Law Department Managers Hold The Line On Spending

Friday, October 1, 2004 - 00:00

The newly released Altman Weil Law Department Management Benchmarks Survey
reports total corporate law department spending per lawyer did not increase
in 2003 despite law firm rate increases and other economic pressures. Lawyer
staffing levels were also unchanged.

"The fact that General Counsel were able to hold the line in this market is
noteworthy," comments Altman Weil principal Daniel J. DiLucchio. "We know law
firms raised their rates during the same time period, and yet we don't see that
reflected in law department expenditures.

This suggests that law departments are finding ways to manage legal services
more efficiently and effectively, including: selecting the right outside counsel
for the right kind of work; consolidating work with fewer firms; implementing
better substantive case management procedures; and negotiating alternative fee
arrangements. We're also seeing a strengthening trend toward the use of
e-billing software which enables law departments to better monitor and control
outside counsel costs."

Law Department Expenditures

Total law department expenses in all companies surveyed averaged $868,742 per
lawyer in 2003, virtually unchanged from the previous year.

Internal expenses represented 48% of total expenses on average. Of those
internal costs, total compensation and benefits expenses per lawyer represented
82.3% of expenditures and overhead and occupancy represented 16.8%.

Outside expenditures accounted for 52% of total law department costs. The
Survey reports the highest percentage of non-litigation outside counsel fees
went to general corporate practice (11%) and intellectual property (8.5%). For
litigation practice areas, the greatest spending was on commercial/contracts
(11.9%) and labor/employment (8.7%).

Law Department Staffing

Lawyer staffing in corporate law departments was stable in 2003, with the key
measure - lawyers per billion of revenue - also remaining virtually unchanged at
3.5 lawyers/billion compared with 3.6 lawyers/billion in 2002. Staff positions
however were reduced, with paralegals falling to an average .9
paralegals/billion in revenue down from 1.5 per billion in 2002; and
administrative staff reported as 1.8 administrators/billion compared to 2.4 per
billion in 2002.

Operational Issues

The Survey reports an average 22.4% of law departments are tracking lawyer
and paralegal time. Of those who track time, 48.5% do so in detail by matter.
Additionally 23.3% of law departments surveyed charge internal clients for
attorney time and 55.7% charge back a portion of outside counsel costs to
operating units.

In a trend first noted in last year's Survey, more law departments are
instituting electronic billing systems. 11.8% of all respondents currently use
e-billing software - up from 7.7% in 2002; and an additional 3.8% are currently
implementing such a system. The prevalence of e-billing software directly
correlates with size of law department, with 30.6% of departments with 26 or
more lawyers currently using e-billing.

Outside Counsel Relationships

When selecting outside counsel, 31% of law departments rated firm
specialization as the most important criterion, followed by responsiveness (17%)
and costs (16%). When asked about relationship blunders law firms make, law
departments ranked 'lack of responsiveness' first, followed by 'over-lawyering'
and 'over-billing.' However, only 16.2% of law departments report that they
formally evaluate outside counsel.

While only 22.8% of law departments participated in a customer satisfaction
survey from their outside law firm in the last year, 53.5% of those who have see
'some' or 'great' value in such a survey for maintaining a good relationship.

The Survey

The Law Department Management Benchmarks Survey , published in
partnership with the Association of Corporate Counsel (ACC), tracks U.S. law
department expenditures, outside counsel relationships, operations and staffing
and is a companion study to the Altman Weil Law Department Compensation
Benchmarking Survey
.

The 2004 Survey includes data from 154 companies, 31% with revenues of $5
billion or more. Survey data is reported by sales revenue, number of corporate
employees, industry type and law department size. Data was collected in the
spring of 2004 and reports on fiscal year 2003.

The Survey can be purchased for $495 from Altman Weil Publications. Orders
and inquiries can be made by calling 888-782-7297 toll-free or by visiting the
firm's online store at href="https://store.altmanweil.com">https://store.altmanweil.com. Altman
Weil Publications conducts and publishes numerous surveys of the legal
profession including the Law Department Compensation Benchmarking Survey, the
LAMA Paralegal Compensation Survey
and the Survey of Law Firm
Economics
. For additional information visit our website at href="http://www.altmanweil.com">www.altmanweil.com.