30 Nov 2016

Use of AFAs expected to rise next year, says new survey

In-house counsel are predicting growth in the use of alternative fee arrangements in the new year.

A recent survey conducted by the Association of Corporate Counsel has found that 50 per cent of chief legal officers and general counsel are expecting the use of alternative fee arrangements to increase in the coming year. The survey results include responses from 300 legal leaders across 37 industries 25 countries. The report found that those legal departments most highly valued within their organisation were those that maintain consistent budgets, adopt an innovative approach to their work, and utilise management practices to help drive efficiency. Additionally, the report suggests that using AFAs ensures a greater than 90 per cent chance of keeping to budget targets, and thus helping to manage expensive litigation and other legal costs.

Changing role of the CLO

Only 30 per cent of respondents in the ACC Law Department Management Survey 2016 said they were planning to decrease their use of AFAs next year. For those companies who have already seen an increase in the use of AFAs and other efficiency and management strategies, the hiring of a law department chief of operations or other operations professional was cited as a common driving factor. ACC chair and ChetWode general counsel Iohann Le Frapper explained: ‘As the role of CLO evolves, the leader of the law department is expected to participate in the important discussions that shape the company’s trajectory and business strategy. Implementing various management practices and applying innovation, more frequently led by legal operations professionals, provides the CLO with more time to spend on strategy.’

Technology and efficiency hand-in-hand

Interestingly neither the volume of litigation work nor the regulatory burden placed on a company were identified as predictors of whether or not a legal department employs efficiency-focused management practices. Rather, it was the size of legal departments and the extent to which they had embraced legal technologies that correlated with whether or not a department had ventured into the management practices cited by the ACC survey. Larger departments were far more likely to be using management practices and techniques, as were those with more advanced technological means. Around 65 per cent of respondents said their department had automated some processes through the use of technology, while 75 per cent practiced value-based staffing whereby work is allocated internally to lawyers and non-lawyers alike based on complexity and risk.

The full ACC report can be viewed here