The competitive landscape for legal firms has always been challenging. But with legal research software replacing the work of associates and “alternative fee arrangements” lowering revenue, it can seem ever more difficult for law firms to get hired by clients in corporate legal departments.
But according to recent surveys, and The Lane Report’s recent discussion with local corporate attorneys, the outlook for companies hiring outside counsel is still showing growth.
According to a November 2016 survey of corporate legal counsel by HBR Consulting, in-house budgets are up 1 percent for 2017, and their average budgeted tech spend is up 2 percent in the areas of document management, legal spend analytics and contract management.
While in-house departments have better technology to track and analyze their legal documents and expenses, that doesn’t necessarily mean they need less from outside law firms. According to a global 2015 survey of 900 corporate lawyers published by Legal Week, 96 percent said the quality and expertise of their outside counsel was “very important,” with cost/billing practices coming in much further down the list of priorities. Of those surveyed, 26 percent said they were increasing their legal budget, 19 percent showed a decrease, while the rest planned to stay the same.
Meanwhile, companies are hiring people with law degrees for many positions, making legal expertise something valued even when a position isn’t required to actively practice. According to Dr. Jeffrey Standen, dean and professor of law at Northern Kentucky University, an influx of legally educated business leadership has helped stoke demand for legal services.
“It’s still a very competitive market for people with law degrees, but we have found that more and more students don’t want to actually practice law. They are using their JD to become corporate leaders. In many ways it’s supplanted the MBA,” Standen said. “And when you have people with legal backgrounds at the helms of companies, they are more likely to see the upcoming legal concerns, and to hire practicing lawyers to address them. It’s strengthening the profession, overall.”
Members of the legal profession in Cincinnati seemed to echo these sentiments when The Lane Report posed these questions:
How is the market changing for corporate counsel looking to hire outside help?
Mark Stall, vice president, Corporex, Covington: “In my opinion, demand for lawyers has risen along with law firm rates, which are up significantly over the last 10 to 15 years. It’s to be expected, really. Good lawyers want to be well compensated. But in Louisville and Northern Kentucky, corporate lawyers can expect to pay $300 to $500 an hour for a great lawyer, especially lawyers at the largest firms. That means we have to be more efficient with how we spend those dollars. Today, document reviews and due diligence searches are becoming more automated, so we really are now looking for lawyers with more industry-specific and specialized knowledge. We’re transitioning the way we look at the legal department in general from a cost center to a knowledge base. We’re value added for the business, and proactive. We need counsel who can help us achieve that.”
Laura Hinegardner, vice president/senior counsel at Great American Insurance, Cincinnati: “I think we all have seen those companies out there that are pressing their firms to lower rates. Many of them are using outside counsel interchangeably. But I can honestly say, at Great American we do just the opposite. We have cases taking place across the country for insurance disputes, or to represent our insured. So we are always looking for the best lawyers to represent us in that particular area, who have knowledge of the local system. We are also looking for lawyers with experience in the many divisions selling particular specialty policies, such as ocean marine insurance or equine insurance. Even as we end up hiring more people with law degrees in claims and other business areas, we find our needs for corporate legal help still continue to rise.”
Bill Hawkins, counsel at BakerHostetler, Cincinnati (former general counsel at Convergys): “The old model is, ‘I know what’s best.’ Outside counsel would come in, take over, and the bill would be what the bill would be. That’s changed. Corporate counselors are under more scrutiny than ever, and they are expected to show clear results and analytics for what they are doing. The client has to be treated as an equal and a partner, and the momentum of the relationship has to spring from that. Those firms that are getting good at providing that kind of service are the ones getting the business.”
How should a law firm configure its services to appeal to in-house counsel?
Hawkins: “At BakerHostetler, we have been very successful by providing our clients with the value-added education they need to do their jobs better. We have a great number of seminars and boot camps addressing issues in depth that are likely to affect our clients. And we have access to Practice of Law Institute programs that we often share with our clients as well. Corporate clients at our firm have also come to expect our regular client alerts, which updates them on news and precedent that might affect their industries.”
Stall: “A lot of firms try to bend themselves to every passing project. But rather than trying to chase every possible new business prospect, you’re really better off ‘going deep’ on the clients you have. Find ways to provide more value, and more industry knowledge. I also am a strong believer in having a project manager at your firm who can help shepherd projects through and coordinate billing. And if you want to know what your clients want and need from your firm, ask them. Doing a review every year is great for getting feedback on your business, and sparking a conversation that will lead to new projects in the coming year.
“There’s been a lot of industry chatter about ‘fixed fee’ arrangements. I think what corporate counsel wants here is not necessarily the lowest possible fees but a sense that they have their arms around their costs. So, if you’re working with a client, I would recommend proposing a fixed fee for a project. If you go over, discount down the overages. Link your success and your client’s success.”
Hinegardner: “What a corporate counsel really wants is no surprises. Personally, I don’t feel alternative fee arrangements are a quick fix. But ‘block billing’ for a certain fixed service, for instance, is a great way to keep those surprises at bay. Involve us in what you are doing, so we know as early as possible if a change of course is needed that will require more budget allocated.”
What are the areas where you feel you still struggle to get your outside legal needs met?
Hawkins: “Years ago, companies didn’t understand the impact of environmental regulations and had to scramble to get representation for that. Today, they are rushing to understand data privacy and cybersecurity because it’s just so new and quickly changing. Everyone is looking for legal help to keep them out of trouble on this front, and minimize their risk when it does happen.”
Stall: “Speaking generally, I think most businesses out there are looking to employ the services of good employment and benefits lawyers and privacy experts. This is especially true for intellectual-property lawyers, who can help companies handle rights for their trademarks, their growing online content, websites, website contests and the like. And corporate legal departments will always hire the lawyers they feel will foster a good, long-term business relationship.”
Hinegardner: “When we go into a market looking for help, we ask, ‘Who is the best in the area?’ And generally, we aren’t asking for general litigators; we are looking for lawyers who are the best in a certain specialty. We want the lawyers who have made their name in a particular field. That’s always challenging.”
What would your “dream relationship” with an outside law firm be like?
Hawkins: “Speaking as someone who used to be a corporate attorney, I can tell you, corporate counsel needs outside legal help that understands the limitations clients have – budget, time, availability, relationship with their business unit, for instance. They need counselors who are prepared and understand the complexities of their industry. They need lawyers who truly care about their business, who can meet their budget, meet their goals, and make their clients look good while they are doing it.”
Hinegardner: “We need counsel who truly understands our business, and the trends in our business. We want partners who can look at cases that are applicable to our business and educate us on recent clarification from the courts. Especially in the insurance industry, we are constantly trying to stay abreast of the latest cases, and we consistently read this kind of educational material.”
Stall: “Every counsel’s dream is to have the kind of relationship where your outside counsel can provide long-term analysis and off-the-cuff advice. We have situations that need attention coming our way all day, and we need outside counsel that can help us triage those needs. We’re looking for counsel who will help us put our resources and attention where it will count. We need partners who understand that.” ■
Susan Gosselin is a correspondent for The Lane Report. She can be reached at [email protected]