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In-house legal chiefs wrestling with cost-control.

Byline: Bennett Loudon

A new survey of chief legal officers reveals how an array of challenges are being addressed by in-house legal departments at American companies.

The 19th annual chief legal officer survey by Altman Weil, the legal management consulting firm based in the Philadelphia suburb of Newtown Square, reports on management, staffing and spending trends in law departments.

There were 279 responses to the survey, which represents 22 percent of the 1,261 corporate law departments invited to participate.

There is a growing expectation from CEOs that law departments will be run like a business unit, the survey found.CLOs are developing broader in-house capabilities, restructuring resources, becoming more sophisticated about what matters get outsourced, and pursuing greater efficiency and cost controls, according to the survey findings.

Many companies are employing professionals with specialized expertise to assist in managing increasingly complex law departments.

"The imperative for change is being thrust upon chief legal officers by their organizations' higher expectations of performance," said Rees Morrison, Altman Weil principal and a co-author of the survey.

"In 2018, most departments are focusing on reallocating spend, rethinking the mix of internal and external resources, and implementing various process improvements," he said.

The survey found that 42 percent of law departments planned to increase their lawyer workforce in the next 12 months, while only 7.5 percent planned a decrease.This level of growth more than five times as many departments planning increases rather than a decrease indicates a continuation of a trend the survey has tracked since 2010.

The survey showed that 53 percent of law departments responding increased total spending from 2017 to 2018, while only 29 percent decreased spending. A gap of more than 20 percentage points in this area has not been seen since 2011.

From 2017 to 2018, 42 percent of law departments increased outside counsel spending, while 32 percent decreased the amount. This is the first time since 2011 that increases have exceeded decreases in this category.

Forty-one percent of CLOs said they expect increasing outside spending in 2019, compared to 29 percent who expect to spend less on outside law firms next year.

The survey shows that 39 percent of all law departments have an administrator who manages law department operations. In 2016, 33 percent had such legal operations managers. And the survey found that three quarters of law departments with more than 50 lawyers have an operations manager.

A popular cost-control tactic is to shift work to lower-cost outside law firms. The survey found that 31 percent of departments shifted work to lower-priced firms in 2018.

Law departments also are implementing an array of changes to increase efficiency.Forty-two percent are redesigning workflow. Thirty-nine percent reported restructuring internal resources. Twenty-seven percent have knowledge management programs, and 25 percent are adopting project management policies.

"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 Jim Wilber, Altman Weil principal and survey co-author. (585) 232-2035

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Publication:Daily Record (Rochester, NY)
Date:Nov 20, 2018
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