The role of corporate in-house legal teams is more important than ever. Through sustained effort, many have become the key strategic partners their business needs to thrive.
But a new survey by Everlaw and the Association of Corporate Counsel underscores how much opportunity remains. Facing skyrocketing outside counsel costs on the one hand and internal calls to slash budgets on the other, many in-house teams report that there is still significant room for improvement, whether in leveraging technology, partnering more effectively internally and externally, or shaking legal's reputation as "the department of no."
The report, The State of Collaboration in Corporate Legal Departments, made headlines in part with its finding that in-house legal teams are ramping up their efforts to bring more matters in-house – and deploying AI to help with the workload.
The results seem to have resonated throughout the industry, with more than a dozen publications highlighting the key findings, which also generated an animated discussion on Bob Ambrogi’s Legaltech Week podcast.
In-House Counsel Embrace AI to Help With Costs
This year’s survey showed that by far the leading corporate counsel cost containment strategy is to bring more work in-house, according to 66% of respondents. Notably, the cohort saying they’ll use technology and AI to help reduce costs tripled over last year, from 12% to 33%.
“Most corporate counsel say they intend to bring work in-house to gain control over outside legal costs and many of them expect technology, including artificial intelligence, to help them do it,” writes Bloomberg Law’s David Jolly in “Corporate Counsel to Use AI to Bring Work In-House, Cut Costs.”
Above the Law editor Joe Patrice says it’s an interesting development. “It suggests that even though Big Law may not be super excited about these products quite yet, the clients are starting to really feel like this is a place where they have leverage,” Patrice said on the Oct. 27 Legaltech Week Podcast episode.
Check out other publications taking note of the growing interest in tech/AI to reduce costs:
1 in 3 In-House Teams to Use AI to Reduce Costs (LawyersWeekly)
ACC: AI and Budget Constraints: A Look at Corporate Legal Trends (Legal Community Mena)
Podcast: Lexis+ AI Launch, DOJ + Pro Bono Union, and More (Legaltech Week Podcast, Oct. 27, 2023)
Legal’s Long-Standing Reputation as “Department of No” Remains Tough to Shake
Corporate in-house teams have come a long way in demonstrating their value within their organizations, but have work to do before they’re considered true strategic partners. And they know it.
The survey found that although an overwhelming majority of respondents feel highly valued by their companies (74%), more than half say their department is seen as a roadblock that slows down projects (58%), while 41% say they are viewed as too risk averse. Those lingering perceptions may be the reason nearly half are brought into strategy discussions after major decisions have been made.
“We live in a time when legal does need to be at the table, just with a more realistic risk appetite on behalf of the company."
Writing for Corporate Counsel, reporter Trudy Knockless says in “In-House Attorneys Still Shackled With Perception They're Impediments to Be Avoided” that legal department leaders have the power to put the negative reputation behind them. It starts with improved communication, she says, especially with other senior leaders, and clarity around legal's responsibilities.
Legal departments need to confront the underlying reasons they're being excluded, Catherine Choe, Everlaw's director of legal ops, told Knockless. “We live in a time when legal does need to be at the table, just with a more realistic risk appetite on behalf of the company," Choe said.
Today’s General Counsel also focused on in-house legal teams’ challenges around getting a seat at the table in “Legal Ops and Law Departments Left in the Dark on Strategic Decisions.”
Smaller Firms Stand to Gain a Bigger Share
Another notable way corporate legal professionals are looking to rein in costs is by rebalancing work with outside counsel.
The second-most-popular cost-control strategy is shifting work from big firms to smaller ones that provide similar or higher value, highlights Knockless in a second article, “In Cost-Saving Bid, Legal Departments Snatching Back Work From Law Firms.” That strategy is favored by 39% of all respondents.
Above the Law’s Joe Patrice takes a look at what the “inhousing” trend means for outside counsel in “Cost-Cutting Clients Look To Bring More Work In-House Next Year.”
“Firms may find a looming structural challenge coming from their clients” as corporate counsel plan to bring even more work in-house in the coming year, he writes.
Stephen Embry at TechLaw Crossroads, on the other hand, says he sees an opportunity for law firms who provide practical solutions rather than theoretical advice in “The Harsh Reality of Being In-House Counsel: An Opportunity for Outside Lawyers?”
Embry writes that the opportunity will go to those outside counsel who step up and “provide transparency about fees and what they are doing. Who are frugal with the billable hours. Who make their clients feel like their work is the most important work they do.”
Outside Counsel Score Low on Predictability, Transparency
In addition to outside counsel cost considerations, the survey shows mixed results when it comes to collaborating with external partners.
Corporate law departments rank law firms highly for the quality and responsiveness of their communication and collaboration, but far less so in other competencies. Project management, transparency, and predictability are all areas for improvement.
Of the 373 U.S. in-house legal professionals participating in the survey, just 4% said they were extremely satisfied with law firms' transparency into costs, writes Hugo Guzman for Corporate Counsel in Legal Departments Frustrated by Law Firms' Lack of Transparency, and just 7% were extremely satisfied with transparency into law firms' processes.”
Major benefits of better collaboration with outside counsel include enhanced operational efficiency, cited by 32% of respondents, and greater freedom to focus on risk management and business issues (27%), the survey shows.
Insights to Inform the Year Ahead
Prepared with the ACC, “The State of Collaboration in Corporate Legal Departments” features candid responses from nearly 400 U.S. CLOs, GCs, in-house counsel, and legal ops professionals about how they rate collaboration and transparency with their internal and external partners.
Download your copy and see how legal teams feel they’re valued by their organizations, what their priorities are for the coming year, their greatest challenges when it comes to tech deployment and use, and more.