Monetizing Gains and Avoiding Commoditization

As this issue of InsideCounsel discusses in-house counsel compensation and outside counsel relationships, I'd like to identify some techniques and trends that I believe will impact each.

Inside Counsel: In my view, legal departments should hire fewer full-time employees, give them broader responsibilities and pay them more.

Start with the denominator. Are you capturing all of the company's spend on legal services? Are human resources, facilities and IT spending money on outside counsel? Is finance getting international tax (or other legal advice) from lawyers at the auditors?

Try drafting an e-mail saying all invoices for legal services need to copy the legal department. You're not stealing anyone's budget, you are just gathering data.

Data-driven decisions. With that data in hand, you can begin to explore how to improve legal services currently outside your domain. Do you recall the formerly big-firm employment lawyers you know who have set up their own shops? Can someone in your network come in and do construction law training for facilities or export classification training for logistics for an hour or two? The $50 legal spends on funding sandwiches for those brown-baggers may be the best investment you make all year.

Monetizing the gains. Once you've shown your internal clients that you can get them better and perhaps cheaper alternatives, you can then discuss sharing the savings. Even if they want to keep all the savings for themselves, you can still point out how legal has reduced the company's aggregate costs. Maybe even throw in the results of a little customer satisfaction survey from HR/facilities. That gives you more ammunition to keep your budget dollars and spend them on your people.

Outside Counsel: I can still recall the first time, as outside counsel, that I was referred to as a "vendor." Me, a $600-an-hour professional with 15 years experience, being lumped in with janitorial services and copier maintenance? That hurt.

And yet, for commoditized services, the analogy is not far off. Accordingly, as outside counsel, your goals should be to avoid commoditization where you can, and get the client's largest market share where you can't.

Avoiding commoditization. The bad news for law firm lawyers is there's not much you can do about this. If your firm's rate structure does not permit you to compete in your niche, you either need to get a new practice or get a new firm.

It's still true that clients hire lawyers, not law firms. In a post-backdating, Sarbanes-Oxley world, inside counsel can't blame suboptimal counsel on the letterhead. If we don't get the best answer available at a price point, we're gone.

So if you feel the commoditization train coming, start talking to your current firm's management about their plan to help you deal with it, or start calculating how you can capture a higher percentage of what your current and prospective clients have to spend in your niche.

Dealing with commoditization. How does the lawn guy keep from being replaced? For starters, he hits his minimum deliverables. If the lawn is supposed to be mowed on Tuesdays, it'd be good to deliver at least that.

If you're the vendor, first build in a cushion. Answering calls, e-mails and texts quickly is also a nice touch; quick acknowledgement of the message will often suffice. Second, people fire friends last. For some, friendships may still be built over lunch or Lakers games. But for most people, the most precious gift is the gift of time.

How do you give back time? When is the last time you offered to take a long conference call at the client's office? Ghost an e-mail for the client to send? Volunteered your colleagues to give that free lunch-time seminar?

Bonus points if you bring in Schlotzsky's.

Martin Collins

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