When to give work to in house counsel or outside counsel

39% of corporate legal departments moved more work to in house counsel in 2020 than in 2019, according to CLOC. Bloomberg Law legal analyst Karen Miller-Kuwana says this pattern will continue “as in house legal departments tighten their financial belts and look for lower costs and efficiencies.”

While the widespread trend is to use outside counsel less to save, legal departments can still get stuck on when it makes the most sense to bring work in house or to outsource. You don’t want to overload your internal legal department, but you also don’t want to spend too much on pricey law firms.

Fortunately, there are some glaring signs to look for to help you decide.

Consider giving work to in house counsel when:

1. Your external legal spend exceeds your planned budget

The most obvious sign you should assign more work to in house counsel is if you consistently spend more than expected on outside counsel. When you frequently use vendors (and lots of them), your well-planned budget can get thrown off quickly. Attorneys billing extra hours, assigning low-level tasks to senior timekeepers, and submitting late or inaccurate accruals create unexpected expenses.

In house counsel is more predictable. You know exactly what you’ll pay because they’re salaried employees, not hourly. You don’t need to worry about exceeding budgets if a matter takes longer to complete. And you don’t have to spend time hunting down accruals from firms or emailing them to dispute high charges.

Look at a few of your previous legal budgets and see where outside legal counsel expenses were higher than expected. Flag repeat offenders and then compare them to your in house team in terms of their cost and their average matter lifecycle times. If your outside counsel doesn’t measure up, it’s a sign to end those partnerships and bring that work in house.

2. You frequently outsource legal matters in the same specialized practice areas

Outsourcing legal matters in specialized areas like intellectual property or litigation is more expensive than using vendors for general tasks like document review. In the long-term, it’s more cost-effective to hire specialized counsel to do that work in house.

This is a growing cost-saving trend, with Gartner finding the “proportion of specialist attorneys on in house teams increased by 21% from 2018–2020.”

Analyze your spend by practice area to find opportunities to move high-volume, high-cost work to a new dedicated team member.

3. You have access to better legal technology than your vendors

If you spend money on old-school vendors that handle most of their work manually or with outdated legacy systems, you’re paying an expensive hourly rate for work advanced legal tech could do in an instant. Instead, invest in legal technology and use it to handle as much of that automatable work as possible to drive costs down.

Whether used in house or at a law firm, legal technology improves productivity and gives attorneys access to concrete data to support their strategic decision-making. It’s so useful that Gartner predicts “legal departments will have automated 50% of legal work related to major corporate transactions” by 2024. When lawyers save that much time with technology, they can bring more value to their company or client. They’re freed up to focus more on thoughtful legal analysis instead of administrative work.

You should only stay in long-term partnerships with vendors that take the initiative to improve their legal practice with technology. When your vendors don’t take advantage of legal technology to automate tasks, improve their reporting, or back up their decisions with hard data, it impacts the quality of their legal advice and their efficiency.

4. Your outside counsel struggle to fully understand your business

If you have vendors that don’t take an interest in the ins and outs of your company, you’re better off sticking with your in house counsel. Expectations for lawyers have changed: companies want attorneys who also operate as strategic business partners. British Business Bank General Counsel and Company Secretary Shanika Amarasekara sums it up: “Be our trusted advisor, not just our lawyer.”

“Doing business during the COVID-19 pandemic has put a premium on outside counsel that takes the time to understand the companies they work for and can serve as problem solvers — not merely managers of litigation.” — Esquire Deposition Solutions, LLC

However, it can be difficult for some outside counsel to grasp all the ins and outs of their clients’ businesses, especially when they’re juggling many different ones. And when your vendors aren’t vested, your ROI suffers.

But as Anthony Armitage, Group Counsel for Southern Housing Group, says, “In house counsel has great versatility, with a deep understanding of the needs of the business.” Your in house lawyers are focused on helping your company, and they learn more about it every day on the job. This knowledge is key for shaping both effective strategic legal and business advice.

Ashurst’s Christopher Georgiou and Kate Bassett note how this immersion in the business paid off during the COVID-19 pandemic. Corporate law departments were able to take the helm on crisis management and act as thoughtful business leaders, giving in house legal “a welcome chance to shine.”

Consider shifting work to outside counsel when:

1. You need more expertise on a niche, high-risk issue

Jomati Consultants Principal Tony Williams explains that you should call on outside counsel when you have high-risk legal issues that aren’t common occurrences and require expertise you don’t have in house. It’s better to pay to have matters like these handled by vendors. You’ll minimize risk by entrusting them to outside experts.

For instance, nearly 27% of chief legal officers increased outsourcing “to prepare for complying with data privacy regulations,” according to the 2021 ACC Chief Legal Officers Survey. Cybersecurity law is a relatively new area that’s quickly growing, so many in house teams lack the depth of knowledge needed to handle those matters. The financial consequences of regulatory noncompliance and data breaches cost more than hiring legal experts, so it’s a smart business move to outsource.

2. Your in house counsel are burning out

Just because you can save money giving work to in house attorneys doesn’t mean it’s a good idea to give them every single legal responsibility. This is especially true if you don’t have the legal ops capacity or advanced legal technology to further support them.

74% of in house counsel told Bloomberg Law they felt “moderate to very high levels of burnout” in 2020. And burnout costs employers between $120 to $190 billion a year. There go your cost savings from decreasing outside counsel use!

The percentage of general counsel who felt their attorneys were “taking on too much administrative work” also went up by 11% in 2021, according to Deloitte. This contributes to those high burnout rates. Tedious, low-level tasks take away from employees taking part in more meaningful work. Then, they get frustrated and disinterested in their in house counsel jobs.

Prevent costly employee burnout (and inevitable turnover) by outsourcing low-risk, repetitive work to an alternative legal service provider (ALSP). ALSPs are definitely cheaper than $120 billion, offering lower rates on legal services than traditional law firms. This is related to their use of technology to improve productivity without compromising on quality.

Strategic work allocation helps prove the value of legal ops

Thoughtful decisions on when to use in house counsel or outside counsel support the bottom line. This helps prove your legal team’s business merit as a strategic cost control center. Legal technology that tracks data on vendors can help inform these important decisions. Take a free tour of our legal vendor management software to see how vendor metrics help ensure you get the highest ROI on outside counsel.