In-house counsel can see how their teams stack up in size, spend and service use in a report released Tuesday by the Association of Corporate Counsel.
Legal teams spanned 71 industries and ranged in size from one lawyer to more than 1,000. The median legal department had four lawyers, one paralegal and no legal operations professionals. Most legal teams accounted for a small percent of their company’s total staff, accounting for 0.3% of employees.
Team size tends to increase with company revenue, the report found, with 8.7 lawyers for every $1 billion brought in.
Lawyers can be overly ambitious when it comes to cutting legal spend, according to the report. The media legal department budgeted just over $1.6 million for 2018 spend but spent $1.9 million. Respondents’ average budget, which could be skewed by larger legal teams, was around $12.4 million while spend hit $16.6 million.
“One thing we see time and time again is that moving off of the billable hour generates better results,” said Catherine Moynihan, the ACC’s associate vice president of legal management services, in an email. “For as much as we talk about value-based fees, two-thirds of in-house law departments still use hourly billing.”
Reducing legal spend was ranked as a key performance metric for departments, yet the average respondent gave their team 3.6 out of 5 satisfaction rating for efforts to cut costs.
Around half of that spend is going to internal legal costs, the report found, at the median and average level. Median in-house spend was nearly $850,000. That breaks down to $560,000 for lawyer compensation.
“Law departments consistently spend the most on labor/staffing—it’s the brainpower to handle the legal matters facing the company,” Moynihan said. ”However, over the past few years, we’ve seen an overall trend towards insourcing, where law departments spend more on internal staff and resources rather than spending on outsourcing.”
The median cost of an in-house lawyer per hour was $90. Mining industry counsel earned the most at $123 per hour and wholesale trade lawyers earned the least in-house at $74.
Firms drew 90% of the remaining half of legal spend for the median department, though 5% is going to alternative legal service providers. Outside spend was 0.2% of total revenue for the median company.
The report also highlighted what work stayed in-house and what was sent to firms.
Almost all respondents’ legal teams kept contract management internal, at 97%. This work was performed by lawyers, versus paralegals or legal ops, in more than 80% of respondents’ departments. More than 40% of the teams have adopted contract management technology.
“Contracts are one of the areas of law where understanding the needs of the business is paramount,” Moynihan said. “In-house counsel are uniquely positioned to do this well, and best. Compared to outside providers, they are more integrated with the business clients.”
Document management, invoice review, legal operations and records management were also kept in-house for most departments. The matters most likely to be outsourced were litigation case management, litigation legal hold and legal research.
The median legal department used 10 firms, listing three “significant” firm relationships.