Managing a Corporate Law Department in 2015
There is little doubt that in today’s legal industry, holding a position of in-house or corporate counsel is attractive. Chief Legal Officers (CLOs) have no problem filling the infrequent lawyer openings by selecting from hundreds of applications.
Thirty years ago, the old saw was “if you can’t make it in a law firm, you become an in-house lawyer.” Today this couldn’t be further from the truth. The contemporary law department has lawyers with top notch credentials and experience in prestigious law firms, who enjoy the respect of their legal colleagues, as well as their internal business clients.
There are a number of features that make working in a law department attractive:
• In-house lawyers get to intimately know their clients, the organization and the industry. They become a part of the business team and can exercise both legal and business judgment. They can help advance the business.
• As more lawyers have moved from law firms to law departments, compensation for in-house counsel has significantly improved over the years.
• Although one in-house lawyer recently told me: “I am busier during the workday than I ever was in a law firm,” in-house lawyers, unlike their law firm counterparts, do not have to spend their evenings and weekends constantly looking for new clients and developing new business.
Many law departments are growing, according to our research and first-hand observations. Altman Weil’s 2014 Chief Legal Officer Survey of 186 US law departments found that 43% percent of CLOs plan to increase their in-house lawyer workforce in the coming year. In addition, 32% of law departments intend to add paralegals, and 21% will supplement their department support staff.
One of the fundamental reasons for having – and growing – an in-house law department is that it is cheaper to perform legal work internally (at ‘wholesale’ cost) rather than sending the work to a law firm (and paying retail prices). This year 40% of CLOs in our survey said they have shifted law firm work to in-house lawyer staff; 36% shifted work to lower priced firms; and 34% reduced the total amount of work sent to outside counsel. Of all cost control efforts undertaken in the last 12 months, CLOs report that shifting work in-house is the one that yielded the greatest cost reduction.
This emphasis on internalization of more legal work must be accomplished with careful planning and caution. Experience shows that in-house counsel workloads are becoming overwhelming, leading to stress and burnout that may result in decreased productivity.
To avoid burnout and achieve their objective of more work internalization, CLOs should consider some of the following strategies:
• Rebalance the risk/reward formula with a willingness handle low risk matters differently – or not at all.
• Push non-legal work back into the laps of internal clients, who are often using the law department as protection against criticism of their business decisions.
• Make a fundamental decision about what types of work to stop doing as new work is added to the department’s load.
• Delegate appropriate work to paralegals and support staff.
• Consider a ‘gatekeeper’ policy to funnel all inquiries and assignments through one department point person. Often, companies allow anyone in the organization to contact the law department with issues and questions, wasting valuable time and resources.
• Clarify long-term ownership of projects. Often, after a deal or contract is concluded, the law department, as opposed to the business, ends up with ownership of implementation and renewal obligations.
Because performing work in-house is more cost effective, it makes sense to continue to internalize as much work as possible. The challenge for CLOs is to ensure that their management practices, organizational structure, technology, and processes support a highly-effective and responsive legal function. A well-managed corporate law department can out-perform outside law firm resources on a variety of measures, including: cost, availability, business knowledge and – perhaps most critically – as trusted advisers.
Effective leadership and professional management of a law department are essential to ensure that the company’s strategic goals and objectives are met.
Daniel J. DiLucchio is a principal of Altman Weil, Inc. He has been providing management consulting services to corporate law departments for over 25 years. He is the author of Altman Weil's annual Chief Legal Officer Survey. Contact Mr. DiLucchio at firstname.lastname@example.org.
Note: A version of this article originally appeared in the Philadelphia Business Journal, December 12, 2014.