5 KEY TAKEAWAYS
1. Nearly Three-Quarters of In-House Counsel Are “Concerned” About Overspending on Outside Counsel
and More Than a Quarter of all In-House Counsel surveyed are “Very” Concerned or “Extremely Concerned” About Overspending
Our questions about overspending clearly touched a nerve with many in-house counsel (Q6).
Not only did nearly three-quarters (73%) of respondents have at least some concern that their company was overspending on outside counsel, more than one-quarter (26%) of in-house counsel were “very concerned” or “extremely concerned” about overspending.
Respondents' comments underscored these concerns. Typical comments included:
“We are not getting value for money”
“[We’re] paying a lot, not getting closure”
“[Outside firms take] excessive time to complete tasks”
These findings should ring some alarm bells among General Counsel and other legal department managers. Statistically speaking, there is a very high likelihood that your outside counsel are not delivering sufficient value for your outside legal spending. After all, in-house counsel are part of a business, and any business should be concerned when a significant segment of vendors is not delivering value.
2. Over One-Half of Legal Departments Are Prioritizing Reducing Legal Spending as a 2020 Initiative
Our survey found that over one-half (55%) of in-house counsel surveyed report that reducing outside legal spending is a priority this year (Q7).
If you have not targeted the reduction of legal spending as a priority in 2020, you might want to consider joining more than half of your peers who are prioritizing this issue.
Typical comments included:
“We are not getting value for money”
3. Nearly Three-Quarters of In-House Counsel Would to Track Outside Counsel Spending Metrics, But Most Currently Lack Tools to Do So
Nearly three-quarters (72%) of in-house counsel surveyed believe that percentage and dollar reductions in outside legal spending would be a valuable metric for their legal department to track (Q8).
However, our follow-up questions revealed that the great majority (73%) of legal departments are not in a position to do so, since they lack any system for managing outside counsel spending (Q9).
A clear takeaway for in-house counsel is that they should educate themselves on the solutions currently available for managing and reducing outside legal spending. Working in a department traditionally viewed as a “cost center,” in-house counsel should also consider how appreciative their management might be if the legal department came up with new ways to save money, rather than spend money.
A nice question to ponder: how might your legal department use the resulting savings?
4. Among In-House Counsel Who Use Legal Billing Software, Four-Fifths Find The Tools At Least Somewhat Effective in Reducing Legal Spending — Though Significant Caveats and Concerns Remain
Zeroing in on the relative minority of legal departments (24%) which do use legal billing software, fully four-fifths (80%) of in-house counsel find the software to be at least “somewhat” effective in reducing legal spending (Q10).
This is an encouraging sign and an indication that most, if not all, legal department managers should investigate the software billing tools that are available.
However, digging just a bit deeper makes it clear that the experience of in-house lawyers with legal billing software is a decidedly mixed bag. Barely 1 in 10 (11%) in-house lawyers who use legal billing software find theirs to be “very” effective, while a large majority (68%) find them only “somewhat” effective.
Even more concerning, a significant minority (21%) complain that their legal billing management software is simply “not effective” — in significant part due to the fact that the software generates too many “false positives” (apparent billing errors which turn out to be typos or only minor discrepancies) while simultaneously failing to catch significant overbilling issues (“false negatives”) by outside counsel.
A key takeaway here is that while legal departments should, by all means, research available tools to manage outside legal spending, they should carefully evaluate the available products and services — since our survey results show clearly that these solutions are all created equal and, unfortunately, some even seem to raise more issues than they resolve.
A nice question to ponder:
How might your legal department use the resulting savings?
5. Seven out of Ten In-House Counsel Would Welcome a Third-Party Legal Bill Review Solution
70% of in-house counsel (among those who do not already use such a service) would welcome a third-party bill review vendor, so long as the service would not significantly impact their legal budget and would ease the burden on their in-house legal team (Q14).
These findings are summarized in this pie chart:
If you do not use a third party legal bill review vendor, how do you feel about the possibility? (Select the choice that fits best)
One question the authors sometimes hear from in-house counsel is “would introducing a third-party legal bill review solution harm our relationship with outside counsel?” Encouragingly, our survey findings indicate that the vast majority of your in-house colleagues do not share this concern. In fact, over four-fifths of in-house counsel are not concerned about the potential relationship impact and nearly 50% even believe that their outside firms will “come to accept the idea” — especially if legal bill review would reassure clients that they are getting real value for their legal spending (Q15).
Based on these survey findings, the key takeaways are that:
(1) in-house counsel should not be unduly worried about the impact of legal bill review services on their relationship with outside law firms; and
(2) in-house counsel should be focused on evaluating the specific benefits such services can provide (in terms of both “hard cost” savings via lower legal bills, and “soft cost” savings in reducing in-house counsel stress and time spent reviewing bills).