Word of Mouth May Dominate Legal Services Procurement, But Practitioners Want Better Options

When it comes to legal services procurement, a contradiction emerges in what businesses want and what they do.

Although in-house lawyers at companies across the globe value sector breadth and expertise most in a search for law firms, the majority still make their choices based on personal connections rather than a neutral assessment of skill and fit, according to Global Trends in Hiring Outside Counsel: Exploring the Need for a Better Way to Identify and Appoint Law Firms, a new report commissioned by Globality.

Globality conducted a survey of more than 300 general counsels and senior in-house lawyers at large companies in Asia-Pacific, Europe and North America, and the results revealed that the most common way to source legal providers is through pre-existing relationships. Referrals are also common, as the graph below shows, more so than conducting an RFP process.

Source: Globality

However, the respondents also expressed the desire to move beyond immediate professional networks in sourcing legal services.

One of the possible reasons for this, the report suggested, is that local regulatory issues are a common challenge for companies operating in new markets. General counsels may not have contacts at law firms with local expertise.

Another possible reason is that smaller law firms are preferred (71% of respondents said that the majority of their work goes to firms with fewer than 500 lawyers). Large law firms can be more costly, respondents noted, whereas smaller firms are seen as more innovative and able to provide better client services. Respondents were three times more likely to be dissatisfied with the services provided by large law firms than those from small law firms.

Source: Globality

Source: Globality

But smaller firms are also less well-known, which leads general counsels to rely more on their own networks.

One senior legal counsel told Globality that “for less familiar locations we definitely rely on word-of-mouth because that is the only way you have a chance of getting the best law firm. We know that this isn’t ideal but it’s the best method we have.”

Fittingly, respondents were most enthusiastic about technology that would enable them to connect directly with high-quality legal experts or better collaborate with outside law firms. While some emphasized that the process of procuring legal services is a “subjective and personality-driven” one, others welcomed the prospect of a more data-driven process.

“If an algorithm can reduce a list of 20 firms to three, then it’s got my vote,” a general counsel told Globality in an interview.