Legal Department Survey Finds Decreases in Staff, Spending and Uncertain Future

Will COVID change law department operations? Survey says change ‘logistical’

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An Altman Weil survey of chief legal officers found that through 2020, ongoing challenges to the work of lawyers exist but have been heightened by the pandemic and its continued disruption of the global economy. Out of the 966 corporate law departments who responded, the survey showed decreases in both lawyers and non-lawyer staff due to COVID.

“These dynamics accelerate the law department’s perennial problem of ‘doing more with less’ — but also, perhaps, create a new level of urgency and focus to make hard choices about staffing, efficiency and resource allocation to advance position change,” a report on the survey states.

A total of 66% of CLOs surveyed in September and October reported their organizations’ revenue declined in 2020 in response to the pandemic, while 77% say their law department’s workload is up, according to the survey.

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STAFF CUTS & OPERATIONS

Altman Weil has conducted the surveyAltman Weil has conducted the survey for the past 20 years, but this year focused specifically on the impacts of the pandemic. One question asked whether COVID has changed the way in which law departments will operate moving forward. According to a large majority of CLOs, the primary change is “simply logistical.” A total of 77% expect remote and/or flexible working arrangements will become common for department lawyers and staff.

“This change will encompass not only office attendance but also court appearances, depositions, mediations and interactions with clients, law firms and vendors,” the report concludes. Other pandemic-caused changes include greater use of technology tools, more attention to cost control and workforce reallocations optimizing value.

“Some of the reductions of staff are likely cuts that [CLOs] felt could have been made in prior years due to process improvements and increased reliance on technology,” according to the report. 

“Now CLOs understand that the staff reductions can no longer be avoided in this environment of newly constrained budgets.”

CLOs reported they spent approximately 15% of their time in 2020 dealing with issues related to COVID-19, according to the survey. In departments with legal operations managers, the senior administrators spent an additional 10% of their time on pandemic issues.

Despite seeing other cuts in staff, the number of departments with legal operations managers has increased, according to the survey. In this year alone, 50% of all departments reported having someone in the role of a professional administrator — up 46% from 2019. In departments with more than 50 lawyers, three-quarters said they had someone in the position.

“It’s noteworthy that — unlike all other law department job categories — not a single operations manager has been subject to layoffs during the pandemic, according to the survey,” the report states.

Layoffs in law departments as a response to COVID-19 were at 11% this year, with 3% of departments reporting a cut of managing lawyers and 4% reporting a cut in the number of staff lawyers, according to the report. Efficiency efforts, decreased budgets and “greater use of technology tools” were the primary reason for layoffs given by CLOs.

A “marked dip” in plans to hire contract lawyers is seen for the coming 12 months, according to the survey. Last year 19% of departments had planned increases in hiring for those roles, while only 11% plan to continue.

One silver lining to the report is that many general counsel expect to add back to their in-house workforce. Roughly four-times as many departments said they expect to be making headcount increases as those making decreases, according to the survey. In 2020, 36% of departments plan to increase staff in the next year, while 9% plan decreases. Over half will make no change, according to the survey.

REVENUE

Total spending this year has mostly gone up, and the survey found 43% of departments increased their total spend. On the flip side, 40% of departments decreased their total spend, while 17% were unchanged.

“These numbers closely track 2019 change levels and reflect the caution of a majority of [CLOs[ who believed a year ago that an economic recession was on the horizon,” the survey states.

For the upcoming year, 44% of CLOs are anticipating total budgets to decrease, and 39% plan increases. If this happens, it will be the first time in a decade that more law department budgets are shrinking instead of growing.

Holding steady throughout 2020  were allocations for spending in personnel and operations, outside counsel, and non-firm vendor portions of departments’ budgets, according to the survey.

In-house spending was the highest for the third year-in-a-row, reaching 47% of outflows, followed by law firm expenditures that ate up 46% of the average budget and non-firm vendor spend that took 7% of department budgets in 2020.

For outside counsel spending, more departments reported decreasing their spending in 2020 compared to those who made increases. Over the past decade, typically twice as many departments have reported increasing their internal spend each year compared to those making decreases — but in 2020, the differential changed to a 10-year low. Forty percent of departments made increases, while 32% made decreases, a decade-high figure.

OUTSIDE HELP

For 2020, the survey team asked CLOs what actions outside law firms offered to assist law departments during the COVID-19 crisis and how valuable that effort was. “Ninety percent of all law firms offered their clients general information on pandemic issues, 46% advised on available COVID-19 benefits, and 27% stepped it up a level with specific coronavirus-related advice customized to the client.” Each of those areas rated between 6.6 and 6.8 on a “value scale” of 0-10.

“However, very few firms went beyond advisory offerings to address the more tangible budgetary challenges their clients were facing this year,” the survey states. 

Only 10% offered additional discounts, 21% offered to collaborate on new alternative fees, and 7% suggested new process efficiencies reducing cost. “Each of these infrequently-offered, but clearly desirable types of assistance received high value ratings,” the report states.

Fewer firms reached out to clients to support their workload crunches, according to the survey. The greatest value found in the survey was from firms that seconded an associate from their ranks to the department at no charge, but only 3% of firms made that offer. 

A total of 9% offered improved communication and access to key lawyers, while 1% of firms offered to participate in  company meetings in advisory capacities at no charge.

For the future? “Now it’s a waiting game,” the survey states, adding that corporate law departments are well positioned to sustain throughout the remainder of the crisis period and emerge “leaner, stronger organizations thereafter.”

  Avery Martinez

zp-pdl.com

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