INHOUSE INSIDER Forum, News, and Career Center for In-House Counsels

10Dec/080

2009 Predictions for In-House Legal Departments

Nearly 75 percent of general counsels responding to a November survey by legal consultants Altman Weil said their legal departments are facing budget cuts averaging 11.5 percent next year.

What will their cost-saving strategies look like?
  • 65% said they would bring more legal work in-house.
  • 57% of in-house counsel at companies with revenues of at least $1 billion said they plan to reduce their number of outside law firms.
  • 53% said they would give additional work to lower-priced outside lawyers.
  • 50.5% said they would require more outside fee arrangements.
That being said, cost-cutting measures will also be internal and in-house legal departments and the lawyers who work there will also be affected.
  • 31% plan to cut lawyer and administrative staff in 2009.
  • 21% plan to cut paralegal positions in 2009.

The decline of in-house counsels has been slight, but steady. The median company employs 3.8 lawyers per billion dollars of U.S. revenues. In the last four years, the number was greater, ranging from 4.2 to 4.7 lawyers per billion dollars of U.S. revenues.

What about projected in-house counsel hiring?

Before Wall Street’s economic meltdown, during the first quarter of 2008, 32.3% of the nation's chief legal officers and general counsels expected to hire more in-house lawyers within a year, 54.6% did not, and 13.1% weren't sure. These numbers have most likely shifted, with fewer companies looking to hire in-house counsels, but the difference might not be as salient as one would guess.

Throughout May and June, Altman Weil surveyed chief legal officers and one of the questions was about hiring new attorneys in the next 12 months. At that time, nearly 50 percent said they were looking to bring on new attorneys. However, during a flash survey conducted by Altman & Weil on department cost control in November, only 25 percent said they would add new attorneys.

In October of 2008, about a third of in-house counsel responding to a survey by the law firm Fulbright & Jaworski were projecting an increase in legal disputes involving their companies for the coming year—and nearly 20% predicted the need to hire more in-house lawyers to manage the expected increase.

While the hiring projections centered mainly on an increase in litigation – some of the legal areas that will require additional attention from in-house counsels will include compliance, regulatory issues, employment matters, intellectual property, and international transactions.

Although the majority of general counsels will look to do more with fewer attorneys, we predict that about 30% will be look to hire additional in-house counsels to handle the additional work in-house, and reduce their outside counsel expenses.

What about compensation?

In-house lawyers in larger companies made an average of $236,000 in pay and bonuses in 2008, up from $226,000 in 2007. But 2009 levels promise to be on the decline, especially at a time when in-house staffing is softening.

  • 29% plan to cut lawyer compensation.
  • 19% say they will reduce staff compensation.

Of those companies not cutting lawyer compensation, we can expect the majority of salaries to remain at status quo, and a minority to increase by a lower margin (expected 5% increase in 2009, over 8% in 2008, and 10% in 2007).

What about bonuses?

  • 31% plan to reduce lawyer bonuses in 2009.
  • 22% plan to cut staff bonuses in 2009.

What does this mean for in-house lawyers?

At the last tally, some 7,300 attorneys nationwide had gotten the ax since June 2008, with more layoffs expected before the end of the year according to the New York Law Journal, in an article reprinted in New York Lawyer (reg. req.). Fewer companies are planning to hire, in the coming year, and more are looking to reduce legal staffing.

In order to secure their positions, in-house counsels will end up having to work more for less money. They will also work with less support – both in terms of outside counsels and internal administrative assistants and paralegals. Resources will be stretched thin. However, most counsels will look to stay with their current companies, as in-house hiring rates will be down in the coming year, and the competition for fewer positions in the marketplace will be more intense than ever.

While 65% of general counsels said they would bring more legal work in-house, 31% plan to cut lawyer and administrative staff in 2009. In other words, in the current economic climate, in-house counsels may be subject to layoffs. They will need to take proactive steps to avoid receiving a pink slip. In-house counsels will have to do more with less, to show greater flexibility, to take on new and added responsibilities, learn new skills especially in the areas of compliance/regulatory matters, and be able demonstrate their value and cost-saving effectiveness.

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