Monday, 06 Feb 2012
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Survey: General counsel under pressure
06 February 2009
2009 may well be the time when, after years of complaining about the level of legal fees, that clients make some serious inroads into both the levels and basis of legal fees.
As the recession deepens, the single biggest issue for general counsel is cost control – by some distance. See graph
Two-thirds of the 81 general counsel who responded to Strategic Legal Advisor's inaugural survey said that keeping a lid on costs was one their top three priorities in the coming year, while one-third described cost control as their single biggest priority.
“General counsel would have put cost control at the top of their list two years ago, but then they would have talked about 'value' – now it's simply about reducing cost,” says Paul Gilbert, director of in-house management consultancy Lawbook Consulting and the former head of legal at Cheltenham & Gloucester. “I can't believe that there's a general counsel out there that hasn't been asked to reduce costs this year.”
Many general counsel also feel that their external advisers are not doing enough to help them. Despite the economic downturn, more general counsel expect their bill for external legal advice to increase either significantly (15%) or slightly (26%) than expect it to fall, either significantly (11%) or slightly (22%). See graph
With 46% of respondents saying that law firm partners charge them more than £350 (€450) per hour for routine work (see graph) and 77% saying they are charged the same for transactional or specialist instructions (see graph), it is perhaps not surprising that 70% describe transactional fees as being too high and 63% saying the same of the cost of routine legal work. See graph
“The rise in fees has been fuelled by the profligacy of the financial services industry, profit-per partner league tables and the cost of keeping staff,” says in-house legal management consultant Mark Prebble of Lawyers in Business. “The backlash has been brewing for ages and the combination of disenchantment and the downturn will bring this to a head.”
In the current economic environment, it is perhaps unsurprising that legal departments are so focused on costs, but more fundamental – and perhaps permanent - forces are also at work. While, in the past, the relatively small size of the legal department in many businesses made them relatively immune to company-wide efficiency drives, the combination of their increasing size and the economic downturn means that they are no longer able to operate in splendid isolation.
Legal departments are increasingly being required to use professional procurement techniques when selecting law firms and their budgets subject to the same scrutiny as any other part of their companies.
“The focus on budgets is part of a longer term trend to look for value in legal services provision which is being exacerbated by the current economic climate,” says one head of legal. “The more prominent a legal department is the more its processes and controls have to match up to those used in the other parts of the business. If all of the other departments are looking for year-on-year efficiency improvements then it is illogical that this should not also apply to legal.”
For survey demographics, please click to see graph 1 and graph 2.
As the recession deepens, the single biggest issue for general counsel is cost control – by some distance. See graph
Two-thirds of the 81 general counsel who responded to Strategic Legal Advisor's inaugural survey said that keeping a lid on costs was one their top three priorities in the coming year, while one-third described cost control as their single biggest priority.
“General counsel would have put cost control at the top of their list two years ago, but then they would have talked about 'value' – now it's simply about reducing cost,” says Paul Gilbert, director of in-house management consultancy Lawbook Consulting and the former head of legal at Cheltenham & Gloucester. “I can't believe that there's a general counsel out there that hasn't been asked to reduce costs this year.”
Many general counsel also feel that their external advisers are not doing enough to help them. Despite the economic downturn, more general counsel expect their bill for external legal advice to increase either significantly (15%) or slightly (26%) than expect it to fall, either significantly (11%) or slightly (22%). See graph
With 46% of respondents saying that law firm partners charge them more than £350 (€450) per hour for routine work (see graph) and 77% saying they are charged the same for transactional or specialist instructions (see graph), it is perhaps not surprising that 70% describe transactional fees as being too high and 63% saying the same of the cost of routine legal work. See graph
“The rise in fees has been fuelled by the profligacy of the financial services industry, profit-per partner league tables and the cost of keeping staff,” says in-house legal management consultant Mark Prebble of Lawyers in Business. “The backlash has been brewing for ages and the combination of disenchantment and the downturn will bring this to a head.”
In the current economic environment, it is perhaps unsurprising that legal departments are so focused on costs, but more fundamental – and perhaps permanent - forces are also at work. While, in the past, the relatively small size of the legal department in many businesses made them relatively immune to company-wide efficiency drives, the combination of their increasing size and the economic downturn means that they are no longer able to operate in splendid isolation.
Legal departments are increasingly being required to use professional procurement techniques when selecting law firms and their budgets subject to the same scrutiny as any other part of their companies.
“The focus on budgets is part of a longer term trend to look for value in legal services provision which is being exacerbated by the current economic climate,” says one head of legal. “The more prominent a legal department is the more its processes and controls have to match up to those used in the other parts of the business. If all of the other departments are looking for year-on-year efficiency improvements then it is illogical that this should not also apply to legal.”
For survey demographics, please click to see graph 1 and graph 2.
