In-house law departments and trust

When I published the results of our national survey of alternative fees, one of the most discouraging sections concerned the lack of trust between in-house law departments and the firms that serve them. Although the interviews were focused on alternative fees, the findings also have implications for hourly work.

If you made a list of the most common characteristics of successful lawyers, would you put trust near the top of the list?  Me neither.  An inherent predisposition to be suspicious is a barrier to agreeing on alternative fees and to making them work:

In the past, where we have proposed unilaterally various fixed fee arrangements, the clients have turned them down because they think that if we proposed them, there must be something wrong with them.

We have proposed ten alternative fee arrangements for every one that is accepted.  Maybe in-house counsel are afraid that outside counsel will sandbag them by building inefficiencies and excess margins into the fixed fee quotes.

I think that people often spend a lot of time putting together an alternative fee arrangement and the in-house counsel ends up rejecting it because they have as great a fear about the risk as the outside counsel do.

The larger problem with RFPs and alternative fees in general is really the trust issue.

Law firms have gotten such bad reputations over the last several years, and I think that's probably due to their bragging about how much money they make. So you really can tell that there is an uneasiness in dealing with in-house counsel that didn't exist five years ago. And I suspect a lot of it is due to purchasing agents, CEOs and others saying, "These guys make way too much money." So now you have a whole different situation.

Several participants mentioned the distrust they had seen in meetings they had attended as part of the Association of Corporate Counsel's Value Challenge:

One of the interesting things I heard at the ACC meeting was [a message from GCs that] if you came to me with an alternative fee proposal, I would assume you had come up with it in a way to screw me. And if that's where you start, it's going to be really hard to do anything. So I think there's got to be a suspension of distrust.  I was surprised at how much distrust was evident [at that meeting].

There are such low levels of trust out there between in-house counsel and their law firms. Whenever I've gone to ACC events, that's the one thing that I see in spades. There are very low levels of trust.

To read the entire post, visit the Legal Business Development Blog.