75% of Law Departments Face Budget Cuts in 2009

Newtown Square, PA, December 9, 2008 – In the newly released Altman Weil Flash Survey on Law Department Cost Control, 75% of responding General Counsel indicated that their law departments are facing budget cuts averaging 11.5% for 2009.  An additional 15.6% reported that their budgets would increase by a smaller percentage than in prior years.

GC Spending Concerns
When asked to identify and rate their greatest concerns about the 2009 legal spend, the top two responses, each named by over 80% of all General Counsel responding, were:  ‘outside counsel costs’ and the ‘unpredictable nature of legal spending.’   Ranked third, and named by forty percent of GCs, was ‘financial exposure from litigation or potential litigation.’

“Cost control and particularly outside counsel costs have been top concerns for law departments in recent years,” says Altman Weil principal Dan DiLucchio.  “The current economic environment may be the tipping point that causes General Counsel finally to demand real financial accountability from their law firms or to start moving work to firms that are more flexible.”

Outside Firms Will Be Targeted
The Survey asked where 2009 law department budgets would be cut and found that the bulk of reductions will be targeted at outside law firms.

Sixty-five percent of General Counsel indicated that they would bring more legal work in-house in 2009 as a budget cutting method.   Fifty-three percent plan to ‘switch some current work or cede new work to lower-priced outside counsel’ and 50.5% will ‘require more alternative fee arrangements.’

“General Counsel are indicating that they will be even more rigorous in their approach to the legal spend,” notes DiLucchio.  “Some law firms may lose work, but there will also be winners among the firms that can adapt to the new expectations of corporate clients.” 

Internal Law Department Cuts
Lawyer and staff jobs and compensation will also take a hit in some law departments.  Thirty-one percent of General Counsel will make cuts in lawyer and administrative staff head count in 2009; and, 21% plan to cut paralegal positions.  Twenty-nine percent of survey respondents plan to reduce lawyer compensation, and 19% will reduce staff compensation. 

As for 2008 year-end bonuses, like their law firm brethren, some in-house lawyers and staff will feel the economic pinch.  Thirty-one percent of General Counsel plan to reduce lawyer bonuses, and 22% will cut departmental staff bonuses as well.

General Counsel identified two areas of administrative spending in law departments that will be reduced in 2009.  Sixty-one percent of respondents plan to reduce spending on events and training, and 35% will delay a technology purchase.

The Full Survey
The Altman Weil Flash Survey on Law Department Cost Control was conducted in November 2008 and polled 1,292 General Counsel. Completed surveys were received from 115 participants, a 9% response rate. The full report appears on the Altman Weil website at www.altmanweil.com/LDCostControl.

About Altman Weil
Founded in 1970, Altman Weil, Inc. is dedicated exclusively to the legal profession.  It provides management consulting services to law firms, law departments and legal vendors worldwide.   The firm is independently owned by its professional consultants, who have backgrounds in law, industry, finance, marketing, administration and government.   More information on Altman Weil can be found at www.altmanweil.com.

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Contact Information

Daniel J. DiLucchio, Jr.
Altman Weil, Inc.
djdilucchio@altmanweil.com

Download the full survey.
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