15 November 2017

Small goes large on legal spend

Small legal departments are spending more on law firms and look set up up their budgets in 2018.

Chief legal officers at small legal departments are set to increase their spend next year whilst departments with one lawyer have already upped external legal spend. According to the Altman Weil 18th annual Chief Legal Officer Survey, 59 per cent reported they increased outside spend while only 12 per cent reported a decrease. When analysising total law department budget, 45 per cent increased total department spend in 2017, 36 per cent decreased their budgets and 19 per cent made no change. However, in law departments with over 50 lawyers, only 22 per cent increased their total spend in 2017, while 59 per cent made cuts.

Fewer resources

'The survey shows law departments with over 50 lawyers doing much more than smaller departments to improve internal efficiencies, manage outside resources, control costs and utilise professional administrators and staff,' according to Altman Weil principal and survey co-author James Wilber. 'Smaller departments simply have fewer resources to devote to these important initiatives and positions.'

Negotiating power

The research also found that law departments have good negotiating power. Up to half of the work could have been done by a variety of outside firms, CLOs said. They are, however, lax about managing outside counsel.  Although 79 per cent of all law departments provide law firms with guidelines for billing, expenses, matter staffing and matter management, only 60 per cent say they routinely enforce those guidelines.  In one-lawyer departments only 32 per cent enforce guidelines, and in two to 10 lawyer departments only half do so.

Price reductions

The top cost control technique is price reductions from outside counsel, reportedly received by 64 per cent of all law departments and by 78 per cent of the largest departments surveyed. The most frequently used efficiency tactic  is a greater use of technology tools, named by 58 per cent of all respondents, and by 81 per cent of departments with over 50 lawyers. Outsourcing to non-law-firm vendors scores highest in effectiveness for efficiency and cost control, although it is one of the least used tactics in each category. Large law departments are significantly more likely to include outsourcing in their toolkits.

More sophisticated

'It's ironic that while most law firms want to work for the biggest and best-known companies, the survey shows that law departments in larger companies are generally more sophisticated and demanding consumers of legal services,' says Rees Morrison, Altman Weil principal and survey co-author.