According the 2009 Chief Legal Officer Survey conducted by Altman Weil, Inc. [summary, PDF], there is deep skepticism among corporate law departments that their law firm counterparts are equally serious about change. When asked how serious law firms are about changing their delivery model, the answers were in sharp contrast. Only 5% of CLOs assessed law firms as highly serious. 20% gave firms credit for some level of effort. 75% rated law firms between zero and 4 on the scale, indicating little or no interest in change.
"This is a dramatic vote of no confidence from Chief Legal Officers," observes Altman Weil principal Dan DiLucchio:
Either many law firms just don't understand that clients today expect greater value and predictability in staffing and pricing legal work, or firms are failing to adequately communicate their understanding and willingness to make real change. In either case, it's a big problem.
Other interesting results from the survey indicated that 27% of corporate law departments have also reduced their in-house lawyer staff so far in 2009, and another 9% consider it "likely" or "possible" that they will do so in the remainder of the year. Law departments also report making cuts to the ranks of contract lawyers (15% of departments have done so), paralegals (21%), and support staff (26%). "This combination of inside and outside reductions means not only that in-house lawyers will assume greater workloads, but also that Chief Legal Officers will need to become more strategic about triaging work, allocating resources, and, in some cases, tolerating higher levels of risk," says DiLucchio. "And when they do hire outside counsel, you can bet that they will be shopping for value."
Whether you are [currently] a believer or not, LPO addresses many of the issues underlying the Altman Weil survey. CLOs are clearly looking for ways in which to deliver quality service to their internal clients. Law firms obviously play an important role in assisting CLOs with that goal. However, for the foreseeable future it is unlikely that law firms are going to radically change their delivery model (at least from what we in the LPO industry see). So where does that leave CLOs? One possible answer to that question has to be – put LPO to the test – the results are likely to set new standards for CLOs – at least in so far as routine, repetitive legal work is concerned. Do not assume however that LPO implies a compromise. On the contrary, LPO does not compromise the quality of the work and offers advantages on cost and productivity.
Gavin, it's not clear to me that law departments and corporate clients generally are serious about change either. I've heard numerous accounts of corporate counsel who rebuffed suggestions of alternative billing or other innovations from law firms in favour of doing the things the same way they've always been done. With a few well-known exceptions, GCs are not taking the lead on making real change happen, preferring window dressing like "rate discounts" from outside counsel that in the result deliver little actual savings and just reinforce the status quo.
It's revealing that in the survey, CLOs were asked to rate the pressure they're placing on law firms to change the value proposition in legal service delivery, as opposed to simply cutting costs. Fully 38% placed that pressure between 0 and 4 on a scale of 1-10; only 25% rated the pressure 8 or higher. In-house counsel need to take a long look in the mirror when it comes to talk about change.
I agree that there is still some resistance to change among law departments and corporate clients. However, we are seeing an increasing number of large law departments in the Canadian market use offshore legal outsourcing services. For various reasons, many of these departments are not yet ready to go public with the fact that they are outsourcing certain legal work. This is bound to change over time.