Managing lawyers and their fees

Lawyers and the fees they charge are not popular subjects and in many cases the value that one gets for the fees charged are often suspect. It is often hard to determine who the winner is and who the loser is when one takes into account the burden of legal fees that the process has demanded.

Even in the most basic legal matters which are non-confrontational, legal expenses and unnecessary complications caused by attorneys themselves make the attorney the issue rather than the issue that caused the need for legal assistance in the first place.

Legal costs have only two components, the first is the result in terms of judgment or financial settlement and the second is the transactional costs of the legal process, a cost that must be borne by both parties. These costs come directly from engaging outside legal representation or indirectly by maintaining an in-house legal department.

To reduce legal expenses is not as simple as cutting costs to the bone. Of course costs can be pared by hiring a cheaper in-house legal team or outside attorneys, forcing law firms to give arbitrary discounts for their services, or directing the outside firm to settle the issue quickly regardless of the outcome and subsequent costs. When the investment made in either inside or outside legal efforts is trimmed to the bone this in itself is one reason why the net cost of the resulting action increase as the settlements and judgments also increase. In an effort to reduce legal expenses to the bare minimum the result is often a higher settlement demanded by the court.

As a direct result in legal fee inflation through the 1980s and cost-consciousness driven by the recession of the 1990s, legal management is rapidly evolving.

Existing legal fee management systems can be broken down into two classifications, one more sophisticated than the other. The first way to contain legal costs is haphazard as it only begins when a crisis erupts and the primary goal is to terminate the attorney for poor results or extraordinary fees.

The second method used to manage legal fees is the current method being employed by sophisticated clients. Clients can recognize that they have leverage and that they can reduce legal expenses by negotiation. Companies are now having legal teams compete for their business and enter into written agreements that are fair and equitable and all bills are scrutinized closely.

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