A disconnect between corporate legal departments and top executives is increasing workloads and shrinking budgets for in-house lawyers, according to a report released Wednesday.
General counsel expect 25% greater workloads in the next three years, and at the same time 88% of them plan budget cuts, the 2021 EY Law Survey found. Company CEOs and boards are driving the changes.
The workload-budget gap “obviously creates a huge amount of pressure,” said John Knox, EY’s global legal managed services leader and a report contributor.
EY, along with the Harvard Law School Center on the Legal Profession, in early 2021 surveyed more than 2,000 business leaders—half of them in law departments—across 17 industries and 22 countries.
About 59% of general counsel say greater use of legal technology can help them reduce costs. However, 97% say they face challenges in paying for the technology, with C-suite “buy-in” as the most important factor, according to the survey.
CEOs of companies with more than $20 billion in annual revenue expect legal departments to cut costs by 18%, up from 11% in 2019.
“The data speaks for itself,” Knox said. “General counsel are having trouble presenting business cases to CEOs and CFOs to invest in legal technology.”
More legal tech could reduce the amount of low-level work in-house lawyers must do. Nearly half of the survey’s respondents said such work is affecting employee morale.
Budget increases aren’t the only solution to general counsel challenges, Knox said.
“It’s more a question of how the budgets are used,” he said. “If you were looking to hire an extra four or five heads, could you think about those extra four or five heads in a slightly different way?”
Instead of hiring five lawyers, companies could hire two and use the other positions for a project manager, legal technologist and process engineer, Knox said. Or, they could use the hiring budget for technology or outsourcing instead, he said.
Reevaluating who gets hired and what tech is used can help alleviate the data challenge general counsel face, said David Wilkins, a Harvard Law professor and the director of the Center on the Legal Profession.
CEOs cited risk management as a top priority in the survey. Sixty-one percent of them want more data-centric risk analyses and business development strategies.
At the same time, 65% of general counsel say their department lacks the data and technology to “effectively respond to a data breach.”
“The general counsels understand that this is a priority,” Wilkins said, “and yet they don’t have visibility on the data, ability to analyze the data, or even fully the understanding of what data would be the most useful in order to handle this.”
Other findings from the report include:
- General counsel expect in-house headcounts to increase by 3% in the next three years.
- 87% of legal department leaders say they spend too much time on low-value, routine tasks.
- Just over half of general counsel say their daily tasks are aligned with broader business strategy.
- 85% of general counsel use alternative legal service providers, up from 72% in 2019.
- Half of business leaders believe inefficient contracting has led to lost business.