Corporate GCs are under pressure to pay more attention to their spending on outside counsel, and they are looking at ways to increase the value of those relationships
In today’s rapidly evolving legal landscape, many General Counsel (GCs) and corporate legal departments face a myriad of challenges. One of the enduring problems is cost control. Since outside counsel is often one of the biggest areas of spend for corporate legal teams, this article will take an objective look at how to increase the value that legal depts receive from this spend and how to work more effectively with law firms.
The state of relationships with outside counsel
Every year, we gather hundreds of feedback ratings from GCs about how well law firms are delivering service and managing the relationship. More than three quarters (77%) gave a score lower than 10 out of 10. Almost half rated 8 or lower.
The results reveal four main areas of discontent:
- Value and innovation — The biggest area for improvement is value, especially rates which accounts for more than one quarter (29%) of all criticisms we heard. Efficiency, predictability, and transparency are key to better pricing models that clients feel are fair and reasonable.
- Quality —Almost one in four (23%) criticized the quality of work from outside counsel. Here, inconsistency across people and product quality is the main frustration while some are looking for more breadth and depth from their firms.
- Service — The top two issues are responsiveness and communication plus speed more broadly – all of which can be greatly enhanced through robust project management and the involvement of legal operations professionals.
- Close-to-client factors — This category encompasses how valued clients feel within the relationship and the effort they feel their law firms put into understanding the client’s business and delivering practical and commercially oriented advice tailored to clients’ needs.
Effective relationships: A different perspective
On the flip side, when the relationship between in-house legal teams and outside counsel are highly effective — meaning the client is extremely likely to recommend the firm — a different pattern emerges.
Here, we take the view from those senior in-house counsel who are prepared to recommend their firm wholeheartedly by giving a 9 or 10 out of 10 for likelihood to recommend the firm. This group are referred to as promoters and reveal a lot about the hallmarks of a strong and successful relationship by explaining why they would recommend these firms.
These relationships are characterized by several key attributes:
- High-quality product — Expertise is where firms largely get it right, consistently delivering high-quality work, in line with – or exceeding – the client’s expectations.
- Business alignment – in the best relationships, legal advice is aligned with the client’s business goals and tailored to their specific needs. All the close to client factors we heard about earlier come into play here plus trust appears in the list now – a hallmark of the most successful relationships which stems from good communication in both directions
- Speedy service — Legal services are provided promptly; communication is great, and the client doesn’t need to chase for updates or answers.
- Value – In highly effective relationships, much less time is spent worrying about rates and invoices – the emphasis is on high levels of efficiency and pain-free billing.
A blueprint for best practices
Over 10 years of research, asking senior in-house counsel how satisfied they are with their law firms and how they could improve reveals a pattern of inertia: this same set of issues has persisted over the years. There have been small shifts to the priority order, such as an increasing emphasis on responsiveness as the expectation for speed has grown, and in some years price sensitivity has been more acute than in others but the set of criticisms remains the same.
The consistency of these critical issues highlights the need for innovative solutions. It is time for new solutions to solve old problems. Legal departments and their law firms need to think differently.
Every healthy relationship is a two-way street which requires both sides to contribute to making it better and that goes for feedback too. While many law firms today have formal client listening programs, they rarely reach every client. For corporate legal departments, which allocate significant portions of their time and budget to working with outside counsel, there is an opportunity to proactively identify improvements to yield better outcomes and stronger partnerships.
It’s important for GCs to think about any of these areas in terms of the question, What can be done differently? What change needs to happen to avoid these same frustrations getting in the way of great work? What systems need to be put in place so every interaction can be highly effective?
This includes understanding what the in-house team does that helps or hinders external lawyers from delivering the desired result. I often hear law firms say they are nervous to share constructive feedback with clients in case they damage the relationship. In fact, it should make it stronger. Our research shows that formal feedback yields a significantly higher level of satisfaction with law firms.
The best feedback involves a two-step process: first is to capture (and listen to) feedback from stakeholders in the relationship and second is to commit to acting on it.
A 360-degree feedback process can inform what systems and processes need to be in place for every interaction with law firms to mirror the attributes of highly effective relationships. This includes fostering trust through transparent and open communication, aligning legal services with clients’ business goals, and addressing pricing and efficiency concerns.
While achieving this level of relationship may seem like blue-sky thinking, it’s a goal worth pursuing. By continually striving to enhance relationships between in-house legal teams and their outside counsel, a legal landscape can be created in which both parties thrive and deliver exceptional value to their organizations.
In highly effective relationships, the value proposition centers on quality outcomes, aligned to the business, delivered on time and fees take up much less energy. How do we create relationships that work like this? For corporate GCs, thinking differently about the status quo is the first step; talking about it to their outside law firms is the next.