Is there an excessive emphasis on the control of legal costs by some in-house departments?
Mr. Terwilliger sees a troubling trend in certain cases:
Today, however, the corporate discussion seems to be shifting from “How much does it cost?” or “Can we do it in-house?” to “Can we do without it?”
Two examples given of this potential short-sightedness are avoiding plaintiff IP litigation and potentially cutting corners on FCPA compliance.
These are two clear high-reward, high-risk areas. The legal department can become a revenue center with the right case and effective IP counsel. On the FCPA front, many companies learn the hard way that the global sales bazaar is not always an easy place to navigate.
Mr Terwilliger rightly notes that in-house departments have to have a proper focus on costs, and that the CFO often demands it.
All good so far, but one comment caught my eye:
That said, however, in a very real way, companies tend to get what they pay for when it comes to purchasing legal services. Companies benefit most from legal advice based on specialized training, expertise and judgment gained through long experience.
All true, when talking about a certain team at a specific firm. The challenge for the GC and other managing counsel is to make the right match. Rare are the firms that have the needed expertise that justifies premium rates across all practice areas.
I think I’ve said somewhere before that cost does not equal value. In some cases the services may be overpriced; in Mr. Terwilliger’s case, heading up the white-collar practice group at a major firm can make his hourly rate a relative bargain.
Today’s GC should definitely not skimp when it comes to necessary support from experienced and service-oriented outside counsel.
But given the depth and breadth of outside legal costs, the focus on control is there, it’s increasing, and it ain’t goin’ away. This raises many challenges for law firms that I’ll save for another day.
I must say right here that I see this trend causing enlightened law firms to look hard at what they offer and who they have doing it. They may find in some cases that they are at a fork in the road.
It may closer than some think; sort of a legal off-ramp?