Year: 2021

Corporate legal departments are increasingly expecting more from their firm relationships. In-house teams are now feeling executive pressure to effectively manage their budgets, save where possible, and demonstrate the value their firms deliver for the prices they’re paying. 

So how are they doing that? Innovative in-house teams are using analytics and sophisticated benchmarks. Armed with “smart benchmarks” that are informed by market data and purpose-built to establish apples-to-apples comparisons, corporate legal departments are leveraging AI-backed benchmarks to influence their law firm relationships for the better — and you can too.

But when do benchmarks give you the leverage you’re looking for? 

Here are three ideal opportunities, and some simple tactics to help you get started with benchmarking: 

1. Rate Negotiations

Rate negotiations can be uncomfortable — but with data, they don’t have to be. Though your firms may describe your rates as “great”, is that actually the case? Are they in alignment with the going market rates for similar firms doing similar work? You’re not going to get the answer from your firms — they’re inherently biased. It’s important you look to trusted third-party sources for market data. 

A smart benchmark will provide you with actual market rates for similar work from similar firms — which is critical. Comparing claims litigation rates to complex litigation rates, or an AmLaw 25 firm with a hyper-regional firm won’t result in usable data. They’re not meaningful comparisons. Make sure your benchmarks leverage contextually relevant competitors executing on similar matter-types and practice areas. 

Benchmarks also help you know when it’s worth the effort to negotiate at all. If it’s clear that the firm you used for all complex litigation matters is charging marginally more than similar firms handling similar matters, then perhaps the juice isn’t worth the squeeze.  

If you don’t have access to smart benchmarks from trusted third-party sources, you can still drive value by conducting a rate card RFP. That can help you at least benchmark firms’ bids against each other, and give you leverage with individual firms based on other firms’ bids. 

But be aware that the bids you receive are only telling you your law firms’ self-evaluated price — what they think they’re worth — not what they should cost. 

Benchmarks, on the other hand, are clear, objective, irrefutable data. Armed with that kind of data you’ll have the negotiation leverage you need to get the rate reduction you want.

2. Measure Outside Counsel Value & Effectiveness 

It’s no secret that law firms can be expensive and it can be hard to determine the value you’re getting for the rates you’re spending. But benchmarks are a great starting place for ascertaining law firm value. 

It’s understandable to want to work with a firm you like and trust, but your legal department should evaluate law firm relationships through a mix of qualitative and quantitative factors, like benchmarking. 

Beyond smart benchmarks, Firm Report Cards are another way to do basic benchmarking. Firm Report Cards allow you to drill down by practice area, matter type, timekeeper level, and even tasks to analyze the firms in your panel. From there, you can benchmark your panel firms against one another to determine who will deliver the most value to your organization and do so efficiently.  

Leading a data-driven discussion with your law firms will enable you to incentivize improvements — or even reward your top-performing firms by paying them more (yes, paying more isn’t always a bad thing).

3. Determining a Matter’s Should-Cost 

Law firms are notoriously vague when scoping costs for upcoming matters. Like many elements of the law, it’s not always clear upfront how complex a matter may be or how contentious your opponent will be. That said, law firms have the data to give you estimates – otherwise, how would they be able to make bids for large matters? They have the data – they’re just not sharing it. 

Having your own benchmarks for matters — estimated hours, allocation of tasks, and rates — is an incredibly valuable tool. By combining a smart market benchmark with historical data on similar matters, you can make a reasonable estimation of the expected cost — within a tolerance of course.

Market benchmarking will help your legal department set realistic and competitive expectations for your matters. With this knowledge, you can make data-driven, strategic decisions when it comes to matter allocation, ensuring you’re retaining counsel that delivers maximum value and acts in your best legal and financial interests. 

Benchmarking is critical to more strategic, informed decisions.  

Organizations are increasingly leaning on General Counsels and their teams to not only mitigate risk for the business but also act as a strategic partner. To be a true strategic partner, you don’t just need data — you need insightful, smart benchmarks.

Relevant benchmarks based on your own historical data, or third-party sources are indispensable and are a key ingredient for strategic success. The insight gleaned from benchmarks is the required ammunition to enable effective negotiation, improved firm management, and more accurate forecasting to keep your department on budget and be the strategic partner the business demands.

Smart rate benchmarks offer corporate legal departments a wealth of knowledge — but just knowing the benchmark only gets you so far. To truly make the most of your rate benchmarks, you have to draw insights, develop a strategy, and then action it. 

Here are three key ways to strategically leverage rate benchmarks (and make sure to check out our recent post on when you should benchmark!): 

1. Improve Performance with Data-Driven Discussion 

Working with law firms can be tricky, especially when it comes to conversations about rates or performance. Many in-house teams have a hunch when their law firms aren’t operating as efficiently or effectively as they could be, but lack the evidence to prove their suspicions

Benchmarks — both amongst your panel and against the market — are a valuable starting place for meaningful discussion with your firms. Data doesn’t lie — which immediately negates many tired arguments. With quantitative analysis like benchmarks, it’s simple to highlight areas where improvements could be made — and indisputable. 

Plus, the data lends itself to actionable insights. It’s easy to spot outliers and ask the right questions about why their numbers are so far off from the pack. They may have perfectly acceptable explanations — or they may have to make changes to how they work to fall more in line with norms.

If there’s one thing your law firms do not want, it’s to lose your business. Using benchmarks will help you to drive transparency through data-driven conversations. 

2. Make More Strategic Decisions on Law Firm Selection & Matter Allocation

Firm selection and matter allocation are other areas where benchmarks can make a huge difference in cost, value, and quality of service. It’s no secret that law is a relationship-driven business. Hiring decisions are often colored by old work relationships or law school friendships. Having a history with a person — or a firm — doesn’t necessarily mean they’re right for an upcoming matter, or for your business in general.  

One easy way to improve firm selection is to leverage benchmarks during your annual rate card review process. Conduct a Rate Card RFP, asking firms to re-submit rates across all or specific practice areas. Then benchmark the firms to establish the bid’s relationship to market prices — but make sure the benchmarks are contextually relevant and level-specific. Your market benchmarks must only compare a firm against similar firms for similar work, and that you’ve got specific benchmarks for each timekeeper level. 

Comparing the rates from the different bids, along with the market rate, will help you understand which firms deliver the most value. For example, certain practice areas may have very complex casework or subject matter and therefore require more specialized (and expensive) expertise. Regardless of the practice area, benchmarks and bids will put you in the driver seat to get the best firm at the best rate for your panel or matter.  

3. Negotiate Fair Market Rates

When it comes to rates, law firms are always adamant that you’re receiving a “really good” rate — even “lower than what other clients pay!”.

But we all know that seeing is believing — or as Cuba Gooding Jr. put it in Jerry McGuire — “Show me the money!”.

The apples-to-apples comparisons gleaned from smart benchmarks enable in-house teams to analyze exactly how their rates stack up against other firms that handle similar matters for similar clients within the same domain. 

As we all know, law firm objections are commonplace throughout rate negotiations. With this information, you have all the ammunition you need to lead data-driven conversations with your law firms and justification as to why you should pay a lower rate.

After all, competition is healthy. If your law firms really value your business, they will see the indisputable logic in your data and adjust their pricing to reflect a more fair market rate in order to keep you as a client.

Benchmarks Fuel Better Business Decisions

You cannot effectively manage what you do not measure. Benchmarks should play an integral role in your legal department’s operations — from relationship management to firm selection to rate negotiations and more.