February 05, 2018

Corporate Legal Departments Seeing Greater Value From Their Outside Counsel, Says 2018 State of Corporate Law Departments Report.

More work moving in-house even as legal department satisfaction with outside counsel value increases  

NEW YORK, Feb. 5, 2018 Corporate legal departments are seeing greater value for the legal services they receive from their outside counsel, according to the 2018 State of Corporate Law Departments Report from Thomson Reuters and Acritas.

The report analyzed data and research from Thomson Reuters Legal Tracker, Acritas and the Corporate Legal Operations Consortium (CLOC).

The average satisfaction rating of outside counsel based on value has increased 9 percent over the last five years showing improvements across all areas of service delivery, according to the report. This is of utmost importance to firms, as legal departments said allocating work to firms that are proactive in showing their value is one of their top priorities. 

At the same time, controlling outside counsel costs is the number-one priority for corporate legal departments, and as a result they are moving more work in-house and increasingly turning to technology and a focus on legal operations to drive efficiency.

The report showed legal departments increased the allocation of their legal budget to in-house legal work to 43 percent, on average, in 2017, up from 37 percent in 2013. Conversely, they spent 57 percent on outside counsel, down from 63 percent in 2013.

In addition, slightly more legal departments are reducing rather than increasing the number of firms they work with. Fifty-three percent of legal departments have reduced their roster of outside firms over the last four years, working with a median of 16 firms. At the same time, 43 percent have grown their outside counsel ranks, with a median of 17 firms. 

These five goals were listed most frequently by legal departments as a high priority:

Controlling outside counsel costs

76%

Using technology to simplify workflow and manual processes

41%

Focusing on internal data security

41%

Focusing on legal operations

30%

Allocating work to law firms that are proactive in showing their value

29%

For controlling outside counsel costs, use of alternative fee arrangements (AFAs), strict enforcement of billing guidelines and the reduction of invoice expenses were most frequently named as the “most effective” steps.

Using technology to simplify workflow and manual processes was rated the second-highest priority. But only two in five departments perceive themselves to have innovated the way they handle legal work in the last year. The main areas of innovation were in developing systems — contract management, project management, e-billing and document management.

“Corporate legal departments are adjusting to deal with dynamic businesses and shifting legal landscapes,” said Chris Maguire, managing director of the U.S. Corporate segment, Thomson Reuters. “Rapidly growing global regulatory requirements, new security threats and challenging business goals are causing legal departments to be more operations focused in their approach. Increasingly, they are looking to leverage technology to improve efficiency, reduce costs, and better manage risk and compliance.”

“Modern legal departments are becoming much more proactive in their roles within the organization,” said Lisa Hart Shepherd, chief executive officer of Acritas. “They seek to add value to the organization, rather than be viewed as a cost center. As such, many are promoting a culture of ongoing improvement and innovation, and leveraging data-driven decision-making to enhance their role in supporting their organizations. Measurement is a critical resource for the modern legal department and our research has identified 21 key metrics that departments should consider tracking.”

Legal operations is increasingly a focus for law departments, with 51 percent having dedicated legal operations roles. Seventy percent of legal departments say legal operations is either a high or a medium priority. A focus on internal data security also is a top priority, with 66 percent of organizations rating it as either a high or a medium priority.

"Corporate legal departments have traditionally operated with a reactive, “Ready, Fire, Aim" approach," explained Connie Brenton, chief executive officer, CLOC. "Legal operations professionals are vital to helping in-house teams improve the way in which they deliver legal services, which is why we see a growing focus across the industry on legal operations."

The 2018 State of Corporate Law Departments Report can be downloaded at: www.legalexecutiveinstitute.com/2018-corporate-law-departments-report.

Acritas

Acritas provides market research insights to the global legal industry. Over the last decade it has conducted more than 20,000 telephone interviews with senior in-house counsel to understand buying trends, measure law firm perceptions and performance and capture stand-out lawyer nominations around the globe. Acritas delivers benchmarking and dashboard services to its law firm, ALSP and legal department clients through its Analytics platform. For more information, visit www.acritas.com.

Thomson Reuters

Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, visit www.thomsonreuters.com


CONTACT

Jeff McCoy
Thomson Reuters
+1 651.687.4091
jeffrey.mccoy@thomsonreuters.com