Downturn Could Catalyze Welcome Change for In-House Counsel

By CHRIS DECONTI

The economic challenges we face in 2023 will likely only exacerbate longstanding demands on in-house legal departments to handle “more work, more quickly.” According to Thomson Reuters’ 2022 Legal Department Operations Index, these teams are already overstretched and understaffed. Sixty-five percent of corporate legal departments see their volume of work increasing, but a smaller percentage of CLOs expect to increase hiring in 2023. Just 38 percent say they plan on hiring more lawyers this year compared to 45 percent last year, according to the Association of Corporate Counsel’s 2023 Chief Legal Officers Survey.

Yet we believe in-house counsel can thrive in this challenging environment by understanding what bogs them down and developing efficiencies to balance those aspects of their work with the complex advisory matters that align with the corporation’s business goals. Here’s how:

HOW DID WE GET HERE?

Companies have long had in-house counsel, but legal departments grew rapidly as organizations expanded exponentially alongside rampant M&A activity in the mid to late 20th century. General Electric’s legal team epitomizes this growth: what started as a sleepy department of 33 lawyers in 1987 transformed into a 1,000strong behemoth by 2006.

As legal teams became a bigger part of the overall business, they started facing the same pressures as their peers in other departments: do more with less. Now, 88 percent of general counsels expect to make budget cuts over the next three years, even as they predict a 25 percent greater workload. The mounting cost of outside counsel only makes matters worse. Newly qualified lawyers now bill hourly what a partner did ten years ago.

Newly qualified lawyers now bill hourly what a partner did ten years ago.

Ultimately, as in-house legal teams grapple with these pressures, more work will land on the same desks, making for long hours filled with more tactical, less fulfilling work. This, in turn, contributes to the mental health crisis we now see in the legal industry. Research has shown that almost three out of every four lawyers have reported experiencing anxiety, depression, or other mental health challenges.

WHY NOW?

These challenges should come as no surprise to anyone who has worked in the legal sector for some time. So, what’s changed that makes this so urgent?

Velocity.

“Do more for less” has long been the underlying challenge. But as an anticipated recession heightens cost pressures, we’re now seeing this maxim transform to “Do more for less, quicker.” As increased velocity drives the system to its breaking point, rationing sets in. When this happens, the urgent (like the sales contracts that the business needed yesterday) wins out over the strategic (like the proactive advice that keeps the company out of the scandal sheets).

That’s a problem.

With the complexities of a recession looming, advisory counsel will be more important than ever, but in-house teams floundering just to handle the day-to-day aspects of their work won’t be of much use. However, this pressure presents an opportunity for in-house teams to really think about where they want to be spending their time.

What can we do?

Legal departments can overcome these challenges by identifying the work that tends to bog teams down. In our experience, we’ve seen that this is neither low complexity grunt work nor high-end advisory. Rather, it’s work with enough subject matter and stakeholder interaction complexity to require some real judgment, and it occurs frequently enough and in sufficient volumes that handling costs matter. We can call this the challenge of complex legal work at scale.

Addressing it requires in-house teams to conduct a thorough self-assessment. Consider these three requirements:

• Expertise. As a non-negotiable starting point, the team must have sufficient knowledge of the relevant legal subject matter and market know-how

• Business integration. Because this legal work often sits in the middle of a larger business process (e.g. making a sale to a new client), it must be carried out in alignment with upstream and downstream stakeholders, corporate databases, systems and processes

• Efficiency. To comply with “more for less, more quickly” this work must be efficiency-enabled with new technologies, processes and/ or resourcing strategies

Today’s in-house teams must take an honest look at themselves, and develop a ranking of how prepared they are to address complex legal work at scale. Where they find a gap in their capacity to solve this challenge, they should develop plans to address the issues today rather than waiting for the wider macroeconomic storm clouds to come crashing in.

If they do, they may not just solve their immediate problems, but set themselves on a course to fundamentally change the way they operate for years to come. Ultimately, if this point in time presents the catalyst that pushes in-house teams to address their biggest problem of complex legal work at scale, and existentially reconsider what business they truly want to be in, it will be remembered as a welcome inflection point.

Chris DeConti is Chief Strategy Officer at Factor, an Integrated Law provider that works alongside corporate legal departments to manage complex transactional legal work. An expert in legal managed services, he helps lead Factor’s corporate strategy and global business development.