Thinking of having an outsourced legal team. I get it; you’re stuck in the classic business conundrum: Your company is booming (which is great) yet suddenly legal issues are skyrocketing (less great).
And now you’re faced with a tricky decision: should you bring round-the-clock legal talent into the fold with an in-house team, or keep things flexible and hire outsourced legal counsel?
To be sure, there are benefits and drawbacks to both choices. Among other things, factors such as cost, availability, specialization, and scalability are all at play.
In this post, we’ll explore some of the most important factors for each option in hopes that you can make the best decision for your business. Congratulations on your success, by the way. This is a good problem to have.
Cost considerations of an outsourced legal team
When it comes to cost, the choice between in-house and outsourced legal teams is sort of like choosing between a fancy steak dinner and an all-you-can-eat buffet. Both will fill you up, but the price and experience can vary significantly.
In-house costs
Hiring an in-house legal team means you’re taking on real, ongoing, hard costs. You’re looking at salaries, employment taxes, benefits, office space, and all the other typical overhead expenses. The initial outlay can be significant, but once you have your team, your costs become relatively predictable.
To give you an example of the price-tag for an in-house lawyer, the median salary for an in-house attorney in Los Angeles is roughly $146,000. That breaks down to around $70 per hour for a full time worker.
When’s the last time you paid under $100 per hour for a skilled attorney at a law firm? If you have enough legal work to keep one or more attorneys busy at this rate, it seems like a no-brainer, notwithstanding the additional overhead costs.
Outsourced costs
Outsourcing your legal needs, on the other hand, is more like paying per dish at a gourmet restaurant. Just like wine, appetizers, and desserts can add up quickly during a night out, hourly rates, retainer fees, and occasional surprise charges can add up quickly when working with a law firm.
Sticking with our Los Angeles example, the median hourly rate for a business/corporate attorney in the City of Angels is a staggering $530 per hour. If you kept one of those attorneys billing you at a full-time rate, you’d be looking at over a million bucks per year in legal fees (and that’s not including the costs that will be tacked onto your bill – things like filing fees, paralegal fees, etc.).
Still, you can potentially save money through scalability – only paying for what you need when you need it. Plus, no need to worry about vision and dental insurance for that top-notch attorney you’re consulting with.
Expertise and specialization
Now, let’s talk about the brains behind the operation. Whether you need a generalist who knows your business inside out or a specialist with deep knowledge in a specific area, both in-house and outsourced teams have their strengths.
In-house expertise
With an in-house team, you get individuals who understand your company’s quirks and complexities. They’re the folks who know why Bob from accounting always insists on using Comic Sans in emails and can navigate your company’s labyrinthine policies with their eyes closed.
They also will likely have a strong knowledge base around your specific industry (which can be a risk to their careers, by the way). An attorney who lives and breathes maritime law, for example, can be an invaluable asset to a shipping company simply because they won’t need to “get up to speed” every time a container is stuck in Customs.
This continuity can be invaluable for a business that has frequent, industry-specific legal issues that can bog down operations.
Outsourced expertise
On the flip side, an outsourced legal team offers access to a wider range of specialists who are up-to-date on the latest legal trends. They swoop in like superheroes and offer instant experience from different industries.
Need an expert in environmental law for a one-off project today? Without a doubt, there’s a firm for that. Facing a class-action wage and hour lawsuit from employees tomorrow? There are a million firms for that.
This is why so many companies used outsourced firms for litigation. With any luck (or skill?), the typical business isn’t embroiled in lawsuits full-time.
Flexibility and scalability
Flexibility in your legal team can mean the difference between smoothly handling a sudden spike in workload or scrambling like mad when a major issue pops up.
In-house flexibility
With an in-house team, you’ve got a small but mighty army at your disposal. That said, if your legal needs suddenly balloon, scaling up quickly can be a challenge, especially for small law firms.
You’re limited by the number of hands on deck, and hiring more staff isn’t a quick fix. In these scenarios, you’re likely to have to hire an outsourced firm to handle the overflow. So, now you have the costs of an in-house team and a law firm.
We’ll talk about why that may not be a terrible thing in the next section.
Outsourced flexibility
Outsourcing gives you the ability to scale up or down based on your immediate needs. Served with a major lawsuit you didn’t know was coming? No problem, just call in the reinforcements. Only need a simple contract review? Great. Your go-to law firm can probably get through it for under $2,500.
This underscores the need for a thorough assessment of your legal needs before a major problem arises. Taking on an in-house lawyer is a major commitment. Sometimes putting out fires is all you really need.
Legal expertise on your management team
In my experience, every business is run by a unique group of leaders. Some are highly sophisticated and have already navigated more legal disputes than many lawyers. Others may have relatively little legal experience and are confounded by the company’s growing legal issues.
Here’s how this plays out when choosing between in-house and outsourced lawyers.
In-house oversight
When companies are run by leaders with little to no experience with law, an in-house lawyer can be a great choice. Somebody, after all, has to be watching your legal hen-house. Even if your company has an in-house lawyer but still has to hire an outside firm to tackle a litigation matter (I told you we’d get back to this), your in-house counsel can more competently oversee that work.
Like it or not, law firms have an incentive to do as much work as they possibly can. They’re in business to make money too, after all. Your in-house counsel can actually save you money by having the knowledge, skill, and expertise to put the clamps on unnecessary work suggested by law firms.
For example, if your outsourced firm wants to depose 432 of your opponent’s employees, your in-house attorney can help determine which of those depositions is actually necessary, and save you the expense of costly and trivial depositions.
Outsourced precision
If, on the other hand, your leadership team is well-versed in legal matters, you may not need an in-house attorney to act as a virtual translator between the real world and the legal world.
Sophisticated business people often have enough legal acumen to decide for themselves what work does (and does not) need to be tackled by an outside law firm.
Long-term vs. short-term needs
Depending on whether your legal needs are a long-term strategy or a short-term fix, the choice between in-house and outsourced teams can make a significant difference.
In-house for long-term
If your company’s legal needs are consistent and integral to your long-term operations, an in-house team offers stability and the chance to build strong, lasting relationships. These attorneys become part of your corporate family, understanding your business’s long-term goals and working alongside you to achieve them.
Let’s say your company has a long-term strategy to acquire several additional businesses. In that case, an in-house M&A team probably makes a lot of sense. After all, at $70 per hour, you can hire several attorneys for the price of one well-experienced law firm attorney.
Outsourced legal team for short-term
For project-based work or temporary spikes in legal needs, outsourcing can be a more efficient and cost-effective solution.
Perhaps your needs are sporadic. An OSHA violation here; a vendor conflict there. Outsourced legal teams can provide the specialized expertise you need without the long-term commitment. It’s akin to a short-term fling – intense, focused, and just what you need for the moment.
Conclusion
In the grand scheme of things, whether you choose to hire an in-house legal team or go with an outsourced one depends on your company’s unique needs, budget, and goals.
If you value direct oversight, deep integration with your company culture, and a team that’s always on hand, an in-house team might be your best bet.
If you need flexibility, specialized expertise, and scalability without the overhead, outsourcing could be the way to go.
Of course, many growing companies are ultimately going to need both. No shame in that. Just make sure that whatever blend you come up with is the most efficient and effective team for your business.
