Trends in Legal Spend from a Law Department Survey

by | Nov 19, 2015

Trends in Legal Spend from a Law Department Survey

Overall corporate legal spend has increased modestly but that spend has largely gone toward inside counsel, according to the 2015 HBR Law Department Survey.

Total legal spend grew by 2% worldwide – which mirrors the findings in last year’s survey.  The survey announcement provided a summary in the form of median numbers:

“The median total legal spending was $27 million worldwide and $26 million in the U.S. Total legal spending was 0.33 percent of total revenues worldwide and 0.38 of total revenues in the U.S. The median inside legal spending was $12 million worldwide. Inside legal spending as a percent of worldwide revenues was 0.13 percent. The median outside counsel spending was $14 million worldwide. Outside counsel spending as a percent of revenues worldwide was 0.17 percent.”

Top Corporate Legal Cost Control Measures

Alternative fee arrangements, keeping more legal work in-house, and enforcement of billing guidelines are the top means to control legal spend, according to Sue Reisinger reporting for Corporate Counsel:

“Chung says the survey asked about what methods are working best to help general counsel control their outside legal spending. ‘At the top of the list is alternative fee arrangements,’ Chung notes, with 84 percent of respondents indicating they use the approach.

The second favored method, she says, was keeping more work in-house, while the third was tougher enforcement of guidelines on outside counsel billing and invoicing.

The survey results ‘support what we see happening in our work with in-house law departments,’ she says. ‘Their efforts to control costs and drive efficiency internally are translating into results.’”

Still Taking Work In-House, but More Slowly

The trend towards taking more legal work in-house may show signs of slowing.   The HBR study found inside counsel spend slowed to 3% from 5%, while outside counsel was flat this year compared to a 2% drop the previous year.

Evidence of slower growth in in-house hiring was also evident. “Though in-house staffing is increasing year over year, this year’s survey results showed they are doing so at a slightly slower pace versus last year’s results,” according to HBR Consulting.

“More work could be headed toward law firms,” according to Sara Randazzo writing for the WSJ Law Blog. “76% of in-house lawyers surveyed by HBR said they expect their legal needs to increase in the next year, particularly in the regulatory and mergers and acquisitions areas.”

There have been other indications of a shift in the in-house trend.  A separate study by BTI Consulting found corporate counsel “will move $851 million of in-house spending back to law firms this year. This is in direct contrast to the more than $8 billion in legal spending moved in-house since 2011.”

Yet BTI offers the caveat that the work being moved back to outside counsel appears to be reserved to big ticket litigation or bet-the-company cases, where outside counsel brings a level of expertise and unique value that corporate legal cannot match.

“Cost control is clearly a top priority for law departments and that’s not going to change. But at the same time, the need for outside counsel clearly remains, and law firms will still play an important role going forward,” wrote Andrew Strickler of Law360  in a report which cites Lauren Chung, senior director for HBR Consulting and survey editor.

This year’s survey included 308 participants and characterized the persona as a company with $9.8 billion in revenue, 18,500 employees, 32 lawyers, 58 total employees on the legal staff and with $29.7 million in annual legal spend.  The full report costs $4,500 for participants and $6,000 for non-participants.

—————————————————————– Legal Spend Trends Big Law Rates Rising-webinarAlso See Legal Spending Trends Based on $18 Billion on Legal Invoices
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