Corporate legal departments are seeing an increase in their caseload, with the majority of that work being assigned to outside counsel. That has been the trend for several years now, according to a Thomson Reuters survey of more than 1,000 corporate legal departments.
That study also found that companies were increasingly focused on managing the legal spend through a number of methods, including outsourced legal bill review (LBR). The question for a busy corporate legal department is whether LBR should be performed in-house or whether they should outsource those functions to an LBR expert and focus on higher value work.
In this article, we will review some of the most compelling reasons to outsource your company’s LBR and explain why it’s better for the legal department, the company, and your outside counsel.
It’s Better for the Corporate Legal Department
Some companies have chosen to keep the LBR process in-house. At least on the surface, that seems to make sense. After all, the corporate legal department is staffed by attorneys and legal support staff who know the company and its legal objectives. They typically know the facts of each case and can make an informed decision on whether outside counsel is billing fairly and accurately.
Let’s face it, no one goes to law school to become an accountant. Often, reviewing legal bills is seen as a tedious distraction from the corporate lawyer’s day-to-day responsibilities and focus on the matter(s) at hand, law firm relationships and performance. Further complicating the entire process is that they may not review bills thoroughly or fully enforce billing guidelines because they often view their law firms as partners and may have even come from an outside firm. These are clearly a conflict of interest that ultimately may end up costing the department and the company more money.
Many corporate legal departments have tried to alleviate this problem by hiring staff specifically to audit legal bills. The problem is that it’s nearly impossible to hire the “right” number of people with the right expertise for this task. If you’re staffing with paralegals or similar staff for bill review, there will likely be significant training involved. Furthermore, competent legal bill reviewers are in high demand so once you train up your internal associates there is a greater risk they will flee to higher paying opportunities. This could set you back six or more months while you train up the next associate.
Finally, the workload ebbs and flows from month-to-month. In-house reviewers can be overwhelmed one month and underutilized the next. In those slower months, the company ends up absorbing the increased overhead. And, in busier months, the billing review process can fall behind, which results in poor performance or delays in bill approval.
All these problems are solved by outsourcing the legal bill review process. An experienced legal spend management partner should presumably have the expertise needed on staff, can adjust resources as needed, and the cost is always directly proportional to the need. Legal departments can keep headcount and costs down, while keeping the legal team happier and focused on high-value work.
It’s Better for the Company
Aside from achieving an acceptable legal outcome, companies are primarily concerned with keeping legal spend predictable and on or below budget. This is where an experienced legal spend management partner can shine. Because they are dedicated to this one task, legal spend management firms have the tools and resources needed to help clients develop or refine best practice billing guidelines and analyze and report on all the relevant factors that a company would use to predict and manage overall legal spend.
LBR experts can be used at every stage of litigation and across all practice areas. Going a step further, an experienced legal spend management partner can provide valuable insights into hiring practices and utilization. For example, one outside law firm might be the most cost-effective choice for “bet the company” litigation projects, while at the same time being unnecessarily expensive for routine matters. Or, one firm might be more efficient at document-intensive cases, but less efficient in others. LBR professionals can track the myriad variables that drive these kinds of decisions and without enforcement of the firms billing guidelines you cannot achieve these apples-to-apples comparisons and gain this valuable insight.
Then, there is the “know your craft” factor. That is, LBR experts are in the business of optimizing the accuracy and efficiency of legal bills and the billing approval process. They spend all day, every day, thinking about ways to streamline the bill review process and gain more and better insights from legal spend data. Just as corporate counsel might hire an intellectual property firm to handle a trademark dispute, an LBR firm brings that kind of expertise to the bill review and approval process. Like hiring an IP firm, the outsourced bill reviewer doesn’t entirely replace the corporate counsel, instead, they amplify the corporate counsel’s abilities in this critical area of responsibility. The net result is that the company gets a better result at a lower and more predictable cost – often with proven return on investment.
It’s Better for Outside Counsel
Unfortunately, legal bill review is sometimes seen as an adversarial task — one where legal departments search for ways to squeeze outside counsel for every penny. But, that’s not always the case. When run properly, a healthy LBR process actually benefits outside counsel.
That’s because the goal is not to reduce legal bills just for the sake of lowering costs. Rather, the legal bill review process is about ensuring that outside counsel is following the company’s billing guidelines. The goal is to identify problem areas and then fix them. It’s more about education than confrontation. More about transparency, accountability and enforcement.
As a result, outside law firms often benefit from outsourced bill review because the LBR provider will often complete the bill review process more quickly and resolve problems faster. The result is that legal bills are approved and paid faster than they’d see with a typical in-house team where bills may stack up for weeks or even months before they are reviewed, adjusted and paid.
Lastly, when a difficult issue does arise, a trusted LBR partner will have dedicated staff in place for outside counsel inquiries and a fair and robust appeals process so issues can be resolved in a timely, consistent and fair manner. This ensures that the relationship between corporate legal and outside counsel is never placed at risk.
Simply put, legal bill review is a necessary part of the corporate litigation management process. But that doesn’t mean the work has to be (or even should be) performed in-house. Outsourced LBR benefits all involved in the process. Corporate legal departments can stay lean and focus on their most valuable work. Companies gain control and predictability when managing legal spend and outside law firms benefit from a streamlined bill review process, resulting in faster approvals and payments.