Results from our first-ever in-house survey show that companies’ legal budgets have largely stayed the same or even increased while demand for external services has risen, debunking the myth that widespread cuts to legal budgets have forced general counsel (GC) to instruct law firms less.
Canvassing the views of more than 100 in-house lawyers worldwide, the survey showed that 50% of respondents’ legal services budgets remained unchanged in the last year, while 44% said that demand for external legal services had increased over the same period. This was despite the fact that 67% said their companies had a policy of retaining more matters in-house.
Surprisingly, while value for money was a clear priority for in-house counsel in seeking external legal advice, flexibility of billing practices was not. ‘Quality of legal advice’ was identified as the number one reason for choosing a law firm, while ‘flexibility of billing practices’ was only considered an important factor in law firm selection by two-fifths of respondents.
As regards billing practices, it is clear from the survey that suggestions that the hourly billing rate is dying out are premature. 60% of in-house specialists surveyed said that they used hourly billing often.
‘We actually find that most general counsel are happiest with the hourly rate.’
Lisa Hart Shepherd, Acritas
Lisa Hart Shepherd, chief executive of legal market intelligence provider Acritas, said that its own research of clients on behalf of law firms supports this view. ‘We actually find that most general counsel are happiest with the hourly rate – it’s what they know and what they understand,’ she said.
Although 70% of respondents to the survey said that they used fixed fees often as well, Hart Shepherd said that GCs are showing a preference for hybrid fee arrangements, using fixed fees for straightforward matters, blended with capped or discounted hourly rates for more complex issues.
Elsewhere in the survey, overlawyering remains a persistent problem that in-house teams have to deal with regarding their external advisers. While 67% felt that their law firms handled their work at the appropriate level, a third still felt that their firms were either overloading associates on particular matters or worse, devoting partner time to matters that could be pushed lower down the food chain.
Feedback from respondents also showed a surprising ambivalence towards law firms’ international networks. Just 7% said that they used international/global law firms exclusively, with the overwhelming majority (63%) preferring to instruct a mixture of local and international firms. Over half of the in-house teams surveyed felt that law firms needed to keep a tighter rein on their international networks. This sentiment is unsurprising considering 35% said that they had received bad advice from the local office of an international firm.