Corporate Legal In-sourcing and Knowledge Management- Part 1

April 29, 2013

Recent studies and research have shown the unprecedented growth and shifting of corporate legal work from outside counsel back to in-house. While the idea of cutting costs by reducing fees to outside counsel, is certainly not a new one, this particular shift is different- according to the researchers. If correct, this research raises several important issues: 1) What evidence do we have that there is a new trend? 2) What makes this trend different than the past? 3) Why is it happening now? 4) How can corporate legal departments handle the additional workload? 4) How does this impact Knowledge Management – specifically, can the corporate legal department easily, quickly and effectively find, understand and use the desired information on a subject that they collected and worked with in the past? Or do they have to keep re-inventing the wheel?  

Here are some e answers to these questions. Ben W. Heineman Jr. former General Counsel at General Electric, cites two important trends in a recent Harvard Business Review blog post:

1. “The general counsel, not the senior partner in the law firm, is now often the go-to counselor for the CEO and the board on law, ethics, public policy, corporate citizenship, and country and geopolitical risk.”[1]

2. “There has thus been a related, dramatic shift in power from outside private firms to inside law departments.”[2]

The Altman Weil 2012 Chief Legal Officer Survey adds additional fuel to the argument by asking over   200 Chief Legal Officers what they have done in the last 12 months to control costs – their highest management priority as reported in the 2011 Survey.  According to the survey, 47% of law departments shifted work from law firms to in-house lawyer staff; and, 36% reduced the total amount of work sent to outside counsel[3]. In 2012, 38% of law departments report that they plan to increase their in-house lawyer workforce in the next 12 months, while at the same time, 39% of law departments decreased their outside counsel budget in 2012, compared to 34% that increased it. [4]This is the first time in three years that the survey has found more departments decreasing than increasing their law firm spend[5]. Clearly, these figures show that this change is tangible and is already occurring.  

I’ll examine such issues as “why now”, what are the “change drivers” and how KM is involved in this equation in my future blogs. Stay tuned.


[1]Heineman, Ben. W. “ The Rise of the General Counsel”, Harvard Business Review Blog, September 27, 2012 http://blogs.hbr.org/cs/2012/09/the_rise_of_the_general_counsel.html

 

[2] Ibid

 

[3] www.altmanweil.com/CLO2012   p.3  © 2012 Altman Weil, Inc. 2012 Chief Legal Officer Survey

 

[4] Ibid

 

[5] ibid

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