We may or may not be in the midst of a legal market revolution. Many an article suggests that general counsels are slashing costs. At best, however, the data are still anecdotal. GCs are, at most, tinkering with pricing rather than removing costs.
By “tinkering with pricing” I mean they are bargaining for lower rates, seeking (putatively) alternative fee arrangements, and moving work to firms with lower billing rates. That’s good as far as it goes. Better yet is “removing costs”, by which I mean lowering the demand for legal services and, for those services still required, reducing the hours required to perform them.
Demand reduction is a combined business and legal decision. Clients need to do a better job assessing risk and deciding what warrants legal attention. Suppose every CEO and CFO assumed that, pick a number, say 20% of legal work was unnecessary. They should ask the GC to prioritize work and list that 20% least risky to cut and what the impact would be. Then make a business decision if the risk of cutting is a good one.
Hours reduction is a legal function. I’ve frequently suggested that law departments must actually manage inside and outside counsel, looking at how lawyers perform their work and actively seeking more efficient and effective ways to practice. They need to ask questions such as, “which tasks are really necessary” and “what is the most appropriate person to perform this task: inside counsel, outside counsel, temp lawyer, paralegal, other professional, or offshore lawyer.”
They also need to apply specific techniques that can control hours. For example, in A radical proposal – divert bill-review time to firm-direction time (3 May 2009), law department management consultant Rees Morrison points out that reviewing bills after a matter is over is much less effective than actively managing the matter while it’s happening. Another example: Ken Adams, an expert on writing contracts, argues persuasively that lawyers can reduce risk and cost by simplifying contract language (see his blog post 14 July 2009 blog post that points to an article about the commodification of contract language).
Fixed fees certainly motivate hour reduction but I’d love to hear from readers on other good ways to reduce hours for that legal work truly necessary.