Bracing for 2023: Law firms and their clients examine the expanding role of outside counsel guidelines

December 19, 2022

Law firms have displayed remarkable agility during the pandemic, overcoming business disruptions and adapting to constant workplace evolutions. With a potential recession in 2023, leaders are once again looking to demonstrate the same acumen to survive and even thrive.

Preparing for what could be a very trying year was among the central themes discussed at Sandpiper Partners’ Fourth Annual Outside Counsel Guidelines and E-billing Roundtable, where Williams Lea’s CEO Clare Hart joined a panel of law firm and client legal department leaders. Instant polling of the attendees also provided a “pulse check” on the challenges of keeping up with outside counsel guideline compliance.

Here are the top takeaways from the event:

With a slowdown on the horizon, law firms and their clients see pressures from all directions

The Great Recession of 2008-09 was a turning point for outside counsel guidelines, turning standard billing and fee arrangements into expansive arrangements covering everything from conflicts to information security and indemnification. Ever since that downturn, clients have become more proactive in “taking a hard look at their guidelines and expanding them,” a panelist said. Law firms should expect this same rigorous approach from clients as the market slows in 2023. Some firms are already seeing trends around multi-year agreements and clients limiting increases.

With pressure to contain costs, clients are also doubling down on rate negotiations and freezes. “We need to discuss rates and make sure they’re equitable,” said one client panelist.

The “billable hour” has been so deeply entrenched in the legal industry that firms and their clients can’t seem to get away from it, but clients continue to push for alternative fee arrangements. “As we go through rate renewal, our message is ‘we’re holding the line on rates’,” said one client panelist. “But we also want to think in terms of fixed fees or alternative fee arrangements.”

Though rate agreements are top-of-mind for both law firms and clients, outside counsel guidelines continue to expand to include non-pricing issues, ranging from DE&I (Diversity, Equity & Inclusion) reporting to rigorous background checks to ensure privacy. “It’s become a chain of demands and requirements,” a law firm panelist described. “They [guidelines] used to be left to the law firm to implement, but now they’re coming with standards and conditions.”

This sentiment was echoed by the audience via online polling, with 60% reporting that firms’ biggest concern about outside counsel guidelines is the increasing volume and complexity.

How can law firms push back against such restrictive guidelines?

Communication and common ground

Outside counsel guidelines lay the foundation for the law firm-client relationship, so it’s critical that both parties discuss and negotiate terms.

“The idea is to find common ground,” said a law firm client panelist.

The law firm participants agreed, with one panelist saying, “It’s about the relationship, you have to appreciate where they [clients] are coming from. They’re not trying to be unreasonable. You just have to kind of work through it and make some adjustments.”

Communication is key. Open dialogue, in particular, plays an important role in invoice compliance. The complexity of the outside counsel guidelines spills over into e-bill creation with 41% of the audience citing the difficulty of complying with a myriad of format, entries, block billing, narratives, receipts, etc. as their firm’s largest e-billing challenge.

Client firms measure invoice compliance in a few different ways, but most have bill review teams to augment their e-billing systems. The teams look at adjustments taken and appeals that come back.

When non-compliance occurs in invoicing or other matters, it’s a signal “for us to sit down and have a conversation [with our law firm], because everyone has the best of intentions, everyone’s trying hard to get us the right information,” said one client legal department leader. “The question is, where’s the disconnect? Was there a major change that we weren’t aware of?”

Other firms have standing meetings to ensure that all stakeholders are on the same page. The more informed everyone is, the fewer the discrepancies.

Technology supported by people

Managing and  complying with multiple clients’ outside counsel guidelines has always been a huge hurdle for law firms. Technology, in some ways, has eased this burden. With the rise of proprietary and out-of-the-box outside counsel guideline and e-billing management solutions, creating and monitoring workflows is becoming more streamlined. The same thing is happening with document storage, with tools like Sharepoint and other intranet solutions simplifying the process.

However, technology isn’t foolproof. “We’re certainly relying on technology, but it’s not flawless for us,” a panelist said. “There’s still a lot of things that require human intervention to make sure we’re complying with the clients’ requirements.”

Clare Hart, Williams Lea’s CEO, agreed with this sentiment: “Williams Lea has a firm view that technology must be supported by people, because this will drive more effective management. We’ve built teams of experts and highly skilled resources, who not only understand e-billing and compliance, but also understand the law firm’s clients.”

“Our teams also expertly navigate industry-leading e-billing software, so we troubleshoot and resubmit rejected invoices,” Hart continued. “Our goal is to ensure compliance, in order to expedite the process of payment to the law firm.”

Law firms and their clients face a lot of uncertainty as they head into the new year, but outside counsel guidelines can help lay the groundwork for stronger relationships. Law firms should use these guidelines to know their clients more. The better they know their clients’ pain points, the better-equipped they will be to provide quality legal services and add more value.

The legal landscape is rapidly changing, especially with the expanded role of outside counsel guidelines. Learn more about how Williams Lea helps law firms manage outside counsel guidelines and e-billing.