The ACC Chief Legal Officers (CLO) 2016 Survey suggests internal corporate legal spend now surpasses outside legal spend. According to the study, CLOs reported 53 percent of their budget is now dedicated to internal spending, while just 47 percent is allocated to outside counsel.
Issues of compliance and ethics were named among top concerns with regulatory requirements and data breaches trailing, albeit, not far behind. This heightened focus on managing the business complexities of a global legal department is creating some new challenges and opportunities for corporate legal departments.
Here are four key trends in corporate legal:
1. In-House Staff Growing at Unprecedented Rates
As these large multinational corporate legal departments face an enormous amount of pressure to prove their value to the business and reduce legal spend, it appears they are beefing up the in-house side of the table.
According to the study, CLOs indicated internal legal department operations staff headcount has more than doubled in the last year. The uptick shows few signs of slowing down.
2. Legal Department Operations Matures
Indeed, tradeshows presented by ALM and ILTA, including ILTACON and LegalTech® New York, have added sessions dedicated legal operations. In addition, new groups have formed or risen to greater prominence in the last several years.
Separately, in the last year, the ACC announced the formation of a dedicated Legal Operations Section. The sector provides a forum for legal operations professionals to collaborate and share innovative strategies about how to run and manage a successful global legal department in an increasingly complex and demanding corporate legal market.
The ACC reports the membership has doubled since it’s inauguration in June 201, as CLOs continue to face a myriad of ethical, regulatory, security and internal business pressures.
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3. AFA Use Trends Upwards
The ACC survey also reports CLOs use of AFAs use is on the rise, “across the board.” The survey data meshes with invoice data culled from the most recent LexisNexis CounselLink ELM Trends Report, which found about three-fourths of all legal departments are currently experimenting with AFAs.
According to the ACC study:
“CLOs in larger law departments were more likely to use alternative fee arrangements (AFAs). Flat fee for an entire matter (41 percent), flat fees for some stages of a matter (40 percent) and retainers (32 percent) were the AFAs law department leaders cited using most often. Across the board, use of AFAs continues to trend upward.”
“As corporate legal faces pressure to prove it isn’t just a cost center to the business,” wrote our own Kris Satkunas in an InsideCounsel article titled AFAs rising: Data shows subtle but steady increase in non-traditional billing.
“Legal departments are maturing internal processes and looking for ways structure legal work not only to get more value from law firm partners, but also to gain important foresight and predictability related to the total cost of legal matters,” she continued.
4. Regulatory Scrutiny Heats Up
About one-third of GS reported being “targeted by regulators” in the last year, according to the ACC study. It appears as these large global corporations seek to conduct more business across borders, government regulators will be keeping close tabs on them.
The responses gel with previous corporate legal studies including a survey of 242 compliance officers and GCs conducted by AlixPartners, LLP. Some “22% said their companies’ litigations involved regulatory matters, compared with 6% in 2014,” according to published reports.
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In spite of these challenges, an overwhelming majority of CLOs (82 percent) say they are satisfied with their jobs and more than 40 percent are “highly satisfied,” according to the ACC study. Perhaps, this means is less about what obstacles are thrown their way and more about how they choose to tackle them.
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Trends in Legal Spend from a Law Department Survey