Corporate legal departments say their most effective cost controls are enforcement of billing guidelines, reductions on invoice expenses, and working with law firms that pro-actively show their value. At the same time, many legal departments are not using fixed or flat fees, matter budgets, competitive bidding through requests for proposals (RFPs) or reallocation of work to smaller firms with lower rates. That’s according to the Thomson Reuters Legal Tracker LDO Index, a new semiannual report based on anonymized data from over 1,100 legal departments. In addition, the report separately surveyed 155 legal departments on their use of cost controls.

Seventy-six percent of legal departments surveyed said that controlling outside counsel costs is a high priority, more than any other factor. This is not surprising, considering that 65 percent said the volume of legal matters they handle increased over the last six months, while only 30 percent said their total legal department budget increased.

Fifty-six percent of legal departments now have a dedicated legal operations function, up from 51 percent from the previous LDO Tracker survey conducted in April. Similarly, legal departments are now more likely to rank their level of sophistication in managing outside legal spend as “proactive” or “optimized,” while fewer legal departments say they are “reactive.”

Sophistication in managing outside legal spending April 2017  September
2017
Chaotic 2% 2%
Reactive 21% 14%
Proactive 58% 64%
Optimized 12% 15%
Predictive 7% 5%

 

“Efficiency is increasingly the watchword as corporate legal departments strive to streamline operations and manage challenging budgets,” said Mark Haddad, head of the Corporate segment for Thomson Reuters. “More legal departments are taking an operationally focused approach to optimize processes, rather than relying solely on blanket approaches such as fixed fees or matter budgets. This is helping legal departments more effectively manage their outside counsel spend. And this approach will benefit those firms that adopt a proactive strategy in delivering and demonstrating their value.”

To read more from the report or to download it, visit http://legalexecutiveinstitute.com/thomson-reuters-legal-tracker-LDO-index-fall-2017/.