March 10, 2021

Law Departments on the Precipice of Accelerated Change Agenda: 2021 State of Corporate Law Departments Report from Thomson Reuters

Report finds unique challenges of 2020 have corporate law departments poised for rapid and continued modernization

DALLAS, TX - March 11, 2021 Thomson Reuters released its 2021 State of Corporate Law Departments Report today, finding that obstacles resulting from COVID-19 uniquely positioned corporate law departments to optimize their value and effectiveness to their organization.

The pandemic stress-tested the current operations of most law departments like never before, placing pressure on areas such as increased and evolved workloads, shifting demand for external support, and increased efforts around security and safeguarding. The report found these pain points have the potential to act as catalysts for departments to think differently. Those that embraced technology and remote working prior to the pandemic were more efficiently and quickly able to support their organizations with the crisis management work that resulted from the pandemic.

The report presented a contrast between modern departments that were able to quickly acclimate to the new environment and traditional law departments that lost time trying to adapt to changing conditions.

“While corporate law department leaders have previously guided teams and businesses through recessions, sales shortfalls and restructurings, the global pandemic put unparalleled pressure on these departments to adapt,” said Lisa Hart Shepherd, vice president of Research & Advisory Services, Thomson Reuters. “Through unprecedented disruption, crisis management and immediate shifts to new ways of working, critical gaps and shortcomings within departments were revealed and many corrected through the implementation of new processes and technologies. Law department leaders who quickly realized traditional methods of work could evolve and still meet department goals were able to pivot faster and more successfully during this year of unexpected challenges.”

Additional key findings from the 2021 State of Corporate Law Departments Report include:

  • As a result of the pandemic, 58% of corporate law departments experienced a surge in workload, more than eight times the number of departments that experienced a reduction, often converging with significant budget cuts.
  • 2020 saw a massive spike in law departments’ hiring of legal operations roles, with 81% of departments saying they were making such hiring decisions, compared to 57% in 2019.
  • The average proportion of a corporate law department’s overall budget allocated externally has remained fairly consistent at 55%. In the U.S., the average is slightly higher at 60%, while in Europe and the Asia Pacific region the figure is closer to 50%.
  • For U.S. organizations, there appears to be an optimal range when it comes to the ideal balance of external to internal spend. The report suggests, U.S. law departments would typically benefit from bringing at least another 10% of their overall budget internally.

“For law departments to be able to keep more of their work in house, they need to invest in additional resources,” said Hillary McNally, general manager of the Thomson Reuters Corporates Legal subsegment. With corporate law departments, there is no margin for error since they are tasked with safeguarding the company and its employees. But with budgets under more pressure, strategic investment in efficiency and cost saving technology will be critical to meet the expectations of the business. Without an investment in the correct technology and tools, law departments will only end up adding more to their already overflowing plates.”

The report also noted that corporate law departments have a unique opportunity to bolster their in-house team with talent from law firms across the country by continuing to offer a flexible working environment. Some 80% of law firm lawyers said they want to maintain the changes they’ve experienced during remote working and 20% said they would leave their current firm if it won’t accommodate greater flexibility, according to a recent Acritas by Thomson Reuters report on the future of legal work.

The impacts of 2020 will likely contain as many positives as negatives and give leaders an opportunity to accelerate their change agenda in 2021. Forward-thinking law departments are poised to continue rapid acceleration in this year and beyond, investing in technology, processes and smart resourcing required to optimize value.

In total, 223 law departments, including those of 81 companies in the Fortune 1000, responded to the survey in June 2020, and their information was combined with Legal Tracker benchmarking data, comprised of more than $90 billion in legal spending from more than 1,450 law departments.

Thomson Reuters

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 Lindsay Bomar
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