Law departments cautious on hiring, spending

Seventy-six percent of chief legal officers expect there will be a recession in the U.S. within the next two years, a belief that may be fueling caution on law department hiring and spending levels, according to Altman Weil’s 2019 Chief Legal Officer Survey.

“Many law departments pulled back on in-house and law firm expenditures in 2019, and fewer plan increases to lawyer staff in 2020,” says Altman Weil principal and survey author, James Wilber. “The changes are moderate, but we see a contraction across all key indicators.”

Highlights from the 2019 survey:

• Upcoming recession: 76 percent of Chief Legal Officers expect there will be a recession in the U.S. within the next 24 months. CLOs in manufacturing and consumer products companies believe their industries are the most vulnerable to recession. Total law department budget: 40 percent of law departments increased their total budget in 2019 and 38 percent decreased overall spending. This differs significantly from 2018 when 53 percent of departments increased total spend and 29 percent made budget cuts.

• Outside counsel spend: Only 27 percent of departments increased their spending on law firms in 2019, down sharply from 42 percent of departments that did so last year. The number of departments making decreases was 34 percent in 2019 and 32 percent in 2018.

• In-house spend: In-house expenditures rose in 47 percent of departments from 2018 to 2019 and decreased in 23 percent of departments. This represents a pull back from the prior year when 54 percent of departments reported in-house budget growth and 21 percent made cuts.

• In-house hiring: 36 percent of law departments plan to add in-house lawyers in the next 12 months, down from 42 peprcent in 2018.

• Legal Operations Managers: The number of law departments with operations managers jumped from 39 percent in 2018 to 46 percent this year. Because adding operations professionals is the most effective means of improving law department efficiency according to CLOs, these additions are in keeping with emerging economic caution in law departments.

“Since the last recession, law departments have added operational management specialists, invested in new technology, restructured in-house resources, and have become more sophisticated consumers of legal services,” Wilber said. “We believe chief legal officers and their teams will be well equipped for a downturn if or when it comes.”

The survey has been conducted and published annually by Altman Weil since 2000, most recently in September and October 2019.

Two hundred thirty-eight responses were received for the 2019 survey, 24 percent of the 977 corporate law departments invited to participate.

Survey topics include: law department staffing, spending, efficiency, cost control, outside counsel management and the chief legal officer’s role in the organization.