As any Fortune 500 general counsel will tell you, briefing law firms is not cheap. And stories of billing rates exceeding $1,000-per-hour and associate starting salaries hitting $160,000 certainly reinforce that notion. Hence the continuing calls from in-house lawyers for their external providers to become more efficient.
But, it turns out that the internal costs of large law departments have been growing more rapidly than their external costs. According to Altman Weil’s 2007 Law Department Metrics Benchmarking Survey, internal costs for in-house law departments of large companies ($5 billion or more in revenues) increased 7% over the previous year, while outside counsel costs were up just 1.4%.
Similarly, the Hildebrandt 2007 Law Department Survey found that, for law departments in large companies ($10 billion in revenues), inside legal spending increased by 8% compared with outside counsel spending growth of 3%. “This trend is not surprising considering the increase in compensation for in-house counsel. Compensation costs are over 80% of total inside legal spending,” said Lauren Chung, editor of the Hildebrandt survey.
These findings suggest that general counsel now need to focus their energies on internal productivity. In his Legal Times article Drowning in Contracts? [PDF], Hildebrandt law department consultant Rees Morrison notes that the activity which consumes the largest amount of law department time is contract review and preparation. According to Morrison, how effectively in-house lawyers “process contracts determines in a major way their clients’ satisfaction with the department and the department’s managerial prowess.” Morrison’s article goes on to list 30 ways that law departments can streamline their handling of contracts.
So, how much money could you save your company by improving the contracting process? If your organization produces lots of similar, standard form contracts (such as sales and supply agreements, employment contracts, procurement documents, licenses, and leases) you’d be amazed at the answer.