Controlling Legal Spending in 2009

Laying off in-house lawyers costs companies big money, but they are doing it anyway. Why?

By The Staff of the Corporate Executive Board

In lean times, companies often reduce staff across the board. Contractors can be hired as needed for whatever work can't be done by remaining staff. In theory, this saves the company money.

But Corporate Executive Board research reveals that reducing legal staff can actually lead to considerable increased legal costs. Companies with fewer in-house lawyers tend to spend twice as much as their peers with more lawyers.

The root of the problem is that contracted lawyers cost two to three times more than in-house lawyers, and companies invariably end up needing to use them for a variety of reasons, and usually on a very frequent basis. Legal work typically isn't discretionary—try as they might, companies can't avoid engaging a lawyer when a legal matter arises.

And while legal departments should take a hard look at their portfolios of work in an effort to reduce waste and inefficiency where possible, the efficiency pickings are often slim.

When approached strategically, companies can make decisions that lead to more cost-effective legal spending without reducing in-house legal staff; following are guidelines for doing so:

• Be diligent in retaining the appropriate mix of legal staff and focus on the highest-value work on their to-do lists.
• Create more efficient legal knowledge management, a proven method for enhancing in-house productivity
• Hire contract or temporary lawyers to keep work inside the company at attractive rates, instead of outsourcing to law firms.
• Consider shifting some legal work from big-city firms that can be executed by corporate firms in smaller markets (e.g., Kansas City, Minneapolis).
• Consider alternatives to law firms; companies such as Counsel on Call, Axiom, LRN, Kelly Law Registry, or Black Letter Discovery have the capability to perform law firm tasks efficiently and at a lower cost.

Provided by Corporate Executive Board —What the Best Companies Do™