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Legal Departments Increase Investment in Legal Operations, Survey Shows
Legal departments are increasingly turning to legal operations as a full-time role rather than one that might be shared with others.
Powered By LawFuel – San Jose, CA, July 18, 2019 — Corporate Legal Operations Consortium (CLOC) today released the results of their 2nd Annual State of the Industry Survey which compared internal to external expenditure, legal operations headcount, technology and innovation, and Law Firm evaluations in its member companies.
The 2019 CLOC State of the Industry survey included respondents from 200+ companies of different sizes representing over 30 industries and 18 countries. According to the survey, corporate legal departments experienced growth in demand for legal services and continued to focus on various means to control costs. Many grew their legal operations teams and continued to invest in technology.
The sum of all external expenditure submitted by respondents totaled over $6.3B for the 200+ companies who participated in CLOC’s survey. Over 50% of respondents reported that their external expenditure on law firms either decreased or stayed the same from 2017 to 2018.
$11.7M Median External Expenditure vs $13.5M Median Internal Expenditure
.46¢ of every $1 spent on legal costs goes to external legal costs
$290K – Median Internal Expenditure per Legal Department FTE
$451K – Median External Legal Expenditure per In-House Attorney
The average total legal spend as a percentage of revenues is 0.44%. Companies reported using a number of techniques to control their overall costs including leveraging alternative fee arrangements (AFAs), preferred provider panels, alternative legal service providers, and moving more work in house.
Legal Operations professionals are accounting for a larger portion of their departments as the function grows in scope and new roles are added. Of the companies that participated, 40% reported an increase in full time attorney headcount in 2018 and 37% reported an increase in dedicated legal operations FTEs.
According to Jason Barnwell, Assistant General Counsel-Legal Business, Operations, and Strategy, Microsoft Corporation and CLOC Board Member, “The core challenge for most legal operations professionals typically reduces to effective change management. The hardest part of the job is helping the people you serve embrace the future you have to offer. Everything else is secondary to that. The great news is that this is a very transferable leadership skill that creates some fabulous options.”
Legal Operations functions continue to have a strong focus on technology to improve transparency and data analytics, efficiency, quality and consistency of work, and speed of execution. 72% of respondents reported having a technology roadmap. Companies with a developed technology roadmap spend 3x more on technology than organizations that don’t have a roadmap or those still developing a roadmap.
Mike Haven, Sr Directory, AGC and Head of Legal operations, Gap, Inc. and CLOC Board Member urges caution in adopting new technology, “Workflow automation, robotic process automation and machine learning all are promising technologies that can and will be leveraged in the legal industry of the future. But cool technology sitting on top of bad process will not be helpful. Beware the bright, shiny objects!”
Implementation of technology solutions was fairly high for a number of tools, with more than 78% of respondents reporting the use of eBilling and 65% using a contract management solution. However, the contracts management market is quite fragmented with 30+ different vendors being used among the 112 companies with a system.
The majority of corporate legal departments do not have in-house engineering support, with only 35% of respondents reporting to have dedicated in-house engineering resources. Regardless, most companies rely on third party technology solutions for their legal department needs and adoption of legal technology is increasing in companies of all sizes and industries. While the use of artificial intelligence in legal departments is still in early stages, many see its promise and are already starting to explore how best to leverage it. 45% of respondents are exploring the use of AI to reduce legal workload, gain more insight, or improve performance; however, only 12% are currently using AI within their tools and processes.
“This year’s data shows that the role and function of legal operations continues to grow,” shares CLOC’s President Mary O’Carroll, who also holds the role of Director Legal Operations at Google. “Technology is changing quickly and more legal operations departments are embracing solutions to improve productivity and results.”
ABOUT CORPORATE LEGAL OPERATIONS CONSORTIUM (CLOC)
CLOC is 501(c)6 non-profit professional association. CLOC’s mission is to help legal operations professionals and other core corporate legal industry players (e.g. tech providers, law firms, LPO’s, law schools, etc.) optimize the legal service delivery models needed to support the needs of small, medium and large legal departments.
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