A new survey of chief legal officers blatantly exposes that corporate clients are interested only in discounts, low priced fees and cost reductions above and beyond anything else in their relationships with private law firms.
"Forty-three percent of CLOs say they don’t really care about a law firm’s delivery model as long as they get the results they want at a competitive price ," says the new 2014 Chief Legal Officer Survey by Altman Weil.
"CLOs were asked which service improvements and innovations they would most like to see from their outside counsel. The top improvement, selected by 58% of respondents, is greater cost reduction ."
At a time when corporate profits are at their highest level in at least 85 years, and employee compensation is at the lowest level in 65 years, in-house corporate counsel are gouging law firms for every penny they can get.
Corporate lawyers expressed no interest in legal project management, online client services and depth and breadth of experience that law firms use to distinguish themselves. A cheap rate the main point they talked about in the survey.
The two methods chief legal officers use most frequently are direct price reductions from private law firms, and alternative or fixed fee arrangements. The most common price cuts that corporations get is a 6% to 10% discount. The number of corporations getting discounts of more than 10% is up by 36% this year, according to the survey.
Among the CLOs, 36% shifted work to lower priced firms.
Moving work in-house
- 40% of corporations said they had shifted law firm work to in-house lawyers.
- 34% reduced the total amount of work sent to outside counsel.
- 26% of law departments plan to decrease their overall use of outside counsel in the next year.
Asked if they could select only one pricing scenario from outside counsel, CLOs said:
- 37% wanted transparent pricing: We want to understand how/why the price is set and have the opportunity to discuss changes.
- 27% wanted guaranteed pricing: We want to know in advance what it will cost.
- 26% wanted value-based pricing: We want to pay a variable price based on our assessment of the value we receive.
Asked which service improvements they wanted, 58% of CLOs said "greater cost reduction." Also at the top of the list are ‘more efficient project management’ chosen by 57% of CLOs and ‘improved budget forecasting’ selected by 56% of the top legal officers.
No surprise, the chief legal officers are heard whining in the survey about law firms. Only 4% of the chief legal officers said they were satisfied with the traditional legal service delivery model.
CLOs also give a vote of no confidence to law firms’ long-term interest in or ability to change. When asked who is the most likely change agent in the legal profession over the next ten years, 43% of CLOs said they believe that corporate law departments will lead change. Only 6% of CLOs can envision law firms as the most likely change agent in the legal marketplace in the coming decade.
The Chief Legal Officer Survey has been conducted and published annually by Altman Weil since 2000. There were 186 responses for the 2014 survey, 15.6% of the 1,189 corporate
law departments who were invited to participate.