Survey shows corporate law departments growing

By Thomas Franz
BridgeTower Media Newswires
 
DETROIT — A survey on corporate law departments shows that CEOs are expecting their legal teams to be run like a separate business unit as they have experienced growth for several years.

Altman Weil’s 19th annual Chief Legal Officer Survey shows that law departments are becoming more sophisticated and are taking on more work instead of outsourcing the work to other counsel.

Jennifer Neumann, president of the Michigan chapter of the Association of Corporate Counsel and assistant general counsel for American Axle & Manufacturing Inc., said the national trends highlighted in the survey are largely comparable to Michigan.

“I think there’s a growing recognition that in-house counsel can be like a very connected business partner, and the more you know the better you can provide appropriate legal advice,” Neumann said.

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The numbers

The survey revealed that a pattern of growth in legal departments since 2010 is set to continue. Forty-two percent of law departments reported they would increase their lawyer workforce over the next year, while 7.5 percent plan a decrease.

In terms of budgeting, 53 percent of departments increased total spending over the past year, compared to 29 percent that decreased their spending. That difference between increase and decrease is the largest the survey has reported since 2011.

For outside counsel spending, 42 percent increased their spending last year, while 32 percent decreased. Forty-one percent of Chief Legal Officers said they expect to increase their outside counsel spending next year, while 29 percent expected to spend less.

There has been an increase from 33 percent to 39 percent for the number of law departments that have an administrator to manage operations. For departments with more than 50 lawyers, 75 percent have an operations manager.

Those administrators were pointed to as the most effective tactic to improve department efficiency this year.

To control costs, 31 percent of departments have shifted law firm work to lower-priced firms in 2018.

Departments are also improving their in-house processes as 42 percent reported they are redesigning workflow, 39 percent are restructuring internal resources, 27 percent have knowledge management programs and 25 percent are adopting project management methods.

“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,” Altman Weil principal and survey co-author Jim Wilber said in a press release.

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Survey reaction

Neumann said that as more businesses look at their legal departments as a business partner, more work is getting done in-house.

“No matter what the industry is, if you are inside the company working on the front lines of the issues that come up, you are going to be better equipped,” Neumann said.
“In-house departments try to keep as much as they can in-house because they know the business the best, or they try to affiliate a small number of outside counsel firms so that those firms start to know that business better as well.”

Neumann said the regulatory environment today is leading to more work being available to attorneys.

“I think in an increasing regulatory environment with privacy laws expanding and other regulations coming into play, and as companies become more global, there’s more they need to think about and more legal work,” Neumann said.

In regard to improving efficiency, Neumann said legal departments are under constant pressure to keep costs down, and the best way to do that is by reducing their outside counsel spending.

“I think there’s a recognition that if you have the bandwidth to do the work internally, it’s a benefit to the company,” Neumann said.

Additionally, Neumann said keeping processes simple and repetitive can also benefit legal departments.

“If you come up with the most efficient way to handle an issue and then you replicate that every time rather than trying to reinvent the wheel, you’re going to be more efficient at it,” Neumann said. “Maybe you can make better use of technology, your administrative assistant or paralegal to help streamline things.”