Law department leaders describe management challenges
Altman Weil’s 19th annual Chief Legal Officer Survey has been released. The 2018 survey reports on management, staffing and spending trends in law departments and how the department’s top lawyers are addressing an array of challenges.
Chief legal officers (CLOs) describe a growing expectation from their CEOs that the law department will be run like a business unit. In response, CLOs are developing a more robust in-house capability, restructuring department resources, becoming more sophisticated about which matters to outsource and which to manage internally, and pursuing greater efficiency and cost control. Many are employing operations professionals with specialized expertise to assist in managing increasingly complex departments.
“The imperative for change is being thrust upon chief legal officers by their organizations’ higher expectations of performance,” says Rees Morrison, Altman Weil principal and survey co-author. “In 2018, most departments are focusing on reallocating spend, rethinking the mix of internal and external resources, and implementing various process improvements. Many are achieving good results from those efforts.”
Highlights from the 2018 survey include:
—Law department headcount
42% of law departments said they would increase their lawyer workforce in the next 12 months, compared to only 7.5% that plan a decrease. This degree of growth – in which four or five times as many departments plan increases over decreases – is part of a long-term trend the survey has tracked since 2010.
—Total law department budget
53% of law departments increased total spending from 2017 to 2018, compared to 29% that decreased overall spend. A differential of this size – over 20 percentage points – between increases and decreases has not been seen since 2011.
—Outside counsel spend
From 2017 to 2018, 42% of law departments increased outside counsel spend, while 32% decreased the amount – the first time since 2011 that increases have exceeded decreases in this category. 41% of CLOs said they anticipate increasing outside spend in 2019, compared to 29% who expect to spend less on law firms next year.
—Legal Operations Managers
39% of all law departments have an administrator who manages law department operations, up from 33% in 2016. Three-quarters of departments with over 50 lawyers employ an operations manager.
—Top efficiency tactic
Employing a professional administrator is the most effective tactic to improve department efficiency in 2018. Getting operational work into the hands of trained specialists improves overall department performance and frees lawyers to concentrate on their practice and advisory roles.
—Top cost control tactic
31% of departments have shifted law firm work to lower-priced firms in 2018 – the most effective cost control effort that law departments have undertaken this year. CLOs noted that they are successfully using smaller law firms that offer quality work and service at considerable reductions in cost.
—Process improvement
Law departments are pursuing a variety of process improvements aimed at increasing efficiency. 42% of law departments are redesigning workflow; 39% are restructuring internal resources, 27% have knowledge management programs, and 25% are adopting project management methods. However, process improvements are consistently rated as less effective in improving efficiency than reassigning work internally.
“Process improvement aimed at transforming traditional law department structures and approaches is clearly more complicated than reallocating work or cutting costs, but it also may deliver the greatest long-term payoff,” according to Altman Weil principal and survey co-author Jim Wilber. “Most law departments are still at the beginning of that phase of the change process.”
The Chief Legal Officer Survey has been conducted and published annually by Altman Weil since 2000, most recently in September and October 2018. Two hundred seventy-nine responses were received for the 2018 survey, 22% of the 1,261 corporate law departments invited to participate. Demographic and budgetary data on responding law departments are included in the survey report. The full survey is available to download at www.altmanweil.com/CLO2018.
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