The Value Illusion: Why Law Firm Relationships Need a Strategic Reset

Introduction

Watch out: your law firm may be offering “value add” – but have no real ability to articulate what value actually means. That’s not just ironic, it’s a strategic blind spot. Legal departments are under increasing pressure to deliver measurable value to the business. That means every external relationship – especially with law firms – must be aligned to that goal.

This blog explores the critical need to reframe how legal departments engage with external law firms. We’ll flag up key considerations to help you better prepare to tackle this issue – because prevention is always better than cure.

Legal issues are important, but they’re easily overlooked as teams focus on the next board meeting, the latest regulatory change, or the issue of the day. And in a legal department, there’s always an issue of the day.

Optional Inclusion: What Do We Mean by “Value”?

In the context of external legal providers, “value” should mean more than just competent legal advice. It includes:

◼️Strategic alignment with the client’s business goals

◼️Efficiency in delivery and cost

◼️Innovation in approach and technology

◼️Transparency in billing and scope

◼️Proactivity in identifying risks and opportunities

◼️Honesty about where they do not represent value

If your law firm can’t articulate these elements – or measure them – then they’re not delivering value. They’re just billing hours.

Why This Topic Is Important

This can be an important issue for legal departments because:

◼️Value Definition: Legal departments must deliver business value – and that requires law firms to do the same.

◼️Cost Transparency: Legal teams need clarity on what they’re being charged for – and what they shouldn’t be.

◼️Strategic Partnership: Law firms must align with the legal department’s goals, not just deliver reactive advice.

◼️Innovation Expectation: Firms should be expected to adopt legal tech and efficient practices.

◼️Performance Metrics: Without KPIs, there’s no way to assess whether the firm is delivering value.

◼️Billing Discipline: Firms must be willing to say where they don’t represent value – even if it means less billing.

◼️Guideline Compliance: Clear engagement guidelines ensure expectations are met and surprises avoided.

◼️Efficiency Gains: Streamlined processes reduce turnaround times and improve internal satisfaction.

◼️Risk Reduction: Poorly managed relationships can lead to legal exposure and reputational damage.

◼️Cultural Fit: Firms that understand your internal culture are more likely to deliver relevant, pragmatic advice.

People Also Asked:

Q: Can law firms be held accountable for value delivery?

A: Yes – through clear KPIs, performance reviews, and structured engagement frameworks.

Consequences of Not Addressing These Issues

The consequences of not attending to these issues may include the following:

Legal Implications

◼️Compliance Gaps: Misaligned advice can lead to regulatory breaches.

◼️Risk Exposure: Failure to proactively manage legal risks can result in litigation or enforcement.

Commercial Implications

◼️Overcharging: Lack of billing transparency can lead to inflated costs.

◼️Missed Opportunities: Slow or misaligned advice can delay deals or strategic moves.

Operational Implications

◼️Workflow Disruption: Inefficient legal processes can slow down internal operations.

◼️Team Frustration: Legal teams may feel unsupported or misaligned with external counsel.

Biz Valuation Issues

◼️Due Diligence Failures: Poor documentation or advice can impact M&A outcomes.

◼️Cost Inefficiency: Excessive legal spend without ROI can affect budget credibility.

The above lists are indicative issues – the relevance of which will depend on your circumstances including the nature of business undertaken by your legal department.

What You Need to Be Doing

We have identified quite a number of potential issues that the legal department needs to consider and below are some examples of the types of steps you might want to consider taking to address these issues considered above.

1. Define Value Metrics

Establish what “value” means for your legal department – strategic alignment, cost efficiency, innovation, etc.

Create measurable KPIs that external firms must meet.

2. Set Engagement Guidelines

Develop a formal engagement framework that outlines expectations, scope, billing practices, and performance review cycles.

Include clauses that require firms to identify areas where they do not represent value.

3. Demand Billing Transparency

Clarify what you expect to be charged for – and what you don’t.

Implement billing audits and require itemised invoices.

4. Push for Innovation

Require firms to use legal tech tools (e.g., document automation, AI review) to improve delivery speed and reduce cost.

Include innovation KPIs in engagement letters.

5. Conduct Regular Reviews

Hold quarterly performance reviews with each firm to assess delivery against KPIs.

Use scorecards to track value delivery and identify improvement areas.

6. Segment Legal Work

Not all legal work requires a top-tier firm. Segment work by complexity and allocate accordingly.

Use alternative legal providers for routine or commoditised tasks.

7. Build Internal Capability

Invest in internal legal ops tools and training to reduce reliance on external firms.

Use platforms like GLS to streamline workflows and manage providers.

8. Educate Internal Stakeholders

Ensure business units understand how to engage with law firms – and what to expect.

Train them on value-based engagement principles.

The above suggestions are just a few of the steps you can consider taking. There are many more things that need to be done to ensure the associated risks are effectively and pragmatically dealt with.

People Also Asked:

Q: Should law firms disclose when they’re not the best fit for a task?

A: Yes – ethical firms should be transparent about where they don’t represent value.

How These Risks Can Play Out

Here are three short but juicy mini case studies:

◼️Case Study 1: The Billing Black Hole

A global FMCG company received a $750,000 bill for “strategic advisory” with no itemisation. The law firm couldn’t explain the charges. The legal department had no guidelines in place – and no leverage to dispute the invoice.

◼️Case Study 2: The Innovation Void

A financial services company needed rapid contract review across jurisdictions. Their law firm refused to use AI tools, citing “quality concerns”. The delay cost the company a major partnership and $1.2 million in lost revenue.

◼️Case Study 3: The Value Mirage

A tech company engaged a top-tier firm for routine NDAs. The firm billed $1,200 per NDA. When challenged, they claimed “value add” – but couldn’t define it. The legal department restructured the engagement and saved $300,000 annually.

Frequently Asked Questions

Q: Can law firms be required to use legal tech?

A: Yes – clients can include tech adoption as part of engagement terms.

Q: Should legal departments audit law firm invoices?

A: Absolutely – regular audits help ensure billing accuracy and value delivery.

Q: Is it ethical for law firms to decline work they’re not best suited for?

A: Yes – and it builds trust. Firms should be honest about where they don’t represent value.

Understanding the Legal Terminology

Engagement Framework: A structured document outlining expectations, scope, and performance metrics for external providers.

Value-Based Billing: A pricing model based on outcomes and value delivered, not hours worked.

Legal Ops: The function within legal departments focused on efficiency, technology, and provider management.

Alternative Legal Provider (ALP): Non-traditional legal service providers offering specialised or commoditised legal support.

Billing Audit: A review of law firm invoices to ensure accuracy, transparency, and compliance with agreed terms.

How GLS Can Help You

By building your legal team capability on the GLS platform, you will be capable of:

◼️Defining and measuring value across all legal engagements

◼️Implementing structured engagement frameworks with law firms

◼️Accessing legal tech tools that drive efficiency and reduce cost

◼️Conducting billing audits and performance reviews

◼️Building internal legal ops capability to reduce external reliance

Final Thoughts

Law firms can be powerful partners – but only if the relationship is structured to deliver value. Legal departments must lead this transformation by defining what value means, setting clear expectations, and holding firms accountable. It’s not about criticising law firms – it’s about enabling them to be better partners. And that starts with a strategic reset.

Ready To Transform Your Legal Team?

Please check out the GLS solutions and know-how resources listed on the right side of this page – they might assist your legal team with the issues explored in this Blog. 

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