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The generation that lived through the Great Depression might now have an advantage when it comes to managing a budget for a corporate law department -- or anything else, for that matter -- according to Susan Hackett, general counsel and senior vice president for the Association of Corporate Counsel.

"The economic downturn is more evident everywhere I go. The impact can be seen and felt all around us: closing businesses, laid off workers, less abundance, less consumerism and an increased focus on family time," Hackett wrote in an essay published on the group's Web site. Recent hard times have reminded her of her mother's frugality, born of growing up in the Depression years.

"In the last few months, those of us who grew up with plenty and who have been living large have seen a glimpse of what was bred in many of our elder parents' bones: a healthy respect for prudence, a less ostentatious lifestyle," Hackett wrote. "We are stepping back from excess and more carefully shepherding our resources because we are worried about what might come. Those of us fortunate enough to enjoy relative security in our jobs, our homes and our daily routines cannot escape the unfortunate comparison to some of our neighbors and colleagues who have been harder hit."

In any budget review for an in-house lawyer, outside counsel costs land at the top of the list, said Hackett. "Empirically, we know that outside counsel costs constitute more than 50 percent of the budget for more than half of in-house departments. While many outside counsel are worth every penny they are paid, we all know there are many more who could be managed to spend a bit less for the work they perform, relative to the value of the services provided. Unless we manage toward those efficiencies, we're going to be caught spending our precious time in unproductive arguments over bills."

The GCs' GC offered a few frugality tips for consideration:

Don't ask for a discounted rate or a freeze on fees. Asking for a 10 percent to 20 percent rate decrease or a rate freeze doesn't usually get the job done. "I believe focusing on reducing outside lawyers' rates is the wrong way to go," Hackett said. While she said that law firm rates have "grown exponentially for several years without any corresponding increase or change in the value of the services," she suggested that lowering the rate would simply lead to more hours billed or more lawyers working on the case and ultimately the same total cost.

Set a budget based on what a project is worth. She suggested asking firms if they are willing to do projects for a stated price, and holding firm. She also suggested encouraging efficiency by promising not to ask for a discount or refund if the work is completed early. Such an approach may lead to lower costs. If not, it still would improve the predictability of the ultimate expense.

A project budget is not something that your outside counsel should prepare. It is something you must drive. GCs should set budgets based on the value of the work to the company. "If a project is only worth $50,000 to the client, what does it matter if the firm says it will cost $100,000? You either find another firm or settle out now for $40,000, and spend your time and effort on something that has a higher value."

A significant portion of the time spent with outside firms should be focused on evaluation and review of their services. "Most of us, however, do very little to tell our firms what they do that we like and what we want them to do differently. The closest we get is paying or disputing the bill," she said. "Keep in mind that cost overrun by law firms is often enabled by a lack of good in-house management."

Consider adopting evaluation/review criteria for both the in-house staff and the outside firm. "If you are going to tell internal counsel that they must hire firms and return results and rates within set parameters, you have to allow them to select firms that will accept and abide by those terms, which may mean firing more expensive and less flexible firms that you've worked with for years."

When you cannot afford to hire expertise or extra hands, depend on friends. Hackett suggests using the ACC network of resources, committee, chapters and online research. "There is intrinsic value to what you will derive from a conversation with an experienced in-house peer over the value of analysis of a legal problem that an outside firm might offer."

She also notes that for those in-house lawyers who are laid off -- if they are already members of ACC -- dues are waived until they find another job.

Hackett's essay is posted on Acc.com.

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