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.