How Transparency Enhances the Outside and Inside Counsel Relationship

Communication is a two-way street – and transparency is what drives communication to be the pathway to a successful relationship. That is the case with the relationship between outside counsel and inside counsel. Too often (in the corporate world), this can be a strained or even adversarial working arrangement, with suspicion, misconceptions, or unwanted surprises taking their toll. With transparency and clear communication, however, both parties can work toward the desired outcome – quality legal services performed efficiently for agreed-upon compensation – while avoiding potholes and pitfalls.

Most importantly, transparency nurtures a trusting relationship that can lead to additional successful engagements in the future and reduce counsel churn.

THREE FUNDAMENTAL ELEMENTS ARE AT THE FOUNDATION OF OUTSIDE COUNSEL MANAGEMENT AND EVERY OUTSIDE COUNSEL-INSIDE COUNSEL RELATIONSHIP:

1. Agree upon clear expectations for scope, staffing, timing, and billing. This can include performance levels, turnaround times, levels of experience or expertise of the assigned professionals, or billing specifics and caps.
2. Establish a schedule for status updates, general communication, and work guidelines, including triggers that would prompt additional updates and rules for pre-approvals for scope adjustments – These updates could be quarterly, monthly, or more frequent, as deemed appropriate.
3. Monitor progress and carefully review final estimate-to-actual reports. Transparent billing software can both simplify the process and provide detailed information for comprehensive analysis.

Transparency is essential to both inside counsel and the outside firm. The in-house legal department must pay close attention to the performance and costs of the outside vendor. Inside counsel must always be ready to discuss how much gets spent and why. A strong business case for this external spend is good for both parties. Transparency makes it easier for general counsel to discuss the strategic value of the arrangement – with a CEO, CFO, or others in the Finance department, for example – as well as recognize trends (increased litigation, compliance, and transactional matters, etc.) and adjust expectations to budget accurately going forward.

For the outside counsel, transparency encourages a firm to be disciplined and function efficiently and effectively. The optimized performance can lead to both parties reaching their goals and the development of a strong relationship based on satisfaction and trust. It can also make for a smooth payment process if there is no reason for argument over hours or perceived overcharges.

On the other hand, a lack of transparency can be fertile ground for mistrust, chargebacks, and late-in-the-game surprises.

If an outside vendor appears reticent or reluctant about providing transparency, it may be that the relationship needs fixing. For inside counsel, surprises are considered harmful, and predictability is a primary goal. A desire to avoid transparency does not necessarily mean outside counsel has something to hide. Still, it reflects a disinterest in the clarity regarding operations that allows accurate, data-based outside counsel management.

And clearly, that is not in the interest of both parties.