The New Normal
Value edges out cost-cutting in survey of in-house counsel priorities
Posted Jun 12, 2013 11:35 AM CDT
By Patrick J. Lamb
Every year, BTI Consulting surveys corporate counsel to determine their top priorities. For the past six years (2006-2012), the top goal was to control legal costs. In the lawyer lexicon, “control” is a synonym for “decrease.” That finding is certainly understandable, because much of that period covers the years of the economic downturn, and it certainly is not news that most law departments were challenged during that period to do more with less.
As reported in the BTI blog The Mad Clientist, there was a subtle shift in emphasis in 2013. The most important goal this year was the delivery of value, with approximately 32 percent of the surveyed law departments identifying value as the most important priority, compared to approximately 21 percent identifying controlling costs as the top priority.
BTI Consulting Group graph used with permission.
This raises the question: What's the difference between delivering value and controlling costs?
According to BTI, the corporate counsel surveyed seek to add value to the business by adopting new tactics to meet their goal, including:
• Redefining strategies to obtain permits and regulatory approvals faster.
• Planning for acquisitions before the business units engage in talks.
• Sitting on R&D committees to spot IP opportunities earlier.
• Developing settlement decision trees to get to resolution faster.
• Redesigning legal work flows—often with law firms.
The quest for value drives corporate counsel to look for bigger savings—the kind rarely achieved by rate cuts. Helping clients meet the value goal demands new thinking. Clients know the savings from changes in their department’s behavior will dwarf savings from cutting law firm rates.
Many will look at this sentence—The quest for value drives corporate counsel to look for bigger savings—the kind rarely achieved by rate cuts—and say there is no difference between “value” and “controlling costs.” It is true that the two concepts are related. If that is all we take from the BTI report, we still know that more that 50 percent of all law departments are focused on cost of outside counsel, and that is a very valuable lesson.
But if that is all we learn from the report, we are missing two very important points that should not be lost in the linguistic tête-à-tête. The first important point is the magnitude of cost reduction (the client’s cost, not the firm’s) that clients are seeking is far greater than many outside counsel appreciate. If a firm cannot discount its way to the client’s objective, it is going to have to change the way it plays the game. Assuming that clients are communicating their goals to their law firms and not just to BTI, it seems as if the pressure on firms is greater than ever. This, of course, stresses the firms’ business models.
Second, it appears clients are focusing more on what they get from their lawyers. Paul Lippe and I have written frequently in this column about the “four buckets” theory of Jeff Carr, general counsel of FMC Technologies (full disclosure—FMCTI is a client of mine). In short, Jeff’s theory is that all legal work fits into one of four buckets, in descending order of importance: counseling, advocacy, process and content—and that clients will pay more for counseling and advocacy because they provide far greater value to the client. The examples noted above by BTI fall squarely into the counseling and advocacy buckets.
The takeaways from the BTI survey results are important for lawyers seeking to plant their flags by representing the corporate world. The “do more with less” pressure that legal technology expert Richard Susskind and others have written about seems to be more prevalent rather than less. How lawyers respond to that pressure is a huge client-service challenge. The focus now needs to be in the advocacy and counseling areas: helping clients avoid problems or solve them faster.
Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.
Pat is the author of the the book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.