There is a trend in GCs shifting towards boutique law firms as their outside counsel, especially in the areas of commercial contracts reviews, data privacy, technology law, and corporate matters. And for very good reason. Boutique law firms can provide  industry experience, a small but diverse team, and the insight on institutional knowledge retention as key focuses.

This year’s in-house legal terrain is projected to be challenging and General Counsel’s ability to be agile will make all the difference. It’s expected that workloads will increase by 25% over the next year, while internal headcounts are expected to decrease.  GCs find they are set back by the piles of commercial contracts, constant meetings, managing different styles of business teams, and the overarching management challenges posed by in-house employees. The path forward is establishing a relationship with the right outside counsel, but GC’s have faced various challenges in finding the perfect fit.

In 2022, EY Law and the Harvard Law School Center on the Legal Profession surveyed 1,000 General Counsel and Chief Legal Officers. The results showed that ninety percent of business development leaders reported facing challenges when working with their procurement, legal, and commercial teams on issues related to commercial contracts. These departments are under increased pressure to operate more efficiently, and in-house legal teams are feeling the brunt of the pressure.

According to EY Americas Legal Function Consulting Leader, “Optimizing use of outside counsel provides law departments with the opportunity to shift cost savings to other areas.”

With solid and strategic support, GCs can enjoy their positions and make a meaningful and noticeable impact on the organization.

 

Here are the top 6 Things that GCs Struggle Getting from Outside Counsel

 

1. Outside Counsel that Are Strategic Business Advisors

Business stakeholders require quick turnarounds and business-minded thinking from the legal team. Outside counsel that can mirror your soft and hard skills becomes a true extension of the in-house team. That allows GCs to trust their outside counsel to work closely with internal stakeholders in the same way the in-house team does.

Outside counsel who  not only identify risks, but also help the business leaders get to fast solutions are the ones with the commercial mindset that bring exceptional value to the entire organization. They should be instrumental in collaborating across operational areas to help stressed out business teams close deals more efficiently.

The great outside counsel will become a fierce advocate for the business and provide tailored, meaningful, and clear advice that business teams can digest.

The right outside counsel is one that will help in-house lawyers flourish in their roles. This means they’ll need a deep understanding of the business they are serving, and anticipate the GCs needs. That’s where the right boutique law firm shines over big law or legal marketplaces. The great ones will truly get to know the business and legal issues, becoming a fierce advocate for the business, which includes not just identifying challenges but also advising on smart risk taking to achieve business goals. That comes down to providing tailored, meaningful, and clear advice that business teams can digest.

 

2. Cost Sensitivity and Control

In-House legal teams have budgets just like other business units. Some boutique firms will provide reduced hourly rates and are generally preferable to large firms as well as online legal marketplaces. Fifty-nine percent of General Counsel believe that a focus on negotiating better rates with a boutique law firm creates some opportunity for cost savings. Additional approaches include consolidating spend into fewer outside providers.

The law firm’s bills should be reviewed by a partner to ensure they are reasonable and accurate. The last thing an in-house lawyer wants to do is to have to question outside counsel’s time entries.

Given the current cost-reduction environment, it’s not surprising that law departments turn to boutique law firms as their outside counsel as opposed to big firms. The key is finding the right match for supporting them appropriately and using them as part of an overall balanced approach.

 

3. Opportunities for Feedback to Outside Counsel

GCs need their outside counsel to be predictable and trustworthy. To that end, a major pain point for GC’s  is that their outside lawyers are not in frequent communication with them. Regular touchpoints let GCs be aware of everything that’s happening, saving you time and helping you shine in front of your internal clients.

General counsel are looking for firms that provide them with opportunities to provide feedback. GCs and their in-house teams want to be asked for their feedback from outside counsel which leads to better relationships and more meaningful outside counsel support. One key reason GCs use firms like Gouchev Law is that we ask the big question “How can we serve you better”.

In addition for opportunities to give feedback, receiving regular status reports from your outside counsel will save considerable time in managing.

 

4. Strategic Risk Management to Accelerate Revenue Recognition

In-house law departments and business leaders struggle with internal process management, which limits the company’s understanding of risk. One pain point is that contract review processes are not standardized, including not memorializing contract deviations from standard terms. Gouchev Law offers a solution by creating a living, breathing playbook that is constantly updated. Great outside counsel should do this for you, sharing knowledge and ensuring the use of updated templates throughout the organization.

Some of the largest organizations don’t track contractual obligations as a matter of process which creates risks that will eventually affect client and vendor relationships. That pain point can be solved with the right outside counsel that has both a commercial mindset and a data-driven approach to risk management. Leaders within the organization will be impressed with the in-house legal team as they get more transparency and efficiency.

 

5. Protecting and Retaining Institutional Knowledge in In-House Legal Departments

CEOs, CLOs, and GCs all say that retaining talent is one of their biggest challenges. All organizations are plagued by the “knowledge drain”. In-house legal are one of the departments that suffer the most in this aspect. Employees and contractors take valuable institutional knowledge with them when they leave, and the insight into the processes and relationships they’ve accumulated departs with them. Indeed, the departure of just one in-house lawyer can lead to substantial delays in turnarounds for key transactions, as one GC told us in an interview of his pain points.

So how can leaders of in-house legal teams capture these exceptionally important intellectual assets? GCs struggle finding outside counsel who understand the importance of capturing and retaining institutional knowledge and making that knowledge accessible to others. This ensures business continuity, provides high quality legal services, and helps GCs and their in-house teams thrive in their roles, even when in-house employees leave. This is priceless and essential to the continued success of any in-house team.

Solving that pain-point lies within using a small firm as outside counsel that keeps the same team with a partner being a key point of contact, creates a process for safeguarding key information, and helps the in-house team promote a culture of knowledge transfer and collaboration. This approach supports your company’s collective knowledge retention, versus using big law firms with revolving associates on your account or individual contractors with other priorities and limited capacity.

A boutique firm can scale with the organization and keep the same key people on the account, using the information they learn over time, and nurturing the relationships they’ve established.

Having long term points of contact as outside counsel helps the business trust that the institutional knowledge will stay and grow with the same people, equaling less management for the in-house lawyers and happier business stakeholders. With this institutional knowledge comes the ability to stay lean on hours, allowing in-house teams to send more work to their outside counsel instead of worrying about having services be over budget.

 

6. Promoting Diversity & Inclusion

Supplier diversity is one of the most effective ways to drive real business value, and GCs are starting to recognize the importance of diversity, equity, and inclusion (DEI) as relating to their outside counsel. Organizations are being encouraged now more than ever to hire vendors, including outside counsel, to improve their diversity, equity, and inclusion (DEI). Diverse teams of outside counsel bring dynamic viewpoints that produce fresh and effective strategies and counsel.

Outside counsel that qualify as diverse will help make meaningful progress on DEI initiatives. The reason this is a pain point for in-house legal leaders is that many outside counsel don’t have a true focus on diversity, equity, and inclusion. According to a recent Diversity Snapshot from Law360 Pulse, at every level of a typical law firm, the representation of minority attorneys increased by less than one percentage point in 2020 and made only incremental progress over the years.

There is an emerging trend to work with not just boutiques, but ones that are women-owned, minority-owned, and/or LGBTQ-owned businesses.

Key Takeaway for GC: Optimizing the Use of Outside Counsel

 The modern in-house lawyer needs agile outside counsel with a likeminded business approach to help take things off their plate so their in-house teams can thrive. GCs and their in-house teams benefit most from outside counsel with an entrepreneurial mindset.

The truly elite outside counsel has resources, stability, and predictability for long-term support. A boutique law firm should be able to scale up or down as your needs ebb and flow. GCs need to find outside counsel that has the niche experience and cost-effective partner-level attorneys who will be with you long-term, retain institutional knowledge, including having project managers that are non-billable.

About the Author

Jana Gouchev

Jana Gouchev is a prominent corporate lawyer on the leading edge of technology deals and complex commercial transactions. She delivers legal and commercial insight that propels companies forward. Jana's practice is focused on Corporate Law, Data Privacy and Information Security, Tech Law (consulting, SaaS, and AI), Complex Commercial Contracts, Intellectual Property, M&A, and Advertising law. 

Hailing from Paul Weiss, an AmLaw 50 firm, Jana has the experience and the business mindset that propelled her to now be the right hand outside counsel to CLOS, GCs and other key business leaders of the world’s most innovative brands, including the New York Times, Citi, Estee Lauder, Hearst, Nissan, and Squarespace. She is also outside general counsel counsel to numerous high-growth private companies. Jana is routinely featured in Forbes, Bloomberg, The New York Law Journal, Law360, Modern Counsel, Inc., and Business Insider for her keen business law insights.

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