Photo by Andrew Harrer/Bloomberg
Photo by Andrew Harrer/Bloomberg

Spending in Law Departments is Rising, But the Money Isn’t Going to Law Firms

Total legal spending is up slightly — by 2 percent — according to HBR Consulting’s 2015 Law Department Survey. But, not surprisingly, outside counsel spending is flat compared with last year.

Spending within legal departments grew only 3 percent.

“Departments are prioritizing internal operations, hiring internally, investing in new or upgraded technologies, and raising total compensation for their employees,” Kevin Clem, who leads HBR’s Law Department Consulting practice, said in a statement.

There’s some good news for those working in-house: The average increase in total compensation, including base salary, cash bonus and long-term incentives, was 3.5 percent.

“There’s a continued push to manage the costs of outside counsel,” according to Lauren Chung, HBR consulting senior director and survey editor.

“Organizations are taking aggressive measures, like the consolidation of firms, use of analytics and use of alternate fee arrangements and detailed budgets, to control for these costs, which is having a direct impact on legal spending.”

The survey was based on results from 308 companies representing 22 industries, up from 292 participants in the 2014 survey.

When asked to forecast their legal needs, 76 percent of those responding said “their legal needs would increase in the next year, compared to just 19 percent that thought demand for legal services would stay the same,” according to the statement.

Areas projected to be the busiest are regulatory work and mergers and acquisitions. That finding may prove instructive as law firms think of their own lateral hiring.