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Pandemic Pushes Corporate Law Department Upgrades, Study Finds

Dec. 10, 2020, 12:00 PM

The coronavirus pandemic is accelerating a transformation of corporate law departments, from technology use to staffing levels, said a survey released Thursday.

Nearly 75% of departments significantly or moderately increased adoption of legal technology compared to last year, according to an HBR Consulting analysis.

Nearly three-fourths had at least one legal operations employee—individuals often tasked with data analytics, financial matters, and outside counsel and vendor management—on staff, HBR found. That’s up from 62% in 2019.

Covid-19 could be the catalyst for the “legal department of the future,” said Lauren Chung, managing director at HBR.

The study of the in-house legal landscape shows that companies have gone from worrying about business continuity and remote work in the pandemic’s early days to focusing on how to manage their employees and technology in a new normal.

“People who had not been as open to adopting technology in the past are now being forced to, and that’s driving more accountability,” Chung said.

More than 250 companies participated this year in HBR’s law department survey, which benchmarks data on corporate legal budgets, compensation levels, outside counsel management, and technology use to develop a “holistic view” of the challenges and priorities facing law department leaders in 2020.

The report came a month later than its survey released in 2019, a delay that Chung attributed to the difficulties the pandemic has brought to corporate America.

“We had to give people the flexibility to participate,” Chung said.

Chung noted she’s held virtual “sounding boards” over the past year with overloaded in-house lawyers grappling with the fallout from Covid-19.

Another survey released last month by global accounting giant Deloitte found that in-house legal chiefs are planning to increase their investments in alternative legal service providers and digital technologies.

Efficiency Crunch

Chung said one other major takeaway for her as the year draws to a close is that many companies avoided mass cutbacks to legal staffing levels by maximizing their own internal resources and technology.

“There were workforce reductions in some industries, but across the board it was really about resource optimization and creating a more agile legal function,” she said.

HBR’s analysis found that only 18% of surveyed companies reported they planned to shed legal group employees this year, while 44% said they would increase staffing levels. When in-house legal groups were trimmed, it was often non-lawyer staffers that bore the brunt of those cutbacks, HBR said.

Doing more with less has become a familiar refrain among in-house counsel this year, as noted in a separate survey of over 100 law departments of varying sizes recently released by legal consultancy Altman Weil Inc.

Bloomberg Law has reported in recent weeks on legal operations professionals being sought out by companies like Tyson Foods Inc., which has been hit hard by Covid-19, and fast-growing cannabis enterprises.

Other Metrics

HBR’s survey found that 91% of surveyed law departments implemented initiatives this year to control outside legal costs, with data analytics (49%), tougher enforcement of billing guidelines (34%), and more consistent planning and budgeting (32%) being the top three measures cited by respondents for controlling expenses.

Despite those financial stresses, internal and external diversity initiatives remained a key criteria this year in selecting outside counsel, according to HBR. At least 78% of legal departments ranked such programs as being “very important” or “moderately important” this year, up from 66% last year, the consultancy said.

Chung cited the national discussion about race that arose in the aftermath of George Floyd’s death as having a significant impact on in-house legal teams, some of which are taking important measures of their own to become more inclusive.

“Diversity is a key priority for organizations worldwide,” Chung said. “And now you’re seeing a real desire for actionable change.”

Going Forward

With the coronavirus still raging across the U.S., Chung said it’s unlikely in-house lawyers will return to the office in early 2021. That will continue to change the way law departments engage with one another and clients, including law firms, she said.

Chung noted the lack of one-on-one in-person communication that often helps foster workplace knowledge-sharing must now be replicated virtually. The companies that do that best will become the new success stories, said Chung, adding that compensation levels for in-house lawyers—many of whom took pay cuts this year—will likely remain flat until the broader economy recovers.

Still, there are some green shoots.

Morrison & Foerster, which in its first-ever survey of in-house lawyers earlier this year sought solutions for corporate counsel coping with the coronavirus outbreak, released Wednesday the results of its third such survey showing that law department leaders remain optimistic even in the face of a potentially long road to recovery.

A report earlier this month by Wells Fargo Private Bank’s Legal Specialty Group found that law firms have continued to see gross revenue gains despite tightening their belts this year. Many of those firms cashed in on technology transactions, with some expecting the windfall to continue into 2021.

To contact the reporter on this story: Brian Baxter in New York at bbaxter@bloomberglaw.com

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com;
John Hughes at jhughes@bloombergindustry.com

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