When Should In-House Counsel Hire Outside Counsel

Outside lawyers are also known as outside counsel, working in law firms and hired by in-house counsel who work in corporate legal departments. The in-house legal team is directed by the general counsel, who indirectly manages external counsels. These external counsel work on strategy in partnership with the in-house counsel team and conduct the day-to-day work associated with case management and matter management.

Managing outside legal counsel begins with a vendor management program. Vendor management is an application of enterprise legal management platforms that helps with measurement criteria for outside legal counsel. Any outside lawyer legal team can be evaluated by legal operations professionals who work in the corporate law department.
Assessing whether in-house lawyers or external counsel are the best choice to take on a matter depends on a variety of factors. Some of the basic considerations are the depth of expertise external counsels offer. Many out counsel, also known as outside counsel, specialize in areas of law. Over time, that expertise is sought after by Large Law and general counsels.

In Large Law firms, those with 750+ attorneys, there is also a breadth of experience that comes in handy for matter management that touches upon several practice areas. Comparatively, the in-house legal team is spread thin. Hiring external counsel becomes a decision not only of expertise but of bandwidth. The matter continuum includes a timeline that can be quick or take time with a bigger workload.

Regardless of the specialty knowledge outside counsel provides, there is a high hourly partner rate associated with that knowledge. The CounselLink 2025 Trends Report indicates that Large Law continues to dominate market share with a 61% gap between the largest law firms and the next smallest tier.

The considerations about whether to hire outside counsel depend on things like budget and workload (mentioned above) and whether a matter can be managed well enough in-house. Is there specialty expertise to address legal issues? How many matters is an in-house lawyer already managing themselves? Is there enough budget to hire an outside lawyer team, and most of all, is the matter critical and timely?

What Is In-House Counsel?

A corporation usually has a legal department. In-house counsel are part of the legal team that delivers legal services to business units throughout the company. When an external legal matter arises, the legal team in the law department manages the issue. They will either manage the legal matter within the company or hire outside counsel from a law firm to take on matter management. A general counsel manages the legal department in a company.

What Is Outside Counsel?

A lawyer who works in a law firm and is hired by a corporation is considered outside counsel. Outside legal counsels provide a service, often in the form of matter and case management, legal advice, litigation, subject matter expertise, and more. External legal counsel brings specialty experience to complex matters that an in-house legal team is unequipped to manage. Outside counsel work for either an hourly rate or a pre-approved legal matter budget.

• In-House Counsel Accountability. While outside counsel is considered for legal matters and case management, the internal legal team manages various areas for the company. Here are some of the areas of responsibility for in-house counsel:
• Daily Legal Issues. The wonderful benefit of having an internal legal department is that the lawyers become expert in the vertical market of the company. Legal issues that pertain directly to the day-to-day management of a company can be assigned and handled directly by the legal team. Not only does this save time, it also saves on costs. Hiring external legal counsel to manage a legal matter directly associated with the company is not always beneficial. The knowledge ramp-up is steep unless a company lawyer has the time to guide outside counsel on pertinent issues. An outside lawyer assigned to represent a company must make a considerable effort to learn the ropes of a company’s industry. The in-depth understanding that an in-house counselor earns in a law department, just because they work there every day, makes that attorney an expert for the company.
• Policies and Procedures. Risk mitigation in a large corporation often begins with employees. The in-house legal team must minimize exposure to risk and legal matters that begin with employees who work within complex business units. Updating legal policies and ensuring company leadership is familiar with said policies is one of the first steps to protect the company and its employees. Laws constantly change in states and federally. Lawyers may enlist the help of outside counsel to remain abreast of various changes so that company policies and procedures can stay current.
• Regulatory and Compliance. It’s becoming more challenging for all lawyers to stay abreast of privacy and security laws issued by states and other countries. An in-house counselor may hire an external lawyer to do nothing but follow the complex regulations of various industries and overall privacy laws. Some software platforms provide that type of information, as well; however, legal experts must sift through the information for relevancy.
• Company Collaboration. Lawyers can embed themselves in a business unit, depending on the size of the legal department. For example, a human resources lawyer can work within that department to manage employee legal issues that may come up. This helps with risk management as well. A legal matter can be deterred at the pass before it blows up. Most of all, this department manages employee hiring and firing, benefits, workplace safety, and compensation. There may be other legal issues like harassment, discrimination, disputes, or other things that could turn into a matter. That’s when an outside lawyer may be consulted to assist.
• Contracts. Contract lifecycle management is the purview of in-house counsel who draft templates for the contracts. There must be alignment with the company’s goals, and the in-house attorney is most familiar with that relationship. Moreover, a contract is written to protect a company from vulnerabilities, manage risk tolerance, ensure that financials synchronize with budgets, and other considerations.
• Litigation. Every company experiences litigation and disputes. Many of these matters require attention from the in-house legal team to resolve. Each issue must be reviewed to determine whether an in-house team can manage or if external lawyers should be hired. Issue resolution can also be managed by arbitration, mediation and negotiation with involved parties.

Hire Outside Counsel For New Matters

Ideally, hiring outside counsel brings relief to the in-house legal team. The time saved permits corporate attorneys to focus on strategic initiatives and other more pressing matters throughout the company’s business units.

External counsel chosen for key matters by in-house lawyers must be well-versed in their client’s company. To assess and better manage vendors, ask the partner in the law firm about the outside counsel team. Are they expert in the issue that requires attention? Do they have experience in practicing law? Are they a specialist or generalist? What hourly rates do they have? Do they understand the regulatory landscape enough that the company isn’t paying for the knowledge ramp-up?

Once these questions are posed and answered, and there is a comfort level with the in-house legal team’s selection of that law firm and practice group team, then everyone can move ahead with hiring considerations.

Select External Counsel To Benefit The Legal Department

• International. Certainly, managing cross-border litigation is challenging for any in-house legal team without representation in other countries. This is where an external counsel comes in handy as many Large Law firms have locations in key countries in EMEA, for example. Countries outside the U.S. have specialized regulations and local legislation that apply to their jurisdictions. Adding external legal teams to assist with such matters is necessary.
• Specialty Legal. Not every in-house legal team has the necessary specialty experience to practice law and address complex matters. Large Law specializes in various areas of law that may not be commonplace for an in-house team. These areas could include mergers & acquisitions, anti-trust, asbestos litigation, and other specialty areas.
• Extending the Legal Team. If a company has growth goals and the legal department budget remains stagnant for hiring new lawyers, then outside counsel must be considered to manage the workload. An external counsel should create a partnership with the in-house lawyer so that trust and confidence form the basis of the relationship. This burgeoning relationship allows more strategic initiatives and decision-making during litigation while also freeing up time for the law department team.

Many more reasons exist for in-house legal to hire outside counsel. A long-term relationship between both proves those advantages. 

Use Enterprise Legal Management Software

In a corporate legal department, the type of technology that serves as the foundation for department functionality is critical. The use of an enterprise legal management platform can be a successful choice for legal operations.

• Bandwidth is a big issue inside a company's law department. ELM software enables more collaboration inside the legal department, in addition to greater efficiency and productivity.
• Budgetary concerns in hiring outside counsel are real. ELM software has applications to manage billing and invoicing with smart financial tools powered by AI.
• Contract lifecycle management integrates with the enterprise legal management software. Access to new templates and archived clause library are readily available to users.
• Vendor management is a feature of enterprise legal management software. Some tools enable side-by-side comparison of lawyers by practice area, jurisdiction, win/loss record, hourly rates, and more. If a legal team wants to hire a new external counsel for a specialty legal matter, they can use this type of tool to enhance the selection process.
• Analytic reporting provides the status of matters, contracts, budgets, and more for the legal team, operations and leadership. Without an ELM to assist with reporting, the leadership team would be in the dark about where the law department sits with its functionality.

Other ELM functionality benefits the in-house legal team collaboration with outside counsel. Contact us to learn more.