Three Huge Myths About Outside Counsel Selection

In the last 100 or so interviews I’ve conducted with general counsel, business executives, staff attorneys and other corporate buyers of legal services, I have heard 100 different answers to the question: How does your organization hire outside counsel?

Every organization is different, and every law firm relationship is different. The idea that there is anything resembling a universal truth about the buying habits of corporate legal departments is false. Here are three common myths worth dispelling within your firm:

• Myth #1: GCs make all decisions. The most common myth involves the role of the general counsel as the primary decision maker in counsel selection. In an interview just last week, a general counsel told me, “If I am telling my team who to hire, then they aren’t qualified to do their job.” Yes, the general counsel plays a role, but the vast majority of legal departments empower their attorneys to hire outside counsel who will best serve the organization and successfully meet its needs.
• Myth #2: You must be on the panel to get any work. Another common myth is the power of being on a “panel” firm. In a recent conversation with a banker at a large global financial institution, the banker noted, “Sure, when the bank is paying we have to first look at our preferred list, but none of my work is bank-pay. So I hire the firm with the lawyer who is going to get the deal done.”
• Myth #3: Alternative fee arrangements are essential for consideration. The role fee arrangements play in buying legal services is far less significant than the conversation on that topic, which is a third common myth. Let me be very clear: I believe that alternative fee arrangements are one of the most valuable tools a law firm can use to truly differentiate from the competition (and a discount is not an alternative fee arrangement). But a true alternative fee arrangement is based on aligned goals, including risk sharing.

The only guaranteed way to understand how a client or prospective client hires outside counsel is to ask every individual who is in a position to hire your firm exactly how they go about hiring outside counsel. Too often I hear: “We know how they hire” or “They will hire us when they need _______.” But when I ask whether clients throughout an organization have validated those assumptions, they usually have not.  

Until you know the buying habits, and the factors that go into those habits, it’s just a theory. Don’t let your firm lose out on business because you can’t take the time to ask a few focused questions and confirm the theory.