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Insights for Law Firms from HBR’s 2019 Law Department Survey

Lauren Chung | January 16, 2020

Now in its 16th year, HBR Consulting’s Law Department Survey continues to serve as the leading source of market data on law department staffing, spending and management trends. It provides law departments with metrics to measure, manage and communicate their performance and to plan for continuous improvement.

For law firms, the Survey serves as the “voice of the client,” offering insights on law departments’ challenges and priorities. The survey results equip firms to plan for improved legal service delivery, stronger collaboration and effective partnership with clients. Our recently published report, “2019 Law Department Survey: Insights for Law Firms,” includes data from the survey of interest to law firms desirous of improving their understanding of their corporate clients’ perspective.

Demand, Spending and Outside Counsel Cost Management

The report includes, for example, data on law departments’ legal demand, as well as their current and anticipated spending. Law departments expect legal demand to increase in the coming year. When asked about their top methods for handling the anticipated growth in demand, the majority of law departments cited increasing the workload of existing legal resources (56%), followed by other methods that strengthen in-house capabilities.

Despite their increasing legal needs, the pace of corporate legal spending has slowed in comparison to recent years. This year, law departments reported a two percent increase in total legal spending, compared to the five percent growth reported last year. And while outside counsel spending still rose moderately (by three percent), companies are more cognizant of how they manage and invest that spend, as discussed below. Additionally, for those who use them, spending on other service providers including alternative legal service providers (ALSPs) increased by 11 percent this year. Historically skeptical of ALSPs, law departments now see them as viable options to the traditional model for legal service delivery.

The report also includes data regarding how law departments are managing outside counsel spending. Eighty-five percent of responding law departments indicated they have made efforts in the past year to reduce outside counsel spending. Thirty-seven percent expect outside counsel spending to decrease in the next year. To control outside counsel costs, in-house teams are implementing stricter enforcement of billing guidelines, alternative fee arrangements, convergence and competitive bidding.

More detailed findings and insights relevant to law firms are included in “2019 Law Department Survey: Insights for Law Firms.”  Among other topics, the report presents data regarding:

  • Growth practice areas and work allocation;
  • Fee arrangements;
  • Convergence programs;
  • Law firm hiring and evaluation criteria;
  • ALSPs;
  • Diversity; and
  • Other influencing factors.

Opportunities for Law Firms Heeding the Voice of the Client

This year’s Law Department Survey findings reflect what many law firms already are experiencing. The market for law departments’ legal work is increasingly competitive. Law departments are also upping their expectations of law firms, putting more weight on “value-adds,” looking to firms to match law department strides in areas like diversity and technology, and holding their outside counsel more accountable for effective service delivery.

In the midst of increasing competition and expectations, however, the current market trends present abundant opportunities for forward-thinking law firms that are willing to take a deep look at their strengths and their market position to better align with their clients’ needs and challenges.   

To remain competitive, law firms will need to continuously improve their value proposition and explore service delivery models that can be offered at more attractive fee arrangements. Listening and responding to the “voice of the client” will be of paramount importance in this process. Based on HBR’s experience advising both law firms and law departments, being transparent and communicative with clients to ascertain and meet their actual needs (rather than what a firm may think a client wants) can create a lasting collaborative working relationship.

HBR’s Insights for Law Firms Report can help stimulate communication and transparency with clients. The goal would be to use the report’s data as a starting point to understand clients’ perspectives on the market trends and uncover their specific challenges and priorities.  This type of dialogue can help the firm’s ongoing journey to be better aligned with clients and deliver greater value.

Click here to purchase the 2019 HBR Law Department Survey: Insights for Law Firms Report. To learn more about our Voice of the Client Briefings, tailored briefings that combine core insights from the Law Department Survey with HBR’s consulting experience, please contact us.

 

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