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Top 10 ways to manage external counsel costs
New global research has identified the best strategies for law departments to control outside counsel spending.
Jerome Doraisamy
Thomson Reuters recently released its 2021 State of Corporate Law Departments Report, which compiles responses from 223 law departments across the globe about the unique challenges faced by departments in 2020 and how best those in-house teams can move forward.
Elsewhere in the report, Thomson Reuters noted that external counsel management was “the top priority cited” for law departments, which is unsurprising, it noted, “given that those costs represent an average 60 per cent of a department’s total budget”.
The 10 most effective ways to manage such external costs as identified by law departments, the report detailed, were:
- General enforcement of billing guidelines and reduction of invoice fees and expenses (as cited by 81 per cent of respondents to the survey);
- Standard discounts on timekeeper rate cards (53 per cent);
- Regular review of budgets and comparison to actual spending on high-cost matters (51 per cent);
- Reduction of invoice expenses (50 per cent);
- Reduction of timekeeper rate increases (49 per cent);
- Volume discount (45 per cent);
- Requiring law firm matter budgets (42 per cent);
- Blended hourly rates (35 per cent);
- Fixed/flat fees, with amount set at matter level (34 per cent); and
- Having preferred vendors or a panel program (28 per cent).
“Given the effectiveness of enforcing billing guidelines as a measure in reducing outside counsel costs, law departments should consider using preferred vendor programs or panels as a way of increasing the value added, rather than simply as a way to further reduce cost,” it suggested.
Moreover, it advised overcoming or reducing communication issues: “Typical breakdown areas between law departments and external counsel are often caused by poor communication.”
More broadly, Thomson Reuters concluded, law department leaders should be rethinking “how they train their people and be more structured in the ways they collaborate, allocate work and build relationships”.
“Leaders also can use the lessons of the pandemic to design a department that fosters relationships with outside counsel and other legal service suppliers that are more efficient, healthier, and more focused on mutually beneficial outcomes,” it said.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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