Last month the Association of Corporate Counsel Australia published its ‘2017 Benchmarks and Leading Practices Report‘. Two leading take-outs from this Report being bounded about are:
- ‘the average total legal spend for ANZ in-house legal departments has increased from $3.1M in 2008 too $4.3M in 2017’, and
- ‘[average] external legal spend has increased from $1.8M in 2015 to $2.6M in 2017, representing a 30% increase.’
In what many, including myself, have called one of the world’s most competitive legal environments, with most reports showing flatline revenue levels for law firms at best; the fact that a report by in-house itself shows that there has been a significant uplift in external legal spend over the two years between 2015 and 2017 should give us comfort. But for some reason that doesn’t seem to be the case. Clearly this uplift isn’t being shared equally among firms and there appears to have been some significant winners, with rather more losers.
Other take-outs from the Report include:
- More than half (51%) of GCs time is spent on ‘urgent high importance/highly strategic work’ – with the most essential skills and attributes required to being a successful GC being ‘the ability to translate complex information into simple communications, active listening, strategic thinking, broad business understanding and influencing skills‘. I would argue that many of these skills need to be top of mind for private practitioners too.
- 80% of organisations rate project management as an important tool for improving the efficiency of in-house legal departments – yet more than half of in-house legal team (63%) have ‘no formal workflow management system‘.
- Worryingly, the dominate project management principle used for ‘complex matters’ briefed out to external providers is, to ‘scope the work‘ (49%) [‘Obtain quote(s)’ is number 3 among cited project management practices]. I believe that if external legal providers are genuine in their declared aim of being trusted advisors to their clients, they may want to look at helping in-house up-skill in this clearly important area.
- The top three considerations used to determine when matters should be outsourced or in-sourced are: (1) Whether external expertise is required (82%), (2) Current and projected internal workloads (59%), and (3) Amount of budget available for outsourcing (30%).
- Work types most likely to be briefed externally are (1) tax (33%), (2) litigation/arbitration/ADR (19%), (3) employment/workplace relations (17%), and (4) banking and finance / capital markets (17%).
All importantly, in such a competitive market, the primary reasons behind in-house legal departments choosing one firm over another are:
- ‘the chosen firm demonstrates an understanding of their requirements’ (72%),
- ‘has specialist expertise’ (67%)
- ‘provides good value’ (53%)
With the drivers of satisfaction being:
- ‘demonstrated understanding of the role of in-house counsel’ (91%)
- ‘demonstrated understanding of the organisation and its goals and priorities’ (89%), and
- ‘the provision of commercially applicable advice’ (89%).
On the issue of billing:
- 42% said that ‘hourly billing was not ideal’, but no alternative was provided,
- disappointedly, 71% cited ‘discount hourly rates’ as the most common form of billing arrangement, but
- the adoption of AFAs has increased from 28% in 212 to 42% in 2017.
Nonetheless, 88% of in-house counsel are ‘satisfied with their top provider’, meaning it remains extremely difficult to break an incumbent relationship.
One final take-out from the Report that needs to be seriously taken on-board by external (private practice) legal providers is this: – “women now account for 50% of head of legal functions“.