In-House Departments Won't 'Double Dip'

While the credit and debt crises and the political bickering in Washington have sent markets onto yet another roller coaster ride (and disgusted most of us) -- and on the heels of an interesting article in the Wall Street Journal on in-house hiring practices -- it’s worth revisiting the impact the last recession had on the legal marketplace – all of three years ago.

At that time (2008), law firms were just truly beginning to feel the burn of hiring masses of high-paid associates – the going rate in large markets was $160,000 for a first-year, but much of the work first-years were expected to handle (see: e-discovery) was already going away. When the economy’s bubble burst, the effect was quick and uncompromising: corporations instituted immediate hiring freezes, put off litigation and other large and expensive projects as long as possible, and there were dramatic reductions in legal spend. That was the whammy that sent giant and mid-size firms alike into a state of layoffs, mergers and dissolutions, as well as hourly rate reductions… which, of course, was soon followed by masses of news releases about alternative fee arrangements and value pricing for clients. It was what I have heard some refer to as the “we get it, you need to cut costs, trust us we can do it” age.

The reason for much of this was the movement by corporate legal departments to flesh out internal processes while operating on a very lean budget, which resulted in the identification of resources that could produce good work at a reasonable cost. In the fall of 2008, I spent many hours with our corporate clients working on alternatives to laying off in-house staff, and those sessions created a number of innovations in how some of the work gets done. Many of those innovations have “grown up” and will help those legal departments weather whatever storm may come their way in 2011 and beyond.  

The results of this maturation process have been outstanding in many instances – better communications, workflows and use of resources, a better work product, close partnerships with service providers, a more strategic use of outside counsel, and, ultimately, millions of dollars in savings. The reason: they (and we) gained a better understanding of the value of their legal work and how to appropriately allocate it, and business decisions -- not just legal decisions -- became a vital criteria for structuring work. Many corporations have now permanently instilled these processes and philosophies into their everyday practice and are well prepared to face a difficult economic environment if it comes again. While it might not all be caviar and champagne, they aren’t going to have as bumpy of a road when they had to lay down the law with their legal service providers in 2008. This is good news for everyone.

If anything, a double dip recession will only solidify that legal work is handled differently now than it was in 2008. It will prompt some corporations who might not have been pushed over the edge three years ago to further explore and develop new ways of handling their matters from top to bottom -- and there are plenty of existing frameworks to draw inspriation from. The values are a lot more defined. But most relevant to this post, legal work is a collaborative process and there are partners throughout the lifecycle of all legal services that can be effective, whether it be a piece of litigation, an acquisition or everyday contracts negotiation… and it’s clear that it's no longer a world dependent on one partner and there is no lone, single way of delivering legal services.

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