What Insurers Can learn From General Electric’s Jack Welch About Lowering Outside Legal Costs

Back when he was running GE, Jack Welch famously argued that leaders should fire the bottom 10 percent of their workforce each year. He believed that doing so was a necessary part of an orderly continuous improvement process.

So, as a part of your own continuous improvement process, you should fire the 10 percent bottom of your workforce. Right?  Okay, maybe your HR Department will not let you do that. Besides, that probably would not do much to lower your outside legal costs. But what you can do (today, even) to lower your outside legal costs is to fire the bottom 10 percent of your outside counsel.

Other than the quality of my work, I usually do not make guarantees. But one thing I can unquestionably guarantee is that if you fire the bottom 10 percent of your outside counsel based upon their ability to comply with your billing guidelines, you absolutely will save on outside legal costs.

Too often outside panel counsel are kept because it is felt that they get “good results” or provide “good service.” But, I have found that when you drill down to really find out what someone means by the terms “good results” or “good service,” you find a false business model.

Moreover, as I asked in my post on Attorney Ethical No-No’s in Billing for Services, “if you cannot trust some attorneys to correctly bill you for their services, can you trust them on other issues?” That is, can lawyer deception in one area (billing) lead to deceptions in other areas?

The answer to this question may be “yes” according to legal scholars who have carefully examined the issues. (See my post on Lying to Clients and Why Being Inefficient Has Its Rewards.)  They have found that deception by attorneys in their billing practices do invariably lead to deceptions in other areas. For example, if your lawyer tells you that she has tried to reach opposing counsel to discuss settlement, is she telling you the truth or is she deceiving you?

In my opinion, it should be beyond question that if attorneys are engaging in deceptive billing practices, they are most likely deceiving you in other areas as well. So, what’s the solution? The solution is simple. Simply get rid of the attorneys who most often violate your billing guidelines and not only will you save on legal costs, but you will also get rid of those attorneys who are most likely deceiving you in non-billing areas as well.

And don’t worry about finding suitable replacements. As I have said before, the legal profession is not just overcrowded, it is vastly overcrowded. And nowhere is is more overcrowded than in the insurance defense field. This is why insurance defense hourly rates are so low when compared to virtually all other practice areas.

Precisely because the insurance defense field is so overcrowded is why if you do fire the bottom 10% of your outside attorneys, you will find that there are literally hundreds of very good insurance defense attorneys in any part of the country who would be willing and able to take on their work – and comply with your billing guidelines.

So why put up any longer with attorneys who continually overbill you and likely deceive you in other ways as well. Do as some insurers (perhaps your competitors?) do that I work with. Make it a habit of firing the bottom performing law firms based upon the firms’ ability to comply with company billing guidelines.  In addition to guaranteeing that you will lower your outside legal costs, I can also guarantee you that Jack Welch would approve.


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