In recent years, corporations have adjusted to the economy’s “new normal” with leaner budgets driven by more critical and more selective purchasing decisions. This same sentiment extends to corporate legal departments, whose flat budgets face outsource-versus-insource decisions, and for legal service clients, which seek greater value from legal resources. To put it simply, everyone needs to do more with less.

At the 2015 Legal Marketing Association (LMA) annual meeting in San Diego, the general counsel panel shared Association of Corporate Counsel (ACC) data and the perspectives of senior in-house counsel on how legal services purchasing decisions are made and external resources are managed.        

The Insourcing Trend Continues

With budgets remaining flat, GCs stressed the “more with less” imperative. They regularly ask themselves if work needs to be done inside, a paralegal can oversee it or technology can do it. For example, M&A, daily transactional, and labor and employment work are areas usually done in-house. Panelists agreed that the pendulum for those tasks is not likely to swing back to outsourcing for the foreseeable future. Instead, the pronounced trend is more insourcing.

For long-term, mutually beneficial relationships, it is important for both the company and the law firm to make sure that legal work is being done at the right level, with appropriate resources and technology. According to the GC panel, the most powerful driver is marketing that showcases value, pricing and staffing that gets the desired outcomes. It is more important than ever to see internal realization metrics – or how the billing is accumulating – to keep management apprised of progress and to prevent them from being blindsided.

First Impressions Matter

The first thing a GC does when weighing one law firm against another is to look at websites and blogs to gain an understanding of a law firm’s values, particularly which values are in line with those of the GC’s company. Any perceived potential clash of cultures will zero out a firm’s chances. The panel also agreed that networking continues to be important, as well as time spent with a practice group owner. If your law firm’s blog or website sends the wrong message, though, you may never be invited to the party.

Tips for Responding to RFPs

The GC panel agreed that unbundling services is a trend and that, to win RFPs, it is vital to focus exclusively on questions the RFP asks, not questions a competing law firm wants to be asked. Law firms that answered questions they were not asked usually didn’t make it to the next round and were met with disinterest.

In one case mentioned, a firm began highlighting its labor practice but then segued to its more profitable M&A practice. It was not invited back; all the GC wanted to hear about was labor. Brevity in answering questions is also recommended, much as with interrogatories.

Corporate procurement staffs are more involved than ever, especially when multiple firms compete, so it’s important for a competing law firm to understand the ownership structure and to respect the role each participant in the decision-making process plays. Who owns the decision – is it procurement, a committee, the GC or a combination of all of them? If so, can you determine the balance between them? Asking questions about how the decision is made is not only appropriate, it is essential.

Advice for Winning and Retaining Business

The GC panel also provided some targeted suggestions on winning and retaining their business. Some of their collective advice includes: 

  • Be honest about pricing, and show the data.
  • Continuity – do more to retain key attorneys working for the company.
  • Help GCs do their jobs better. 
  • Offer ideas, tools and solutions.
  • Offer to partner with a company on something notable, such as a pro bono project.

Moving to Flat-Fee Agreements Removes Tension

GCs expect fair value for services rendered. They don’t want to squeeze every dollar out of a law firm, but they do want to know why and for what they’re being charged

Moving to flat-fee agreements removes the tension in the attorney-client relationship. Perhaps that’s why, according to the panel, moving to value-based fees is becoming a trend. Such fee arrangements also give the company an opportunity to do preventive work.

Shift from Large to Mid-Market Firms

Half of corporate GCs use a manageable network of 10 or fewer firms to save costs. In fact, 95 percent of new matters went to existing firms. One of the ways corporations made sure work stayed with current firms was by requiring a GC’s approval to go outside the network. 

GCs also leverage their relationships with outside counsel to negotiate flat-fee pricing. As panelists mentioned, GCs told firms that, if the firms held flat on pricing, they’d stay with those firms. Otherwise, they’d have to go through an RFP process, which potentially could knock the law firm off the list of in-network firms. Not surprisingly, most law firms agree to hold pricing flat.

The list of preferred providers also always includes two value firms, with panelists noting that – for example – comparing a New York firm to a Midwest firm shows a significant price differential.

How Do GCs Evaluate Firms?

GCs manage and evaluate firms by meeting quarterly to ensure that law firms maintain a diversity ratio and appropriate division of work. They also will determine whether or not a matter was handled successfully and if it receives discounts and credits at the end of the year.

In addition, GCs have after-action assessments twice a year and assess any value-added services they might receive from the firm, as well as any pro bono work or partnerships. For example, on tax matters, they might evaluate the time it took and how much had to be paid to calculate a success fee.

Succeeding in the “New Normal”

Clients are people, whether a corporate executive, in-house counsel or business owner, and they respond to the same realities, mandates and incentives as everybody else. Learn what those dynamics are in every encounter and embrace professionalism and honest, open communications, and you will win and retain business in the “new normal” and well beyond.

Leave a comment or contact Vivian Hood at vhood@jaffepr.com.