Pressure rising on in-house budgets

12 October, 2012 |Lawyers Weekly |Staphanie Quine

One-in-three government and corporate organisations are looking to reduce their external law firm spend, according to a trans-Tasman survey released today (12 October).

Detailed responses from 346 organisations were gathered to compile the 2012 ACLA/CLANZ In-house Counsel Report: Benchmarks and Leading Practices.

Australian Corporate Lawyers Association (ACLA) CEO Trish Hyde said the report, released jointly by ACLA and the Corporate Lawyers Association of New Zealand (CLANZ), was the most comprehensive research of its kind in the region when she addressed the World Masters of Law Firm Management conference yesterday. The theme of the conference was LPO: The real story.

“We are in a state of evolution; the profession has changed in-house and it continues to evolve,” said Hyde.

“We have leaders who are looking at new ways to tackle work to prove their value; the value of their budget … they have to take the same responsibility as their peers for financial control.”

Hyde outlined key statistics from the report, which showed that 61 per cent of general counsels (GCs) are under pressure to reduce costs; 64 per cent of which are under pressure to reduce spend on external firms.

Almost all GCs surveyed (91%) forecasted increased workflow over the next two years and only three per cent had some type of formal workflow management system in place. However, 23 per cent indicated that they plan to adopt some form of workflow management in the next two years.

With or without you

“Six per cent currently use LPO [and]over the next two years another seven per cent plan to use it … that can be either in partnership with a law firm or independent,” sad Hyde, adding that GCs are looking to get the best deals they can.

In the case of the NZ Qualifications Authority, a government organisation, the senior in-house counsel came up with an innovative strategy in which he stored up non-urgent legal work and bought time, in advance, from a law firm in its quiet period.

“That to me is thinking outside the box,” said Hyde, adding that the firm benefits and the in-house counsel gets a great rate and is also managing his workflow.

“He’s not part of the group executive but he manages to influence the organisation beautifully,” said Hyde.

There has also been a significant shift in how in-house counsel are seen by their own organisation. They no longer have to get a “big name firm” to give the advice, said Hyde.

Sixty per cent of in-house counsel are now seen as providing better advice than external advisors to their organisation, because they’re able to put it into commercial terms, and with this comes greater power for them, said Hyde.

In-depth interviews with Woolworths revealed the frankness with which the organisation holds its conversations with law firms.

“They want the firms to walk in their shoes … they expect to know ‘which LPOS are you using, how do we get the better value, is there a better LPO?’, so they’re actually involved in the decision making … and its working really well,” said Hyde.

In another instance, an in-house team of three people did their own research and found the best provider they could, for the work they wanted, in the Philippines, and were handsomely rewarded within the organisation for their management efforts.

Organisations do have an appetite for alternative fee options – up to 50 per cent have tried some kind of fixed pricing – but less than 30 per cent use it on a regular basis.

The report revealed that only 21 per cent of GCs believe their main law firm offers alternative billing methods that work.

“Just as direct briefing of barristers is becoming more popular, so is the ability to go out and look for an LPO … at the big end and small end of town,” said Hyde.

“Those law firms who find a way to adapt will thrive … the alternative is not in the interests of law firms.”

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