Big US and UK companies have cut spending on BigLaw. Has anyone stepped back to ask how much should they should spend? The current US debate on health helps illuminate the answer.
The US spends far more on health care than other developed countries yet achieves similar outcomes. Perhaps the same is true for corporate consumption of legal services. (Comments here are not about consumer legal spending.)
Experts debate what woes US health care. I think over-spending is fueled by unnecessary diagnostic tests and rampant over-treatment. (For example, re the former, see In Push for Cancer Screening, Limited Benefits, New York Times, 17 July 2009, and re the latter, recent studies show that back pain usually resolves without treatment yet many have surgery anyway).
Last week in Reducing Legal Costs Beyond Tinkering with Price I suggested that business should reduce the demand for legal service and that lawyers should fulfill that demand more efficiently. Thinking about that post plus reading a week of articles about pending US health care legislation got me thinking more about aggregate corporate legal spending.
In health care, numerous experts study spending and results, both at an aggregate level, comparing countries and regions, and at a micro level, comparing hospitals or treatments. In contrast, what informs client decision-making about legal spending other than their own experience or industry benchmarks?
I wouldn’t rely on industry benchmarks because law is driven by precedent and lawyers by the question of “who else is doing this.” Whole industries may well be getting legal spend wrong. Unlike in health care, no third parties study legal spend nor search for the cause of what may well be serious over-spending.
Like the US health care market, the US and UK legal market may be spending far too much for average results. It may be that a lot of the diagnosis and treatment that corporate law departments order do no good or even cause harm. If so, then the drastic reduction in legal spend prompted by the crisis is just an opening act.
I’d love to figure out a way to analyze this – any ideas? And who is institutionally positioned to do the analysis?