Introduction: In-House DNA

 In-house counsel are legal advisors employed within companies to provide and coordinate legal services required by the corporate entity. While government and public interest lawyers are also considered employed counsel, this article is written to address corporate counsel who work in private organizations, such as companies or non-profit entities, and who solely represent their organizational clients. Thus, the in-house lawyer has only one client (even if that client has many facets and representatives), and they do not hold themselves out for retention by others.

Most in-house counsel work in jurisdictions where they are trained as lawyers and “graduate” to their in-house job after spending several years as outside counsel in law firms or sometimes as government lawyers. It is rare for junior lawyers or lawyers fresh out of law school to secure an in-house placement; most departments hire experienced counsel (laterals) who have demonstrated expertise. There are some jurisdictions that do not confer professional status on local in-house counsel, even if they are otherwise licensed lawyers.

While all lawyers are subject to the same rules regulating legal practice, in-house counsel’s work and operational focus is often very different from the work and focus of those who are employed in law firms. Law firm lawyers are called upon to remediate or resolve problems that have already arisen, while in-house counsel spend most of their time managing the varied remedial projects being handled by outside counsel and thinking about how to prevent those problems from arising in the first place (keeping the milk in the glass, as it were, rather than cleaning it up after it’s spilled).[1]

How Departments Insource, Determine What Departments Outsource

 Historically, law departments were created to provide some services to the company directly, and to select, retain, and manage outside counsel who performed the majority of the company’s legal work (“majority” referring to the proportion of budget spend, the number of lawyers deployed, and hours worked). Thus, the organizational premise selected by corporate management for most law departments is an “outsource” model. Of course, there are and always have been exceptions to this rule, with some solo practitioner law departments providing pretty much all service through their single in-house lawyer (because the legal agenda is minimal), and some very large law departments that, in spite of hiring outside firms to handle litigation or specialized work, for instance, internally provide most of the work required by the client in-house via the hundreds of lawyers they keep on staff.

Even though the ACC (Association of Corporate Counsel), the ABA (the American Bar Association, the IBA (International Bar Association), and national bars conduct regular census surveys of their members, there is no definitive understanding of the actual number of in-house counsel or law departments practicing in any particular jurisdiction or globally. Many law departments literally operate below radar; they are not visible outside the company and little is known about their structure. Even less is known about aggregates of how law departments are run in terms of shared common practices; unlike the business models of law firms, which are usually not terribly different from firm to firm within segments of the profession (solo practices, mid-tier firms, boutiques, BigLaw, global firms, etc.), the business models of law departments can be as diverse as the companies they serve. Since they are not in the business of practicing law to make money, their drive is to deliver the services that their particular client needs in real time … and so they are often a reflection of the management style or the industry in which their management teams work.

This means that while most departments outsource more work than they insource (regardless of their department size), they may choose to outsource different kinds or work, or select different kinds of providers or products in a manner that defies easy categorization. Low-tech companies may have the most tech-savvy departments, and there are lots of finance-, information-, and technology-based companies whose legal teams are relative tech Luddites. Some departments are in relentless pursuit of lower costs, and others may choose to hire the most expensive providers in the marketplace without much regard to the financial health of their parent companies.

It’s Not What Vendors Want to Sell, but What Clients Want to Buy …

 Here are some categories of products and services that are most common in legal departments (in no particular order):

 1.     Outsourcing legal work to law firms:

Law firms are retained either to be an extension of the in-house department that doesn’t have enough hands to get work done, or they are retained to provide services or expertise that the law department doesn’t have and doesn’t wish to hire folks to provide internally on an ongoing basis.

Because there is a ton of attention to historical over-charging and over-spending with top-line law firms, a trending in-house practice is to increase the scrutiny on and improve the management of law firms. This can range from convergence projects that concentrate more work with fewer firms that are more tightly regulated and partnered to align with the legal department, to collecting data and developing strategies to concentrate attention on cost control, better work processes, and project management. Because so much work and therefore so much of the department’s expenses are concentrated on law firms, many departments are increasing their use of technologies that allow them to better communicate and coordinate with their firms, from matter management and e-billing systems, to knowledge management and collaboration platforms that allow firms and clients to work more seamlessly as a team. While it’s clear that not as many departments use these kinds of technologies as well or as fully as they should, and that even more don’t use them at all, they are the focus of most department technology conversations (rather than technologies that are limited in use to the in-house team), and they drive whatever data the in-house team regularly collects

2.     Partnering legal work with law firms:

Both firm and department leaders will tell you that there should be a great partnership between a firm and its corporate legal clients, but it’s only been in recent years that the talk has been forced into practical application. There’s a rise in the number of departments bringing law firm lawyers onto their staffs — for the duration of a large project, for instance, or as a tour or rotation that is part of the firm lawyers’ advancement on the client relationship team. It’s also more and more common to see matters staffed by a defined team of in-house and outside counsel who operate on a virtual and highly collaborative plane; sometimes the demarcation between the in-house and outside folks is blurred and seen as irrelevant in such a collaboration.

 3.     Staffing agencies and contract lawyers:

Many departments have drastically increased their use of staff lawyers and contract lawyers. Once seen as second-class workers, these kinds of placement companies are now known for peddling incredibly well-trained and sophisticated lawyers (partly because of the changing economy and partly because of changing lifestyle interests of millennials, among various other factors). Whether it’s to cover for a new parent or a caregiver who has to leave the workplace for a few months; staff a regularly occurring task that’s only one day a week; or provide surge capacity for an intense deal that’s snowballing toward deadline, being able to pick up a phone and have a competent lawyer show up in two hours to stay for any relevant period (and then leave without further obligations!) when no longer needed is incredibly efficient and convenient for department leaders. While these lawyers used to just do document review or other mundane tasks, you can now replace the need to retain expensive outside firms with a deeply competent staffing company that can provide most any kind of worker expertise imaginable.

 4.     ABS — Alternative business structures — MDPs are coming!

As of this writing, a few jurisdictions have authorized the creation of ABS (alternative business structure) firms that allow lawyers and other kinds of experts (whether via financing or via the creation of a multidisciplinary practice, or MDP) to co-own/share profits in the same firm. This means that clients may now consider hiring such firms for regularly repeating work or to do work out of the country if the ABS firm doesn’t operate in the client’s home jurisdiction. The entrants in this market — unlike some of their vendor counterparts that start small and have to grow the hard way — are often large and well financed. This draws participation from the likes of the traditional accounting firms/consulting practices (such as PricewaterhouseCoopers, KPMG, Deloitte, etc.) and newly-structured law firms with outside investors (such as Riverview Law) and more, to do their work. How these firms will fit into clients’ portfolios and the larger legal landscape (whether their entry will change everything or very little) remains to be seen, but clearly they will create greater competition via more definite and clearly articulated pricing and service strategies; a re-shifting of top talent as new practices open and steal top-name experts and practice groups; and probably some firm merger mania, all of which will inevitably affect clients’ decisions about which firms to hire with the correct value proposition for their work…

 5.     Outsourcing to vendors:

 Clients are being offered an ever-increasing number of options beyond sending work they can’t staff internally to lawyers in firms or some other structure that contracts lawyers to staff client matters. They’re making more and more use of them each year, sometimes exponentially growing the percentage of work they’re sending on an annual basis as they get more comfortable with the concepts. LPOs (on-shore and off-shore legal process outsourcers), e-discovery vendors, litigation support companies, firm service centers, and more are creating predictably priced service options for clients who wish to buy a particular “product” or a talented and highly trained team to deliver a pre-defined set of results at a fixed cost (as opposed to undefined work often thrown over the wall to a law firm that was told to get going on it, figure it out, and then anticipate that the client would argue with the firms over the invoice later). These kinds of companies first showed up in India, Singapore, and other cheaper-workforce/highly-educated labor markets, but now are just as likely to be found in West Virginia, Northern Ireland, or even in a big law firms’ back office operations somewhere in the hinterlands, away from the high-price real estate and labor market where the big firm opens its offices.

 6.     Hot technologies in law departments:

 There’s a lot of attention (even if relatively little actual action) on knowledge-based systems that allow the department to automate or process-manage routine functions. These are extremely popular, even if only fully implemented in relatively few departments in a sophisticated fashion (something beyond a Word or Excel spreadsheet, for instance). These include contract management systems that allow departments to encourage business managers to self-serve their own negotiation and contracting processes, as well as work platforms that drive the increased use of template work processes or decision-trees for commonly repeating matters.

 No matter what a law office chooses to use or what sort of projects they have, there is an option for legal outsourcing that will fit into any budget. This is true whether the firm brings in an experienced professional or sends the work overseas to vendors; the end result will be a quality product — and a new professional contact in a rapidly shrinking legal landscape.