Everything All At Once: The Challenge for In-house Legal Teams

Businesses across every industry are looking at 2023 with more than a little caution. Leadership teams are being met with questions largely out of their control.

Are we headed into a recession? Will staffing challenges continue? And for Legal Departments, the added question: will the amount of work we have in front of us continue to increase?

While we won’t look into an economic crystal ball today, the likelihood of staffing challenges, increasing workloads, and tightening budgets seem certain.

Thomson Reuters surveyed In-house Legal Departments to understand their priorities, where gaps exist in execution, and challenges looking forward. The 2022 Legal Department Operations Index provides valuable insight for In-house Legal Departments heading into 2023. We’re insights gleaned from the report along with some opportunities to shorten the gap between priorities and execution.

Where We Are Today

As we have previously noted, the legal industry is facing the same staffing challenges as other businesses. This speaks more to the ubiquity of the problem rather than legal, specifically, being unable to attract and retain talent.

In addition, leadership teams are keeping a close eye on the market and a potential recession. It is important to note that legal is typically considered more recession-proof than most industries. However, for in-house legal teams, the type of work is likely to shift during a recession.

And while the work may shift in terms of matter type, it is also more likely to be handled internally rather than by outside counsel in the coming year. Respondents to the Thomson Reuters survey indicated that the number of matters is increasing while simultaneously bringing more matters in house.

In exploring the priorities facing in-house teams in the coming year, there is no shortage of big goals. The stated top priorities for In-house teams are relatively unsurprising: control costs, staffing, and keep data secure. While these are mainstays on the priority list, legal departments are seeing an increased focus on technology adoption and ESG (Environmental, Social, and Governance).

Cost Control

For in-house teams, controlling cost will be a key focus in 2023. In fact, 85% of respondents indicated controlling cost is a high priority. When faced with economic uncertainty, this is a smart approach.

By focusing on bringing matters in house, which almost half of survey respondents indicated was a high priority, is a solid start. 80% of departments reported that a quarter of their work is handled by an outside firm. With the increase in matter numbers maintaining strategic partnerships with outside firms will be imperative to control cost and still have the subject matter expertise necessary to manage important matters.

For outside firms providing alternative fee arrangements could help solidify relationships with in-house teams. The survey indicated that less than 20% of work is billed using an AFA. Teams shared that outside firms haven’t provided good alternatives to traditional billing models, which is an opportunity for law firms to provide clear, mutually beneficial options. AFAs are often viewed as ineffective, but as Thomson Reuters points out, this may be a self-fulfilling prophecy. Information is most often anecdotal rather than being tracked and analyzed in a meaningful way.

In general, a systemized approach to spend management would benefit in-house teams. Only 15% of respondents report having optimized spend management. Most teams look at spend at the macro level where drilling down and examining outside spend by practice group or matter type will likely provide useful insights into how and where to better manage spend.

Help Wanted

If matters are increasing and organizations want to move more matters in house, it begs the question, who is going to do all this work?

Legal Operations staffing is reported to generally be staying flat. However, exactly what, or who, falls into the bucket of legal operations can be hard to define or has been nebulous in the past. Perhaps the evolving definition of the work points to its importance for in-house legal teams.

Even as staffing is predicted to remain flat, 28% of respondents reported being dissatisfied with resource allocation and budget. In this scenario in-house teams will need to be creative in their approach, leaning strategically on outside partners and making purposeful investments in technologies that streamline efforts.

2023: Rise of the Machines

Embracing technology has, historically, not been something that legal teams are known for doing well. However, in 2020 teams were forced into adopting change quickly. While legal tech has become more commonplace, its use isn’t where it should be. Legal departments themselves report frustration on the pace of change.

29% of respondents said that their existing technology, across thirteen different categories, is being underutilized. For organizations making investments in technology, driving better adoption can increase utilization, satisfaction, and help teams more fully realize the benefits of the investment.

Often the decision to add software is seen as the solution to one problem which can limit the approach and the success. In viewing software as an opportunity to refine and enhance existing processes teams have the ability to streamline work rather than simply automate a step or two. Through thoughtful selection and implementation, better training and education, teams and individuals can be better prepared to truly embrace technology.

Where teams expect to make their next technology investments isn’t surprising. Most groups indicate that they expect to invest in AI for contract analysis, legal workflow automation, contract management, knowledge management, and robotic process automation. All areas that can help alleviate a human resource crunch, though most groups also report dissatisfaction with their technology budgets remaining flat or decreasing.

In addition to adopting new technologies to enhance work efforts, in-house teams must keep a strong eye on data security. Both in the practical approach to keeping sensitive information a legal team houses secure and the legal team’s role in the event of an organization-wide breach. As cybersecurity incidents increase, understanding the legal ramifications for their organization is critical.

Moving Forward

In-house teams and outside counsel will undoubtedly increase their reliance on legal operations professionals. Understanding that the next year will likely be challenging in terms of budgets and resourcing, they will have to find ways to address these challenges. For big companies it may be easier to adapt, while smaller organizations may have to find ways to do more with less. Technology can ease the burdens of staffing issues when thoughtfully implemented and should be considered as a strategic investment, then measured to provide insights into its return on investment. Though the road ahead looks bumpy, it’s important to realize that the legal market is better positioned today than before the recession in 2008.