In this era where some lawyers charge over $2,500 per hour*, the pressure to manage and reduce outside legal expenses is becoming more critical for businesses an d organizations of all types.
As we head into 2025, organizations may need to take proactive steps to control legal spending without compromising on quality.
Below are four effective strategies to manage and reduce outside legal fees, along with additional methods that can help create predictability and transparency in outside legal spend.
1. Pre-Assignment Planning and Clear Communication
Before assigning any case, transaction, or matter to an outside law firm or counsel, establish a clear understanding of expectations and outcomes. This can prevent costly misunderstandings and surprises as the case or matter proceeds. Consider the following steps:
- Define the desired outcome: Clearly outline the ideal or intended result for the case or transaction and set expectations around timing and risk tolerance.
- Budget agreements: Discuss and agree on a not-to-exceed budget or a flat fee before retaining outside counsel. Establish who has the authority to approve budget increases and how such approvals should be communicated, whether in writing or verbally.
- Scope and surprises: Specify how and when you should be notified if scope creep occurs or any budgetary surprises arise. This ensures transparency and helps maintain control over costs.
- Mission-critical elements: Identify the critical stages and steps within the case and clarify the roles of both in-house counsel and outside lawyers. This ensures that everyone involved understands their responsibilities and can work together efficiently.
- Technology use: Discuss the use of secure, cost-saving technologies such as automated RFP platforms (e.g., Banyan RFP, Justice Bid, Persuit), e-billing, and online collaboration tools. These can save time and money while improving communication and work efficiency.
By defining these elements upfront, companies can create predictability, avoid scope creep, and ensure that outside counsel delivers within the agreed-upon budget and timeframe.
2. Unbundling and Reallocating Legal Work
Instead of handing off entire cases or matters to one law firm, consider breaking them down into stages, phases, steps, or tasks. By unbundling legal work, companies can assign different parts of the case to the most appropriate and cost-effective legal provider.
- Lower-cost alternatives: Assign routine or less complex tasks to junior attorneys or use contract lawyers. Reserve high-level strategic work for more experienced and specialized attorneys. This allows for a more efficient allocation of resources and significantly reduces overall costs.
- Cost transparency: Employ some of the strategies listed above, such as setting budgets, discussing timelines, and agreeing on how to handle scope changes. This will help maintain transparency and predictability in legal spending.
3. Invest in Business Understanding
A deeper understanding of your business or organization can lead to more efficient legal service. Encourage your outside lawyers to spend time learning about your company’s operations, culture, and goals. Ideally, this should be done on a non-billable or reduced-rate basis.
- Client relationship management: If the outside lawyers are unable to dedicate time for this, suggest that they assign a chief client service officer or director to handle this aspect. Having a dedicated resource focused on understanding your business will streamline future legal work and help ensure that services are aligned with your company’s needs.
4. Explore Alternative Legal Service Providers (ALSPs)
While large law firms (#biglaw) may offer extensive resources, they often come with hefty price tags. Consider alternatives such as boutique law firms, ALSPs, or contract attorneys for specific legal tasks. These options can offer the same level of expertise at a fraction of the cost.
- Use of specialized firms: Boutique firms often specialize in specific practice areas, providing tailored expertise without the overhead of larger firms. ALSPs can handle routine or administrative tasks, further reducing costs. These alternatives allow for flexibility in managing legal work while ensuring cost-effectiveness.
As legal billing rates continue to rise, managing outside legal expenses is becoming a crucial part of business strategy. By implementing clear communication strategies, unbundling legal tasks, investing in business understanding, and exploring alternative legal services providers, companies can take control of their legal budgets. With these strategies in place, businesses can navigate the rising cost of legal services while maintaining high-quality legal representation.
Proactive planning and collaboration with outside counsel can ensure that legal work is performed efficiently and within budget, providing long-term value for the company.
*“Rock-Star Law Firms Are Billing Up to $2,500 per Hour. Clients Are Indignant” - by Erin Mulvaney
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Connect with Julie Savarino on LinkedIn.
