Law Department Managers Hold the Line on Spending Despite Tough Economy, New Survey Reports
Newtown Square, PA, September 8, 2004 — The newly released Altman Weil Law Department Management Benchmarks Survey reports total corporate law department spending per lawyer did not increase in 2003 despite law firm rate increases and other economic pressures. Lawyer staffing levels were also unchanged.
"The fact that General Counsel were able to hold the line in this market is noteworthy,” comments Altman Weil principal Daniel J. DiLucchio. “We know law firms raised their rates during the same time period, and yet we don’t see that reflected in law department expenditures."
This suggests that law departments are finding ways to manage legal services more efficiently and effectively, including: selecting the right outside counsel for the right kind of work; consolidating work with fewer firms; implementing better substantive case management procedures; and negotiating alternative fee arrangements. We’re also seeing a strengthening trend toward the use of e-billing software which enables law departments to better monitor and control outside counsel costs.”
Law Department Expenditures
Total law department expenses in all companies surveyed averaged $868,742 per lawyer in 2003, virtually unchanged from the previous year.
Internal expenses represented 48% of total expenses on average. Of those internal costs, total compensation and benefits expenses per lawyer represented 82.3% of expenditures and overhead and occupancy represented 16.8%.
Outside expenditures accounted for 52% of total law department costs. The Survey reports the highest percentage of non-litigation outside counsel fees went to general corporate practice (11%) and intellectual property (8.5%). For litigation practice areas, the greatest spending was on commercial/contracts (11.9%) and labor/employment (8.7%).
Law Department Staffing
Lawyer staffing in corporate law departments was stable in 2003, with the key measure – lawyers per billion of revenue – also remaining virtually unchanged at 3.5 lawyers/billion compared with 3.6 lawyers/billion in 2002.
Staff positions however were reduced, with paralegals falling to an average .9 paralegals/billion in revenue down from 1.5 per billion in 2002; and administrative staff reported as 1.8 administrators/billion compared to 2.4 per billion in 2002.
Operational Issues
The Survey reports an average 22.4% of law departments are tracking lawyer and paralegal time. Of those who track time, 48.5% do so in detail by matter. Additionally 23.3% of law departments surveyed charge internal clients for attorney time and 55.7% charge back a portion of outside counsel costs to operating units.
In a trend first noted in last year’s Survey, more law departments are instituting electronic billing systems. 11.8% of all respondents currently use e-billing software – up from 7.7% in 2002; and an additional 3.8% are currently implementing such a system. The prevalence of e-billing software directly correlates with size of law department, with 30.6% of departments with 26 or more lawyers currently using e-billing.
Outside Counsel Relationships
When selecting outside counsel, 31% of law departments rated firm specialization as the most important criterion, followed by responsiveness (17%) and costs (16%). When asked about relationship blunders law firms make, law departments ranked ‘lack of responsiveness’ first, followed by ‘over-lawyering’ and ‘over-billing.’ However, only 16.2% of law departments report that they formally evaluate outside counsel.
While only 22.8% of law departments participated in a customer satisfaction survey from their outside law firm in the last year, 53.5% of those who have see ‘some’ or ‘great’ value in such a survey for maintaining a good relationship.
The Survey
The Law Department Management Benchmarks Survey, published in partnership with the Association of Corporate Counsel (ACC), tracks U.S. law department expenditures, outside counsel relationships, operations and staffing and is a companion study to the Altman Weil Law Department Compensation Benchmarking Survey.
The 2004 Survey includes data from 154 companies, 31% with revenues of $5 billion or more. Survey data is reported by sales revenue, number of corporate employees, industry type and law department size. Data was collected in the spring of 2004 and reports on fiscal year 2003.
The Survey can be purchased for $495 from Altman Weil Publications. Orders and inquiries can be made by calling 888-782-7297 toll-free or by visiting the firm’s online store at https://store.altmanweil.com.
Altman Weil Publications conducts and publishes numerous surveys of the legal profession including the Law Department Compensation Benchmarking Survey, the LAMA Paralegal Compensation Survey and the Survey of Law Firm Economics. For additional information visit our website at www.altmanweil.com.
