Legal departments move more work in-house in 2021: Association of Corporate Counsel survey

More departments are capturing diversity metrics of their outside counsel

Legal departments move more work in-house in 2021: Association of Corporate Counsel survey

The internal/external legal spend distribution of legal departments around the world shifted from a near 50/50 split last year to a majority internal spend this year, according to a new report from the Association of Corporate Counsel and Major, Lindsey & Africa.

Compared to last year, more legal departments in 2022 moved work internally in the areas of due diligence, labor & employment, legal research and intellectual property,

 The third annual Law Department Management Benchmarking Report by the ACC and MLA found departments are spending more internally than externally (54 percent of legal spend in-house) compared to the 2021 survey, which tilted slightly toward a larger external spend (51 percent on average) spent outside versus 49 percent inside. The distribution of internal and external spend continues to vary significantly by company size, with smaller organizations spending more internally on average while the largest departments spend more outside.

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“As law department leaders continue to navigate supply chain, regulatory, ESG-related issues including the Great Resignation, and more, this report provides a baseline from which to chart a path forward to maximize productivity while reducing costs and ultimately deliver greater value,” said Veta T. Richardson, president & CEO of ACC.

The report also found that at least 90 percent of departments handle at least some portion of the following functions internally, if relevant: compliance, contract management, corporate and governance, document management, invoice review, legal operations, privacy and security, records management, and regulatory. At least eight in 10 departments also handle some aspect of due diligence, labour & employment, legal research, and litigation/legal hold in-house.

Legal departments rely on external providers for other tasks – most notably discovery – with only 68 percent handling data collection internally and less than half (45 percent) managing data hosting and processing. Forty-four percent of departments outsource data collection to outside counsel and 58 percent do so for data hosting and processing. These are also the two areas most commonly outsourced to alternative legal service providers — 11 percent and 23 percent, respectively.

Another sign to the increase in overall work for legal departments, this year saw a six percent increase (35 percent from 29 percent) in the number of respondents who said they increased the number of law firms they engaged compared to 2020.

Twenty-nine percent of respondents track internal diversity metrics or have targets regarding the department’s composition — same as last year. While the number for those that track diversity with respect to their outside counsel composition is lower (21 percent), it is three points higher than in 2021.

When it comes to internal diversity metrics, among those who track diversity metrics, 97 percent report doing so for hiring, followed by promotions, departures and levels or functions – with a third tracking diversity related to staffing and training. This marks an increase in each of these items compared to last year.

The ratio of legal operations professionals to lawyers changed slightly, from seven to one in 2021 to eight to one in 2022. Additionally, the data showed that the number of paralegals increases faster than the number of administrative staff, which in turn increases faster than the number of legal operations professionals as the lawyer headcount grows.

“As organizations are challenged with future proofing and navigating the current market dynamics, benchmarking is a predominant tool to effectively provide leaders with perspective and build a plan toward performance improvement using actionable peer data,” said Gregory Richter, partner and vice president, retained search and advisory services for MLA. “We are excited to leverage this data to help our clients grow and improve.” 

This executive summary report is based on the responses from 427 legal departments in organizations spanning 24 industries, 26 countries, and all company sizes.

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