Flagship report from Nabarro finds many GCs struggle to develop practical tools to deliver value

Fewer than half of general counsel are taking steps to drive down legal spend, despite the fact 80% acknowledge the importance of being more cost-effective, according to new research.

Nabarro's second annual report on attitudes among general counsel found that only 45% of respondents were actively addressing the cost effectiveness of both external legal spend and the legal function as a whole.

The firm's General Counsel: Vague About Value? report, which involved interviews with more than 100 GCs, heads of legal and other senior in-house lawyers, found that the same percentage (45%) had no plans to address the issue at all.

The findings show that only a minority of companies have introduced sophisticated measures to analyse cost either internally or externally, despite the fact many companies have introduced panel processes as a means to drive down spending.

Only 53% of responding GCs said they consult with external legal advisers about how they can jointly deliver financial value, with a further 15% indicating that they might do so in the future. Fewer than half (45%) of GCs see their external counsel as essential partners in delivering financial value.

In addition, only 43% of respondents said they had implemented value-based billing arrangements with their external law firms, with a further 47% admitting they had never discussed this. Those that had made progress in the area focused mainly on fixed-fee arrangements and capped fees.

Meanwhile, looking at the overall performance of their internal legal teams, only 21% of GCs said they were using some form of key performance indicator (KPI) to assess the value the legal function adds to the business, with most (65%) having no intention of introducing KPIs.

This comes despite the fact that only a little more than half (55%) of GCs surveyed said they were sure their in-house legal teams were recognised internally as adding value to the business, with many finding it difficult to change perceptions and gain recognition.

Understanding the commercial objectives of the business was seen as the single most important factor in senior management's recognition of the value of the legal team, with many seeing technical legal skills taken as a given by other parts of the business.

Nabarro disputes partner Jonathan Warne commented: "The findings reveal that many GCs are not actively consulting with external legal providers on ways in which to deliver greater financial value. Metrics may help demonstrate improvements, but collaboration between in-house lawyers and external counsel is the starting point."

The report includes five in-depth case studies with those who are taking steps to address the issue of value.

Vodafone GC Rosemary Martin (pictured) commented in the report: "Beyond dealing with legal and corporate reputation issues, cost is the number one item on my agenda…. Having just set up a legal panel, I will be reviewing panel members' performances in a more organised way."

She added: "We have spent a lot of time talking to them about fees and how they go about structuring them. We are also interested in what else they can offer to help us further shape the legal function we want."

Other findings contained within the report include the fact that while GCs believe it important to improve the efficiency of the legal function, most are doing nothing about it.

While law firms have been making increasing use of legal process outsourcing, Nabarro's survey found it unpopular with clients. In relation to the subject, 78% of interviewees said they did not use it, with the majority feeling it inappropriate for their business.