More than half of legal departments now dedicate resources to legal operations functions with larger legal departments leading the way, according to the latest Thomson Reuters Legal Tracker™ LDO Index.
Further, almost two-thirds of legal departments surveyed (65%) reported legal work volumes have increased in the last six months. However, outside counsel shouldn’t pop the champagne yet — 95% of legal departments reported that keeping outside legal spending under control is a top priority.
This Fall edition of the Legal Tracker LDO Index — based on anonymized data from more than 1,100 legal departments representing more than $73 billion in legal spend — is the second in a series of semi-annual reports that highlight qualitative and quantitative insights into the operations of corporate legal departments. (You can check out the inaugural issue of the Legal Tracker LDO Index here.)
The report found that the size of legal departments, as defined by annual outside counsel legal spending, provided the most similarities in responses. To that end, the report grouped legal departments into the following categories:
- Small ($0-$4M in external spend)
- Moderate ($4.1M-$15M in external spend)
- Medium ($15.1M-$50M in external spend)
- Large ($50M+ in external spend)
According to the Fall Index report — which can be downloaded for free below — legal operations functions are growing as well. Among those responding to the survey, 17% say they’ve increased the number of staff devoted to legal operations within the last six months, while only 5% have decreased staff. Not surprisingly, the largest increases were seen in the largest legal departments, where 38% of respondents in that strata said they have increased legal operations staff.
Additional findings in the Legal Tracker LDO Index report include:
- Insourcing — More legal work is being kept in-house as 85% of legal departments say that is a priority for them, and 34% have increased the number of in-house attorneys within the last six months.
- Cost Control — Many legal department indicated that reducing legal spending is a primary means of achieving their goal of controlling costs within their department. Indeed, 79% of respondents ranked “moderate enforcement of billing guidelines” as one of the most effective ways they use to control costs, while 78% said attempting to reduce invoice expenses was also an effective strategy.
- Diversity — Unfortunately, many legal departments are still making slow progress in enforcing diversity requirements on their outside counsel with 77% of legal departments still not requiring law firms to supply them with firms’ diversity information. Only 6% of legal departments have started a diversity initiative in the past year, and just 10% plan to launch a diversity initiative within the coming year.
- Metrics — Realizing that you can’t manage what you don’t measure, legal departments seem to now fully embrace metrics, with 92% of legal departments reporting that they routinely quantify total spend by law firm, and 29% saying they track the savings realized from reductions on invoices.
Overall, the Legal Tracker LDO Index report provides a detailed and intriguing picture of how legal departments are aligning themselves in a shifting legal marketplace that increasingly sees corporations in the driver’s seat when it comes to determining how the legal market will continue to evolve.