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Stats, Facts and Comments from 7 Corporate Legal Studies

Briefing Stats Facts and Comments from 7 Corporate Legal Studies

Cliff notes, summaries and neatly organized reports are all part of the close watch the Business of Law Blog keeps on legal industry studies.

Today’s roundup focuses on those studies and survey stemming from inside counsel – and cuts the list of studies to review from 17 to 10.  As always we strive to link to the underlying source as well of as relevant commentary and reporting by the larger legal community.

The following seven summaries are fairly current and stemming from reports published in recent months.

1. Running Law Departments like a Business

“Legal departments are running more like a business, and the latest figures prove it,” wrote Erin Harrison, editor-in-chief for Legaltech News. By numbers, she means the 8th Annual Law Department Operations Survey by the Blickstein Group, in cooperation with Huron Legal.

The legal department operations (LDO) survey canvassed 107 respondents and the ensuing 16 page report highlighted key findings:

  • 56.2% have formalized metrics or reporting program and the top metrics tracked include:
    • 80.8% track “total expenses by law firm for particular groups of matters”
    • 58.9% track legal spend as a percentage of revenue and by total expense
    • 45.2% track the average or median bill rate by law firm
  • Top three challenges facing legal ops include:
    • Driving and implementing change
    • Identifying opportunities for business improvement and cost savings
    • Obtaining funding or resources for staffing, technology, etc.
  • Most common alternative fee arrangements (AFAs) tried:
    • 82.9% hourly discounted rates* (*though some argue discounts are not true AFAs)
    • 68.6% fixed fee per matter
    • 54.3% flat fee to handle all matters in a given area

Interestingly, respondents indicating law department metrics affect compensation – up from 22.7% from the previous year.  David Cambria of Archer Daniels Midland Company and who chairs and advisory board for the survey, broke it down in commentary for Legaltech News:

“The compensation ramifications are really more about a law department reaching its corporate objectives and goals for creating or preserving value for the corporation. The only way you can measure that is to track and report on specific law department activities, such as outside counsel spend, total cost of outcome, evaluation of internal lawyer performance, etc. This is most likely to play out in the annual bonus pool.”

Also see: The Top 5 Law Department Metrics for Insurers [Infographic]

2. Compliance Drive “Bet the Company” Litigation

A survey of 242 compliance officers and GCs, predominately serving companies headquartered in the US or Europe, found “bet the company” litigation is on the rise according to news from Bloomberg Big Law Business.

Eleven percent of those surveyed said bet the company litigation inched up from 8% the previous year.  In addition, “22% said their companies’ litigations involved regulatory matters, compared with 6% in 2014.”

About a quarter of respondents indicated involvement in cross-border litigation, “compared with 22% in 2014.”

The conclusions seemingly mesh with those of other market research firms like BTI Consulting which estimates US litigation spending will rise to $19.55 billion in 2016 – up from $19.36 in 2015.

The AlixPartners survey also highlighted “important” cost control measures on the minds of inside counsel:

  • Controlling costs: 73%
  • Data security: 66%
  • Proactive risk management: 66%
  • Early case assessment: 57%
  • Global compliance issues: 55%
  • Information governance: 50%

The survey was conducted by AlixPartners, LLP, a business advisory firm.

Also see: Litigation Costs Study:  How P&C Shops are Keeping a Lid

3. Quality Trumps Price, says 900 In-house Lawyers

In the business of legal advice, quality is the top job according to a survey by the UK-based trade publication Legal Week.

Writing about the survey for Corporate Counsel, Sue Reisinger reported, “900 in-house counsel rated the quality of legal advice as well as the quality delivering that advice as the most important factors in judging outside counsel, both scoring high with 96 percent of respondents.”

The ALM publishing company, which owns Corporate Counsel, announced it had acquired Legal Week in January 2015.

In its own article for Legal Week, reporter Anna Ward noted the pressure on legal budgets continues:

“The survey found that 26% of respondents expect to increase their legal budget over the coming year. More than half expect budgets to remain stable while 19% predict a decrease.”

She cites University of London General Counsel John Stewart in an assessment of the survey results: in an assessment of the survey results:

“It’s about delivering an overall package that will help us make good business decisions. We depend on lawyers as experts with in-depth knowledge on certain areas as they have the time and people to specialise. Three in house lawyers in London can’t specialise.”

Also see: Legal Department Metrics: Cost vs. Value

4.  Top Challenges for In-house Counsel

Privacy, cybersecurity, corruption and competition are the top challenges corporate counsel faces, according to the 2015 ACC Global Census Report.  The survey tallied up responses from 5,000 in-house lawyers across 73 countries and looked at the top challenges both within and outside a given lawyer’s jurisdiction:

  • Privacy: 30% within; 39% outside
  • Cybersecurity: 20% within; 15% outside
  • Corruption: 8% within; 14% outside
  • Competition: 9% within; 9% outside.

The study examines a range of issues from litigation (a top reason to consult outside counsel) to growing multinational responsibilities.  Notably, the study also reported on gender equality. The number of women working in corporate counsel increased to 49.5% up from 41% in 2011.  However, imbalances in inside counsel compensation remain.

“We found this year that women were more likely to occupy the lower salary categories compared to men, who were more likely to occupy the higher salary categories – regardless of the number of years they had been in a particular position,” said Veta T. Richardson, ACC president and CEO in a statement announcing the study.

Also see: Infographic: Cybersecurity Stats for Legal Tech

5. Legal Increasingly Turning to Analytics

Legal analytics are poised to go mainstream, according to a survey of “164 senior attorneys and IT decision-makers” by the Coalition of Technology Resources for Lawyers (CTRL).  Culling, early case assessment and relevancy review were the top three use cases cited by respondents.  More than 70% of legal departments said investments in eDiscovery analytics would increase or remain the same in 2016.

Analytics are growing in favor in applications outside of eDiscovery as well. According to the study the five most common uses are:

  • Legal Matter Management, Billing and Budgeting
  • Information Governance
  • Outcome Analysis or Risk Assessment
  • Contract Review
  • Selection of outside counsel

Also see: How Inside Counsel can Use Data and Analytics

6. GCs Eye Potential in Process and Technology

“In-house legal teams are facing the double challenge of delivering “more for less” and demonstrating how they can further add value to the business,”  according to the UK-based Radiant Law firm. The assessment stems from a report and survey of 53 GCs and points to process and technology as an answer.

“More than three-quarters (78%) of general counsel lack separate budgets for process and technology services, despite exactly the same percentage identifying a ‘compelling need’ for them, a survey has found,” reported Deputy Editor Nick Hilborne, in piece for Legal Futures, a UK trade publication.  “Nonetheless, two-thirds of GCs had invested in process or technology with an external supplier in the last two years.”

He noted the survey findings suggest GCs have largely avoided a formal assessment of options for process and technology support – two of three dynamics (people, process and technology) within reach.

The Radiant Law report makes several recommendations including:

  • Start with something manageable and build from there;
  • Understand how change needs to be led to deliver effective results;
  • Look at both the financial and soft benefits when making a business case.

Also see: Legal Tech Evolution: Discomfort and Lasting Relationships

7. State of Diversity in Legal

Minorities among the GC ranks in Fortune 500 companies dropped to 51% from 54% a year ago, according to a study by the Minority Corporate Counsel Association (MCCA):

“Overall, when it comes to the racial representation among the general counsel at Fortune 500 companies, now there are 25 African Americans, 11 Hispanics and 15 Asian-Pacific Americans, the survey reveals. There are 31 men and 20 women among these minorities, too,” according to a story by InsideCounsel.

Corporate counsel isn’t alone – another study published about the same time by the National Association for Law Placement (NALP) found similar challenges at all levels within law firms.

“The percentage of African-American associates has declined steadily since 2009, when 4.66 percent of associates were black, according to the NALP report. In 2015, that number was down to 3.95 percent,” reported The American Lawyer.  The publication also reported, “The percentage of African-American partners has remained relatively flat. The number stood at 1.71 percent in 2009 and reached 1.78 percent in 2013.”

* * *

Have a strong view about the findings in any of these studies?  Please feel free to share it in the comments below.  Have you spotted a good study?  Tweet us a link @business_of_law and we’ll add it to the list for consideration in our next roundup.

If you enjoyed this post, you might also like:
Key Metric:  The Current Law Firm Billing Rates by Practice Area

Photo credit: Frédéric BISSON, Dossiers jaunes (CC BY 2.0)

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About Frank Strong

Frank Strong
Frank Strong is the communications director for the LexisNexis software division located on NC State’s Centennial Campus in Raleigh. In this capacity, he leads communications efforts in support of software products for law practice and law department management and also litigation tools – across large law, small law and corporate counsel segments. With more than 15 years of experience in the high-tech sector, Strong previously served as director of public relations for Vocus, which developed marketing, PR and media monitoring software. He has held multiple roles both in-house with corporations, ranging from startups to global organizations, and has also endured the rigors of billable hours, having completed gigs at PR firms including the top 10 global firm Hill & Knowlton. A veteran of two year-long deployments, Strong has concurrently served in uniform in reserve components of the military for more than 20 years, initially as an enlisted Marine and later as an infantry officer in the Army National Guard. Strong holds a BA in Film and TV production from Worcester State University, an M.A. in Public Communication from American University, and an M.B.A. from Marymount University. He is a PADI-certified Master Scuba Diver and holds a USPA "B" skydiving license.
4 comments
My Claim Solved
My Claim Solved

More must be done to ensure future financial products are not mis-sold. However if people were mis-sold, they can at least get their money back. Whether you were mis-sold PPI, an Endowment, a Packaged bank account, an FSAVC, an Investment, a Whole of Life, a Payday Loan or a Pension, you can always <a href="http://myclaimsolved.com">get your money back!</a>

drhjmaue
drhjmaue

Frank , as usual very job touching virtually all of the important points when it comes to synthesizing all thus pertinent information that was produced from seven studies. You have laid out what are the really important issues facing corporate legal departments. Obviously one area caught my eye which was under 2. Compliance in that controlling legal expenses ranked 73% but what does that really mean because it may mean something entirely different to everyone you ask in a corporate legal department. It may mean getting a rate reduction, negotiating a fixed fee or simply relying on an E-Billing application to assist in controlling legal spend. It is my opinion after over 30 years in the legal cost control business that if you combine the resources of the best E-Billing application company with the best invoice review services company in this small industry and that's an absolute winning combination. The difficult process is finding this winning combination because it seems that most E-Billing companies have advertised that they offer this combined service. This combined service arrangement will insure that your company's written billing guidelines will have the very best chance to be in full compliance with your written billing guidelines.The goal of any legitimate legal cost control company is to work with your all your law firms in an effort to get them into full compliance with these guidelines and not make outrageous claims about saving X % or even worst have on your web site an ROI formula. But in order to retain this winning combination it's absolutely essential to do your due diligence to find this combination which simply cannot found through slick web sites, I does not take much google reaesch to find out that what you see is not what you get and by that you can easily find out that first for some inexplicable reason claims are being made about being in business for 20 to 30 years yet a simple search you find Its really only 2 to 3 years. Secondly claims being made about a full time staff of lawyers yet in fact it's a group of independent contractors producing consistently inconsistent work product. I wish every legal department the very best in finding a winning combination it can be found,

BLSS
BLSS moderator

@drhjmaue  Hello, Dr. Maue.  Our take on that figure simply means maintaining or reducing overall legal spend.  It seems to be a consistent theme over the last few years.  Certainly different organizations will have different takes on how to maintain costs -- that's the essence of management in business -- how to apply finite resources to maximum benefit.    

In a separate study, which we conducted, of 86 claims and legal departments we asked what the top cost containment initiatives were.  These were the responses:

  • Early case assessment – 76%
  • Electronic billing – 65%
  • Staff controls/plans – 60%
  • Flat fee arrangements – 60%
  • Third party bill review – 51%
  • Rate freezes – 48%
  • Volume discounts – 44%
  • Quick-pay discounts – 36%
  • Discounts rates with success bonuses – 25%

drhjmaue
drhjmaue

Thanks for you quick response to my comments regarding the controlling costs percentage it gives greater clarity. But I still feel very passionate about the comments I made regarding the issue because it seems during the last 30 years every conceivable idea has been tried to control legal spend. But at the end of the day the value added service of having full time experienced lawyers reviewing all law firm invoices is the real solution to controlling legal spend used in conjunction with the best E-Billing application. But I also feel that along with my original comments the value of metrics and analytics is extremely valuable. At the end of the day no one tool or application will be a panacea in controlling legal spend its the combination of proven technology along with human intervention,