CHICAGO--()--Companies worldwide increased total legal spend by 5 percent, returning to 2009 Survey levels, according to the 2012 HBR Law Department Survey. Contributing to the growth in total legal spending worldwide is an increase in both inside legal spending and outside counsel spending. There were dramatic changes in legal spending levels outside the U.S. with a 9 percent increase in total legal spending.
“This is in line with our observations within the industry that there is a greater desire among companies worldwide for benchmarking data, as well as an awareness of the important role such data plays in effective communication with management concerning law department performance.”
Survey respondents participated in the survey in record-breaking numbers, confirming that metrics have become a key requirement in effective law department management.
“Participation levels for HBR’s 2012 survey increased by 19 percent over last year’s survey,” said Chris Petrini-Poli, CEO of HBR Consulting LLC. “This is in line with our observations within the industry that there is a greater desire among companies worldwide for benchmarking data, as well as an awareness of the important role such data plays in effective communication with management concerning law department performance.”
“The increase in law department spending is significant, because last year spending was down,” noted Managing Director Jonathan P. Bellis, who leads the HBR Consulting’s Law Department Consulting Group. “There is a swing in total spending of 6 percent, and a swing in outside spending of 7 percent.”
“The increase in spending across the board is likely attributable to a number of factors, including the economic recovery, which appears to be slow but continuing, rising outside counsel rates, growth in legal spending and staffing outside the U.S., and an increase in extraordinary expenses,” said Lauren Chung, Senior Director and Survey Editor.
Key spending and staffing data from the Survey include the following:
- Spending levels are up worldwide – The current level of spending is back up to levels observed in the 2009 Survey, which reports data for 2007 and 2008. Total legal spending and outside counsel spending was down for the past two surveys (HLDS 2010 and HLDS 2011). Last year’s survey reported total legal spending was down 1 percent and outside counsel spending was down 3 percent.
- Legal spending outside the United States has grown significantly – Total legal spending increased 9 percent; inside legal spending grew by 12 percent; outside counsel spending increased by 8 percent.
- There has been a notable increase in outside counsel rates - The average hourly rate for the three top-billing firms is $458 in the Unites States, up from $409 reported in the last survey.
- Extraordinary expenses contribute to rise in spending – 67 percent of companies noted they had extraordinary expenses in 2012—one-off spending such as big-ticket litigation and large business transactions that increased legal spending for the year. Last year, 58 percent reported extraordinary expenses.
- In-house staffing continues to grow - Worldwide, 57 percent of participants reported an increase in the total number of lawyers between 2010 and 2011. This is up from the 42 percent of participants that had an increase between 2009 and 2010. Outside the U.S., 41 percent of participants experienced an increase in the number of lawyers between 2010 and 2011. This is compared to 35 percent of participants that had an increase between 2009 and 2010.
The HBR Law Department Survey provides comprehensive data on legal spending, staffing, organization, compensation and management practices. The 2012 Survey also reports information on how the current economic and regulatory environment is impacting law departments.
This year, the HBR Law Department Survey included a record-breaking number of participants with a total of 260 companies representing 21 industries. Over 30 percent of participants are companies with more than $20 billion in revenues. Nearly 70 percent of participants have revenues at or above the Fortune 500 level; this includes companies that are privately held or based outside the United States. The 2012 Survey reports data for 2010 and 2011.
The HBR Survey is unique among law department surveys in its continuity during the past 26 years, focus on larger law departments, orientation toward global as well as U.S. law departments, and emphasis on data consistency and rigorous quality control procedures.
Law Department Spending
The median total legal spending was $31 million worldwide and $26 million in the U.S. Total legal spending as a percent of revenues worldwide was 0.36 percent. The median inside legal spending was $13 million worldwide and $10 million in the U.S. Inside legal spending as a percent of revenues worldwide was 0.14 percent. The median outside counsel spending was $16 million worldwide and $13 million in the U.S. Outside counsel spending as a percent of revenues worldwide was 0.18 percent.
The median company reported 30 lawyers worldwide and 23 lawyers in the United States. Per billion dollars of revenues, the median company had 3.4 lawyers worldwide and 3.7 lawyers in the United States. The median number of total law department staff (including lawyers and all non-lawyer staff) was 59 worldwide and 45 in the United States.
Forecast for Legal Services
The participants were asked to forecast their demand for legal services across 28 different legal practice areas. Regulatory, International and Government Relations make up the top three on the list. Fifty percent of participants noted an expected increase in demand in the regulatory practice area. This is down from the 54 percent reported last year. Other top areas with forecasted increases in demand include International (44 percent in 2012, down from 48 percent in 2011), and Government Relations (39 percent in 2012, down from 40 percent in 2011).
About HBR CONSULTING
HBR Consulting—previously Hildebrandt Baker Robbins and the former consulting arm of Thomson Reuters—is internationally recognized as the leading business and technology operations consultancy in the legal industry. Since being taken private in 2011, HBR Consulting continues to expand on its foundation as a leading provider of consulting services to the legal industry. With more than three decades of experience, we help law firms and law departments plan, implement and measure business, information and technology initiatives.
HBR Consulting helps clients holistically address their needs in the areas of Core Infrastructure, Strategic Sourcing and Business Operations, IT Strategy & Planning, Information Lifecycle Management and Law Department Consulting. For more information, visit www.hbrconsulting.com.