Containing Costs- How Law Firms Can Stay Relevant

October 15, 2014

The most important part of a General Counsel's career is picking the right law firm.  The right law firm will help the company save time and money.  It will also help proactively handle major legal issues and of course it will make the  General Counsel ( GC ) look good in front of the CEO or CFO.  The issue facing the GC is of course picking the right law firm.  What criteria should be used when deciding which firm to use?

The GC will have numerous law firms begging to be considered- each claiming they are the best firm for the job. Obviously, the GC will look for a firm that adds value to the company instead of one that does not.  One of the major criteria in selecting the right firm is cost containment. Which firm does the best job in containing legal costs and fees while providing effective and efficient legal services?  Which firm adds value.

Firms that want to stay relevant must realize that as companies are requiring in house law departments to be more efficient and cost conscious- so will the GC require outside firms to be efficient and cost conscious.  What does this mean for law firms?  It means a number of things:

1.  Controlling costs is essential.  If a firm thinks it can continue to bill excessive legal fees  and costs it it wrong.

2.  The billable hour is dead.  Most GCs are now demanding law firms to agree to Alternative Fee Arrangements ( AFAs) - primarily fixed fees or hybrid fee arrangements.

3.  Firms must view themselves as a business that provides legal services.  As a business they are subject to the vagaries of the business world.  They must find a way to differentiate themselves from the "pack".  They must also use business tools at their disposal- such as risk assessments, client surveys and metrics to become efficient and effective providers of business solutions that resolve legal issues.

4.  They must focus on cost management and implement strategies to contain costs.

5.  They must be creative in attracting and retaining clients by offering various fee and billing arrangements customized for the client and matter at hand.  One size does not fit all.

6.  They must give serious thought as to how to provide AFA s while still making a profit. Like any business, if they agree to a fixed fee but underestimate the amount of work needed they may be forced to close their doors.

7.   They must use the latest software in predicting costs and controlling costs.

8.   They must advise the client on what it can do to lower legal costs.

9.   They must become involved in their client's business on a regular basis so they can help the client stay proactive.

10. They must minimize billing as much as possible by taking such steps as minimizing internal meetings, not charging for admin costs and not over staffing.

By taking steps to control costs, a law firm is not only helping its client's bottom line, it is staying relevant.  For those firms which pay only lip service to controlling costs, it is extremely doubtful that they will remain viable business entities much longer.

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