Companies Pose New Resistance to Spiking Legal Costs
NEW YORK (November 8, 2011) In a "2011 Survey of Legal Counsel Spending," Eolis International Group reports 75% of its 96 counsel respondents plan to press outside law firms to assure a better bang for the buck in 2012.
"The most clear cut factor affecting plans to re-evaluate counsel lies not in questionable work product nor in issues of responsiveness but rather in the costs associated with the relationship", says Wendeen H. Eolis, CEO of Eolis International Group.
During the period July-October 2011 EOLIS queried participants regarding the level of their satisfaction with their outside law firms with respect to the following factors among others: fees, fee basis, hourly rates, responsiveness, expense containment and staffing selections.
The corporate counsels, drawn from major legal centers around the country "rated their experience." Particularly noteworthy was the counterpoint between fee satisfaction with ongoing counsel compared with counsel selected in 2011; 42 respondents cited "less than satisfactory" arrangements with one (or more) of their "existing 'go to' law firms while 81 respondents gave a "satisfactory" or better rating to law firms selected for the first time in 2011-for a significant matter.
The EOLIS survey also revealed that a surprising number of respondents still felt more comfortable with hourly rates than with "unique alternative fee arrangements," noting that the primary issue was spiraling costs-no matter how the fees were calculated.
Eighty per cent of respondents said either billing rates, for the same personnel or the introduction of higher level personnel to do work previously done by more junior staff could generally explain the noticeable spike in their legal costs. Additionally, alternative fee arrangements have proved debatable; there was widespread skepticism among law firm clients as to the real benefits derived from such efforts.
More startling is the number of chief legal officers with an expanded appetite for success -based fees in matters previously undertaken only on hourly rates. Citing, immense pressure from the C-Suite, one chief legal officer bluntly stated; "My first priority is lowering the company's legal costs," and I am comparing the last three years on a matter by matter basis to see where we can tighten the belt."
In reviewing respondents' comments, Ms. Eolis says, "A potential crisis looms for law firms that overlook the current mood and intentions of in house counsel to put the brakes on their legal costs". She notes, "Companies now have a wide range of law firm choices at increasingly variable price points on billing rates."
The impact is clear: law firms will have to work harder to sell and prove their distinguishing capabilities or they will be forced to succumb to mounting pressure from clients who are increasingly dedicated to protecting their company's profits at the law firms' expense.
