Huron Consulting Group Releases Fifth Annual IMPACT Benchmarking Survey to Track Legal Spend
Majority of Law Departments Use Analytics to Drive Decision-Making, Huron Legal Survey Finds
The 2014 IMPACT survey shows that law department cost management programs are becoming more sophisticated in light of ongoing financial pressures. One indication of the increased intensity is that over half of the law departments surveyed (57%) reported using market data and analytics to drive decision-making, most commonly to inform decisions about outside counsel fee arrangements and rate negotiations (41%).
“This year’s survey results confirm what we are seeing in the market –
law departments continue to evolve in efficiency and value delivery,”
Best Practices Lead to Lower Spending
According to surveyed law departments, those that employ best practices related to financial and outside counsel management had 48% lower external legal spending as a percentage of company revenue than those without similar comprehensive programs. Some of those best practices reflected in the survey responses include the following:
- Matter management and e-billing technology
- Detailed matter level budgets
- Alternative fee arrangements
- Evaluation of outside counsel adherence to billing guidelines
- Defined panels/pre-approved lists for sourcing
Of the respondents, 43% indicated that legal spend is expected to be the
same as last year, and of entities with over
“We find with our law department clients that there is no
one-size-fits-all solution that results in spending reduction across the
The survey also found that more law departments are integrating comprehensive management programs throughout their law department operations. These programs often include the following initiatives:
- Widespread Use of Alternative Fee Arrangements: The use of alternative fee arrangements (AFAs) has continued to increase with 83% of law departments reported using AFAs in 2014. Forty-eight percent of responding law departments reported that AFA spend accounted for at least 10% of their total outside counsel expenditures. On average, AFA spend accounted for 20% of total outside counsel spend.
- Increased Emphasis on Budgeting: Consistent with last year’s findings, matter level budget usage remains high across all revenue segments with 75% of departments reporting the usage of these budgets. The majority of law departments continue to establish their matter level budgets at the fee and expense level. However, the percentage of departments reporting the establishment of budgets at the phase/task level has increased from 37% to 57% since last year’s survey.
Focus on Law Department Management Technology: A majority (70%)
of companies with over
$10 billionin revenue reported that their law departments have a long-term strategic technology and process development plan which includes matter management, e-billing, and contract management. The reported use of matter management and e-billing systems has increased notably since 2011; matter management/e-billing technology is used by 85% of companies with over $10 billionin revenue.
The 2014 IMPACT Benchmarking Report encompasses survey data collected from 75 companies of varying size and industry. Unless otherwise noted, all quantitative questions pertain to fiscal year 2013 data and all qualitative questions gauge more generally the ongoing practices of the law department.
About Huron Legal
Huron Legal provides advisory and business services to assist law departments and law firms to enhance organizational effectiveness and reduce legal spend. Huron Legal advises on and implements strategy, organizational design and development, outside counsel management, operational efficiency, and discovery solutions, and provides services relating to the management of matters, contracts, documents, records, digital evidence and e-discovery. Huron Legal is not a law firm; it does not offer, and is not authorized to provide, legal advice or counseling in any jurisdiction. Learn more at www.huronconsultinggroup.com/legal or follow us on Twitter: @HuronLegal.
Huron Consulting Group
Jennifer Frost Hennagir