Fostering Solid Relationships Between General Counsel and Law Firms
All relationships require work and must be carefully nurtured, or they might become strained and tense. The relationship between in-house legal teams and their outside counsel is no exception.
The tension between corporate legal departments and law firms is often fueled by confusion and mistrust surrounding billing practices or the lack of performance data to quantify the value of the services provided. But whatever the underlying cause, the problematic issues that sometimes develop between law firms and legal departments can endanger the ultimate goal of everyone involved: the fast, efficient, and cost-effective delivery of high-quality legal services.
The GC/Outside Counsel Relationship: A Closer Look
For many companies, retaining the services of outside counsel is an efficient alternative to expanding their corporate legal department. However, besides the financial benefits, outside counsel frequently gives companies access to a highly specialized skill set that can sometimes be challenging to attain.
An established track record in a particular practice area
An understanding of their industry, business model, company culture, and objectives
A genuine focus on safeguarding company interests and providing practical legal solutions suitable for the business
A willingness to manage tight legal budgets
Transparency, certainty, and predictability in billing
However, outside counsel usually has their own wish list when it comes to working with GCs. Some things that law firms generally want out of their relationships with in-house teams include:
Complete transparency regarding what is expected
Appreciation for the services they provide
Trust surrounded the recommended course of action – even if it’s not good news
Prompt payment on invoices – with minimal adjustments
The law firm has a specific role: to perform work for the client (the in-house legal department). There is an unspoken understanding that firms are replaceable and must remain competitive—including on price—or they will receive less work and eventually be eliminated altogether. Invoice errors and billing discrepancies can make this situation even more contentious.
According to the 2020 CLM Defense Counsel Study, billing issues are the most common cause of “love/hate relationships” between in-house teams and their outside counsel. The research found that outside counsel rated both getting paid for the work performed and being paid on time a 56/100 on the “pain scale.” Seventy-six percent of the responding lawyers said invoice adjustments were “very subjective,” and many felt that invoice cuts were “arbitrary, highly inconsistent, and damaging to the relationship and end goals of both parties.”
An invoice review process where one party worries about being paid on time, believes that most adjustments are arbitrary, and feels that performance conversations are not backed by useful, unbiased metrics is ineffective. Worse still, it will likely erode an already tenuous relationship between an in-house team and outside counsel, negatively affecting the overall effectiveness of the collaboration.
However, when in-house teams institute a legal spend management system and outsource billing review, they begin to work cooperatively with outside firms to correct specific billing errors and excessive charges. As a result, the friction surrounding financial issues will often disappear, and relationships will strengthen.
How are Law Firm/GC Relationships Improved Through Spend Management?
People are at the heart of the legal progression, and any discussion of of results-based legal spend analysis should include how the relationships between in-house legal teams and outside counsel can be transformed. Along legal spend management, billing review services can enrich the relationships that legal teams have with their outside law firms by:
Introducing transparency into the spend management process
Eliminating legal invoice review time for in-house teams
Defining budgets that everyone can live with
Helping in-house legal teams control outside counsel spending
Decreasing the hostility that may arise due to billing issues
Implementing predictable billing guidelines that are firm yet fair
Boosting law firm accountability – and legal department trust
Encouraging the mutual sharing of practical feedback between teams
Most GCs want solid and long-term relationships with their outside counsel. However, this is not always how it works, particularly when billing issues arise. Here’s the problem: Many in-house lawyers resent external law firms for what they think are unjustified charges but are uncomfortable pointing out errors. Potential solution: A third-party legal bill review service reviews all charges on every legal bill, focusing on the hours, not the rates. After identifying specific errors and overcharges, outside counsel are invited to respond with additional facts to justify the charge, and the adjustments are revised, if necessary. Legal billing services bridge the gap between GCs and law firms and ultimately strengthen bonds.
Benefits for In-House Teams
Establishing and maintaining a clear dialog with outside counsel does several essential things for in-house teams:
Improves the transparency of legal costs. A lack of shared understanding about legal costs can be a prominent and ongoing bone of contention between a legal team and its outside counsel. That is why law firms and corporate legal teams must agree on billing guidelines and expectations as well as monitor the work performed to build trust.
Increases efficiency in the flow of legal services. Onboarding new law firm partners can be time-consuming and sometimes frustrating. Long-term partnerships facilitate ongoing working relationships that motivate everyone to move matters forward.
Ensures that legal services remain in line with broader corporate objectives. A dedicated legal team has the experience to know the difference between legitimate invoice line items and questionable ones. They can also advise whether outside counsel has the company’s best interests at heart and truly understands its priorities.
When this expertise is complemented with legal bill review services, in-house counsel maintains financial control over its legal services, greater confidence that outside legal counsel will positively impact the company’s bottom line, and a stronger relationship between the two is forged.
How Legal Spend Management Transforms Relationships
Retaining outside counsel has become increasingly popular as legal departments have faced budget constraints, heavier workloads, and the need to do more with less. With results-based legal spend analysis services, in-house counsel can save time and control spending, law firms can get paid faster and more consistently, and both sides can build and maintain a more positive relationship.
Want to learn more about how a “people and process” extension of your legal ops team can take the burden of reviewing bills off your team’s plate and reduce your outside counsel spend in the process? Contact LegalBillReview.com today.
