Inside legal spending and staffing up slightly

Somerset, NJ. Oct. 19, 2010 – For the first time in ten years, law departments have reduced their total legal spending, according to the Hildebrandt Baker Robbins 2010 Law Department Survey. Much of that reduction involves use of outside counsel. More than 60 percent of survey participants decreased their spending on outside counsel; at the same time, internal legal spending and staffing increased slightly.

"The survey results confirm what we are seeing every day in our consulting practice with law departments of all sizes, sectors, industries and locations,"said Jonathan Bellis, who chairs Hildebrandt Baker Robbins' Law Department Consulting practice. "As shown in our survey last year, law departments began to adopt a wide range of management practices to reduce and control internal and external legal costs. These efforts have continued, resulting in an overall decrease in total legal spending for the first time in the past 10 years of the survey. The decline in total legal spending was driven in particular by a reduction in outside legal costs."We expect that efforts to reduce spending will continue, particularly with outside counsel spending, which makes up nearly 60 percent of total legal spending,"said Lauren Chung, survey editor. "The challenge for law departments will be to move beyond the low-hanging fruit and develop more comprehensive and innovative strategies for managing not just legal costs, but also legal risks and services."The 2010 survey achieved an all-time high in participation, reflecting a strong interest in benchmarking among general counsel and law department managers. The survey provides comprehensive data on legal spending, staffing, organization, compensation and management practices. The 2010 survey also reports information on management practices that law departments have adopted in response to the current economic environment.

This year, the Law Department Survey included 252 participants representing 22 industries. Almost 30 percent of participants are companies with more than $20 billion in revenues. Over 65 percent of participants have revenues at or above the Fortune 500 level. This includes companies that are privately held or based outside the United States. The 2010 survey reports data for 2009 and 2008 and, therefore, captures legal staffing and spending data during the heart of the economic downturn that began in 2008.

The Hildebrandt Baker Robbins survey is unique among law department surveys in its continuity over the past 25 years, focus on larger law departments, orientation toward global as well as U.S. law departments, and emphasis on data consistency and rigorous quality control procedures.

Law Department Spending

The 2010 survey showed a decrease in total legal spending – by 1 percent in the U.S. and by 2 percent worldwide – between 2008 and 2009. Over the previous nine survey years, total legal spending in the U.S. had increased by an average of 7 percent, with a range of 5 to 9 percent.

The median total legal spending was $24 million in the U.S. and $33 million worldwide. Total legal spending as a percent of revenues worldwide was 0.40%.

Inside legal spending rose by 1 percent in the U.S. and on a worldwide basis. Spending on compensation for in-house legal staff, which is 86 percent of inside legal spending, increased by 2 percent worldwide. The most notable decreases in global legal spending were on contract and temporary staff (down 12 percent) and administrative expenses (down 13 percent). The median inside legal spending was $9 million in the U.S. and $12 million worldwide.

Outside counsel spending decreased by 5 percent in the U.S. and by 6 percent worldwide. Over 60 percent of the participants reported a decrease in spending on outside counsel worldwide. Global non-litigation spending, excluding intellectual property costs, decreased the most at 14 percent. The median outside counsel spending was $14 million in the U.S. and $17 million worldwide.

Legal Staffing

The median company reported 21 lawyers in the U.S. and 31 lawyers worldwide. Per billion dollars of revenues, the median company had 4.3 lawyers in the U.S. and 3.7 lawyers worldwide. The median number of total law department staff (including lawyers and all non-lawyer staff) was 47 in the U.S. and 56 worldwide.

For most law departments (66 percent), the total number of lawyers worldwide increased or stayed the same between 2008 and 2009. Approximately one-third of participating companies experienced a decrease in their total number of lawyers worldwide.

In the U.S., 51 percent of the participants anticipate that the number of lawyers will stay the same in the coming year, 41 percent expect an increase, and 8 percent expect a decrease. The expected median increase in the U.S. is 6 percent. Outside the U.S., 56 percent expect the number of lawyers to stay the same, 39 percent forecast an increase, 5 percent anticipate a decrease. The expected median increase outside the U.S. is 9 percent.

"Most law departments do not appear to be reducing staff as a cost-savings measure,"said Chung. "We have seen that, now more than ever, they are focused on optimizing the use of internal resources through organizational and operational effectiveness. Many departments are seeking to enhance their internal capabilities to do even more. As a result, significant decreases in inside legal staffing are unlikely."

Forecast for Legal Services

The participants were asked to forecast their demand for legal services across 28 different legal practice areas. Among these, regulatory was the highest, with 44 percent of participants expecting an increase in demand in this area. "This result is not surprising, considering the major financial reforms being instituted in the U.S. and globally, health care reform, and the ever-increasing focus on myriad compliance requirements around the world,"commented Bellis. Other areas with significant forecasted increases in demand include employment and labor (39 percent), government relations (35 percent) and international (35 percent).

About Hildebrandt Baker Robbins

Hildebrandt Baker Robbins is a multidisciplinary consulting firm, helping legal departments, law firms and other professional service organizations to plan, design and implement strategic technology solutions to streamline operations, manage efficiently and measure outcomes. The firm provides practical business and technology solutions for major global corporations and law firms, from offices in New York; Washington, D.C.; Houston; Chicago; Los Angeles; San Francisco; London; Somerset, NJ; Eagan, MN; Beijing; Hong Kong and Sydney. For more information, please visit www.hbrconsulting.com or email info@hbrconsulting.com.

CONTACT

  Jonathan Bellis, 203-625-0706
  Lauren Chung, 732-560-8888

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