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Further reflections on obstacles to improving outside counsel management

A previous post discusses my concurrence with and dissent from some obstacles within law departments to improving outside counsel management (See my post of June 30, 2007.). Some reasons were not mentioned at all by that compilation.

Law firms, to put it bluntly, are flush. If they have as much work as they can handle, why should they care about pleadings by their clients for cost restraint. A second obstacle is the fear of inside lawyers to try something new, especially if there is a risk (See my posts of April 12, 2006 on risk aversion and personality styles; Oct. 18, 2005 generally on lawyer on risk aversion; Dec. 17, 2006 on Type I and II errors; and Aug. 27, 2005 on mutual blame as to why alternative fee arrangements not succeeding.). A third brake is the lack of palpable incentives for individual lawyers to reduce costs.

One other hurdle that should be recognized is a manifestation of the principal-agent problem (See my posts of Jan. 16, 2006 on the principal-agent split; May 16, 2006 on why individual lawyers don’t reduce costs; and Jan. 28, 2007 on agency theory.). Finally, the reality is that many law departments have needs for outside counsel that are sporadic and spread out, so there is difficulty having a critical mass of services need and thus gaining traction on cost control.