More Legal Work Will Go In-House in 2008, According to New CLO Survey
Newtown Square, PA, June 24, 2008 – The 2008 Chief Legal Officer Survey, conducted annually by Altman Weil, Inc., reports an upcoming shift in the inside-outside mix, with Chief Legal Officers (CLOs) planning to increase law department staffing and decrease outside counsel usage in the next 12 months.
The Inside / Outside Mix
Forty-nine percent of Chief Legal Officers participating in the survey plan to extend their in-house capabilities by hiring additional lawyers in the next year, jumping from 40% last year.
In addition, 26% of law departments plan to decrease their use of outside counsel – up significantly from 16% in last year’s survey. Only 8% of CLOs plan to increase their use of outside counsel, down from 18%.
“It’s interesting that in this economy, with many CEOs reportedly planning layoffs, Chief Legal Officers are planning to hire more lawyers,” notes Altman Weil principal Daniel J. DiLucchio. “This reflects the pressure law departments are under to control costs and to do more work in-house where they are paying ‘wholesale’ instead of ‘retail’ for legal services.”
Chief Legal Officers identified ‘cost control’ as their top concern over the next three to five years according to the survey. Cost control was rated first by 28% of CLOs responding, a two to one margin over the next issue of ‘limited resources’ chosen by 14% of respondents. Compliance, which was the top concern for CLOs in each Chief Legal Officer Survey from 2003 to 2007, fell to number three in the 2008 survey.
Does Size Matter?
This year for the first time, the Chief Legal Officer Survey looked at outside counsel use by law firm size. Survey respondents indicated that, on average, 20% of their legal work went to mega-firms with over 750 lawyers; 25% of work went to large firms (350-750 lawyers); 27% of work was done by medium-sized firms (100-349 lawyers); and, 35% of work went to small firms with under 100 lawyers.
However, when asked how that same work was allocated based on the dollar value of the business, CLOs surveyed indicated that 37% of their outside counsel expenditures went to mega firms, 26% to large firms, 23% to mid-sized firms and 22% to small firms.
“The fact that mega firms handle 20% of matters but collect 37% of fees is not surprising because corporations are likely to put ‘bet-the-business’ matters that are not price-sensitive into the hands of those firms,” explains DiLucchio. “This is important because it means that a CLO’s ability to negotiate fees and control costs is really limited to less than two thirds of a law department’s outsourced work.”
Relationships with Outside Counsel
When asked if they have fired or are considering firing at least one of their outside law firms this year, 48% of CLOs answered affirmatively, compared to 32% in the 2007 survey. The reasons for their dissatisfaction with outside counsel were: ‘mishandling a critical matter’ - named most often, followed by ‘poor quality legal work,’ and ‘cost management issues.’
Although outside counsel have taken steps to improve working relationships with their clients, not all efforts are perceived as equally valuable. In ranking relationship building efforts, Chief Legal Officers named ‘discounted fees’ number one, as well as ‘improved responsiveness,’ ‘improved project staffing’ and ‘learning our business’ as the most important efforts law firms can make.
The Chief Legal Officer Survey has been conducted and published annually by Altman Weil, Inc. since 2000, most recently in May and June 2008. One hundred and twenty six responses were received for the 2008 survey from law departments throughout the United States. Twenty-eight percent of respondents were in law departments with over 30 lawyers; 33% of respondents were in 10-30 lawyer departments; and 39% were in departments with fewer than 10 lawyers. Additional demographic and budgetary data on responding law departments is included in the survey report. The survey is available online at www.altmanweil.com/CLO2008.
About Altman Weil
Founded in 1970, Altman Weil, Inc. is dedicated exclusively to the legal profession. It provides management consulting services to law firms, law departments and legal vendors worldwide. The firm is independently owned by its professional consultants, who have backgrounds in law, industry, finance, marketing, administration and government. More information on Altman Weil can be found at www.altmanweil.com.
Contact InformationDaniel J. DiLucchio, Jr.
Altman Weil, Inc.
Download the complete survey.