Outside Counsel Services: Prestigious or Problematic?
While the Paul Hastings slides may have rekindled debates (and jokes) about law firm culture, this isn’t the first time we’ve come to LinkedIn to lament over the delivery—and price—of outside counsel services.
If you haven’t seen the slides, you can check them out below:
Spend management programs have been rapidly developing over the last ten years or so as in-house legal teams try to get some semblance of control over the billing practices of their law firms.
How? Legal teams are leveraging operations to ensure they can hire high-quality firms without blowing the budget. We’ve even got some pretty cool software to help us do it. Wink wink.
Most of you reading this already know this. So why am I writing about it?
Understanding Billing Frustrations
In my former life as a paralegal, entering billables, preparing invoices, and drafting settlement summaries was a day-to-day reality—and so was being the buffer between clients and attorneys when the bill was due.
It was just how we made money.
“You came to us for help, remember?”
“This was on Page 7 of the intake form YOU signed.”
At the time I couldn’t understand how clients could be so angry about paying for outside counsel services they requested. But these days I am on an in-house legal team—in other words, on the receiving end of law firm invoices. And I now realize why these clients were so mad.
Law firms are missing the mark by miles when it comes to client experience.
If it was that bad, they wouldn’t be in business, right? Well… it’s not that simple.
The Need for Outside Counsel Services
Outside counsel services are an essential part of scaling an in-house team. Most in-house legal teams will never get the internal headcount or resources to do everything themselves. The training, experience, and knowledge of outside counsel is an amazing resource to lean on.
But no one wants to lean on a cactus.
Nothing feels worse than:
- Getting billed for way more than what was budgeted.
- When the cost fails to match the value of the deliverable provided.
- When you ask one lawyer for help but get billed by 10.
- Hourly rates ballooning up every year like San Francisco rent ($750–$1350 for a first year associate? REALLY?).
- Finding out other teams are getting massive discounts you weren’t offered (you said we were special!).
How to Smooth Things Over
There are some distinct patterns of behavior exhibited by law firms (consciously or not) that translate to the client that they don’t care about the client’s budget or their team.
Harsh I know, but hear me out.
In this article (rant, blog, what have you), I am going to lay out some of the areas where a law firm’s service (and billing) model is putting off their corporate clients. I’ve also thrown in some high level tips on how to fix it.
An essential caveat here: there are a handful of firms working to adapt and address the items outlined below. They are hiring and empowering innovation, client development, and/or pricing teams to hear and action our feedback.
But they are not the majority. So my rant continues.
Take It Or Leave It?
In-house legal teams have to work the way the business does. Collaboration and iteration are key to succeeding in a corporate environment—nothing is done once or accepted as-is. Culture is lateral; we are expected to collect cross-functional feedback and adjust our work to align with changing needs.
As a result, any work outsourced by an in-house team has to be malleable, undergoing similar feedback cycles.
The law firm service model has not yet adapted to this style of work.
Why? Most outside counsel expect to receive a comprehensive summary of the facts (IRAC anyone?), and then will work independently until such time that a “final version” appears in the client’s email. That work product may go through an initial drafting cycle (i.e. paralegal → associate → partner), but often the client isn’t involved.
(Sidebar: I suspect someone told their counsel 50 years ago to “stop asking questions and get it done,” and that directive seems to have lived on in infamy. If you ever meet that person please throw a drink on them for me.)
The Communication Disconnect on Outside Counsel Services
We (the client) assume that it is okay to get a law firm started with a high-level set of facts, provide updates and feedback as it comes in, and run the “draft” the firm provides through one or more internal review cycles before the firm molds it into a final product.
What many in-house clients are surprised to find is that outside counsel are not receptive to multiple rounds of questions on their work product, and do not see iteration as part of the service package.
On the firm side I get it; if you are trained to do everything perfectly the first time, getting questions or edits in response to your polished deliverable is a gut punch. I used to feel that way, and it is frustrating!
But on the client side, law firms who present their deliverables as a final piece of work product (“take it or leave it”) come across as defensive. Without context or the ability to look at the process it took to get from A-Z, it leaves the client to wonder how trustworthy the work is.
What is the Fix?
Law firms should proactively create client touch points to ensure they don’t miss updates or changing needs.
In-house teams need to provide transparency into the potential review cycles and versioning a project requires—and set boundaries as to where it is appropriate to work autonomously and where the firm needs to seek input.
Law firms must adjust to the idea that feedback and edits to a deliverable are not a rejection of their efforts (or skill), but a natural continuation of the service.
Are You Trying To Steal Our Lunch Money?
The law firm compensation model is based on the value of time—not the deliverables attached to it. If you use an attorney’s time, there is automatic value associated with that.
Here’s an example:
Our in-house lawyer Joe Goldberg texts his friend Dave over at Super Fancy & Prestigious Law Firm that he needs an NDA template ASAP. Dave is happy to take the work—SF&P has associates on call 24/7!
Joe has made a big mistake without realizing it. By leaving almost everything up to interpretation except the word “ASAP,” he is now at the mercy of Dave to decide what is a reasonable amount of effort required to create the NDA.
In all likelihood, Dave will read Joe’s text as “I need an NDA template in 24 hours—and it better be flawless.” Dave gets a vibe from Joe that he doesn’t handle frustration well. So the NDA template will go through multiple rounds of internal drafting and research. Dave might end up looping in more associates and partners to make sure it is in top shape.
The result? The unilateral NDA template may end up costing $15,000+, but only being used a few times that year. Joe is pissed and Dave has unexpectedly gone out on leave.
While it is unclear who is more to blame, this could have been avoided had the parties been more clear about their expectations and intentions.
Poor communication has created a few stereotypes about outside counsel services:
- It is nearly impossible to get a reasonable price from a firm.
- The work that a firm produces costs exponentially more than the value the client receives.
- If you don’t watch your words around a law firm, they will take advantage of you.
- There is a complete lack of transparency into how much work a firm will do (or how many staff members they’ll tag in to do it) on a matter.
What is the fix?
Law firms should be completely transparent as to the journey they intend to take to create the deliverable(s) the client asked for.
Law firms should be proactive around pricing and budget discussions to help dispel the notion that they are taking advantage of clients.
Clients should outline the basics in writing for each project. Spell out your needs, budget, and timeline.
Don’t start work until the firm confirms (in writing) who will work on your matter, what they will do, and confirms they won’t go over your budget.
I’m Sorry, You Charged Me For What?
Imagine you book a lovely massage. The location, staff, and lobby are super high-end. They didn’t have prices on their website, but you’ve been to less fancy spas and it was about $250. So you figure, worst-case scenario you’ll pay about $500.
Just like the decor, the massage was top notch. You felt well taken care of—the masseuses are clearly well-trained and knowledgeable. They spent a lot of time asking about your activities and health concerns, and focused on those areas giving you the most trouble.
Afterwards, the receptionist hands you an invoice with the following:
- Client Intake (5 minutes): $50
- Draft treatment plan – Associate Masseuse (5 minutes): $150
- Review of treatment plan – Senior Masseuse (5 minutes): $50
- Discussion with Client RE Treatment Plan (5 minutes): $50
- Research into shoulder knots (5 minutes): $50
- Research into calf cramps (5 minutes): $50
- Lavender massage oil (1 ounces): $22
- Collecting Client Feedback on Treatment – Associate Masseuse (5 minutes): $50
- Review Client Feedback With Senior Masseuse (5 minutes): $50
- Discuss Client Feedback with Client – Senior Masseuse (5 minutes): $50
- Herbal Tea (8 ounces): $12
- Invoice Preparation (2 minutes): $20
- Printer Ink (1 use): $2.85
- Print Paper (2 sheets): $1.50
- Laundry Charges (Shirt & Robe): $15
This is much higher than you had expected! They never even told you the tea was extra! You hand the invoice back, demanding to see a manager. In an effort to appease you, the manager offers a 10% new customer discount.
On the way home, you can’t stop stewing about it. That night you write a scathing Yelp review and vow to never return there again.
If you loved the service, why the anger?
Setting it All on the Table
When people seek out a high-end service, they expect to be taken care of. They don’t mind paying more money for the peace of mind that comes with knowing the experience will exceed their expectations.
Such is true with law firms: clients come to a firm with sensitive and urgent needs, and trust that if they pay a higher price, a team of highly qualified lawyers will provide solutions that are in their best interest (if not solve their problems).
And nothing exudes care and confidence less than adding overhead expenses to the bill.
Overhead is a natural consequence of running a business. Most industries set the market value of their services so that the sale of them alone covers overhead costs as well as profit. If your rates are not covering our overhead, that is a core business issue—not a client one.
By handing clients an invoice full of hidden overhead costs, here’s a few things you are communicating:
- I don’t want to invest anything into your happiness (even tea).
- My business isn’t sustainable without passing my overhead onto you.
- The services I am providing are not valuable enough on their own.
Client experience matters more than ever these days. Clients are more knowledgeable about the legal services market, about the matters they seek legal advice for, and also about the areas of work they can outsource to other companies (like an ALSP).
What is the fix?
If your hourly rate isn’t covering your overhead, consider building internal efficiencies or finding creative ways to reduce internal overhead (I know a few legal ops people who could help).
Proactively offer modern pricing options (AFAs or subscription rates) that provide a healthier balance between client access and firm profit.
Where moving off a billable model just doesn’t make sense, preemptively remove overhead costs and any non-compensables off your invoices. Don’t make your clients chase you to correct invoices on the back-end.
Set clear expectations as to what you consider billable (or non-compensable) by publishing a set of Outside Counsel Guidelines.
Ensure you are getting a clear view of the itemized invoice (and potential hidden charges), consider onboarding a spend management platform.
Don’t be afraid to push back on your firms when it comes to invoice corrections and discounts. Your peers in the market are more often than not already getting those benefits from their firms.
It’s damaging to your relationship and taints the quality of the work you perform.
Was There A Point To All Of This?
The very things that some firms pride themselves on are the things that make the client want to run away and never look back.
- We don’t want you available 24/7.
- We don’t want to pay to train your employees.
- We don’t want you to be perfect – we want you to listen.
- And we want you to adapt your practice to meet modern needs.
The legal services industry has a long way to go in terms of adapting to the changing needs and expectations of their corporate clients. Clients are looking for more than just legal expertise; they want to be treated as partners in the process and to have a positive experience.
Legal teams have lost their appetite for the “take it or leave it” approach to the billing and service delivery models that many law firms offer. Instead, they demand transparency, flexibility, and collaboration from their outside counsel.
With the right communication, processes, and tools in place, it is possible for outside counsel services to be both prestigious and practical for their clients.