How to cut outside counsel spend

How pressured law department leaders have cut costs and stuck to budgets.

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At FMC Technologies in Houston, General Counsel Jeff Carr’s legal team has developed an operating credo with respect to outside counsel: Their goal is to be their law firms’ most important and least significant customer.

Rational Ratios

According to the Corporate Executive Board’s General Counsel Roundtable, the average corporate legal department now splits its work about 60/40 between outside and in-house counsel.

Embedding Expertise

Identifying optimum practice areas for your in-house legal function to handle is a matter of volume and consistency, especially when it comes to staffing up to handle increased internal responsibilities. There should be enough of a type of matter to keep an employee busy, and that volume should stay fairly consistent. That’s why, for the majority of companies, large, one-off M&As or litigations are almost always handled by outside counsel.

The Right Staff

If you plan on starting to handle more work in-house, the first step is making sure you have the right in-house people with the right expertise, which sometimes can mean hiring.

The Headcount Case

If the volume of work is there, then from a cost standpoint, it’s always going to make more sense to add another head to the legal department and avoid paying for law firm overhead and profitability. The Corporate Executive Board estimates that in-house staffing is still a few years away from picking up. For now, the challenge may be convincing your company that hiring is the right call.

Beyond Outside Counsel

As legal departments try to save money by minimizing their use of expensive outside counsel, insourcing isn’t the only option. It’s also not going to solve every budget concern, says Lee. He senses a larger fundamental change in the way companies use outside counsel.

Associate Editor

Melissa Maleske

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