The inability of law departments to offer a fast turnaround to their clients was a recurring theme among respondents to the Corporate Legal Times/PeerPoint Technologies survey of chief executive officers (CEOs) and chief financial officers (CFOs).
The questionnaire, conducted in conjunction with the American Management Association, surveyed 114 executives.
When asked how in-house legal departments could provide better help in running the company, the message was clear. “Be more timely,” wrote the vice president of a railroad company. “[The legal department is] very slow in providing preventative advice.”
The CEO of a chemicals company also believed there was a need for “faster reaction time”. And a “quicker response” is what the president of a materials-handling company wanted. “Be proactive,” was that executive’s message to the company’s legal department.
About 43% of top corporate executives were only ‘somewhat satisfied’ with the work of their company’s legal department – while 7.1% said they were ‘dissatisfied’.
But although corporate counsel came under fire, outside lawyers fared even worse. Only 25.9% of senior executives said they were ‘completely satisfied’ with their company’s outside counsel – while 71.4% said they were ‘somewhat satisfied’.
At one end of the scale, the CFO of a pension-fund management company wrote: “[The] general counsel is a strategic thinker and intensely in tune with the needs of constituents. This has enabled us to develop plans sensitive to, but not overpowered by, legal issues.” But at the other extreme, when asked to describe the legal department’s contributions to the company’s strategic planning and goals, the CFO of one manufacturing company simply wrote: “None”.
The cost of running the department was another issue that the survey studied. Only 12.4% of respondents said that the legal department’s budget was a ‘very important’ measure of overall value – while 76.1% said it was ‘somewhat important’.
Having said that, respondents were evenly split when asked to judge their satisfaction with the internal cost of legal services. Forty-five per cent described themselves as ‘completely satisfied’ and 45% described themselves as ‘somewhat satisfied’ with the law department’s cost. Almost 10% said they were ‘dissatisfied’.
Law firms bore the brunt of respondents’ dissatisfaction. Only 14.4% of respondents said they were ‘completely satisfied’ with the cost of their company’s outside counsel and 21.4% said they were ‘dissatisfied’ with the cost of outside counsel. About 64% said they were ‘somewhat satisfied’ with outside counsel costs.
“Internal costs are not an issue to CEOs,” believes W Marc Schwartz, president of PeerPoint Technologies, “but responsiveness is an issue. Outside legal cost is an issue, and that’s consistent with what the GCs would say.”
Schwartz says that even though the issue of cost is less important to CEOs in relation to other items in the survey, the issue of cost in itself is important.
“Cost control will continue to be an important issue to GCs,” he says. “But I would recommend that they continue to focus on the balancing of internal and external costs, and on managing those costs. Their clients want responsive service, they want proactive service – and they want it at a reasonable price.”
Preventative work important but falls short
Not surprisingly, 93.8% of respondents said the in-house department’s quality of work was a very important measurement of value and nearly 90% said that responsiveness was a very important factor.
But only 13.3% of respondents gave their in-house department’s performance an ‘A’ grade when it came to offering fast turnaround. More than 20.4% of respondents awarded their department’s responsiveness a ‘D’ or ‘F’ performance. (On average, legal departments earned just a ‘C-plus’ in this area.)
Only 37.8% of respondents said they were ‘completely satisfied’ with their department’s preventive legal counselling. (54.1% said they were ‘somewhat satisfied’, and 8.1% were ‘dissatisfied’.)
But when satisfied with an in-house department’s efforts, respondents often listed preventative counselling among the department’s most significant contributions to corporate strategic planning and goals and as a valuable aid to decision-making.
The vice president of a consumer goods company wrote that the department’s contributions include identification of: “trend[s] and expected changes in legislation, efforts to reduce short-term and long-term litigation liability [and the] development of prevention programmes.”
The CEO of a computer manufacturer said that one of his legal department’s most valuable contributions to decision-making was that the department “anticipates potential problems”. The president of a financial company cited the value of the legal department’s proactive counselling as one of its most significant contributions.
And the CEO of a distribution company held in high regard the legal department’s “pro-active training on contract and employment laws to line managers and supervisors”.
On average, respondents gave the legal function a ‘B-minus’ for its creative and effective preventive legal advice. In the region of 20% earned an ‘A’ grade, 44.7% earned a ‘B’ and 25.4% earned a ‘C’. Only 2.6% of respondents gave their departments an ‘F’ grading.
Preventive counselling was deemed by 59.3% of respondents to be a very ‘important measurement’ of the legal department’s value, while 40.7% said it was ‘somewhat important’.
