In-house on the warpath
1 November 1999
This year promises to be a testing time for law firms as more companies than ever plan a strategy to minimise fees and squeeze greater value for money from their external lawyers. That is the finding of two exclusive surveys of in-house lawyers undertaken by The Lawyer last year.
A mid-year survey conducted among 250 people revealed that 32 per cent of companies were unhappy with their external legal advisers and intended to change law firms in the next year - a figure that had risen from 28 per cent in the previous year. Also worrying for law firms was the finding that a third of companies that sought external legal advice did not believe they were getting good value for their legal expenditure.
But by the close of 1998, The Lawyer's second survey - taken among 100 leading in-house lawyers, uncovers that concern about value for money has rocketed. Seventy per cent of respondents condemn the fees charged by outside practitioners as excessive and say they intend to hunt out a cheaper alternative. And while in-housers fume, one cause of the widening rift between the sides may be a difference in expectations. In the absence of clarification about precisely what kind of advice companies require, external law firms tend to cover their backs and advise on every angle - and hike up their bill accordingly. As John Dumbleton, an in-house lawyer at entertainments giant the Rank Group, explains: "A Rolls-Royce service is provided when it is often not really needed."
Certainly, one in-house lawyer admits that "as a company we need to provide better instructions", suggesting that external law firms are not always at fault. But he argues that this "can be difficult when management decide too early to throw a project on to a firm almost at the outset, and then it is too late to complain about fees ".
Robert Gibber, general counsel of food manufacturers Tate & Lyle, points out another problem. "Sometimes a trainee might do some work on the document which may then be pulled apart by an assistant, with final touches added by a partner, hence tripling the cost," he says.
Hours spent catching up on the basics of the company business structure before advising on the legal issues is another factor that escalates companies' legal bills. Seventy per cent of in-house lawyers who were familiar with the amount of time and knowledge required on an advice say they will not hesitate to go elsewhere if they find advisers' fees excessive or will seek to fix the fee beforehand.
The problem for companies is that they still need external advice. The survey finds that a quarter of all company work is outsourced, the main call for outside expertise being when the issue is too specialised or if the in-house team is simply too busy to handle the work.
On a more positive note, the summer survey finds that 74 per cent felt outside lawyers were "helpful", 42 per cent applaud them as "accommodating" and a mere 5 per cent believe their external advisers have a tendency to be "patronising" - encouraging news for two sides of the profession that have a reputation for not exactly being bosom pals.
But despite a high regard for their private practice colleagues, over three quarters of in-house respondents who have made the switch say that even the sector's more lucrative salaries are not enough to tempt them back - the in-house style of work and career structure are held up as just two reasons not to return.
As Claire Powell, in-house lawyer at City bankers Charterhouse, puts it: "As an in-house lawyer I am not concerned with marketing or selling my services, but simply concentrating on the law."
Respondents also claim they enjoy a better lifestyle in-house. More than two thirds of in-house lawyers believe they have more time for family and social activities. On average most in-house lawyers work under 40 hours a week; 36 per cent are at the office for between 40 and 50 hours a week, and only 6 per cent more than 60 hours. One in-house lawyer compares this to life in the City practices, where he says lawyers are "continually being thrashed" to meet deadlines and "put in an enormous amount of billing hours". By contrast, most in-house lawyers say they have far greater control over their timetables and do not feel pressured to work to stringent deadlines.
The survey asks in-house lawyers to name the reasons for the change from private practice. As well as having more control, many respondents say they enjoy more company benefits working in-house, such as pensions and share schemes, and greater flexibility in the workplace.
Patricia Alsop, group legal adviser of clothing manufacturer William Baird and who made the jump from City practice Middleton Potts to in-house in 1984, says the main reason she switched was "the greater freedom to choose the work you do, closeness to the client and being more involved with the business side".
Susan Ward, legal adviser of clearing bank APACS, adds: "It is quite possible to find work as an in-house lawyer where there is greater flexibility in the working environment. This is particularly important for working mothers who have responsibilities at home and would not necessarily have to work as late or rise as early."
And not only are in-house practitioners generally happy with their lot, most feel their employers reap considerable benefits from their services. "They see us as a constant source of advice and experience on tap," says James Scorer, director of business affairs at ITN.
Company lawyers, the survey finds, feel they are able to set the agenda, rather than being answerable to a paying client or worry about how much profit the firm is making. Patrick Andrews, legal manager of Kingfisher, the retail giant that owns Woolworths, B&Q and Comet among others, says: " Rather than just giving advice and sitting back, there is ample chance to take decisions as a team and have more responsibility for the company."
So while in-housers feel up-beat about their futures, it is the external advisers they employ that will have to ask themselves some serious questions. Unless some nifty dialogue can ease the bad feeling evident in the responses to The Lawyer's survey, it seems that 1999 could witness a renewed spate of contract wrangles.