Survey says legal departments increasingly turn away from law firms for outside services
In an ever-changing market, with constant corporate pressure to cut costs yet take on more work, corporate law departments are shifting from hiring more lawyers to making better use of what they’ve got. And, here’s a big one, for certain kinds of work, they’re shifting from calling on outside counsel to hiring other kinds of legal and tech providers.
Those are the big takeaways from the 2019 HBR Consulting (HBR) Law Department Survey. The annual survey found that while most law departments (88 percent) expect their legal needs to increase in the next year, in-house hiring slowed for most respondents: just 37 percent reported an increase in in-house legal staff, compared to 52 percent in 2018. And they’re doing more with what they have by s by increasing the workload of existing legal resources (uh, do they mean humans?) (56 percent), reengineering and / or standardizing work processes (42 percent)—and, according to a press release, “redistributing work to more appropriate resources (37%).”
“Over the past few years, corporate law departments have focused heavily on investing in their in-house legal staff to build integral internal capabilities and reduce outside counsel spend. They are now shifting their focus from new hiring to maximizing their existing staff through process improvements and technology investment,” said Lauren Chung, managing director at HBR. “At the same time, they continue to refine their use of external resources to address the growing legal demand.”
Almost half of all participants expect their inside legal spending to increase in the next year. According to this year’s report, they’ll spend more on technology and contract/temp staff. And, no surprise here but an indication of how entrenched these people are, 62 percent of the 225 respondents have at least one person dedicated to legal operations.
But while they’re spending more, the rate of increase is slowing. This year, law departments reported a 2 percent increase, compared to the 5 percent increase in total legal spend reported in last year’s survey. Cost control continues to be top of mind for the majority of law departments, with 51 percent of survey respondents listing it as a top challenge. Someone’s got to contribute to those higher profits.
One of the ways they’re doing it is by changing whom they hire for work in-house resources cannot perform. Spend on other service providers (including alternative legal service providers) increased by 11 percent this year. And to streamline operations and reduce costs, law departments continue to place a strong emphasis on investments in technology. This year’s survey findings indicate that adoption of legal technology increased in almost all categories compared to the prior year.
Read the whole report to get the total picture.