Law360 recently published 5 Ways for Firms To Weather The Litigation Slowdown, though it also noted “opinions vary on the current state of the litigation market.”
In pouring over the data running though our systems, I’m not confident we can say the litigation market is slowing down – that remains to be seen. However I’m confident that legal departments are focused on how to reduce the cost of high-value litigation matters, in intellectual property for example.
Corporate counsel does gravitate towards law firms that are more willing to find creative ways to reduce costs while securing favorable outcome. That’s why our focus isn’t on cost, but on value.
To that end, there are a few steady trends in corporate legal that will be of interest to inside- and outside counsel alike. Here are six in which we’ve observed staying power over the last few years:
1. Increased sophisticated law firm selection. Corporate counsel is becoming increasingly sophisticated in developing systematic process for choosing outside counsel – even for subjective factors. The law firm scorecard project a large insurance company implemented is a good example:
When it gathered leaders from within the legal department, it quickly realized what made for a great legal partner was subjective in nature. A review consistently found the best law firms were those which took the time to solve problems creatively and communicated well.
Those attributes then became the basis for three questions—to be answered on a 10-point scale—inside counsel would answer every time a matter was closed:
• How satisfied are you with the outcome?
• How well did the law firm communicate?
• Would you want to work with that law firm again?
All outside firms would then be scored and measured evenly against the results.
2. Business metrics enter the legal lexicon. Most of the lawyers I’ve engaged over my career enjoy parsing legal arguments but find far less pleasure in the discussion of business and metrics. However, data and analytics are increasingly seeping into the industry by way of legal operations, because data is driving decision making and inherently proves value. Business metrics are destined to become a minimum barrier to entry on both sides of the inside/outside counsel table.
3. Legal budget accuracy. While many of the discussions around legal spend analysis centers on the cost of outside counsel, both the value of legal services and accuracy of legal budgets are the fundamental drivers. One large financial institution with hundreds of millions of dollars in spending is able to forecast the company’s legal budget within 1%. In part, this is because the organization is looking at the total cost over the “life of the matter.” I’d forecast that aggregate views of legal spending, such as life of the matter, will grow more common in some way, shape or form over the next 12-24 months.
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4. Staffing matters for the right outcome. For a bet-the-company case, an A-list attorney billing $1,000 per hour may well be worth it. The discussion is better centered on value. To that end, corporate counsel is paying closer attention to the mix of talent on a law firm client team. Staffing matters for the right outcome is a delicate mix. Corporate counsel will be hard pressed to find value in paying to train junior attorneys but at the same time, also won’t subscribe to an A-list attorney billing for routine work.
5. Data breeds transparency. Corporate legal and law firms alike should embrace data as a basis for transparency. Most corporate counsel I’ve consulted with look at data for exactly that reason. “We like you and like working with you, but by the looks of this data analysis, you charge a heck of a lot more.” At the same time, law firms have access to their own data and should seek ways to share that information for mutual benefit and transparency to strengthen relationships and trust.
6. Incumbency is no longer a guarantee. The trends we’ve been able to compile based on $17 billion in legal spend has consistently demonstrated GCs are willing to entertain moving work to smaller (but not small) firms. These firms tend to be more flexible and more willing to get creative in pricing. This point is again a chance to reiterate it’s not just about cost, but about cost versus value.
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With specific regard to litigation, we’ve been analyzing data in a specific segment of late and will soon have some results to report. It may offer some insight into the ebb or flow of the overall litigation market.
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As Director of Strategic Consulting at LexisNexis, Kris leads the team’s efforts to advise corporate legal department managers on improving operations with data driven decisions. Kris has over 15 years of consulting experience in the legal industry. Areas of expertise include benchmarking, practice area metrics and scorecards, dashboard design, matter pricing and staffing, and cost management.
Prior to joining the CounselLink team, Kris honed her legal industry knowledge by advising and consulting with leaders in large law firms. As Director of the Redwood Analytics Think Tank, she partnered with a group of industry thought leaders to develop advances in analytics and best practices that improve law firm performance. She has authored numerous articles and speaks regularly at legal industry conferences and events.