Top 10 ways to manage external counsel costs
New global research has identified the best strategies for law departments to control outside counsel spending.
Thomson Reuters recently released its 2021 State of Corporate Law Departments Report, which compiles responses from 223 law departments across the globe about the unique challenges faced by departments in 2020 and how best those in-house teams can move forward.
Lawyers Weekly reported that, according to the report, law departments have pain points that have the potential to act as catalysts to not only think differently moving forward, but separate themselves from the pack and better showcase their value and effectiveness. In short, Thomson Reuters posited, law departments are “uniquely positioned to optimise value” moving forward.
Elsewhere in the report, Thomson Reuters noted that external counsel management was “the top priority cited” for law departments, which is unsurprising, it noted, “given that those costs represent an average 60 per cent of a department’s total budget”.
The 10 most effective ways to manage such external costs as identified by law departments, the report detailed, were:
- General enforcement of billing guidelines and reduction of invoice fees and expenses (as cited by 81 per cent of respondents to the survey);
- Standard discounts on timekeeper rate cards (53 per cent);
- Regular review of budgets and comparison to actual spending on high-cost matters (51 per cent);
- Reduction of invoice expenses (50 per cent);
- Reduction of timekeeper rate increases (49 per cent);
- Volume discount (45 per cent);
- Requiring law firm matter budgets (42 per cent);
- Blended hourly rates (35 per cent);
- Fixed/flat fees, with amount set at matter level (34 per cent); and
- Having preferred vendors or a panel program (28 per cent).
While spending on external counsel is important to manage, Thomson Reuters wrote, the performance of law firm providers – and the value that they offer – is even more critical, it noted.
“Given the effectiveness of enforcing billing guidelines as a measure in reducing outside counsel costs, law departments should consider using preferred vendor programs or panels as a way of increasing the value added, rather than simply as a way to further reduce cost,” it suggested.
Moreover, it advised overcoming or reducing communication issues: “Typical breakdown areas between law departments and external counsel are often caused by poor communication.”
More broadly, Thomson Reuters concluded, law department leaders should be rethinking “how they train their people and be more structured in the ways they collaborate, allocate work and build relationships”.
“Leaders also can use the lessons of the pandemic to design a department that fosters relationships with outside counsel and other legal service suppliers that are more efficient, healthier, and more focused on mutually beneficial outcomes,” it said.