Business Leaders Need to Drive Better Legal Pricing and Services Delivery Because Lawyers Won’t or Can’t

The message of this blog, and what I do for my clients, is based on a single guiding conviction:

American businesses large and small pay increasing (never decreasing) legal costs – and miss opportunities to prevent liability before it happens.

Because owners and executives let the legal industry and its business model call the shots on pay, work flows, and personnel. They let law firm and in-house attorneys make decisions in these areas that no general manager would tolerate anywhere else in the business.

Meanwhile, demands of the litigation and regulatory environments proliferate.

It’s not as though no one agrees with this view.

In fact, this view is the staple of lawyers’ conferences (for instance, here, here, and here) and publications (for instance here, and here).

The words are the staple … that is.

Any constructive action in response not so much.

On the law firm side, the most recent Altman Weil survey of law firm leaders reported: “In 69% of law firms, partners resist most change efforts”.

69% of law firms.

The reason?

59% answered: “We are not feeling enough economic pain to motivate more significant change.”

What about the in-house side? Are general counsels demanding greater value in legal services delivered?

Canadian consultant to law firms and in-house departments Richard Stock in advice to general counsels on how to negotiate with law firms last month cited the most recent Altman Weil Chief Legal Officer Survey (2017) to give the answer:

“Altman Weil found that 55% of Chief Legal Officers believe that they do not have enough buying power to negotiate more effectively. Some 51% also say that law firms are resisting discounting. Interestingly, 30% of the CLOs do not want to damage good relationships with external counsel by asking for greater discounts.”

In the 1990s I was an executive — not a practicing lawyer — at GE. Jack Welch was in charge. A Harvard Business Review article describes what Jack Welch made sure that all of us then at GE experienced firsthand (“Kill Your Business Model Before It Kills You“):

” … During the dot-com boom, Jack Welch required each of his business to go through an exercise that he called ‘Destroy Your’ in which he asked them how competitors could possibly put them out of business. In other words, long-term success is more likely when we welcome the anxiety of competition instead of avoiding it.”

Law firm attorneys just don’t see marketplace needs the way that a general manager of a business sees them. (Some give lip service to those needs conceptually — but their business model doesn’t allow them to change pricing and service delivery to any material extent.)

And the timidity of those in-house lawyers who should be getting better deals for their client companies.

I can imagine Jack Welch’s response if told that failure to negotiate a good deal for GE had been caused by lack of “buying power”, the other side’s “resistance”, or fear that resolute bargaining might “damage good relationships”.

Both law firm attorneys and in-house lawyers — as these surveys demonstrate — stand frozen in the headlights as serious demands face their client companies.

So it’s up to business leaders — not the legal industry — to fix what broken in the pricing and delivery of companies’ legal services.

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