Outside counsel costs are going through the roof, with no relief in sight, but in-house legal teams might take a page from their colleagues who oversee procurement to get ideas for better managing future spend, management consultant Jason Winmill says.
Two decades ago, Winmill said in a webcast, he provided consulting services to an executive at Johnson & Johnson who was trying to manage the company’s legal bills better by requiring some outside counsel to do work on an alternative fee basis.
Flat, fixed, capped and other types of alternative fees are familiar today but 20 years ago they were novel and the executive was determined to learn if they could help the legal team slow the rate of growth in its spend, Winmill told Sagi Eliyahu, founder of legal workflow software company Tonkean, in the webcast. Winmill is managing partner of Argopoint and chair of the Buying Legal Council.
“I asked him how he knew these [fees] are saving money in advance,” Winmill said. “He said, ‘I don’t know. These are experiments. I’m running experiments — clinical trials — just like the scientists here at J&J.… I’m convinced we’re smart enough that we can get better over time if we have better data.’”
Combining this willingness to experiment with the patience to measure results in years rather than in quarters could yield a better use of the legal team’s budget, Winmill said.
“Managing outside legal costs doesn’t mean costs go down,” he said, “but we’re going to know what we’re buying and will get a fair price for what we’re buying.”
Winmill is an advocate of legal teams partnering with their procurement colleagues to tap their expertise in getting better deals.
“There are people in corporations that are good at buying things,” he said. “They have market intelligence. They can help manage outside advisors and suppliers strategically. Many are in procurement.”
It’s best to start small on a cost-saving journey, he said. Pick a matter that won’t rock the company if the experiment fails.
“How many corporate initiatives died because they envisioned some sort of cold fusion in a jar?” he said. “Start small. Pivot something that maybe you’re curious about that doesn’t really matter.”
Recommending that legal chiefs try to get quick wins to build momentum for bigger change isn’t novel advice; the twist is to work with procurement to help guide the project.
“Practical innovation is combining two things that already exist,” he said. “With legal procurement, you’re taking practices that procurement [is] using successfully and bringing that into legal.”
Doing nothing isn’t an option, he said. “Demand for legal services is through the roof in corporate America,” he said. “So prices are through the roof. Legal departments are beleaguered in the sense they have more needs than resources. It’s a universal complaint. It applies to the biggest and best funded organizations in the world. They’ve been working on this problem for 20-30 years. Legal costs are a one-way ticket to the moon.”
