Legal Expenditures, Value and the Three-Legged Stool Approach

Expenditures are always a spotlighted area, but especially so in this economic climate. When looking at the amount of money that some clients pay to have legal services performed, I often wonder: What do they get in return?

Companies pay millions of dollars annually for litigation services. Historically, a good result was the best a client could hope for. However, if an entity has to pay for litigation, a cost of doing business, then why not get something more than a result … why not start building processes so that they next time litigation presents itself the company can build upon what was done in the prior matter to cut costs moving forward? Processes are created, responses are stored, material is archived, knowledge is retained, the decision-making process is enhanced (and more reliable) … these are company assets that can be modified and improved moving forward without reinventing the wheel every time. Short term, heads of litigation are in a position to forecast or budget future litigation. Long term, the money spent on litigation actually creates assets that can consistently benefit the company. This is the mindset in our Litigation Support Division: What is truly in the best interest of the company? Is it a big matter or a small one? Because when we are all looking for value -- and what are we getting in return for the money paid – can we really afford simply to pay a significant amount of money and not create something that can save us money in the future?

A few weeks ago I met with a client, an attorney who is former GC of public company, who is now in charge of operations for several divisions, including legal. During the discussion we were talking about the need that every company has to continue to make budgetary cuts. This client has worked with Counsel On Call for several years and discussed how, based on his experience, this is where he sees the future of the in-house legal department: In-house attorneys, outside counsel and outsourced attorneys making up the legal team (the “three-legged stool approach” referenced by another client a few months ago). Some in-house leaders have seen the value of this approach for several years, but it is certainly becoming more mainstream in today’s business world.

Yet, when one says outsourced I still believe there is a caveat … are you building relationships with the outsourced attorneys? Are they part of your team? Counsel On Call attorneys choose to work with our company, this is the way they choose to practice law. They were with us before the economic downturn and will be with us when it passes. Thus, we have experienced and well-credentialed attorneys who work with the same client, in-house legal departments or law firms, for years. The cost savings are staggering and the value received is real – someone who knows you, your business, your issues, and possesses the skill to get the job done correctly, and who is available to work whenever you need. This value and flexibility makes them integral to the team’s success. The word “outsourced” doesn’t necessarily capture that sentiment – it’s almost a divisive word. But that spoke of the wheel is equally important when building a cohesive legal team with well-defined roles.

All of this being said, one of the most common questions I get is, “So, how does it work?” Many people simply don’t know where to begin, which is easy to understand. Labor is often the No. 1 expense for our clients, so it’s good to start by assigning value to that enormous expenditure:

  • What are you getting in exchange for the money paid?
  • What are your in-house attorneys doing? Is that a good use of their time based on the total amount being paid?
  • Could you have someone else do some of the lower-level work and free up your in-house attorneys to do more complex matters?
  • What are you paying outside counsel to do? Are you getting real value for the money paid?

To the last questions regarding outside counsel, often the answer is “yes,” but more often is it “sometimes.” The implication is that things can be done better, or more efficiently, or more cost-effectively. So once this bridge is crossed, it becomes a matter of shaping a new, collaborative approach between in-house counsel, outside counsel and Counsel On Call attorneys working together in the best interest of the client.

Assuming times stay tough for a while longer, in-house counsel aren’t simply going to be able to continue sending things to their traditional outside law firm for reasons like, “that is what we have always done” or “we just do not have the internal resources to get it done.” The stakes are too high and there are proven, high-quality and cost-effective ways to accomplish the same tasks. Most involve collaboration, and there are numerous “pain-free” ways to implement this approach. Like the client I was meeting with the other day, I too believe this is the future model for in-house legal departments (and, quite honestly, law firms ... but that’s a topic for another day).
 

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