The results for the 2014 Altman Weil “Chief Legal Officer Survey” are in. In addition to reflecting a mix of opinions about the best model for the inside-outside relationship, many common frustrations of chief legal officers (CLOs) emerged. Only 4 percent of CLOs expressed that they are satisfied with the traditional legal services delivery model. Overall, there is a major trend within corporate law departments to focus on decreasing outside counsel expenditures by not only flexing outside buying muscle, but also demonstrating more internal innovation. These two points are closely linked.
When CLOs were asked which service improvement and innovation they would like to see most from outside counsel, it was no surprise that “greater cost reduction” took the top spot (58 percent). Demonstrating discontent with the status quo and desire for better control and access to information, “more efficient project management” (57 percent) was next, followed by “improved budget forecasting” (56 percent). The latter two improvements allow for the ability to track cost, inform change and ensure better value for their spend. This also allows for better collaboration, which is at the root of many of these issues. Forty-three percent of CLOs said they don’t really care about a law firm’s delivery model as long as they get the results they want and at the right, competitive price.
The survey summary notes:
“Initially it may seem that law departments just want to pay less for outside counsel. But these results show it’s more complicated. Some CLOs really want law firms to be more efficient and to align with their department’s internal efforts to innovate legal service delivery. Others may have a more transactional relationship with outside counsel that is primarily driven by price considerations.”
Focusing further on price reduction, the survey explored corporations’ use of AFA, the shift of work to lower-priced firms and, most notably, the shift of work from outside to in-house. The survey also revealed shifting work in-house has resulted in the greatest cost reduction. In fact, 40 percent have already shifted law firm work to in-house lawyer staff, including litigation. Looking to the future, 43 percent plan to increase their in-house lawyer workforce to continue to handle more in-house.
As the summary notes, “This continues a seven-year survey trend in which decreases in the use of outside counsel have been reported at about twice the rate of increases.”
When asked what is the most likely change agent, CLOs name corporate law departments and technology innovation as No. 1 and 2, respectively, with law firms trailing far behind at 6 percent. Again, technology was noted as a large factor in improvement. Two-thirds of CLOs cited “greater use of technology tools” as the method for increasing their departments’ efficiency in delivery of legal services.
The work trend from outside to in-house may continue, unless outside counsel can respond to cost reduction and delivery of service concerns, with better collaboration and communication throughout the process.