In-House Counsel Becoming Bolder - Requiring More From Their Outside Counsel

Frustrated with Rising Costs & Inexperienced Lawyers, the Eighth Annual ACC/Serengeti ‘Managing Outside Counsel Survey’ Reveals In-House Counsel are Taking Action

Posted: Oct 20, 2008

(Seattle, WA/Washington, DC) — Over the past eight years, more in-house counsel have required specific terms of retention that govern what they expect from their outside counsel, according to the results of the 2008 ACC/Serengeti Managing Outside Counsel Survey, a collaboration between the Association of Corporate Counsel (ACC) and Serengeti Law, released at ACC’s Annual Meeting, October 20 in Seattle, WA. Gone are the days when in-house counsel send out major projects to outside counsel, pay vague bills “for services rendered,” and remain uninvolved while outside counsel do whatever they think is necessary. Seeking to find out how in-house counsel were managing the work  being done by outside counsel, and to gather metrics regarding the management techniques being used, the annual survey collected objective data from in-house counsel to assess the methods undertaken to better manage their work with outside counsel. 
As to the most significant areas of change, in-house counsel “have become more systematic in the ways that they manage their work with outside counsel.” Specifically, they are applying basic vendor management techniques (project plans, budgets, results tracking, etc.) already used in departments of the company other than the law department. 
"Year after year in-house counsel voice their frustration and finally, they are taking action,” explains ACC President Frederick J. Krebs.  “In-house counsel face increased pressure and scrutiny from internal management to lower their costs and this year’s survey results further validate the need to reconnect value to costs for legal services. Many in-house counsel have become engaged in the ACC Value Challenge, an initiative designed to align law firm business models with what corporate clients want and need. We are intent on promoting a dialog within the legal profession to change the way corporations and their law firms think about the relationship between the cost of legal services and the value delivered.”
This year’s results reveal that roughly “one-fourth of in-house counsel are more actively managing outside counsel than the majority of their peers.” Such activities include convergence (reducing the number of firms with which they work on a regular basis); issuing competitive bids for new work; requiring minimum levels of experience of associates working on their projects; getting discounts for early payment of bills; and systematically evaluating the performance of their outside counsel. In general,  this representative group of in-house counsel have been creating new ways to manage their work with outside counsel, using techniques that their less activist peers have yet to try.
Another major change during the past four years is the increase in time and energy demanded by compliance issues, including periodic reporting on legal spending and developments. A key area that remains unchanged is the traditional way in which outside counsel are compensated—hourly billing. The primary driver of legal costs is outside legal spending, which is roughly double the spending on in-house counsel. 
“During the past several years, the ratio of outside spending to in-house spending has decreased, reflecting the increasing value of in-house counsel and the legal work being done in-house,” reports  Serengeti’s Rob Thomas, the author of the survey Report. “While median spending on the law department is at one of the highest levels in eight years, median spending on outside counsel is at the lowest level. Similarly, the median increase in outside legal spending this past year was the lowest in the history of the survey.  Continual annual increases in outside counsel hourly rates, and the growing rate of such increases, are having a negative impact on the volume of work being sent to outside counsel.” 
More than 2,000 law departments have completed the ACC/Serengeti survey since its inception in 2000, describing their experiences working with outside counsel.  The survey questionnaire has become a living document, changing to reflect the latest developing areas of activity among ACC law departments. Each year, the survey report analyzes the data collected regarding new developments, while also comparing the current year’s data with prior years.  In-house counsel can compare their management techniques and results with those of other law departments. Where their performance differs from the benchmarks established by this survey, in-house counsel can assess whether they should modify their current practices or adopt new practices.  The following general conclusions present some of the more significant areas of change, as well as some of the constants, over the past eight years. 

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