A survey of chief legal officers by the consulting firm Altman Weil found that 76 percent of the respondents think there will be a recession in the United States within the next two years, which may be fuelling caution on law department hiring and spending levels, according to Altman Weil's 2019 Chief Legal Officer Survey.
Pulling back expenditure
CLOs in manufacturing and consumer products companies believe their industries are the most vulnerable to recession. “Many law departments pulled back on in-house and law firm expenditures in 2019, and fewer plan increases to lawyer staff in 2020," says Altman Weil principal and survey author, James Wilber. "The changes are moderate, but we see a contraction across all key indicators.” On total law department budget, 40 percent of law departments increased their total budget in 2019 and 38 percent decreased overall spending. This differs significantly from 2018 when 53 percent of departments increased total spend and 29 percent made budget cuts. Outside counsel spend saw only 27 percent of departments increasing their spending on law firms in 2019, down sharply from 42 percent of departments that did so last year. The number of departments making decreases was 34 percent in 2019 and 32 percent in 2018. In-house expenditures rose in 47 percent of departments from 2018 to 2019 and decreased in 23 percent of departments. This represents a pull back from the prior year when 54 percent of departments reported in-house budget growth and 21 percent made cuts. In-house hiring results show 36 percent of law departments plan to add in-house lawyers in the next 12 months, down from 42 percent in 2018.
More ops managers
The number of law departments with operations managers jumped from 39 percent in 2018 to 46 percent this year. Because adding operations professionals is the most effective means of improving law department efficiency according to CLOs, these additions are in keeping with emerging economic caution in law departments. “Since the last recession, law departments have added operational management specialists, invested in new technology, restructured in-house resources, and have become more sophisticated consumers of legal services,” says Mr Wilber. "We believe chief legal officers and their teams will be well equipped for a downturn if or when it comes."