Legal Spending Up 3% According HBR Survey

September 26, 2013 – (Chicago, IL) – Companies worldwide increased total legal spend by 3 percent, according to the 2013 HBR Law Department Survey.  “This modest growth reflects stabilization in the efforts to control and manage legal costs for law departments,” said Lauren Chung, Senior Director and Survey Editor. “In recent years, law departments responded aggressively with a strong focus on cost reduction. These efforts have allowed them to contain costs amid rising legal demand and cost of services.”

Once again, the HBR Survey had record-breaking participating numbers with 280 companies contributing data. This trend supports the growing focus among law departments on data and metrics to manage, measure and communicate the effectiveness of the in-house legal function.

“We are very pleased with the continuing growth in our participant base,” said Christopher Petrini-Poli, Chief Executive Officer. “Leading law departments are relying heavily on metrics and data analytics to better understand their legal spending and operations. Now more than ever, best-in-class legal functions seek reliable benchmarking data as a proactive performance management tool.”

Key spending and staffing data from the Survey include the following:

♦  2012 total worldwide legal spending increased by 3 percent according to this year’s survey. Inside legal spending (cost on compensation and operating expenses for the law department) climbed 5 percent, while spending on outside counsel rose 2 percent.

♦ In the United States, total inside legal spending also rose 3 percent in 2012.  Contributing to this overall rise is a 5 percent increase in inside spend and a 2 percent increase on outside counsel spending.

♦ Legal spending outside the United States has remained relatively unchanged – Total legal spending increased 1 percent; inside legal spending grew by 4 percent; outside counsel spending declined by 1 percent.

♦ There has been a slight increase in outside counsel rates - The average hourly rate for the three top-billing firms is $461 in the United States, up from $458 reported in the last survey.

♦ In-house staffing continues to grow, although at a slightly slower pace compared with the 2012 Survey results. Worldwide, 52 percent of participants reported an increase in the total number of lawyers between 2011 and 2012. This is down from the 57 percent of participants that had an increase between 2010 and 2011. Outside the U.S., 38 percent of participants experienced an increase in the number of lawyers between 2011 and 2012. This is compared with 41 percent of participants that had an increase between 2010 and 2011.

The HBR Law Department Survey provides comprehensive data on legal spending, staffing, organization, compensation and management practices. The 2013 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 280 companies, a 7 percent increase from the 2012 Survey. Approximately 26 percent of participants are companies with more than $20 billion in revenues. Nearly 67 percent of participants have revenues at or above the 2013 Fortune 500 level; this includes companies that are privately held or based outside the United States. The 2013 Survey reports data for 2011 and 2012.

The HBR Survey is unique among law department surveys in its continuity during the past 30 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 $32 million worldwide and $25.5 million in the U.S. Total legal spending as a percent of revenues worldwide was 0.32 percent. The median inside legal spending was $12 million worldwide and $10 million in the U.S. Inside legal spending as a percent of revenues worldwide was 0.13 percent. The median outside counsel spending was $17 million worldwide and $12 million in the U.S. Outside counsel spending as a percent of revenues worldwide was 0.19 percent.

Legal Staffing

The median company reported 32 lawyers worldwide and 22 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 56 worldwide and 43 in the United States. Per billion dollars of revenues, the median company had 6.5 total legal staff worldwide and 7.4 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 Contracts - Commercial make up the top three on the list. Forty-seven percent of participants noted an expected increase in demand in the regulatory practice area. This is slightly down from the 50 percent reported last year. Other top areas with forecasted increases in demand include International (holding steady at 44 percent for the past two survey), and Contracts - Commercial (37 percent in 2013, slightly down from 39 percent in 2012). Last year, Regulatory, International and Government Relations were identified by participants as the top areas with expected growth in demand.

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.