Ten takeaways from the Thomson Reuters Legal Tracker LDO Index

Nearly a decade has passed since the Great Recession, marking a milestone event forever changing how corporate legal departments manage their operations and outside counsel. A recently released survey, the Thomson Reuters Legal Tracker LDO Index, provides deeper insight into the evolution of the corporate legal department function. The LDO Index provides answers to some of the most pressing questions facing legal departments like, “What methods of cost control are considered most effective?”, “How much has average spend per matter decreased due to cost controls?” and “What are the most highly utilized reporting metrics?” The inaugural edition includes both survey data and data from Thomson Reuters Legal Tracker software solution, representing over $71B in legal spending and over 1,000 legal departments.

Here are the top 10 takeaways:

1. The legal department operations function has reached a tipping point. 51 percent of legal departments surveyed reported a dedicated legal operations function.
2. For large legal departments ($50M+ in annual legal spend), legal operations isn’t just an option, it is a reality. 93 percent of large legal departments reported a dedication to legal operations.
3. Most legal departments reported being “proactive” in their spend management – including some combination of use of billing guidelines, invoice audits and legal bill reviews, and processes for management of timekeepers and matters.
4. Legal departments that focus on legal operations are going beyond the proactive to the optimized or predictive. Organizations are combining their operations team focus and the utilization of technology to leverage the data available to take action.
5. The volume of legal work – defined by the number of legal matters – is increasing. That increase is widest among small legal departments (less than $4M in legal spending) and large legal departments (legal spending over $50M).
6. Legal departments are using a variety of methods to handle the increasing work – and that method doesn’t necessarily translate to more human resources. A variety of methods are being used to handle doing more with less, including greater focus on legal operations, effective cost controls on outside counsel, and more use of technology.
7. The numbers for average spend per firm and average spend per matter year-over-year have been relatively flat or decreasing – however, overall the number of firms being utilized has increased. Am Law 50 firms enjoyed the highest average growth in rates YoY across index averages.
8. Organizations face greater pressure to increase efficiency and maximize cost-effectiveness. Methods determined most effective for cost control include enforcement of billing guidelines, auto-reduction of invoice expenses, requiring law firm matter budgeting, fixed/flat fees set at the matter level, and volume discounting. Cost-control methods determined least effective (high utilization but low ratings as effective) include use of blended hourly rates and utilization of corporate procurement policies.
9. Legal departments have identified a handful of common metrics used widely across the profession. Most common metrics include total spend by law firm, matter type, and practice group.
10. Less commonly utilized metrics across all legal departments are more utilized by sophisticated legal departments. Law firm diversity, costs avoided and matter cycle time may be indicative of new legal department trends.

Want to see how your legal department compares? Download the full LDO Index for a deep dive into the themes above and to compare your legal department’s performance.

About Legal Tracker

This look at the benchmarking for corporate legal departments comes from Legal Tracker – the most widely used e-billing, matter management, reporting, and analytics system. To gain access to more trends for legal operations, please visit legaltracker.com.

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