In-house legal trends in 2023

This month I will be reflecting on the key trends - or priorities/challenges/opportunities depending on your mindset - likely to affect in-house legal teams in 2023. Some of them are in many ways perennial, but with perhaps a more acute focus this year. One such trend is that legal teams will be expected to do more with less notwithstanding increasing operational costs and growing compliance risks.

This backdrop means a doubling down on external legal spend is likely to be a key focus. However, a recent report by Wells Fargo suggests that law firms are looking to raise fees by almost 10% on average this year, which makes this all the more challenging.

For many legal teams, external legal fees are the most significant cost that they face. However, when I speak to general counsel I am often surprised how little they understand about how this cost is made up. All in-house legal heads should ask themselves; do we understand how much we are spending externally? Who are we spending it with? And what activities are we spending it on? Only once you’ve clearly established that fact pattern can you begin to address what the solution might look like.

As an aside, in seeking to establish the facts, it may be necessary to implement an appropriate technology solution to help get that grip that you desire. Trying to do this on the back of a fag packet or even a spreadsheet, is a real challenge.

Once you have the facts, it is likely that any solution to bring down the unit cost of your external legal spend - or the unit cost at least, given that overall spend is in part event driven - will involve the following three drivers:

1. Choice of firm. A review of who is on your panel and a hard-headed assessment of the value they bring to the organisation is a must. As lawyers, we all have deep and long-standing relationships with law firm providers and individuals - we need to challenge ourselves on the value of these. As part of any review, we will likely see a continued growth in the use of ALSPs during 2023, especially but not limited to activities that are regarded as lower risk and repetitive.
2. Controls and process. The former must be robust, the latter simple. What I often observe in in-house teams is a real mismatch between how hard it is to bring legal resource into your team vs how easy it is to spend, often significantly more money, with external counsel. So controls need to be well understood, upfront and designed to ensure you instruct the right firm, for the right activity at the right time. Despite the need for robust controls, the process to then engage the firms should be made as simple as possible. If not, lawyers will find a way to go round it and control failures will follow and on occasion poor engagement decisions will be made. So a simple process where lawyers are encouraged to make decisions as though they were spending their own money and having the appropriate approvals in place is the desired outcome here.
3. Technology. Attempting to deliver results sustainably in this space cannot be done without technology - at least not for any business with a large panel of providers to manage. My experience of technology in this area is that the return on investment of the right solution can be material. Tools that give you the full picture of what your spending, who with and what on (afterall, that was the problem statement identified earlier) and allow you to enforce billing guidelines will, in my experience at least, more than pay their way.

Too often General Counsel, despite their best intentions, are not able to get to focus on this sufficiently to drive the transformation necessary. That’s where the role of legal operations professionals is critical. Done well, the cost of those professionals will be more than covered by savings made on external legal spend.