After the last two years of severe recession and huge corporate legal spending cuts, I thought it was safe to assume that general counsel buying behavior had changed. It turns out, perhaps not.
Reading What’s Really Going On in Today’s Legal Departments? a survey of GC in the August issue of Inside Counsel, the results sound very similar to what I read a few years ago: complaints about law firms but little evidence of buyers exercising their power. Cathleen Flahardy, editor-in-chief, notes in From the Editor “We were surprised that the economy didn’t have the impact we expected—GCs overall are still satisfied with their firms.”
Let’s see why the surprise: Over 90% of respondents report economics are increasing pressured to reduce outside counsel spend. So far, that seems to be the new program. Almost 70% are happy with their outside counsel relationships. Reading that, I would guess that firms are performing the way GC want. But keep reading.
Additional questions reveal that 50% of GC don’t think law firms recognize corporate budget constraints; 65% say law firms don’t actively seek ways to reduce cost; under 40% of firms are open to alternative fee arrangements; and 60% report their firms don’t understand their businesses. There’s more: only 65% of GC require firms to submit budgets; of these, 46% of firms adhere to budgets. That means that only 30% of law firms have matter budgets that they meet.
How should a CEO or CFO interpret these results? I’m not sure, but I can see that they would conclude, among other things, that GC are among the most easily pleased people. They might also conclude that it’s time to put purchasing professionals fully in charge of outside counsel relationships.