Chief Legal Officers Wield Buying Power to Control Costs

Newtown Square, PA, November 4, 2014 – The 15th annual Altman Weil Chief Legal Officer Survey finds corporate law departments are wielding their buying power to drive down expenditures on outside counsel, and innovating from within to further control costs.

“The impact of the recession on in-house law departments has been twofold,” says Altman Weil principal and survey author Daniel J. DiLucchio.  “Internal department resources have been constrained in many cases, but at the same time law departments have gained more leverage over external resources. Chief Legal Officers are buyers in what is currently a strong buyers’ market.”

The two methods Chief Legal Officers (CLOs) used most frequently to control costs in the last 12 months are direct price reductions from outside counsel, and alternative or fixed fee arrangements, according to the survey.  The most common price reduction - received by half of all law departments surveyed - is between 6% and 10%.  The number of departments receiving average discounts of more than ten percent is 36% this year, a jump from 28% in the 2013 survey.

Along with targeting outside counsel pricing, CLOs also manage costs by managing the distribution of work to law firms.  This year 40% of those surveyed have shifted law firm work to in-house lawyer staff; 36% shifted work to lower priced firms; and 34% reduced the total amount of work sent to outside counsel.  Of all cost control efforts undertaken in the last 12 months, CLOs report that shifting work in-house is the one that yielded the greatest cost reduction.

“Law departments usually can do work less expensively in-house if they have the resources in place,” says DiLucchio.  “And when they do it themselves, they can also inject staffing and process efficiencies that their outside counsel may not offer.”

The survey asked what law departments have done in the last 12 months to increase efficiency in the delivery of legal services.  Two-thirds of CLOs indicate they have increased their departments’ use of technology tools.  Over half have undertaken a restructuring/reorganization of internal resources, and 45% have made greater use of paralegals and other paraprofessionals.  The in-house effort that yielded the greatest improvement in efficiency was the reorganization of internal resources. 

The survey asked Chief Legal Officers’ about the changing law firm service delivery model, and found two primary schools of thought.

Forty-three percent of CLOs say they don’t really care about a law firms’ delivery model as long as they get the results they want at a competitive price. Forty-two percent of CLOs say they like to work with firms that offer innovative service delivery, although other selection factors may take precedence. An additional 9% of respondents actively seek out law firms that offer innovative approaches to service delivery. 

Only 4% of Chief Legal Officers are satisfied with the traditional legal service delivery model, according to the survey.

“Chief Legal Officers may have mixed opinions about the best model for the inside-outside relationship, but the fact that only 4% are content with the status quo is an unambiguous indicator that the old model is not sustainable,” says DiLucchio.

The Survey
The Chief Legal Officer Survey has been conducted and published annually by Altman Weil, Inc. since 2000, most recently in September and October 2014.  One hundred and eighty six responses were received for the 2014 survey, 16% of the 1,189 corporate law departments invited to participate.  Demographic and budgetary data on responding law departments is included in the survey report. The full survey is available to download at www.altmanweil.com/CLO2014.

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.

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Contact Information

Daniel J. DiLucchio, Jr.
Altman Weil, Inc.
(610) 886-2012
djdilucchio@altmanweil.com

Download the full survey.

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