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From time to time we see published a survey or study about corporate counsel’s dissatisfaction with outside counsel. Observed over time, there's some consistency to these published reports, with the results seemingly pointing to relationships in peril:

  • Only a third like their outside counsel enough to recommend the firm to someone else, and
  • Only about a quarter think their primary outside counsel excels in client service
  • Two-thirds claim they plan to change their primary outside firm

Reading this, it's understandable for law firms to smell blood in the water and get excited about the apparent opportunity to displace long-established incumbent firms from coveted clients (although it seems prudent to first make sure one’s own client-service house was in order). Some of these dissatisfied companies will even organize formal competitions in support of their purported willingness to switch counsel.

However, before rushing headlong into an expensive and draining assault on competitors’ franchise clients, remember an observation from market researcher BTI, one of the firms that conducts these studies: “Just like any long marriage, the relationship between a corporation and its outside counsel often experiences peaks and valleys. Corporations with longstanding relationships with law firms frequently stick with their legal partners despite dissatisfaction in a particular matter.”

Changing counsel is easier said than done. During the relationship’s tenure, the incumbent has acquired a lot of knowledge about the client’s business, industry, people, culture, customs, processes, protocols, etc. These are called "switching costs." They're real barriers. (Longtime sales people have a saying, "Buyers are liars." It doesn't refer to the prospect's integrity, but to the chasm that's often between intent and action.)

While the GC and others in the legal department may be frustrated by certain aspects of outside counsel’s performance, these knowledge assets can be of significant value to the company’s line-of-business executives, who are properly reluctant to forfeit them. That's a big switching cost. For many reasons, more companies say they will switch outside counsel than actually do it. 

If you’re invited to a beauty contest based on a GC’s declared intent to change counsel, don't get too excited. Recognize that, while it's possible this company may actually switch, the odds are against it, so be skeptical. Many of these exercises are a shot over the incumbent's bow, and the primary outcome is for the incumbent to get the message and modify the part of the relationship that's causing the problem.

When you meet with such a prospect, early in the discussion acknowledge reality and ask the obvious question: “You’ve been with XYZ Firm for 12 years. Replacing them would seem to involve significant disruption to your legal and business processes. So you must have really important reasons for doing so. Under what circumstances would you actually make a change?”

Focused as they are on their current frustration, the client may not have thought through actually pulling the trigger on a change, or visualized the potential impacts. If they can't describe specific circumstances that would justify all the disruption that attends a counsel change, they probably aren't really ready to do it. If they have an answer but decline to share it with you, that’s another red flag. If they don't trust you enough to discuss legitimate considerations like this one, what's the likelihood they'll trust you with their work?

To protect their interests, the company is conducting due diligence on you and the other candidate firms for this purported change. To protect yours, you should do likewise. Remember that people only make the decisions they must make. That's defined as the cost of not making a decision being unacceptable. Under what circumstances must they do this? Focus your investigation on that question before you waste a lot of time and money trying to convince them to choose your firm. Here's a hollow victory: "If we had actually switched, we'd have picked you." Before you compete, make sure there's an actual prize to win.

Mike O'Horo

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