As corporate clients continue the journey toward operational excellence, law firms are being challenged to respond to corporate client requests to improve transparency and efficiencies. With corporate legal spending on outside counsel continuing to decrease – it was down 2 percent in 2016 according to our annual law department survey – we are seeing inside spending as a percentage of revenue exceed outside spending for the first time. This is resulting in law firms seeking ways to differentiate themselves in an increasingly competitive market.
In the market, we are seeing a movement towards leading law firms paying close attention to evolving law department trends. By evaluating key law department strategies, HBR is helping law firms to better align their services with both current and future client needs. Our law department survey found that the top criteria for outside counsel selection was the level of client service and engagement (79 percent). Law firms that are truly engaged with corporate clients have a solid understanding of their overall business, beyond individual matters, and holistically looking at the entire lifecycle of the client relationship to determine areas where they can improve, such as:
- Minimizing billing surprises. As corporations look to control costs, law departments are increasingly seeking transparency and visibility from law firms in an effort to minimize billing surprises. To meet these requests, leading law firms are focused on implementing clearer billing processes and leveraging technology to ensure transparency from the onset of new matters.
- Making IT a strategic partner. According to our survey, 40 percent of law departments plan to increase their use of technology to automate routine tasks, enhance work processes and support data analytics in the near future. As law departments become more tech-savvy, there is a desire to work with law firms that are elevating their IT functions from ‘back office’ support to a more strategic partner. For some firms, this means moving to third-party IT infrastructure and support to free up IT leaders’ time so they can focus on strategic initiatives that support the firm’s attorneys in achieving overarching business goals.
- Managing third-party risk with advanced procurement capabilities. Leading law firms are looking to improve operational efficiencies and reduce costs through enhanced procurement functions. But with increased client awareness around potential third-party risks, law firms are strategically investing in support areas focused on establishing vendor governance policies and processes to comply with client security requests.
From the outside counsel selection process all the way through the billing process, law firms looking to differentiate themselves are leveraging the client perspective to help drive change within their firms. And as corporate client needs continue to evolve, law firms that are continuously reevaluating how they design processes and deliver services to align with corporate clients will be the firms that thrive in an increasingly competitive market.