In-housers: stop complaining and do something about it

In-house counsel have once again expressed dismay at the “hugely inflated” rates charged by their external lawyers (The Lawyer, 19 November 2007).

Although it is true that hourly rates have risen exponentially in the last few years, the very individuals who vociferously object to the rates still appear unwilling to go beyond merely objecting in the press and obtain equivalent services from more reasonably priced and equally capable firms.

Are they not, therefore, the architects of their own unhappiness and by dint of this accepting the inflation?We have seen this debate in various forms before. Sometimes frustration is expressed about a lack of transparency in fees, or demands are made for new billing techniques such as fixed fees. The source of consternation is often misdiagnosed. The straightforward issue is that people are paying too much, plain and simple.

National firms are apparently also feeling the wrath of our in-house brethren. However, they overlook the significant number of regional practices that are staffed with highly qualified lawyers, often who have trained and/or spent many years in the City at the magic circle firms.

At a decent regional firm you could expect to have a senior partner handle your work for the same, or even a lower, hourly rate than a newly qualified associate at a magic circle practice. It seems clear where the preferable option lies for many cases.

However, despite obvious benefits to the utilisation of firms outside the City, in-house counsel remain reluctant to instruct regional firms without significant London presences.

The reason for this seems obvious – the majority of the work is City-based, and the assumption is that a City-based, or City-linked, lawyer must be able to do it better. This is just not the case.

If in-house lawyers were willing to become more sophisticated in their buying behaviour, and distance themselves from the idea that only City lawyers can do City-based work, they may find that their legal fees become considerably easier to endure.

Growth in the use of panels has also been exponential and this is, broadly speaking, a wise move on the part of purchasers. It ensures that legal services providers come under scrutiny in terms of genuine service delivery, price, the relationship with the company and exposure to experienced partners. These are the crucial elements that make a successful partnership, not expensive marketing and corporate hospitality.

However, in-housers need to be a little more selective about how they use panel firms. There is still a tendency to give all the work to the brand they know, regardless of the firm’s suitability for the task in hand. Why use a City giant to process a fairly standard medium-value employment claim, for instance?It is about picking the right tool for the right job, and that is something that senior management in any commercial organisation will appreciate, especially if it saves them money.

It is said that rising fees are the biggest issue facing the commercial profession. While in-house counsel regularly express dissatisfaction with the system, they are consistently complicit in its perpetuation.

If in-house counsel continue to recruit external legal services from such a small number of firms, and refuse to consider alternatives, fees will continue to rise.

Buying into the ‘branded law firm’ philosophy will only continue to propagate the system that in-house counsel so strongly resent. Sure, no one ever got sacked for buying IBM – but they do get sacked for overspending.

Gavin Tyler, head of corporate, Cripps Harries Hall