NEW PROVIDENCE, N.J. & NEWTOWN SQUARE, Pa.–LAWFUEL – Law News Network – Are law firms starting to get it when it comes to managing client relationships? Yes, according to the 2006 Chief Legal Officer Survey. The annual survey conducted by Altman Weil, Inc. and LexisNexis® Martindale-Hubbell® reports a dramatic decrease in Chief Legal Officer (CLO) dissatisfaction with their outside counsel.
“In seven years of conducting the survey, this is the first time we’ve seen a big change in perspective on the inside-outside relationship,” remarked Altman Weil principal Daniel J. DiLucchio. “Chief Legal Officers are less likely to fire outside counsel, and when they do, it’s more likely to be for substantive performance issues rather than relationship problems.”
“For over a decade, law firms have been talking about relationship issues, developing key client programs and investing in various client service initiatives, and it looks like it’s finally starting to pay off.”
Outside Counsel Relationships
Just 30% of CLOs report that they have fired or are considering firing one of their outside law firms in 2006. This is down over 18 percentage points from 2005 and far below the 50-60% response reported in every survey since the first conducted in 2000.
The reasons given by those unhappy with outside counsel were also different. Each year from 2000-2005, CLOs named ‘lack of responsiveness’ as the number one reason for firing a law firm. This year, responsiveness dropped to the number three concern behind ‘mishandling a critical matter’ and ‘poor quality legal work.’
When asked what steps outside counsel had taken to improve the working relationship with the law department, the top response was improved communication. Reduced fees, revised billing practices and understandable budgets were the second most prevalent answer. Other relationship building efforts named were partnering with the client to better understand their business, improved staffing fit, and offering free training programs.
Selecting New Counsel
The Survey includes a series of questions on how Chief Legal Officers select outside counsel. When choosing from similarly qualified firms on a preferred provider list or when looking for representation requiring a new area of expertise, most CLOs begin by calling their relationship partner at law firms, and then consulting their in-house staff. In each case cost considerations fall lower on the list.
When looking for new counsel in the absence of a personal reference, CLOs turn first to law firm websites, closely followed by legal directories. Over 70% indicate that it takes only hours to locate an appropriate new law firm.
“Although there will never be a substitute for personal references, online resources are clearly changing the equation in outside counsel selection,” noted Barry Solomon, Esq., Vice President and General Manager of LexisNexis Martindale-Hubbell. “A process that once took days or weeks is now accomplished in hours – and with much more consistent and reliable results.”
Inside / Outside Staffing
The Survey reports in-house hiring should be stable in the coming year. Thirty-six percent of Chief Legal Officers anticipate hiring new in-house lawyers in the next 12 months, compared to 35% in 2005. Regarding overall use of outside counsel in the same time period, plans to decrease use slightly outpaced planned increases, 18% to 14%.
Compliance is Top Concern
When asked about their long-term concerns over the next three to five years, Chief Legal Officers identified compliance as number one by a two to one margin over their second concern, limited resources to manage their departments. Other concerns voiced by respondents were litigation / risk management and controlling costs.
The number one new position added in law departments this year was Chief Compliance Officer. Compliance expertise was also identified as the greatest resource gap that Chief Legal Officers would like to fill in their departments.
The Chief Legal Officer Survey is conducted and published by Altman Weil, Inc. in partnership with LexisNexis Martindale-Hubbell. Complete survey results, based on 165 responses received in September 2006, are available online at www.altmanweil.com/CLO2006.
About Altman Weil
Founded in 1970, Altman Weil, Inc. (www.altmanweil.com) provides management consulting services to law firms, law departments, government legal offices, and legal vendors throughout North American, Latin America, the U.K. and Europe. The firm is independently owned by its professional consultants who have backgrounds in law, industry, finance, marketing administration and government. Altman Weil offers a broad range of consulting services, including strategy, management, governance, M&A, compensation, marketing, finance, organization and training.
Altman Weil Publications, Inc. (www.altmanweilpubs.com), a subsidiary of Altman Weil, Inc., has collected and published management information for law firms and corporate law departments for over thirty years. The company conducts market research and publishes numerous surveys of the legal profession including the Law Department Compensation Benchmarking Survey, the Law Department Metrics Benchmarking Survey and the Survey of Law Firm Economics. Altman Weil surveys are the industry standard and are often utilized in courtroom expert testimony.
LexisNexis® (www.lexisnexis.com) is a leading provider of information and services solutions, including its flagship Web-based Lexis® and Nexis® research services, to a wide range of professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets. A member of Reed Elsevier Group plc (NYSE: ENL) (NYSE: RUK) (www.reedelsevier.com), LexisNexis serves customers in 100 countries with 13,000 employees worldwide.
LexisNexis Martindale-Hubbell (www.martindale.com) provides client development solutions for the legal profession, partnering with its law firm customers to meet their practice development goals. An integral part of Martindale-Hubbell’s service to the legal community is its Peer Review Rating system, which evaluates lawyers and law firms in the U.S. and Canada based on peer review. Peer Review Ratings attest to a lawyer’s legal ability and professional ethics, and reflect the confidential opinions of members of the Bar and Judiciary. The Martindale-Hubbell database of more than 1 million lawyers and law firms, accessible at www.martindale.com and www.lawyers.com, is the number-one lawyer directory on the Internet (as measured by Nielsen//NetRatings). The company provides lawyers, business executives and consumers with detailed information to help them identify, evaluate and select legal counsel.