Technology

The Pressure's On: What Legal Departments Want From Their Outside Counsel

The findings have a number of implications that outside firms should keep in mind.

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In last month’s article, I covered some of the results of the 2021 Wolters Kluwer Future Ready Lawyer: Moving Beyond the Pandemic and insights into why technology-leading organizations have continued to show greater profitability based on the findings, even in the midst of an especially volatile year. Next, we’ll dig deeper into the survey’s results to examine how these trends are impacting corporate legal departments and, subsequently, the law firms with which they work.

Even before the pandemic, corporate legal departments had been under increased pressure; but the onset of the crisis intensified them further, leading to significantly increased workloads and tightened budgets. The “2021 Wolters Kluwer Future Ready Lawyer” provided a snapshot of how corporate legal department professionals coped with the pandemic — and sheds some light on the long-term impacts of the crisis on their technology adoption, budgets, and their relationships with outside counsel.

According to this year’s results, legal departments are placing greater emphasis on their own technology investment. The biggest change legal departments expect ahead is the Greater Use of Technology to Improve Productivity, and 57 percent of legal departments expect to increase their technology investment over the next three years. This indicates an increase over prepandemic projections in 2020, when 51% said they planned to increase technology investment.

The survey also found that the top areas where legal departments expect the greatest change over the next three years include: Greater Use of Technology to Improve Productivity (84 percent of respondents), Greater Collaboration and Transparency between Law Firms and Clients (80 percent), and increased Emphasis on Innovation and Greater Use of Alternative Fee Arrangements (both at 78 percent).

Another factor impacting corporate legal departments is the continuing gap in performance versus expectations for the outside firms they employ. Legal departments assessed the attributes most important to them when choosing a firm — such as trusting the firm to meet their needs, specialization in services, and use of technology to deliver services — but according to legal department respondents, fewer than one-third of the firms they work with fulfilled these top-five attributes very well.

Furthermore, the survey indicated that a higher number of legal departments are considering switching firms (with 24 percent very likely to switch) when compared to 2020 (13 percent), pointing to a direct consequence of the gap in firms’ performance and their clients’ satisfaction with them.

If we take a closer look, these findings have a number of implications that outside firms should keep in mind. Here are a few takeaways for firms on how the increased pressures on their clients will impact their business — and some thoughts on how they can set themselves up for success in the future.

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Focus On Results

In light of the budgetary pressures that many legal departments are facing, law firms can benefit from having a more results-oriented view of their work for clients. Aside from an ability to understand a client’s needs, it is key to be able to deliver, irrespective of billable rate. Efficiency needs to be factored in as well, and this is often where technology comes into play. The survey confirmed that professionals across the legal industry see digital transformation and technology as a key driver of improved performance, efficiency, and productivity, with 82 percent of corporate legal departments saying it’s important that the law firms they work with fully leverage technology. A firm that leverages technology to improve performance is more likely to produce better results for their clients.

Increase Transparency

Innovation, doing things differently, and transparency all give corporate legal departments confidence that the fundamental changes are being made by a firm to be more responsive for the long haul. But, right now, that also needs to show up in the outcome as measured by the legal advice delivered for a competitive price.

In the survey, collaboration tools for document and contract drafting and review came in as the top technology investment for legal departments — and to me, that signals pretty strongly that departments are serious about getting more transparency around how efficiently work is completed. A firm may be able to fake it by reducing rates or writing off hours in the near term, but if they do that, in the long term they won’t be able to compete as well.

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Talent Alone Won’t Bridge The Gap

We’re seeing across many industries — legal included — that talent is at a premium right now. Despite the early panic and cutbacks that occurred at the start of the pandemic, many firms are paying more than ever to fill vacant roles and new roles alike. And typical staffing practices may not necessarily be the answer — tools and efficiency are going to need to play a role. One possible approach could be for firms to figure out ways to get as much leverage via tools out of an attorney for maximum productivity and bill accordingly, whether through an alternative fee arrangement or lower billable hours.

The pandemic has changed a lot about the way we work, and for the legal profession, the crisis turbocharged the changes that were already underway in our industry. This acceleration offers professionals a reason — and an opportunity — to drive change within their organizations, look for ways to innovate their processes, and find solutions to provide the best service possible. Based on the survey’s results, doing so will be key not only to success, but also survival in the future.

Ken Crutchfield is Vice President and General Manager of Legal Markets at Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Ken has more than three decades of experience as a leader in information and software solutions across industries. He can be reached at ken.crutchfield@wolterskluwer.com.

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