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The Yin and Yang of Corporate Counsel Convergence

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By Neetal Parekh on July 22, 2009 1:44 PM

Legal departments look to un-divide divisions of labor with outside firms.

Economic indicators may be looking up these days, but that doesn't make the idea of corporate counsel convergence any more appetizing to law firms.  Convergence is the consolidation of the number of outside firms an in-house legal department utilizes.  Instead of approaching various different firms specializing in different practice areas to meet a company's multi-faceted legal needs, the economic slowdown has led to the corporate legal department trend of retaining a few firms to handle it all. 

BTI Consulting Group, a provider of strategic research to law firms and General Counsel, recently released a survey that projected a downward shift from the 2 primary firms, 10 secondary firms, and 40 other firms that companies surveyed used in 2007 to the estimated 2 primary firms, 6 secondary, and 23 other firms that companies are expected to use in 2012.  The pharmaceutical conglomerate, Pfizer, took the convergence trend to the nth degree when it announced in 2008 that it would retain one firm to address all of its labor and employment needs.  In bold move, it negotiated an annual cap on fees and a no-billable-hours policy with national firm, Jackson Lewis.

Convergence is a game of un-dividing the division of labor---and in times of corporate layoffs and shrinking legal departments, this restructuring also has also enabled companies an efficient means of overseeing firms.  By playing 'zone defense' with a smaller subset of firms, short-handed legal departments are able to effectively delegate and manage work flow, score significant savings, and keep their own shirts in the process.

For firms, however, convergence is changing the way they do business.  Instead of being poised to serve companies piecemeal,  major firms are endeavoring to provide a one-stop shop for legal departments shopping around for effective cost-cutting solutions.  And with increased leverage power, companies are able to dictate terms such as fee caps while firms are eager for steady, long-term business.

Corporate convergence, it's all about achieving a fine balance in a brave new world.

 

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