6 Warning Signs You're Mismanaging Outside Counsel

October 18, 2017

Contributor: Sarah Morris

The wrong trade-offs in selecting outside counsel cost organizations more than money. Are you mismanaging outside counsel? Know the signs.

Imagine if a CEO allocated 55% of his or her company’s annual budget to a star employee whose work was subpar. Now imagine that this employee’s work required over a thousand hours of rework, in addition to the employee’s high salary.

Although this scenario may seem farfetched, it may be familiar to general counsel who spend a majority of their budgets on outside legal services that they feel aren’t measuring up to expectations. While the financial costs are disappointing, the productivity drag and questionable quality are even worse.

“ Execution-focused management improves law firm performance far more than personal connections or monetary incentives”

“Most corporate law departments take a hands-off approach when managing their outside counsel,” says Abbott Martin, legal research director at CEB, now Gartner. “While micromanaging is never ideal, in-house legal staff must know when and how to set expectations and intervene effectively.”

Enabling a more proactive stance can help enterprises achieve a higher quality of service from their outside legal teams.

Learn More: 6 Shifts GC Must Make by 2025 Action Plan

Common problems

Based on a Gartner survey, in-house legal teams encounter these most common problems when working with outside counsel:

  1.    Costs balloon for seemingly routine work
  2.    Lack of visibility into and predictability of outside counsel spend
  3.    Business partners complain about the quality of legal services
  4.    Outside counsel’s strategy doesn’t align with business needs
  5.    Business partners feel out of the loop about legal status
  6.    Missed deadlines are routine

Encountering these signs may indicate it’s time to retrain people supervising the outside resources.

Most general counsel fail to realize how useful their staffs can be in boosting the quality of the work they receive from external firms, exacerbated by the fact that so many in-house lawyers actually have previous outside corporate legal experience. This type of clubby atmosphere makes even the perception of micromanaging seem uncivilized to most senior in-house lawyers at major enterprises.

General counsel who encourage their legal teams to manage external work more closely face a few key challenges. First, some in-house lawyers manage outside counsel more successfully than do others, but it’s hard to pinpoint what makes them successful. Second, general counsel struggle to find more time for more work from their teams amid the press of day-to-day corporate legal duties.

But keeping a firm hand on the wheel can avoid some big problems down the road. Here’s how:

Focus on execution, not relationships

Execution-focused management improves law firm performance far more than personal connections or monetary incentives. Legal teams that improve their execution-based management can reduce the rate of incorrect work by 71%, according to our data. This type of “hands on” approach involves four key elements:

  1. Specify priorities at matter outset: In-house legal teams should specify their priorities for not only the outcomes of outside counsel activities, but also how they would like the work to be done.
  2. Manage trade-offs in real time: Rather than feel left in the dark, companies should push their external legal partners to provide real-time visibility into the progress of their work. To do this, in-house lawyers should define points at which poor trade-offs might occur and structure their involvement around those points.
  3. Ensure in-house fulfillment of outside counsel management: Legal department leaders should evaluate in-house lawyers on their ability to help outside counsel make necessary trade-offs. One way to encourage this is to reinforce desired behaviors by linking a portion of in-house lawyers’ compensation to outside counsel management goals.   
  4. Provide outside counsel with clear performance feedback: In-house legal departments can use formal performance reviews for their external partners to highlight underperformance and/or opportunities for improvement.

Although training in-house legal staff to be more proactive in managing outside counsel requires upfront work, the potential returns are more than worth it to improve on a vital, if historically problematic, relationship.

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Recommended resources for Gartner clients*:

Some Gartner clients can read more in 10 Costly Outside Counsel Mistakes.

*Note that some documents may not be available to all Gartner clients.