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‘Law Departments Have to Act’ on Cost Savings After COVID Inspired New Efficiencies

By Dan Clark for Law.com

In-house legal departments focused largely on resource management and cost optimization in 2020, spurred by the COVID-19 pandemic, according to a report published by HBR Consulting on Thursday.

“COVID has really prioritized [cost savings] among law department leaders and created an environment where law departments have to act,” Lauren Chung, a practice group leader at HBR Consulting in New York, said. “It’s not just a nice to do, it’s almost a mandate to make a change in response to what’s happening more broadly in the organization.”

HBR conducted its study between April and November, surveying in-house lawyers at 175 organizations across 15 different industries.

The report shows that despite the pandemic, legal departments are still hiring in-house attorneys. Among the respondents to HBR’s survey, 18% indicated that they planned on making cuts to the legal department in 2020 while 44% of legal departments said they intended to add attorneys this year.

“In this cost control environment, we need to bring in the right resources for the long term,” Chung said. “We want to make sure we’re building capabilities to handle not just the current challenges but the longer-term cost control method.”

And 84% of legal departments indicated they would continue to see an increased demand for legal services for the foreseeable future while being constrained by decreasing budgets.

Cost control is not a new concept for legal departments. However, COVID-19 has made legal departments reevaluate their work processes and their relationships with outside counsel.

“Cost savings is a dimension. But it’s really about the evolving needs of the organization and provides closer alignment with clients,” Chung explained. Beyond looking to add in-house attorneys, Chung said general counsel have a renewed focus on evaluating their outside counsel.

The survey reflected the same, as 91% of respondents indicated they have taken steps to reduce spending on outside counsel in the past year, and 34% of respondents said they have implemented tougher enforcement of outside counsel billing guidelines.

“It’s not just about more work being done in-house, but are the right firms doing the right work?” Chung explained. “Being much more thoughtful about that has yielded significant savings for law departments.”

Other dimensions in cost savings include looking at how the work can be shifted to alternative legal service providers. “We’re also seeing opportunities from a cost-saving perspective for the role of technology,” Chung said.

The report said 61% of respondents reported that they have implemented contract management technology. But not all legal departments are purchasing new technology—46% of legal departments reported increased use of existing technology to meet increased demands.