How to Strategically Leverage External Legal Services

As businesses navigate a new normal marked by market volatility, supply chain uncertainty, talent scarcity, cyber and privacy risk, and increasing complexities, the role of in-house legal has taken on new significance. Today, business leaders expect their legal teams to be more anticipatory, data-backed, digitally enabled, and deeply involved in risk management at the highest levels.

However, this evolution does not mean routine legal work has disappeared. General commercial matters, including contract drafting and negotiations, Non-Disclosure Agreements, management of Intellectual Property and trademarks, as well as legal matters relating to compliance or employment law, all remain critical, albeit Business As Usual (BAU) tasks.

Many in-house legal teams are scrambling to keep pace with the increased scope, complexity, and specialist nature of matters they are dealing with. For example, AI technology, data protection, privacy rules, and intellectual property rights are critical areas that may need specialist external legal counsel advice.

On top of this, digital transformation has become a key task for General Counsel, tasked with automating and streamlining legal processes through emerging legal operations tools and technologies, including AI. All of this contributes to an overflow of in-house legal work that is contributing to a culture of overloaded and burnt-out lawyers.

Businesses can choose to establish in-house legal departments or obtain the necessary legal expertise externally. Increasingly, even those organisations with an in-house legal team require additional or specialist legal resources to supplement their capabilities and manage the overflow of legal work.

Internal vs External Legal Service

Larger organisations, including multinational companies, energy and infrastructure companies, telecommunications, retail, automotive and financial institutions, typically have larger in-house legal teams compared to early-stage or SMEs. Despite being well-resourced, even these organisations find it challenging to meet their ongoing legal needs due both to the volume of legal matters and the restricted talent market.

In addition to their legal expertise, in-house lawyers develop a deep understanding of their business, including the industry it operates in, its mission and business goals, liabilities, and obligations. These insights give in-house lawyers a unique perspective on the business and its challenges, putting them in an ideal position to provide tailored and commercially-driven legal counsel that aligns with business goals.

With an in-house team, companies benefit from focused service delivery because these lawyers are responsible exclusively to the company they work for. Currently, about a third of all legal practitioners in Australia are in-house lawyers – and yet limitations for this model are evident.

In-house lawyers don't bill hourly; they are paid a salary. Consequently, in-house legal teams can represent a significant overhead for a company. As a result, companies are steadily seeking alternative and flexible external legal solutions that better suit their business objectives, meet their budget, or supplement their core legal team.

In-house legal teams face many competing demands and are often swamped by project or crisis-type work, which diverts their attention from business-as-usual (BAU) legal work. In-house teams must constantly balance the high-priority project work with the still important BAU work.

Given budget limitations to fill staffing shortfalls, or to gain short-term legal expertise, some companies opt to obtain external legal support by hiring an in-house legal secondee or outsourcing legal tasks to an independent law firm.

External legal services can be a cost-effective solution – where a permanent in-house legal team can be a costly overhead, paying for specific legal services as needed can be an attractive option, although there is a risk of legal cost blowout when the scope for a project is more complex than anticipated.

Another more innovative model for businesses to access external legal services is on a fixed-cost basis. Examples of these types of engagements include on-demand legal services, legal subscriptions, or the popular Law Squared as a Service (LSAAS) solution, offered exclusively by Law Squared.

With this type of engagement, organisations benefit from a more innovative and cost-effective approach to support their in-house legal teams and address their resourcing challenges.

It's important for business leaders to weigh up their company objectives, preferred engagement approach, budget considerations, and specialist areas of law they will be seeking guidance from.

Different Models For Engaging Outside Legal Services

1. Hiring Outside Counsel

Outsourcing to traditional private practice law firms gives business leaders access to extensive legal expertise and professional legal services and advice, billed at an hourly rate. These firms specialise in a wide range of legal matters, enabling them to handle a broad range of legal issues.

Corporate in-house legal departments make use of law firms when the business is involved in litigation, mergers, or acquisitions, and in-house teams don’t necessarily have the experience to deal with such complex legal matters.

2. In-House Legal Secondees

Businesses can also extend their legal resources by hiring in-house legal secondees. Legal secondees are lawyers "seconded" from an external law firm to assist a company's legal department by filling a temporary resource gap, such as when a team member is on maternity leave.

Under the legal secondee model, an individual lawyer will work with the company's in-house legal team to provide additional expertise and general support or to extend the department's capacity for a specific time or project. They don't become part of the business's permanent staff.

The benefits of hiring a secondee lawyer include the services of a dedicated, often on-site lawyer for an agreed daily rate.

Large legal departments are costly but lean legal departments often don't have the range of specialist experience or simply the bandwidth to cover both BAU and project work. Employing a secondee extends the in-house legal expertise for a specific project or when demand requires extra hands. The other side of the coin is that in-house legal departments will still be limited in terms of their breadth of legal expertise based on the individual legal secondee’s specific skills and experience.

3. Outsourced General Counsel

For early phase or smaller companies that don't have the budget or appetite to employ their own in-house lawyer, exploring an outsourced General Counsel model might be the answer. An outsourced General Counsel is a highly qualified lawyer with commercial experience that you don't employ permanently. This person may work part-time in the company, remotely, or by special arrangement.

An outsourced General Counsel brings the expertise and skills of an in-house counsel without the expense of a permanent General Counsel on the payroll.

These professionals make it their business to understand your organisation, so they can provide tailored legal services for the companies that employ them. This arrangement gives companies peace of mind that their legal requirements are met as and when needed.

4. Engaging A Panel Of Law Firms

Engaging a panel of law firms is an option available to those companies that face a broad, complex or high volume of legal issues that can be more effectively handled by a group of law firms or individual legal experts.

A panel of law firms can provide invaluable external counsel, but the process can be costly and time-consuming, normally requiring in-house counsel to brief multiple firms if specialist legal counsel is needed in different practice areas - such as litigation and disputes, cybersecurity, intellectual property rights, or regulatory requirements.

Engaging a panel of law firms and engaging an external law firm have many similarities. To cost and time expediencies, public sectors (in particular) may put a panel arrangement in place once they have undertaken due diligence on their capabilities and have arranged a pre-agreed rate card.

5. Law Squared As A Service (LSaaS)

LSaaS is an innovative, alternative approach for accessing external legal support for overstretched in-house teams. This unique model was developed by Law Squared to meet the specific needs of in-house legal teams who may need to cover a resourcing gap, handle overflow work or access specialist legal knowledge.

LSaaS provides clients with total cost certainty by agreeing to an upfront, fixed monthly fee based on the client's needs. The LSaaS engagement is coordinated by a dedicated LSaaS Relationship Manager

who is a specialist in in-house legal matters. Their role is to become steeped in the client's business and understand its risk appetite, commercial objectives, company goals, and culture. The Relationship Manager is then responsible for coordinating the right legal resources and advice from across the firm's practice areas, including Employment and Workplace Relations, Corporate and Commercial, Disputes and Litigation, Privacy and Cyber Security, Energy and Infrastructure and Legal Operations and Technology.

LSaaS engagements have been successfully deployed for in-house legal teams across retail, automotive, insurance, technology, energy and infrastructure, and not-for-profit sectors. Thorough onboarding, regular meetings, and reporting, combined with practical and commercial legal advice, ensure seamless collaboration between Law Squared’s lawyers and client in-house teams.

Achieving Business Objectives With A Fixed Cost Engagement

Fixed-cost engagements are an attractive option for businesses that need legal services but need to be budget-conscious. Clients can budget for legal services because they know exactly how much it will cost. Everything is included in the fixed fee; there are no unexpected surprises.

Hourly rates quickly add up, with clients often required to pay more than originally anticipated. Fixed-cost arrangements eliminate the fear of cost blowouts because all fees are agreed upon upfront, ensuring lawyers are incentivised to scope carefully and work as efficiently as possible to the client’s advantage.

Under a fixed-fee arrangement, lawyers are incentivised to work more efficiently because they have to provide their services within the agreed-upon fixed fee. Clients can expect fast turnaround times, timely communication, and efficient service delivery, often boosted by the latest digital tools to streamline activity.

Ultimately, this is a value-based approach to billing, focusing on the outcomes of an engagement, rather than the time spent on it.

What that amounts to, is better value for money. With a fixed-fee arrangement, clients are fully informed about the legal services they can expect and what each will cost. This discussion happens upfront before the engagement commences, which allows for a better working relationship between clients and lawyers because they are focused on the outcomes of the engagement, rather than being fearful of exceeding their budget.

With fixed-cost arrangements, there’s no risk of unexpected fees or overbilling, which creates transparency and cost certainty for clients. The onus is on the law firm to scope the matter correctly and not saddle the client with a surprise bill at the end of the proceedings. This transparency gives clients more control over their legal spend whilst giving them a better understanding of what legal services are involved and how much they cost.

Benefits Of Choosing LSaaS For External Legal Services

When choosing an external legal contractor to collaborate with, the LSaaS model offers a range of benefits for in-house legal clients.

Law Squared as a Service:

1. Extends the capacity of an in-house legal department in times of increased demand without adding to full-time staff costs. It's a cost-efficient way of supporting an in-house team rather than putting undue pressure on existing lawyers.

2. Offers value-based billing. Clients pay a fixed monthly rate that is agreed upon before the engagement starts. There are no hidden costs.

3. Provides access to Law Squared's specialist practice areas, facilitated by a dedicated relationship manager who is fully versed in the client's businesses risk appetite, commercial objectives, systems and ways of working.

4. Provides overflow support for busy in-house teams either on an ongoing basis or for a short time to cover a resourcing gap, like maternity leave or down-time during recruitment or large projects.

5. Integrates seamlessly with the client’s in-house legal team through comprehensive onboarding, regular catch-ups, reviews and reporting as well as a strong focus on building relationships with key stakeholders.

To navigate today’s complex business landscape, strategic allocation of legal spend can offer cost-effective solutions for handling increased volume of work, but also add invaluable legal expertise to meet the shifting needs of the business and emerging risks.