Food giant Kraft Foods has rewarded one of its law firms for its common sense approach to reducing and controlling legal costs. This in and of itself isn’t so surprising, inasmuch as companies like DuPont, United Technologies and others have taken similar actions. The big difference is that Kraft has lauded Morgan Lewis for controlling legal costs using the billable hour, as opposed to alternative fee arrangements.
Given the rush to alternative fee arrangements since the recession began, might we be seeing a new equilibrium emerging, where alternative fees drive new thresholds of billable hour efficiency?
Kraft Lauds Morgan Lewis’ Service
Robert Half Legal’s recent survey lends further support to clients seeking greater value for their dollar.
Corporate counsel seeking more value from outsourced law services
Certain firms are increasing their rates for more experienced associates. In a climate in which alternative (fixed) fees are becoming more and more popular, I view this uptick in rates as a hedge against potential cost overruns in fixed fee arrangements.
While we’ve seen a shift in economic power from attorney to client, I’ve encountered more general counsel who are less concerned with merely negotiating lower rates than they are with a more holistic approach to cost control – an approach that not only reduces costs, but also manages expectations and improves performance.
Our clients want to reduce fees and expenses, but if the tradeoff is a decrease in quality or an increase in administrative oversight (of less experienced associates), any short-term economic benefit will be far outweighed by more fee volatility and a contentious relationship. Some, therefore, are willing to pay for more experienced attorneys as long as there are corresponding increases in predictability and efficiency.
It’s January, the start of a new year, and a time to say good-bye to 2009. But if you’re like most law department managers looking at 2010, perhaps ”happy” is a stretch goal. “Sane” would be nice, and really goes without saying, so I apologize for even bringing it up. How about “predictable” - predictability in the nature, timing and level of legal fees and expenses? (Read More)
A colleague recently asked me what middle market companies can do to streamline their internal legal function. By ”middle market”, I mean $1 - $5 billion companies, which typically spend about .5% of their sales on total legal costs. Generally, companies in this range have anywhere from 5 to 30 attorneys and assistants. Of course, these relationships will vary by industry and, for that matter, for each specific company. For those of you in this position, you’re in the driver’s seat. (Read More)
I participated in a panel discussion during Corporate Counsel’s Controlling Legal Costs conference last week. A colleague made the point that slashing costs with no holistic or cohesive plan may well do more harm than good. Carol Ann Petren is Executive Vice President and General Counsel for CIGNA, and she went on to point out that aggressive staffing cuts can increase outside counsel fees and expenses or result in higher liability exposure. I could not agree more. Focusing on cost minimization rather than performance optimization is a recipe for disaster. (Read More)
Count UBS among the growing number of banks completing legal panel reviews to help identify top-performing firms and reduce legal expenses.
UBS pushes down on rates after completion of global panel review
How did it come to this? Managing your legal department and controlling legal costs has all of the excitement of the new NFL season, but with all of the satisfaction of filing your taxes with an amount due. (Read More)
A recent Business Week article indicates that some law firms are bringing the roles of junior associates back down to earth. Associates with 0-3 years of experience are one of the biggest pain points for in-house counsel, as the cost of their inefficiency has risen with their ever-increasing rates. Now, however, certain firms are capping rates and the number of hours new associates can bill for the first two years. If this turns into a trend, it will be interesting to see if lower rates for better-groomed junior associates will slow GC’s propensity for bringing more routine tasks in-house.
According to CFO Magazine, companies spent 7% less on outside counsel in the first quarter of this year. Although this has largely been the result of a shift to less expensive firms, there are indications that this decrease won’t last long. Experts expect a rise in the following areas: regulatory matters, bankruptcies, securities and employment issues. Moreover, what has not been considered yet is the near-certain avalanche of litigation stemming from the sub-prime crisis. Will this signal a shift back to larger firms?
