Why Won’t In-House Counsel Force Their Law Firms to Innovate?

As a follow-up to my recent article “Why Won’t Law Firms Innovate?,” where the answer was in part that their in-house counsel won’t force them to, I’ve had the chance to speak with several other in-house counsel and I asked them bluntly,  “Why won’t you force your outside law firms to innovate?” The responses were varied, and even though the most frequent answers were centered around fear, uncertainty, and doubt, the real answer lies in one response – “we have no incentive or motivation to do so.” After a long conversation with that respondent, we likened it to Sisyphus pushing the rock uphill.

Let’s explore these answers in a little more detail.

Fear Uncertainty, and Doubt

Fear, uncertainty, and doubt (or FUD, which is a term often used in sales) happen for a variety of reasons with the most prevalent being, “I hire outside counsel to make things go away” or “take care of things I don’t have experience doing” or “I don’t know enough about that area of the law and I don’t want to make a mistake.” So, in the end in-house counsel end up hiring and trusting their outside counsel to take care of it.

(Perceived) Lack of Bargaining Power

A common response I heard was that in-house counsel, despite hiring and paying the bills of their outside counsel, did not think they had the bargaining power/influence to make their outside law firm “do anything.” One respondent basically said, “Yes, I could push my outside law firms to use a more diverse team on my project or have them bill the work a certain way, but it would be for that one deal or case; it wouldn’t be a systemic change. I would have to fight the same battle on the next set of work. And I don’t have any incentive or motivation to do so. I get no reward for doing so. In fact, it may not even be in my best interest to do so, culturally (in my own business) or relationship-wise with that law firm.” This sentiment applied to many situations and included changing how work was done (by partners, associates or paralegals) or choosing the legal team doing it, as well as the way work was billed (any alternative fee arrangement to the billable hour).

Old School/Comfort

It’s easy to default to a comfort behavior in a world that is relationship driven. I heard time and time again, “This is the way we’ve always done it.” “White Shoe” Law Firm has always handled [fill in the blank] legal work for us. I don’t see any reason to change now.” Yes, it is risky to change a relationship. Yes, it is difficult to change the ways things are done, but that is what is required for innovation (and in turn saving money), by definition.  Without taking risk, in-house counsel and their companies will continue to pay far more for some legal services than they need to.

Rely on Particular Expertise

I’ve been in-house counsel for over 20 of my 25 years as a lawyer and I would say that I relied on outside counsel for particular expertise: Expertise I didn’t have (and frankly, didn’t want). I heard this same refrain loud and clear from other in-house counsel. Personally, I am an intellectual property lawyer who specializes in start-ups. I didn’t particularly want to build any expertise in employment law, stock administration, or litigation so I chose to rely on outside counsel for that expertise and experience. Are there things that I could do in those areas, yes, but I thought my time was better spent elsewhere, so I relied on outside counsel, and I trusted them and the working relationship I’d built with them.  When stakes are high, that probably makes sense, but what about when they’re not?

That reliance may not make in-house counsel a smart consumer of legal services. This happens for several types of reasons – things are considered one off rather than business as usual so they are treated in a catch-as-catch-can manner rather than in a planned, considered manner. This happens especially in litigation (and particularly in eDiscovery areas) and employment matters that are treated as a crisis and handled with kid gloves.

Time is of the Essence

Often as in-house counsel, we seek help from law firms when something is hot, timely, and a mess. We don’t have the time or resources in-house to be proactive about everything that comes across our desk. Often that means a quick call to current counsel or, if the legal need is more nuanced, it means putting together a quick list of criteria and then hosting a dog and pony show by law firms and then choosing one (usually based on a referral or other trusted relationship). This approach, again, does not make us smart consumers of legal services, because we don’t have the luxury of time to look outside the box of traditional solutions.

Work Volume Doesn’t Warrant It

Many responses centered around the work volume or case volume not being high enough to cause a law firm to change its behavior. I see this response as falling into the perceived lack of bargaining power/influence category. One response, from Riley R. Russell, Senior Vice President Corporate Development and Chief Legal Officer of Sony Computer Entertainment America, focused on forging a path with or without law firm support. He said, “for those who forge their own path, they have to fight a bit with their law firms.” About ten years ago, Sony filed one of the first inter parte reexams with the USPTO. Riley said, “At the time it was like pulling teeth to convince our outside counsel it was a good idea – so we used another firm.” Twenty-three cases later, “we have a pretty good model,” Riley continued. Not every legal department has 23 cases of anything, let alone one type. This lack of volume or critical mass is a contributing factor to the “business as usual” mindset that keeps in-house counsel locked into their current approaches with their law firms. Riley and his team at Sony had the foresight to forge a different path with their law firm.

As you can see, there are many reasons why in-house counsel won’t force their outside law firms to innovate. The perceived (and sometimes very real) lack of bargaining power is at the top of the list. When time is of the essence or your company doesn’t have the case volume to force a law firm to change, it can seem like a daunting task to seek innovation or change from that law firm. But more importantly, if the in-house counsel’s motivation or compensation aren’t tied to making/implementing this type of change, innovation won’t happen from the in-house counsel to law firm direction.

Note: I actually had two in-house counsel laugh out loud when I posed the question. And their next response was, “you are kidding, right?” No, actually, I am serious. Why don’t in-house counsel force their law firms to innovate? Well, there is enough fear, uncertainty and doubt to go around, that’s for sure. There is also enough “business as usual” to go around as well. If you have examples of innovation in the in-house to law firm context, I’d love to hear from you.

Stay tuned for the next installment in this series exploring innovation in the business of law.

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