Working with outside counsel is like getting thrown in a pit of rattlesnakes and hoping one won’t bite you. Anonymous

Axiom, the 14,000-person alternative legal service provider, launched in 2000, together with Wakefield Research, recently conducted and published a Study of U.S. in-house counsel. They conducted a 15-minute Survey online in January and February of this year. Some 300 general counsels of small, mid-size, and large businesses responded.

The Significance of the Findings

The findings and recommendations are significant and should sound alarm bells for law firms representing businesses of any size. 

The Survey confirmed that in-house legal departments simply lack resources across the board. And it’s getting worse. 96% have had their legal budgets cut in the last year. The GCs report an average decrease in legal department funding of over 10%. Almost all reported a lack of necessary staffing to do their jobs.

Nearly all expect a freeze on hiring even though they are seeing experienced people leave. That exodus leaves more work for those who stay, and as a result, ultimately, more people leave. About 97% of those surveyed used outside law firms last year to handle some 25% of their company’s legal matters. 

There is no real surprise here. Axiom had previously offered similar findings. So did an Everlaw and the Association of Corporate Counsel Study, both of which I previously discussed.

To be blunt, in-house counsel just aren’t very happy with their law firms.

The Problem with the Opportunity for Outside Law Firms

As dour as this is for in-house counsel, it could be an opportunity for outside law firms. Outside law firms could pick up the slack that in-house counsel don’t have the time or resources to do. But not so fast. To be blunt, in-house counsel just aren’t very happy with their law firms. 89% say not effective solution to resource challenges and…

100% experience challenges that cause them to regret using law firms. That’s right, every single GC who responded regretted having to use outside law firms. It didn’t matter whether the GC was from a smaller business that uses a smaller law firm or a big business using an AmLaw 100 firm. 

It’s hard to conclude anything other than abject and universal dissatisfaction with the service law firms are providing

And while you may have to take the results with a grain of salt since the Survey was commissioned by an ALSP who wants a piece of the GC business. Nevertheless, it’s hard to conclude anything other than abject and universal dissatisfaction with the service law firms are providing. The unanimity of this dissatisfaction also leads to the conclusion that law firms can get away with lousy service because every firm offers more or less the same level.

Clients’ Grievances

The reasons given for the dissatisfaction also reveal a lot about the attitude of law firms toward client service. Here’s what the GCs say:

  • Administrative management of law firms takes too much time;
  • Outside lawyers don’t give practical advice but offer conceptual platitudes;
  • Outside lawyers lack good communication skills; 
  • They lack business acumen;
  • They lack institutional knowledge of the client’s business;
  • It takes too long to get them on board, and
  • They don’t prioritize their client’s business.

Pretty damning list since it shows outside lawyers aren’t taking the time to address their client’s pain points.

What About Alternative Fees?

Alternative fees don’t seem to be an answer either. Every GC who used alternative fees reported challenges that their outside lawyers weren’t addressing. 38% of the GCs disliked the uncertainty and were concerned with overpaying when the proposed fee didn’t align with the work involved. 34% had trouble benchmarking the cost of services covered by the fee. 34% said firms cut corners or reduced services for profitability reasons. These numbers reflect a lack of understating and comfort of in-house counsel with alternative fees. But they also show that law firms are doing a poor job in educating in-house counsel about alternative fees. They also show that law firms don’t have a clear understanding of how to develop and manage a different billing structure.

There Is Some Good News

But there is good news for firms that want to commit to becoming more client-centered. As Jack Newton, founder of Clio, put it in his book, The Client-Centered Law Firm, “Your ability to differentiate yourself from the competition based on your work product alone is likely limited; however, you have virtually unlimited opportunity to differentiate yourself based on the client experience you provide.”. 

Or, as Joey Seeber, founder and CEO of Level Legal, puts it, your customer (client) should come away with its experience with a feeling of delight. 

Looking at the list of GC’s concerns with their outside lawyers, most of the problems stem from a lack of effort and commitment on the part of law firms. Why is there a lack of effort since it seems so simple to address? It takes lots of time to address the kind of concerns the GCs have—nonbillable time. 

Most of the problems stem from a lack of effort and commitment on the part of law firms

Lawyers Fall in Two Camps

Lawyers fall into two camps. Many lawyers don’t want to see their hours drop to address the kinds of issues GCs are having. Certainly, the argument could be made that addressing these concerns will lead to more significant long-term opportunities and profits. However most lawyers and law firms are more interested in end-of-year profit distribution than in the long term.

The other group of lawyers –the better ones—say they don’t have the time to do the things that would make their clients happier. To some extent, they are right. But part of the cause for the lack of time for these lawyers is that they are spending too much time on things that they are over or not qualified to do. 

Billing. Drafting repetitive pleadings and correspondence. Time entry. Reading through and summarizing lengthy documents. Digesting nonlegal information. Summarizing transcripts. Creating new documents when existing ones could do. Cutting and pasting.

See where I’m going? Automation, AI, and Gen AI indeed offer the promise of letting lawyers spend more time on their client’s pain points instead of their own.

For far-sighted firms, there is opportunity

Technology holds other opportunities as well. It can standardize tasks and create predictability of time. It can allow lawyers to offer flat fees for some services. This is the promise of companies like AltFee, who won the start-up alley competition at this year’s ABA TechShow

Moreover, once you introduce standardization and predictability, alternative fees become less challenging and risky. You can start talking about flat fees in terms of value and cost, not time. Determining a flat fee should involve a consideration of the cost of undertaking the work and the value of the matter. It should not necessarily involve a mere calculation of how much time it will take to do the work plus a comfort pad.

So, for far-sighted firms, there is opportunity here. But all firms should face reality. 

The Reality

As much as technology promises more time for outside lawyers to focus on their clients, it allows in-house counsel to do more work with less. 100% of the GCs surveyed said they send work that could have been done in-house if they had the resources. Technology can provide those resources at a fraction of the cost of adding lawyers and legal professionals. Anecdotally, several in-house counsel I have talked to say that they are doing more in-house using automation and standardization tools. Gen AI and large language models can only add to that ability.

There is an even more significant threat, though. Law firms need to face facts: their clients ain’t happy. ALSPs like Axiom and even the Big Four accounting firms see blood in the water. Axiom closes its Report by recommending that in-house counsel make greater use of technology and ALSPs like Axiom. The Report notes that 85% of the GCs responding say they would be open to using a “flexible legal talent provider” or new resourcing models. Do more for less cost. Reduce the use of traditional law firms.

Law firms need to do something before won’t becomes can’t.

Here’s how Axiom puts it: 

Axiom’s extensive suite of in-house solutions and law firm services are revolutionizing the industry once again, empowering today’s overworked, overwhelmed, and under-budgeted legal leaders by helping them shift legal matters and law firm work to a much more cost-effective, low -risk gear…Axiom is once again setting a new standard for giving GCs what they need when they need it and hopefully putting the naïve notion of being able to do more with less out to dry.

In other words, we’re coming for you.

Law firms need to do something before won’t becomes can’t. Or as Jerry Rice, the football hall of famer, put it: “Today I will do what others won’t so tomorrow I can do what others can’t.”