Last year The Corporate Executive Board (NYSE: CEB), conducted a wide ranging survey of over 300 of its member’s legal departments. They’ve been conducting such surveys for a decade now and put together a list of the 9 efficiency trends they project legal departs will be adopting in the coming years. They are listed below, with commentary.
1. Perform more legal work in-house
Corporations have long since wised up at overpaying for legal services. Much of the work that used to go to outside counsel, now stays in-house. With the legal job market in turmoil, they have also been able to pick up up many good lawyers for lower costs.
2. Use Non-Lawyer Professionals More Often
Not something silly like forms, but adopting and utilizing paralegals for appropriate work in order to allow in-house attorneys to focus on high-value work. Legal departments used to be focused on hiring lawyers, but are increasingly coming to resemble law firm structures with a 2 lawyer->1 paralegal organization hierarchy.
3. Invest in Legal Operations Capabilities
Budgeting, technology selection, vendor management, and career development, all fall on operations. As legal departments grow, so do their operational needs – which are often unique from the operational needs of the rest of the organization.
4. Invest Selectively in Legal Technologies
Matter management, e-billing technologies, and document management solutions are all growing in legal departments. Unfortunately much of it is not particularly good.
5. Unbundle Legal Services
Legal departments want to take administrative or information-intensive activities away from law firms. They feel as though these needs can be better served either in-house or through a non-law firm provider. Litigation, M&A due diligence, legal research, and patent filing are other areas that are being sent to third party vendors other than law firms.
6. Focus on Litigation Matter Budgeting and Oversight
Litigation is often seen as a cost black hole by legal departments, and at the moment, legal departments are more likely to conduct early case assessment than to set a budget. But with greater scrutiny of costs, expect more legal departments to focus on budgeting as well.
7. Use Smaller Law Firms More Often
I’m going to quote them directly on this one:
Law firm size is the primary driver of hourly rates; it has a greater role in setting the price of legal services than partner experience, practice area, or even location (the second largest). We see larger companies reducing their reliance on large law firms in favor of mid-sized law firms (more than 50 but less than 500 lawyers) that also provide the expertise and coverage that permits them to consolidate their legal spending, in addition to seeking out high quality counsel at smaller firms.
8. Reduce the Number of Law Firms
While legal departments should solicit competitive bids for legal work, they can also spread themselves too thin. CEB’s research showed that “legal departments that consolidate a higher percentage of their legal work with their top-ten firms have lower outside counsel costs than peers in similar departments.”
9. Be Judicious with Alternative Fee Arrangements
This should be a surprise to no one. Alternative fee arrangements are a continuing trend. Although CEB notes that manner in which legal departments administer and monitor fee arrangements is more important than just having them.