Despite this, in-house teams are overwhelmingly appointing law firms based on personal connections rather than a rational appraisal of which firms would be best for the job. Companies find smaller firms provide better client service, but often lack the means to source them. An overwhelming majority of general counsel (GC) are excited by technologies for sourcing and/or communicating with legal providers outside of their immediate networks.
Big companies increasingly want to work with smaller law firms, a new survey of more than 300 general counsel (GC) and senior in-house lawyers at international businesses generating more than $1 billion in annual revenue has found.
The survey, Global Trends in Hiring Outside Counsel, commissioned by Globality and conducted by The Lawyer Research Service, revealed levels of dissatisfaction to be three times higher with larger law firms (19%) than smaller rivals (6%).
Legal teams within large companies find smaller firms to be more innovative and provide better client service, but they are being frustrated because these firms are typically outside of their established networks. If clients had access to technology that could help them source the right legal providers outside their immediate networks, it would present them with an exciting opportunity to work with firms that are more innovative and possess the right expertise in the right jurisdictions.
However most in-house teams quizzed on the factors that are important to them when identifying and appointing law firms are still overwhelmingly selecting law firms based on personal connections rather than a rational appraisal of which firms would be best for the job. Over two-thirds (68%) of GCs rely on pre-existing relationships (selected by 44% of respondents) or referrals from their personal network (16%) to source new legal providers.
This is because of a lack of obvious alternatives. When presented with a series of technologies, 86% of survey respondents were most excited by technologies for sourcing and/or communicating with legal providers outside of their immediate network.
Companies not using such technologies are presented with a particular problem when operating abroad, with a quarter of in-house teams saying that the greatest obstacle to doing so is finding a reliable local partner.
The survey data is based on over 100 responses in each of North America, Europe and Asia-Pacific from international companies across a range of sectors including technology, media and telecommunications, energy and infrastructure, financial services, oil and gas, real estate and insurance.
It reveals that half of companies surveyed that have large in-house legal teams say they primarily work with smaller firms because they find them more innovative, while nearly two thirds (63%) of teams that hire small firms say they do so because they provide better client service. Meanwhile, companies are becoming increasingly turned off by large firms due to their high prices, with over half of survey respondents saying their primary frustration when working with larger law firms is cost.
Joel Hyatt, CEO & Cofounder of Globality said: “It’s clear clients are increasingly unhappy with larger legal providers. They’re expensive, aren’t as innovative, and don’t provide the same level of customer service smaller firms can offer. But despite this, international companies are remaining with the larger firms through their old networks because they don’t know how to reach smaller firms that have the right expertise in the right jurisdictions. We can see a clear appetite for new ways of sourcing law firms and artificial intelligence matching provides the answer.”
Ben Woolf, General Counsel EMEA at Tate & Lyle said: “We get better client service from smaller firms. We have 4,000 employees and £4bn in turnover. When we instruct larger firms we are probably one of their smaller customers and just another customer in the long list they already have. If you go to a smaller firm, even with a fairly small legal spend, we can be an important customer to them. You do get a bit of specialist treatment as a result of that and perhaps they concentrate on you a bit harder than a bigger firm would do.”