Last year ended with some worrying news for law firms: The market for legal services is getting tighter, with corporate legal departments taking more work in-house and cutting back on what they send to outside GCs.
According to a survey released by Liquid Litigation at the end of December, this is down to a greater focus by GCs on efficiency. As legal technology grows in sophistication, corporate legal departments are able to do more in-house than ever before – reducing the work they need to send out to law firms. Liquid Litigation’s survey revealed that 40 percent of in-house counsel surveyed plan to do just that in 2017, while roughly the same number will focus on improving internal efficiency as well.
At the same time as GCs are withdrawing work, their relationships with outside counsel are also souring in key areas. In its annual Inside/Outside Counsel Relationship Survey, the International Association of Defense Counsel (IADC) found that inside and outside lawyers are quite far apart in terms of how they rated their respective effectiveness. GCs tended to give low marks to outside counsel in a variety of areas, from responsiveness and willingness to collaborate, to legal expertise. Those same GCs generally rated themselves much higher in these areas, which no doubt is fueling the move to do more work in-house.
Perhaps unsurprisingly, the widest gap in perception identified in the IADC survey was around billing and legal costs in general. Inside counsel tended to feel their matters were overstaffed with bills regularly exceeding what was budgeted. They also complained that the fee arrangements offered by law firms did not line up with the value of the work to in-house counsel.
In light of all of this, law firms seem to be heading into 2017 with their GC clients leveraging technology to hang onto more work themselves. They also have a dim view of what they are being charged for the matters they do dole out to outside counsel, and higher esteem for what they’re able to do in-house.
Winning New Business When Competing on Two Fronts
It seems, then, that law firms are now competing for business on two fronts – among themselves, and against their own clients. And one of those “competitors” – GCs – are growing more confident in their ability to handle work previously done by outside counsel.
The good news is that savvy, strategic firms can win business in even the tightest market. Here are steps that law firms should take in this current market environment:
Hold on to current clients: The old adage that it costs more to keep a current client than win a new one has never been truer. A survey by Altman Weil last year revealed GCs are also currently reluctant to change outside counsel — so don’t give them any reason to. They are more likely to maintain the status quo in this market. Losing a client right now could be more costly than ever.
Prove value: In order to win business from a GC – or keep it from going in-house – law firms must prove their value. This is always the case, but it’s now much more important. GCs must feel confident they are making the most of their legal spend, and every dollar counts. This might be a time to seriously walk the talk of alternative fee arrangements.
Ask the right questions: Whether you’re taking a long-standing client to lunch or meeting with a prospect, you should be asking the right questions. This is the time to get a fix on exactly what the GC is thinking, what they want, and whether or not you measure up to other firms or what can be done in-house. Demonstrating that you are concerned for the client or prospect’s situation and want to ensure you’re the perfect fit can go a long way in both keeping business and winning new matters. And be ready to admit that the fit may not be right – better to walk away that pursue work that doesn’t make sense for your practice.
Ask about the competition: One of the questions you ask should be about your competition, both other firms and in-house departments. Rather than asking “how can I win your business,” focus instead on what the client or prospect is receiving from competitors. The answer to “I’m really impressed with what you’re getting done, how are you doing it?” can reveal a lot about what the client values. It may also lead to a conversation about what’s frustrating them at the moment — information you can use to position yourself as the solution.
There’s no question that current GC attitudes on hiring outside counsel make for a tough market. Winning new business right now demands a client-focused strategy that firmly establishes a law firm as the best option for a GC seeking value. If you would like to discuss how you or your firm should be addressing this issue, please get in touch.