Network Firm News

Tuesday, December 17, 2002

Survey Says:
Rob Thomas -- The Law Marketing Portal -- 12/14/02
An annual survey for the American Corporate Counsel Association involving hundreds of corporate law departments firnds:
· Spending on outside counsel dropped, while in-house spending increased.
· The median increase in hourly rates reported for 2001 was 6.3 percent.
· More in-house counsel are requiring that law firm associates have a minimum level of experience to handle their work.
· Companies are reducing the number of law firms that they work with (often referred to as “convergence”).
· This process is also leading to a greater concentration of corporate work among large firms.
· While fixed fees are used by 25.1 percent of in-house counsel, other alternatives to hourly rates are much rarer.
· In-house counsel rely on personal referrals to find new outside counsel.
· Changing lawyers on a matter without client consent is cited as a primary reason for termination of law firms.

Top Priority: Outside Spending
Controlling outside spending is said to be the most pressing issue facing in-house counsel.
Inhouse counsel are concerned that outside counsel do not share concerns regarding the cost of services.
Specific complaints included resistance to alternative fee arrangements and not responding to RFPs.
Plan on less work being allocated to law firms.
Median increase in outside counsel spending for 2001 was 6.3 percent

Convergence Takes Hold
The median number of U.S. law firms used by law departments during 2001 declined by 15 percent from a year earlier, from a median of 10 law firms to 8.5 firms. Only 8.9 percent of the surveyed law departments used more than 50 law firms domestically during 2001, a marked decrease from the previous year’s 12.4 percent. Large companies (revenue over $1 billion) are twice as likely to have implemented the strategy of convergence than small companies (revenue less than $100 million).

This process is also leading to a greater concentration of corporate work among large firms. The mean average percentage of legal spending with large law firms (more than 100 lawyers) rose significantly, from 33.6 percent to 51.2 percent, while spending with small law firms (up to 10 lawyers) fell from 12.3 percent to 11.8 percent.

Personal Relationships
Even more than last year, in-house counsel rely on personal referrals to find new outside counsel, the most common sources being outside counsel, in-house counsel at other companies, other in-house counsel at their company, a company-approved outside counsel list, and other employees at their company. Declines are seen in the use of published directories, online directories, and searches of law firm Web sites.

When selecting outside counsel, in-house counsel consider the skills of the individual lawyer before the qualities of the law firm. Consistent with this approach, in-house counsel are less likely to tolerate a change of team members unless they are consulted in advance. Changing lawyers on a matter without client consent is often a violation of the client’s terms of retention, and is cited as a primary reason for termination of law firms. Despite more formal management of the work performed by outside counsel, personal relationships remain paramount.

Tactics for Controlling Costs
Budgets, discounted/ alternative fees, billing guidelines/ spending rules, an in-house fee/bill manager, and evaluations of outside counsel.
· An in-house fee/bill manager produced a mean average savings of 23.9 percent
· Discounted/alternative fees saved 21.5 percent
· Evaluations of outside counsel saved 20.4 percent
· Case/matter budgets saved 17.6 percent
· Matter management systems saved 15.5 percent.

To avoid paying for training or inefficiencies of young lawyers, more in-house counsel are requiring that law firm associates have a minimum level of experience to handle their work.

Rob Thomas, Vice President, Strategic Development, at Serengeti Law, can be reached at (425) 748-5115 or rob.thomas@serengetilaw.com. Information about the 260-page “2002 ACCA/Serengeti Managing Outside Counsel Survey Report” is available at www.serengetilaw.com/survey.
 

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