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In recent years, something that corporations have begun to adopt is converting fixed costs to variable — a key managerial economics concept. Because labor is often the biggest line item on the P&L, a variable workforce is the fundamental component of this shift. Companies ranging from startups to Fortune 500s employ this model with great success, and almost half of the American workforce will be independent workers by next year.
For in-house legal departments, the value that comes from adopting this practice is especially fascinating. Corporate legal departments can tactically tailor their teams to make the most of their legal budget while lowering the risk all thanks to the emergence of a class of elite lawyers seeking to become contract counsel. From drafting and negotiating to joining trials to providing high-level substantive expertise in niche and cutting-edge areas, these contract counsels are a group of talented individuals from Am Law 200 law firms and in-house positions with experience in handling crucial work.
Below are the reasons why and when you should consider the temporary legal staffing option:
Why?
- Improved Financial Agility: As a company grows, the importance of its corporate law department grows with it. Unlike at law firms where increased work means increased profits, legal is considered a cost center for corporate budgeting. It is vital, then, for law departments to react nimbly to changes — whether large or small — such as shifting market conditions, seasonal needs, new lawsuits or regulations, and new products or services. Contract counsels provide a flexible resource sans the troubles of committing to an employee long term.
- Increase Internal Resources:One of the job features that in-house lawyers typically enjoy is the variety of issues they tackle. Expanding their legal expertise beyond the typical practice areas they handled as law firm attorneys can provide a sense of professional fulfilment. The appeal of this variety (and the value to the company) tends to plummet, however, when senior attorneys are diverted to non-core legal tasks — work that must get done, isn’t substantial enough to require a new full-time attorney, and doesn’t justify incurring outside counsel rates. Calling in a skilled attorney to handle these matters on a variable basis reallocates in-house legal talent to its most productive uses.
- Diversity: Many general counsel and their teams are deeply committed to promoting diversity in the legal profession — both within their own departments andat the law firms they engage. Some GCs are beginning to make the leap by moving their business to firms that genuinely care about diversity. In addition, while many have close relationships with women and minority-owned law firms to which they would like to send large matters, they have concerns about the firms’ capacity to take on these larger engagements. These general counsel now encourage diverse law firms to engage contract attorneys to scale to demand to comfortably fulfil the legal needs.
When?
- Growth of Company: Expansion creates atypical workloads for law departments that are not indicative of post-growth needs. Instead of investing resources into the process of costly hires, contract attorneys not only parachute in for the transition but also allow corporations to gauge the long-term workload without having to initially overcommit. Furthermore, expansions raise one-time legal questions (regulatory compliance, state-specific legal constraints, industry-specific expertise) that don’t justify a permanent hire.
- Distinct Legal Challenges: Though in-house departments are structured to handle the ongoing business needs of the company, legal issues regularly pop up that are – thankfully — out of the ordinary. Litigation is a prime example. Assembling a combination of outside counsel and contract attorneys reduces both the actual expense of litigation, as well as the secondary expense of reduced in-house productivity. Lawsuits can create a flurry of activity for a corporate legal department that detracts from normal responsibilities. Hiring a contract attorney not only plugs gaps but lightens the workloads to keep law departments running smoothly.
- Internal and Outside Legal Spend Balance: Corporations often feel a pull between adding “headcount” on the one hand, and the cost of outside counsel on the other. The efficient rates, variable compensation, and easy scalability allow contract attorneys to bridge this gap — while also providing concrete data to general counsel about whether there is indeed enough work to justify an in-house hire.
Contract attorneys are not a replacement for general counsel or their deputies (or even their deputies’ deputies), but as workflows fluctuate and required expertise varies, corporations will do well to strategically utilize the first-tier contract attorneys now at their disposal.
Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Michael Allen is the CEO of Lateral Link. He is based in the Los Angeles office and focuses exclusively on Partner and General Counsel placements for top firms and companies. Prior to founding Lateral Link in 2006, he worked as an attorney at both Gibson, Dunn & Crutcher LLP and Irell & Manella LLP. Michael graduated summa cum laude from the University of California, San Diego before earning his JD, cum laude, from Harvard Law School.
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