In-House Counsel

Is Everything Old? The 2016 Chief Legal Officer Survey

2016 Chief Legal Officer Survey offers much to think about, and it provides a cautionary tale for law firms.

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taking online survey concept

I love surveys. Not only are they full of interesting and useful information, they can also be harbingers of change, if people are willing to listen. (No, I am not making any comment about election 2016. I’m talking about surveys, not polls, and they’re different animals.)

Altman Weil’s 2016 Chief Legal Officer Survey offers much to think about, and it provides a cautionary tale for those outside law firms (Biglaw and others, are you listening?) about why law firm business is in decline. 

It’s pretty straightforward, and it’s nothing different than what my in-house legal department was saying and doing twenty some years ago. It’s same old, same old. Sigh.

Firms are tone-deaf if they don’t listen and heed what CLOs are saying about them. The survey discusses the following:

1 “…[O]utside counsel presents a broad target for cost cutting.” People, where have you been for the last two decades or so? Reducing legal expense has always been the mantra for in-house departments.

We fired outside counsel on a regular basis back in dinosaur days. They were too expensive and churned cases. They suggested spending the client’s money on discovery and motions that didn’t advance the client’s case. We’d ask for budgets, risk analyses, and the client would then decide that it was better off paying the plaintiff something (using the outside counsel projected future attorneys fees for that purpose) and getting rid of the case. I can still hear one outside counsel whining when we instructed him to deliver the files to our office for handling in-house.

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2. “When asked how many of their top ten law firms have provided useful spend analyses to the law department, 73% (not a typo) of CLOs reported that none of them had.” As Altman Weil notes, the outside law firms are “…not even in the game.” What is so difficult about providing that information to your corporate clients? Don’t you think that if it’s a true partnership between the law firm and the legal department that transparency would be beneficial for the ongoing relationship? Apparently not. The survey says that the “…bar for success is low.” That’s a no-brainer.

3. The survey says that law departments switch law firms because of problematic service, cost and efficiency. Again, this should be old news, but I guess it’s not. Returning phone calls promptly, answering questions without writing a law review treatise (and being billed for it) and answering the question asked, not some wishy-washy response from a junior associate who knows far less than the in-house counsel asking the question, but who is usually making twice as much as that senior lawyer. There’s nothing worse than paying for advice that you don’t get in clear, client-understandable language.

Back in dinosaur days when faxes were the preferred method of communication (emails and pdfs were still to come), outside firms would routinely try to charge us for the following: one dollar per page for incoming and outgoing faxes, plus phone charges, plus whatever other charges a firm thought it could attach to those faxes, such as having a staff member stand by the fax machine to gather up the pages as they spewed out. Profit centers? Uh, no.

We encouraged law firms to ditch the nickel and dime charges and suggested that they just increase the hourly rate by some factor agreeable to both. Not one firm ever took us up on our suggestion, and so, our bill reviews always contained a whole lot of subtraction for charges that were specifically excluded in our retention agreement. (A couple of firms also tried to include staff time, especially overtime hours. Any firm time management issues there? Wasn’t that what the hourly rate was supposed to include? More red pencil by us and calls to the relationship partners of the various firms to tell them to knock it off.)

The survey found that in the last twelve months, more than one-half of the CLOs shifted a portfolio of work worth $50,000 or more because of a client service issue. Why did that happen? 41% switched firms in search of lower fees. Understandable. 30% of the CLOs moved their work to firms that managed caseloads more efficiently.

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One other point to make that the survey makes: in 2016, for the eighth consecutive year, CLOs rated law firms at a median three on a zero to ten scale in which zero is “not at all serious” about change and ten is “doing everything they can.” (No, this is not the TV game show Family Feud). At the same time, the legal departments rated the level of pressure they’re applying to the law firms to change as a six on a ten point scale.

Why aren’t legal departments doing more? Altman Weil found that the answers divide almost evenly into thirds: one-third is either satisfied with the status quo or the law firms have complied with requested changes. Another third focused on outcomes and prices, rather than the delivery model. The final group is dissatisfied with the status quo. They’re asked for changes and not gotten them, they’ve dropped law firms because of service delivery issues, and approximately ten percent of this final third think it’s the law firm’s job to be proactive and improve. Is anyone listening out there?

The survey results should surprise no one. 

Is it that difficult to sit down with the corporate client and ask “how are we doing?” “What can we do better?” The answers may not be what you want to hear, may even be cringeworthy, but the only way we improve is to hear constructive criticism, take it to heart and do better. Don’t assume that you know what the corporate client wants or needs. Ask.

A corporate client will respond to efforts to improve. The result can be more work, higher quality work and the long-term relationship that every firm wants with a corporate client that pays its bills on time. Many things have changed in law practice in the last two decades, but the basic “how-tos” of client service delivery remain the same.

old lady lawyer elderly woman grandmother grandma laptop computerJill Switzer is closing in on 40 (not a typo) years as a active member of the State Bar of California. Yes, folks, California, that state west of the Sierra Nevada, which everyone likes to diss. She’s had a diverse legal career, including stints as a deputy district attorney, a solo practice, and several senior in-house gigs. She now mediates full-time, which gives her the opportunity to see old lawyers, young lawyers, and those in-between interact — it’s not always pretty. You can reach her by email at [email protected].

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