Legal News

GCs, in Survey, Say Firms Are Bluffing When It Comes to Service, Cost

By Brian Harris

By Gina Passarella
Of the Legal Staff

For all the talk about change in the legal industry, corporate counsel are finding it hard to believe that outside firms are serious about rethinking their approach to client service and billing.

In a survey released Tuesday by Altman Weil, 75 percent of the responding chief legal officers rated their law firms between zero to four on a 10-point scale, indicating their opinion that firms had little or no interest in change. Only 5 percent of the respondents ranked their outside law firms between eight to 10, with 20 percent falling somewhere in the middle.

?This is a dramatic vote of no confidence from chief legal officers,? Altman Weil Principal Daniel J. DiLucchio Jr. said in a statement. ?Either many law firms just don?t understand that clients today expect greater value and predictability in staffing and pricing legal work, or firms are failing to adequately communicate their understanding and willingness to make real change. In either case, it?s a big problem.?

In terms of how much pressure chief legal officers said they were putting on firms to change their value proposition, the results varied. About 25 percent rated the pressure they were placing on outside firms as high, 37 percent put it at a mid-range and 38 percent said their pressure on outside law firms was low, according to the survey.

One type of change that is accelerating is the use of non-hourly billing.

For 2008, 73 percent of respondents said 1 to 10 percent of their law firm fees were non-hourly with 27 percent saying more than 10 percent were non-hourly. In 2009, 57 percent of departments expect to pay between 1 to 10 percent in non-hourly billing and 43 percent will spend more than 10 percent of their budgets on such arrangements.

The survey also showed corporate counsel will decrease the use of outside counsel in the next year and will reduce their in-house staff size.

Forty percent of respondents, up from 26 percent last year, said they would give less work to outside firms this year. Since the survey was first conducted in 2000, that number had never risen above 20 percent until last year.

Twenty-seven percent of the respondents have already cut the size of their law department and another 9 percent said they could do so by the end of the year. Other types of lawyers and legal staff have been cut as well, the survey showed. Fifteen percent of law departments cut contract lawyers, 21 percent have cut paralegals and 26 percent cut support staff.

?This combination of inside and outside reductions means not only that in-house lawyers will assume greater workloads, but also that chief legal officers will need to become more strategic about triaging work, allocating resources, and, in some cases, tolerating higher levels of risk,? DiLucchio said. ?And when they do hire outside counsel, you can bet that they will be shopping for value.?

The survey also found that the importance of price when hiring outside counsel decreased as the importance of the work goes up and there is a direct correlation between the importance of the firm?s capabilities and the importance of the matter. While that wasn?t surprising, DiLucchio said in the statement, he did find it surprising that CLOs said the importance of the relationship with the outside firm was the same regardless of whether the matter was commodity work or critical work.

Full post as published by The Legal Intelligencer Blog on June 30, 2009 (boomark / email).