There’s good news and bad news for law firms in our first-ever survey of in-house counsel this month. The good news is that clients need their external lawyers now more than ever. The bad news is they’ll need more effort from their firms for the same amount of money.
It’s symptomatic of the current zeitgeist. In every sector of the global economy, clients are demanding that suppliers give them more for less. Employees everywhere have to work twice as hard for the same pay, while bosses shrug their shoulders and proclaim: ‘It’s the economy, stupid.’ The legal profession has weathered the economic storm better than most industries but it certainly isn’t immune to this new normal.
General counsel throughout the world find themselves increasingly caught between a rock and a hard place. Legal budgets remain largely unchanged as finance directors keep a tighter hold on the purse strings, while workload has increased because companies have to face more and more regulatory and compliance issues.
As a result, GCs definitely have to be more proactive in managing their business. Although they would probably prefer to retain as much work in-house as possible, this is unfeasible in practice as many lack the expertise to handle complex regulatory matters. But they are demanding more bang for their buck these days. There are more savings to be made for clients by improving efficiency within law firms and it’s fairer on the law firms than asking them to reduce rates.
But how do firms improve this efficiency and offer better value? Firms must use their resources better and the main way of achieving this is to understand a client’s strategic priorities better so that a matter isn’t over-engineered or even under-engineered.
This isn’t rocket science but overlawyering happens because too many firms made too many associates up to partner during the boom years with little prospect of them ever becoming equity partners, and have too many associates waiting to take their place. But clients are often only referring work externally when the matter becomes complex and they can’t handle it in-house. If that’s the case then they want an experienced partner working on their matter, not an associate. No client wants to pay for someone to gain experience and that’s the nub of the problem. The firm that can find the right solution to overcome this problem will be in serious demand.