in the Altman Weil survey indicated that when it comes to what influences their hiring decisions, what matters most is "demonstrated understanding of your business/industry"—which rated a 9.6 on scale of 0 to 10. 

"Other highly rated influencers were referrals from colleagues, rated 8.6; personal contacts, rated 6.7; and written material demonstrating a lawyers' expertise, rated 6.1," according to the results. "Ten additional factors, including law firm websites, directory listings and social media activity, all rated under 5 on the 0 to 10 scale." 

See also: "What In-House Counsel Do (and Don't) Want from Outside Counsel," CorpCounsel, October 2012.