Three Ways Midsized Firms Can Beat The In-House Trend

September 17, 2014

Mid-sized firmIn several earlier posts on this blog, we have observed that corporate legal departments are keeping more work in-house. We certainly are not the only ones taking note of this trend:

  • Recently, the Wall Street Journal reported that this year, corporations are going to take $1.1 billion that would have been spent on outside counsel and redirect it toward internal legal services. (Click here for the article, although a subscription is required.)
  • Additionally, BTI Consulting recently interviewed 300 general counsels and reported that some 58 percent of companies they represent are planning to keep more legal work internal this year. Last year, 50 percent gave the same response.
  • The $41 billion companies spent on internal lawyers is 22 percent more than they spent in 2011, according to BTI.
  • Sixty-three percent of the 1,200 chief legal officers recently surveyed by the Association of Corporate Counsel said they plan to “in-source” more work in the coming year than they have previously.

The belief behind this transition seems to be that in-house attorneys are cheaper, more efficient and more responsive. Clients also want greater predictability, and it is easier to get information from someone who works for the same company as you do than it is to get it from outside firms, which are often faulted for being less than clear and forthcoming.

One interesting facet of this shift? Large Law firms might not be noticing it quite as much. Large Law firms tend to specialize in rarified practice areas that are too esoteric for in-house counsel, and “bet the farm” litigation scares clients enough that they will often pay a Large Law firm’s asking price. Since Midsized Law firms often focus more on “commodity” legal work that can be done by in-house counsel, they are special risk to feel pinched by this trend.

So, how can Midsized Law firms adapt and thrive in the face of this trend?

Give them what they want: This sounds so obvious it should not need to be mentioned. And yet…Clients say they want price predictability, but a surprising number of Midsized Law firms do not widely offer Alternative Fee Arrangements. Clients report needing more clarity about where a matter is going, and yet “Communication” still tops many lists of gripes about law firm performance. Law firms that start catering more closely to their clients’ expressed wishes, even if the result is a nontraditional business practice, are more likely to keep those clients than firms that only pay them lip service. Midsized Law firms are generally thought of as being more amenable to change, since their size lends itself to change and flexibility more than does that of Large Law firms. It is time Midsized Law firms capitalized on that capability,

Be the partner they didn’t know they needed: Focusing only on the matter at hand is rather myopic. A Midsized Law firm that can advise clients on potential future issues (maybe even before they ask) and offer counsel that complements the client’s plan for growth weaves itself into a client’s future — and becomes much harder to do without.

Consider unbundling: Recently, clients have begun to explore the idea of “unbundling” —  breaking a matter into its components and distributing them among law firms and legal service providers (think Axiom, et al.) to obtain an overall cheaper price. Understandably, a Midsized Law firm might balk against this trend. Another way to think about it, though, is to ask whether you can retain a piece of a client’s business instead of watching the client leave entirely.