Secondments, labour arbitrage and a new race to the bottom

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  • In-house teams have been the biggest ‘growth’ area in legal post 2008 and some in-house teams are now bigger than the law firms they previously outsourced worked to
  • Most GCs report to the CFO
  • GCs are increasingly under pressure from the CFO to reduce their ‘cost’ (including bonuses now linked to reducing cost – note: not external legal spend)
  • GCs have effectively two cost centres: ‘labour’ or ‘ external legal spend’
  • Procurement tells GCs they can reduce both ‘labour’ and ‘spend’ at the same time – secondments (heavily discounted at daily or weekly rates in RFPs – don’t need to advise out and don’t need to hire in-house!)
  • Law firms enter the discounted labour arbitrage market

And a new race to the bottom starts*…

As always, interested in your thoughts/views/feedback.

rws_01

*welcome to the party LoD

6 comments

  1. The need to do more with less is not new–the complexity of the world and the global reach of business are a lethal duo when it comes to the need for “more.” The labor arbitrage play is one strategy, but it isn’t sustainable. The more forward-thinking GCs are focused on #DoLessLaw–how to reduce demand on the law department resources. This can be accomplished in ways that, importantly, help the business operate better. It is hardly a race to the bottom–it is a matter of long-term survival.

    Liked by 1 person

  2. Above about 3 days a week, it will be cheaper to hire than use a body shop. Where they do help is a short term placement or what the CFO is probably really after – reducing permanent headcount and improving metrics based on number of employees.

    But Patrick makes the real point – if we keep thinking about inevitably needing many bodies to deliver the same old legal task, rather than looking again at what we are really trying to achieve, we will not make real progress.

    Liked by 1 person

    1. Leaving aside Patrick’s comment Alex, which I do agree with, if the GC is getting seconds for free as part of the value-add of being appointed to a panel, then there is no hard cost (although I accept there could be significant soft costs) and this helps the GC go some way towards meeting their cost reduction target(s).

      Like

  3. Law firms devalued labour a long time ago with “free” or v.low price secondments that bore no relation to the cost of the individual (base or opportunity). IMO, would have been better to use realistic hourly rates that equate to value and therefore not need to give stuff away for free, than set unrealistic rates and then give ‘freebies’ to make the proposition more palatable. Did we think through the implications of the expectations we were creating with free secondments?

    Combination of doing less law and operating more cost effectively = likely way forward.

    Contingent labour is about labour arbitrage, for sure, but not always and only – is also about sourcing talent globally and using different models to operate in a more agile and creative way, (well it is for Free Range Lawyers, anyway……)

    Liked by 1 person

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