Money Talks, Part 2: The Client Perspective on Legal Budgets

The fourth quarter brings Halloween, Thanksgiving….and budget talks. In a recent survey, 72 percent of in-house counsel said they faced increased pressure to better manage legal spend; lawyers who want to keep their business must help with this task.

In Part 1, we spoke with Lizzy Duffy, a client feedback and research specialist, for tips on how lawyers can initiate constructive budget conversations. Now it’s time for the client’s perspective, courtesy of Todd Silberman, the president of General Counsel Mediations. Todd has nearly 20 years of in-house experience and has held leadership positions within the Association of Corporate Counsel’s Small Law Department Committee. His take: “Don’t put it off.”

What do you wish outside counsel knew about the business budgeting process?

Silberman: We report to someone – or several someones….and budgeting for matters can be as quick as an email or as long as waiting until all stakeholders are in the same room, focused, and actively discussing….so give as much advance notice as possible. And yes, we do continue to look at the budget compared to where the matter is currently pending.

What kind of friction exists between legal departments (which have to submit formal business budgets by 4Q, typically) and law firms (which push through rate increases in 1Q)?

Silberman: It depends on the level of partnership between the two. I always try to have a high level of trust and appreciation going both ways in partnerships with law firms. In fact, I have no problem advising a partner when their rates are low and need to be increased. Of course, that conversation is usually simpler than the opposite when advising a partner firm that their rates are not within the range of national/regional counsel in a particular area of expertise.

In a perfect world, how would law firms and legal departments work together on this important business process?

Silberman: In my world, we sit down, ideally in the same location but at least on the telephone, and discuss ALL aspects of the relationships, including budgeting. I always want this to be done at the beginning of a relationship and each matter so there is no miscommunication from the outset.

What should law firms know/recognize/do about the in-house counsel budgeting process?

Silberman: Give advance notice. Advise about any expected or actual major changes immediately – and periodically review the proposed and actual budgets with us to ensure we continue to be on the same page in terms of dollars spent as well as those to be spent going forward.

What’s your advice for how a proactive lawyer can initiate a healthy and productive budget discussion?

Silberman: Open and frank conversations with the client representative. Don’t put it off. We understand your business and hope you understand ours, as well as the goals, which may vary matter to matter. Continue to have the conversations with us as the situation/facts change so we and our stakeholders are not caught by surprise – and do not change your opinion mid-case or at the end of the case, without significant fact changes. Nothing makes us more frustrated.