From Law Firm…To Corporate Legal Department To…Freelancer.
Much has been written about the loss of law firm jobs to in-house legal departments where companies can gain better control over legal spend, and to have lawyers with knowledge of the workings of the business, thus making them more valuable.
Internal lawyers understand the business, intimately, and can quickly assess and manage the legal risk profile of the organization. And their analytic skills can be helpful in other aspects of the business that do not necessarily involve purely legal issues.
The downside will always be that each of these lawyers is an expense. Salary, benefits and taxes will impact the bottom line, consistently, as opposed to outside legal bills, which are episodic and, depending upon the particular fiscal year of the company, could be more, or less, than the cost of inside counsel.
And it is difficult to compare the cost of inside counsel, where the costs may be measurable but the benefits are not, against outside counsel, where invoices can be tallied to get at the costs, and the benefits can be viewed as the result for the particular invoiced matter.
Some companies have been creative at measuring, such as adding the annual cost of each lawyer (salary, benefits and taxes), dividing that number by the number of work hours in a year, and coming up with an hourly rate for that lawyer, then having that lawyer record his or her time and charging it to the cost center requesting the legal work.
This can be effective and show bottom line savings year over year compared to outsourcing the legal work, but it will be difficult, if not impossible, to measure the intangible value of in-house counsel intimately familiar with the business, though one could argue that the value will appear in greater efficiency (i.e. faster results in solving a given legal problem because the learning curve is shorter, or non existent, compared to hiring outside for a given task).
The model can also be effective in showing zero or negative bottom line savings, thus leading to the conclusion that the size of the legal department is not warranted.
The Quarterback and the Freelancer
But what if companies could have the best of both worlds.
That is, the cost savings and control over legal spend without adding full time employees?
I believe the next wave will actually be a reduction in house counsel, and in a sense, a return to the General Counsel as gatekeeper and traffic cop, except with far greater hands on management of outside counsel.
I can see a small number of General Counsels, seasoned lawyers who know the business cold, assessing the legal service needs of the organization, then contracting the work out to their network of freelancers, and managing the issue and legal spend on behalf of the organization.
Just as with the return of the solo and small firm on steroids with their niche expertise, judgment and technology, so too the business organizations of tomorrow will take advantage of the revolution in communication to improve their services and bottom line.
And those lawyers who were first displaced from their firms, and who entered legal departments? They will join the future small team of general counsels, or become freelancers themselves.
In a nutshell, then, we may see one or two quarterbacks in the corporate legal department of tomorrow. They will be seasoned lawyers who know how to manage other lawyers. And they will determine the legal services of the company, then contract out the work to their network of freelancers.
Thanks for reading,