Close to half of chief legal officers don’t care about a law firm’s service delivery model as long as firms produce the right results, but only 4 percent are satisfied with how firms traditionally provide legal services, according to a recent survey by Altman Weil.
“The fact that you saw only 4 percent [who were] content is that tension between getting cost-effective legal services” and the desired results, said Altman Weil principal Daniel J. DiLucchio. “The law firms’ economic objectives and the objectives of the company and the general counsel are never going to be aligned. So I think that 96 percent is saying, ‘Look, we’d like to see some changes.’ ”
According to Altman Weil’s 15th annual Chief Legal Officer Survey, 43 percent of survey respondents didn’t really care about a law firm’s service delivery model as long as they got the results they wanted at a competitive price.
Another 42 percent of respondents said they like to work with firms that offer an innovative service delivery model and an additional 9 percent actively seek out law firms that offer innovative approaches.
Mr. DiLucchio said that in his experience consulting in-house counsel, general counsel are looking for more transparency in how they are being charged and what they are getting for that money.
Between 56 and 58 percent of respondents said they wanted to see law firms improve on achieving greater cost reductions, becoming more efficient at project management and their budget forecasting.
Andrea E. Utecht, general counsel of FMC Corp. in Philadelphia, is interested in a law firm’s delivery model because there is a much greater likelihood the client will get the end result it is looking for if it specifies the delivery model it wants.
The firm’s delivery model is particularly important when FMC is the plaintiff in a case, Ms. Utecht said. In those situations, she has to rely on the firm to give evaluations of cases, and if the firm has some “skin in the game” through an alternative fee arrangement that pays based on outcome, the firm is more likely to give an honest evaluation, she said.
When FMC has a project that requires intensive, detailed work, such as document review, “We want to know that the law firm has looked at alternative ways of getting that work done other than using full-time associates that charge a lot more,” Ms. Utecht said.
She said she wants to ensure firms are using lower-priced contract lawyers, or she will go to a firm that offers the service as a commodity.
“Bottom line, I do care about the delivery model,” she said.
Ms. Utecht said alternative fees don’t work in every situation. When looking at volume discounts, for example, she said it is hard to know whether the company saved money or if the firm just increased the hours it billed.
According to the survey results, direct price reductions from law firms was the most common way law departments looked to control costs, with alternative or fixed fee arrangements a close second. The most common price reduction firms doled out was between 6 and 10 percent, according to the survey results. More than 90 percent of respondents said they were getting reductions on their bills.
When asked how serious chief legal officers felt law firms were about changing their service delivery model, the majority rated it at 3 or below on a scale of 1 to 10, with 10 being the most serious about changing the model. That has been the consistent response for the past several years.
Law departments are also shifting how they allocate legal work in an effort to control costs. According to the survey, 40 percent of respondents said they have shifted law firm work in-house, 36 percent shifted work to lower-priced firms and 34 percent reduced the total amount of work sent to outside counsel. The respondents said they realized the greatest cost reduction from shifting work in-house.
Mr. DiLucchio said corporate law departments have also been looking at how to improve efficiency in-house. In the last year, two-thirds of respondents said they increased their departments’ use of technology, more than half undertook a restructuring of internal resources and 45 percent made greater use of paralegals.
Mr. DiLucchio said the typical ratio in-house is one paralegal for every four lawyers. He said it should almost be the opposite.
“Let’s say you have 10 lawyers and you could move 10 percent … of each of their work to a paralegal,” Mr. DiLucchio said. “You have effectively added a lawyer to your staff without the cost associated with it.”
To read more articles like this, visit www.thelegalintelligencer.com. Gina Passarella can be contacted at 1-215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.
First Published: November 25, 2014, 5:00 a.m.
