How To Tame The Legal Spending Behemoth
2) Unique/Discrete Issue: Is the matter related to something for which there is no in-house capability, or is it a distinct area of expertise for which you generally rely on outside counsel?
3) Jurisdictional Issue: Is it a unique jurisdictional issue for which the company cannot practically maintain internal capability?
Although some companies aim to cut back on the use of outside counsel, many recognize the need for specialized expertise and hope to hold costs flat, or may even find it cost-effective in the long run to rely more on outside counsel where needed.
Fealing observes, "If we can effectively bring more legal work in-house we will, but we also recognize that we are an extremely lean organization. So we have to outsource a good deal of work to our counsel, and that will likely become more of a factor as we become increasingly global. As a smaller organization of a dozen lawyers, we need the resources of a law firm to help in matters like anticorruption and privacy worldwide. You cannot do some of these things on your own."
As a result of the ability to focus on the needed few firms and drive additional revenue to them, relationships between client and outside counsel can deepen, adding value for the client. "We now have closer ties with those firms, so that we can pick up the phone and talk to them at any time," says Fealing.
Make sure you're not pennywise and pound-foolish: The spending on outside counsel is completely justifiable if it requires expertise not found in-house, and the work can be done more effectively and efficiently.
"There are going to be some relationships you are obviously going to want to keep for big bet-the-company matters. But there are others where you say, 'Hey, it's really not that critical that we have that relationship and pay that kind of money.' That's where you are willing to consider alternatives," says Kirkland Hicks, general counsel of Towers Watson.
When seeking to build relationships with law firms, look beyond the usual suspects—that is, the large firms that have customarily served large corporations and may still balk at alternative fee arrangements. "General counsel generally don't think the traditional big law firm model is sustainable in the long run," says Hicks. "We're seeing partners leave some big law firms for other firms that may not be in the same tier, but they still practice law at a very high level and charge their clients a more reasonable rate." There are organizations that match corporate legal departments with experienced but more reasonable outside counsel alternatives, often beyond the big cities. These firms are vetted and may prove a cost-effective solution for more generic work, where there is not a premium on institutional knowledge. "It's possible to get very good lawyers who are up to speed on the issues without paying New York rates," says Hicks. MacCarthy adds, "In the more commodity areas, we have found that flat fees work well,"
Another practice that further leverages the relationship between corporate legal departments and law firms is "secondment," and it can be a win/win: A seconded lawyer, whose primary employer is a law firm, may work on site at a client for a reduced rate for a brief period, or even many months. It enables the lawyer a more in-depth understanding of the client, gives the law firm a more entrenched relationship, and provides the client a savings in fees and the solution to a staff shortage.
According to Fealing, ITT has made effective use of secondment from one of its law firms for a corporate secretary role. The attorney worked out of ITT's offices for a number of months, and remains the go-to when coordinating legal work with partners at her firm.