The 16th annual Altman Weil Chief Legal Officer Survey finds law department leaders taking an increasingly strategic approach to directing legal service delivery internally and in deploying outside counsel to support their in-house team, with the aim of reining in costs.
The 2015 survey found 40 percent of law departments plan to decrease their spend on outside counsel in the next twelve months.
That’s twice the number that plan to increase outside counsel expenditures in the same time period.
Among those departments decreasing their law firm spend, 76 percent said some of the work would go to their own in-house legal staff instead.
Additionally, 13 percent of chief legal officers (CLOs) will use vendors and nine percentwill use contract lawyers to cover work done previously by law firms.
Just under half (49 percent) of all law departments decreasing their outside spend indicated that some of the decrease will come from work they no longer need to do — up significantly from 29 percent who chose that response in the 2014 survey.
“Although some of the work that law departments won’t do this year is likely the result of the natural completion of large litigation matters or transactions,” said Altman Weil principal Jim Wilber.
“Some of the decreases will come from work that chief legal officers have decided is simply no longer necessary. This more aggressive rebalancing of cost and risk is an important evolution in strategic thinking for many CLOs.”
Law departments also are striving to manage the inflow of work from their internal clients to maximize department performance. The most frequently reported effort — and also the most effective — is designating law department ‘gatekeepers’ for specific business units or types of work.
“This also shows CLOs’ heightened awareness of the need to keep the law department focused on the highest value work, and to maximize the effectiveness of often limited department resources,” said Altman Weil principal Rees Morrison.
Chief legal officers responding to the survey cite internal and external cost pressures as their greatest concern in managing their law departments in 2015.
Their two most frequently used cost control measures address outside counsel fees: 68 percent of law departments report receiving fee discounts from law firms and 60 percent used alternative or fixed fee arrangements to cut costs.
Receiving price reductions was one of the most highly valued law department cost control efforts.
When asked which three service improvements and innovations they would most like to see from their outside counsel, 50 percent of chief legal officers chose greater cost reduction — the number one choice.
Other cost-focused selections were improved budget forecasting, identified as desirable by 46 percent of CLOs, and non-hourly pricing, chosen by 36 percent of law department leaders.
Chief legal officers also want law firms to take a more innovative approach to how their work is done.
Forty percent want more efficient project management from outside counsel while 31 percent would like law firms to stop over-lawyering matters and modify the work they do to more appropriately match legal risk levels.
Twenty-six percent of CLOs said they wish outside counsel would make a greater effort to understand their business.
In rating a list of things law firms can do to better understand them, law department leaders identified three top choices with a single theme: conversations about pricing/budgets, conversations about matter management efficiency and conversations about project staffing.
The message seems clear: chief legal officers want to work more collaboratively with law firms to rethink how their work is priced, managed and staffed.
They don’t want to be only buyers of law firm services — they want to have a strategic voice in how that work is done.
The Chief Legal Officer Survey has been conducted and published annually by Altman Weil since 2000, most recently in September and October 2015.
Two hundred fifty eight responses were received for the 2015 survey, 19 percent of the 1,363 law departments invited to participate.
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