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1、Thomson Reuters Institute 2023 Legal Department Operations IndexBuilding a focus on protecting and enabling the business Thomson Reuters 20232023 Legal Department Operations Index 2Executive summaryCost control and efficiency rank high on the list of corporate general counsel priorities across the g

2、lobe,and particularly in the US.1 It is,therefore,understandably incumbent upon those responsible for overseeing the operations of corporate law departments to align with these priorities in ways that benefit both the law department and the broader enterprise.This is no small mandate,and it requires

3、 focus on a large number of priorities.At the same time,legal department operations(LDO)professionals must also structure their efforts in a way that reflects the broader realities around them including technology trends,economic influences,and the changing strategies and alignments of outside couns

4、el law firms.To better understand how LDO teams are balancing these often-competing interests,the Thomson Reuters Institute is pleased to produce this latest iteration of our Legal Department Operations Index.Among the key findings in this report:A strong majority of law departments are experiencing

5、 an increase in the volume of legal work.At the same time,many are trying to handle an increasing share of their workload with internal resources rather than outside counsel.At the same time,nearly two-thirds of law departments report that total department budgets are either flat or decreasing,furth

6、er reinforcing the“do more with less”mantra.A majority of law departments report an increased use of legal technology tools in the past year,despite a generally slow pace of adoption of new technology.For the majority of law departments,attorney headcount is unchanged,meaning the increased volume is

7、 placing a greater strain on in-house lawyers.Controlling outside counsel costs remains the top“high priority”item on LDO agendas.A majority of law departments are increasing focus on using legal technology tools to help manage workflows.However,most law departments also report the share of their bu

8、dget devoted to legal technology is remaining flat,meaning law departments looking to increase operational Most law departments are facing increasing matter volume,especially matters handled in-house,but with flat or decreasing budgets.1 Thomson Reuters State of the Corporate Law Department 2023 rep

9、ort,https:/ Reuters 20232023 Legal Department Operations Index 3METHODOLOGY The results contained in this report,unless otherwise cited,are derived from an online survey of legal department operations professionals in the US,conducted in June and July 2023.n=71Total$1 billion38%$1 billion-$5 billion

10、27%$5 billion-$10 billion10%$10+billion25%n=108MeanAttorneys36.8Paralegals9.5Legal operations staff5.1Other21.5Source:Thomson Reuters 2023Approximate annual gross revenuesMean number of legal department employee rolesefficiency via technology need to get a higher return on their technology investmen

11、t to see increasing value out of their spend.Efforts to control costs,particularly with regard to law firm rates,appear to be bearing fruit,although more innovative ways to price and track legal work remain uncommon.LDO professionals are increasingly concerned about threats posed by data security is

12、sues.While LDO professionals want to place a greater focus on legal operations,additional headcount and budget are hard to come by.The metrics tracked by LDO teams cover the financial aspects of the law department well,but they may not be comprehensive enough to provide a broad overview of all areas

13、 of responsibility.Questions around how legal teams work and return-to-office policy remain common,and many law departments are seeing their policies set by the broader enterprise.19+21+18+8+23+11ALegal department staff sizen=108150+11%1-9 19%10-24 21%50-74 8%75-149 23%25-49 18%Figure 1:Respondent p

14、rofile Thomson Reuters 20232023 Legal Department Operations Index 4PrioritiesTechnology conundrumOther priorities may be sufferingTrends78%say controlling costs is a high priority72%see using technology to simplify workflow as a high priority90%say their dept.makes only slow to moderate progress in

15、adopting new tech66%report flat or decreasing budgets43%brought more work in-house last year and nearly the same expect to do so againOnly 32%report an increase in legal tech budget22+78F10+90F57+43F32+68F78%29+71F72%90%Only 29%report increase in legal operations staffFewer departments reporting hig

16、h priority in law firm diversity information.34+66F66%70%report an increase in matter volume35%report increasing attorney count14%report declining headcount70%71+29F29%75+25F25%202283+17F17%2023Figure 2:Key findingsSource:Thomson Reuters 2023 Thomson Reuters 20232023 Legal Department Operations Inde

17、x 5Trends impacting todays law departmentTodays corporate law department is faced with myriad forces some pushing while others pull but all influencing how the attorneys within the department serve the interest of the enterprise and meet the goals of the department.Respondents were asked to give a d

18、irectional indication of the impact of some of these trends on their departments operations.Over the last 12 months,how have the following areas trended within your legal department?n=108Source:Thomson Reuters 2023Volume of legal work-number of legal mattersUse of legal technology toolsOutside couns

19、el spendingPercentage of work handled in-house-measured by number of legal mattersTotal number of active law firmsNumber of internal headcount-attorneysTotal legal department budgetLegal department budget for technologyNumber of internal headcount-devoted to legal operationsUse of alternative fee ar

20、rangementsUse of legal process outsourcing/alternative legal service(LPO/ALSP)providersDecreasingFlat-no changeIncreasing Figure 3:Legal department trends70%24%43%53%5%36%50%14%35%51%14%34%40%26%32%57%10%29%62%9%26%70%4%22%73%5%53%43%5%47%32%21%6%Chief among the trends influencing legal department o

21、perations today is the increasing volume of legal work.Some 70%of respondents report an increasing volume of legal work,more than the 65%who reported an increased volume last year.Even among the relatively Thomson Reuters 20232023 Legal Department Operations Index 6small portion of departments not r

22、eporting an increase in legal work,very few report any sort of decrease.The resulting conclusion is that high workloads for corporate legal departments are a near universal reality.Law departments will have had to decide how to allocate this increasing volume of matters between law firms,alternative

23、 legal providers and the in-house team;the chart above shows that departments are using a mixture of these strategies.Interestingly,the outside resource of choice appears to continue to be law firms rather than alternative legal service providers(ALSPs).Only 22%of respondents report increasing utili

24、zation of ALSPs,while 47%report an increase in outside counsel budgets.At least some of this increase in law firm spend is due to an increasing number of outside counsel as 36%of respondents report working with a higher number of law firms than a year ago.At the same time,as we will see later in thi

25、s report,many LDO professionals are in fact looking to reverse this trend,and reduce the number of firms they work with.In a somewhat surprising corollary to this finding,this years report actually shows a smaller percentage of law departments reporting an increase in the share of legal matters hand

26、led in-house rather than by outside counsel.According to this years results,43%of respondents report an increase in the percentage of work handled in-house,compared to 52%who reported an increasing in-house share last year.However,this may be explained,at least in part,by last years results.Given th

27、e large percentage reporting an increasing in-house workload from 2021 to 2022,many law departments may feel as though they are operating at maximum capacity.This would be reflected in the greater proportion of respondents who say their in-house share of legal work has remained flat;their plates are

28、 full and the overflow has to be handled by external resources.This theory is further backed up by the fact that,even in light of an increasing volume of legal work,relatively few law departments(35%)report an increase in the number of in-house lawyers.Nearly an equal percentage report an increase i

29、n their department budget.Even fewer report an increase in the number of internal headcount devoted to legal operations(29%).The end result of these factors is a classic illustration of the well-worn corporate trope of“do more with less.”Likely as a means to optimize internal operations and efficien

30、cy,without the need to increase attorney headcount,53%of law departments report an increased use of legal technology tools in the past year,but most have done so without increasing the share of their budget dedicated to legal tech.This increased use of technology no doubt serves to increase the prod

31、uctivity and output of the departments attorneys,a vital outcome given other realities the department may be facing.High workloads for corporate legal departments are a near universal reality.Thomson Reuters 20232023 Legal Department Operations Index 7Please identify the priority your legal departme

32、nt places on the items below.n=108Source:Thomson Reuters 2023Controlling outside counsel costsUsing technology to simplify workflow and manual processesFocus on internal data securityFocus on legal operationsBringing more work in-houseFocus on external data security-outside counsel security practice

33、sUsing business intelligence to inform decision makingBringing e-discovery in-houseReducing the number of law firms utilized-convergenceReliance on AFAs as opposed to hourly ratesUsing diversity data as a factor in firm selectionUse of alternative legal service providers(ALSPs)No priorityLow priorit

34、yHigh priority Figure 4:Legal department priorities78%20%66%23%11%62%29%9%44%34%21%46%35%20%39%40%21%25%29%46%24%41%35%21%32%47%17%34%49%12%35%53%72%23%5%Setting future prioritiesPerhaps as a reflection of both current economic and workload trends,the top“high priority”items on the agenda for LDO pr

35、ofessionals relate to controlling outside legal spend and improving the use of technology.It is interesting to compare the above view,from those in legal operations,with the general counsel perspective from separate Thomson Reuters research.2 Overall perspectives on cost control are similar with GCs

36、 in the US placing a premium on attention paid to cost control.However,the strategies utilized by GCs are informative in terms of illustrating their priorities.The vast majority state that more efficient processes will form a significant part of their cost control strategies in the coming year.Incre

37、asing the amount of work handled in-house also looks to factor heavily,as does the idea of ramping up pressure on law firms for increased hourly rate discounts.Increased use of technology also will likely play a substantial role,creating an avenue for natural alignment between GCs and the operations

38、 teams that make their departments run.2 Cost control remains a top priority for GCs in the US:Strategies for bringing down department spend.”Available at:https:/ Reuters 20232023 Legal Department Operations Index 8Controlling outside legal spendGiven the amount of money most corporate law departmen

39、ts spend on outside counsel,it is understandable that it would rank so highly on the list of department priorities.It is important to note,however,that“controlling”costs is not necessarily synonymous with“reducing”costs.Indeed,corporate general counsel are currently reporting a net spend anticipatio

40、n(NSA)score of 27,3 clearly reflecting that more corporate counsel expect their external spend to increase than expect it to decrease.Which of the following will form a significant part of your cost-control strategy over the coming 12 months?Source:Thomson Reuters 2023Efficient processesBring work i

41、n-houseDiscounted ratesTechnology/AutomationAFAsTriage new mattersMove work to lower-cost firmsEarly settlementMove work to ALSPsHiring freezeFigure 5:General counsel cost control strategies 83%69%68%57%51%50%45%54%26%18%3 To calculate net spend anticipation(NSA),a sample of global corporate counsel

42、 is surveyed on a question of whether,in the next 12 months,they expect their outside legal spend to increase,decrease,or remain the same.NSA is calculated as the difference between the percentage of respondents anticipat-ing a decrease in external spend,subtracted from respondents anticipating an i

43、ncrease.For Q2 2023,47%of respondents expect an increase while 20%expect a decrease for an NSA of 27.Thomson Reuters 20232023 Legal Department Operations Index 9However,that does not mean that expectations surrounding where or how that money is spent are static.An examination of trends regarding the

44、 flow of legal matters clearly shows a continued outflow of legal work from the largest firms into smaller,often more cost-effective law firms.Number of responses:Q2 spend expectation(380)Figure 6:Net spend anticipation(NSA)Source:Thomson Reuters 2023Plan to increasePlan to decreaseNet spend anticip

45、ationTotal legal spend anticipation:Global companies with$1B+in annual revenue 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 23 Q2 23Percent planning spend increasesPercent planning spend decreases34%36%41%36%35%35%38%37%33%-29%-26%-24%-19%-27%-28%-28%42%42%36%38%27%-24%-3

46、2%-19%-24%-29%47%-20%-20%-27%-27%33%27%Figure 7:Demand growth by segmentSource:Thomson Reuters 2023All timekeepers.Billable time type;non-contingent matters.Am Law 1-50 Am Law 51-100 Am Law Midsize Second HundredQ2 2023 vs.Q2 2022 year-over-year change4%2%0%-2%This is particularly true of practice a

47、reas which have been experiencing a surge lately practices colloquially called counter-cyclical practices4 due to the fact they tend to experience upturns during times of relative economic decline.Among Midsize law firms,these practices grew by 5.3%in Q2 2023,compared to just 2.8%for Am Law 100 law

48、firms.4 Counter-cyclical practices include litigation,labor&employment,and bankruptcy.Thomson Reuters 20232023 Legal Department Operations Index 105 Worked rates are defined as the rates clients agree to pay to engage work on a new matter.They are also frequently called agreed rates.This figure repr

49、esents the average increase in worked rates from a sample of 166 law firms in the US,representing 46 from the Am Law 100,48 from the Am Law Second Hundred,and 72 Midsize law firms.We also appear to be witnessing the continuation of a trend first reported in last years LDO Index.In last years data,we

50、 noticed a widening disparity between the increases in agreed rates from law firms and the changes in effective rates paid by clients.At the time,the conclusion was that clients were engaging in a practice known as“tiering”of legal work shifting at least some portion of their legal work from larger

51、firms to smaller firms,resulting in a net cost savings to the client even as the law firm saw an increase in the hourly rates.The relative performance of Midsize law firms in 2023 compared to their larger law firm counterparts indicates that this phenomenon is likely still in full effect.At the midy

52、ear point of 2023,the average law firm had raised worked rates5 by 5.7%compared to the same point in the prior year.However,very little of those rate increases appears to be directly impacting the rates paid by clients.The relative performance of Midsize law firms in 2023 indicates that“tiering”of l

53、egal work is still in full effect.Figure 8:Percentage change in paid rates by clients total revenueAverage Law Firm Worked Rate Increase 5.7%YTD June 2023Company size by annual revenueTimekeeper classificationPartnerOf CounselAssociateUnder$500M-1.1%-3.0%-3.7%$500M-$2B-4.6%-2.4%-6.1%$2B-$10B-2.1%-3.

54、4%-3.0%$10B+-6.8%-7.5%-8.0%Source:Thomson Reuters 2023The data shows that,while law firms are commanding worked rate increases that are approaching historic highs,clients have managed to find ways to blunt the impact of those increases,creating instead some significant rate savings.How is this possi

55、ble?Tiering of legal work no doubt has much to do with it.Hypothetically,an Am Law 100 law firm and a Midsize law firm could both raise their worked rates by the average increase of 5.7%.If we assume the Am Law 100 firms rates were higher to begin with in terms of actual dollar value,then from a cli

56、ents perspective,every hour of work shifted from the Am Law 100 law firm to the Midsize law firm would result in a net cost savings to the client,even though the Midsize law firm implemented just as large an increase.The client simply shifted work to a lower-cost service provider.As shown in Figure

57、5,50%of US general counsel are indeed planning to shift work to lower-cost firms.Thomson Reuters 20232023 Legal Department Operations Index 11At the same time this tiering is occurring,24%of LDO professionals report a high priority being placed on convergence reducing the number of law firms they wo

58、rk with.This too can be an example of controlling costs as work can be consolidated within law firms that consistently deliver better value to the client,even if that law firm isnt necessarily any cheaper.The resulting increase in experienced value and simplification of outside counsel relationships

59、 helps improve the value of each dollar spent.Given the volume of legal work handled by outside counsel,the potential for cost savings is potentially significant.Figure 9:Working with outside counselSource:Thomson Reuters 2023How would you rate your companys sophistication in management of legal spe

60、nding?n=108Predictive 9%Optimized 19%Proactive 44%Reactive 23%Chaotic 5%Predictive-Active management of matters with collaborative involvement from attorneys,outside counsel and legal operations;detailed matter budgets,predictability and forecasting;benchmarking performance.Optimized-Centralized man

61、agement of rates;utilization of RFPs,bids or discounts to set rates;focus on internal processes that drive down costs;advanced reporting on legal department performance.Proactive-Use of billing guidelines,invoice audits and legal bill review;defined process for management of timekeepers and matters.

62、Reactive-Use of e-billing system;basic reports on spending.Chaotic-Legal invoices outside of e-billing system;no consistent way to report on legal spending.Please estimate the overall percentage of legal work handled by outside counsel.n=10775%-100%50%-74%25%-49%10%-24%0%-9%24%32%24%10%11%Percentage

63、 of legal work handled by outside counselLegal spending sophistication Thomson Reuters 20232023 Legal Department Operations Index 12The vast bulk of corporate LDO professionals surveyed report that the majority of their legal work is still handled by outside counsel.Yet the plurality of those survey

64、ed characterize their handling of outside legal spend as merely“proactive,”meaning they employ strategies such as billing guidelines,invoice audits,and defined processes for timekeeper management,but they do not employ more advanced strategies such as forecasting of detailed matter budgets,benchmark

65、ing,centralized management of rates,or focusing on internal processes that drive down costs.Please rank the measures that are effective for cost control in your department,where 1 is the most effective,2 the next most effective,and so on.Rank all measures that you use in your department.n=108 Source

66、:Thomson Reuters 2023General enforcement of billing guidelines-reduction of invoice fees and expensesRegular review of budgets to actual spending on high-cost mattersLaw firm matter budgets-requiredStandard discounts on proposed timekeeper rate cards(e.g.10%off rack rates)Reduction of timekeeper rat

67、e increasesVolume discountUtilization of preferred vendors/panel programReduction of invoice expensesFixed/Flat fee-Set amount at group level(matters of a similar type)Fixed/Flat fee-Set amount at matter levelFixed/Flat fee-Set amount(s)at certain stages in litigationBlended hourly rates(e.g.fixed r

68、ate for partners,fixed rate for associates)Regular meeting with firms to discuss and set ratesCompetitive bidding(Legal-driven RFP)Utilization of corporate(non-legal specific)procurement policiesLimitations on the use of first-year attorneysRank#1Rank#2Rank#3 Figure 10:Cost control measuresGeneral e

69、nforcement of billing guidelines is by far the most effective cost control measure.Other top cost control measures include regular review of budgets and required law firm matter budgets.11%18%36%12%12%8%3%13%13%10%8%7%7%7%7%7%6%7%7%5%5%5%5%4%6%4%3%7%4%3%5%3%3%3%3%5%3%Thomson Reuters 20232023 Legal D

70、epartment Operations Index 13Currently,strategies to manage legal spend rely heavily on tried-and-true methods.General enforcement of billing guidelines through invoice review and reduction remains the top cost control measure,a place it has occupied for a number of years.Regular reviews of budgets

71、to actual spend saw a jump in this years results,moving from fourth on last years list to second this year with more respondents likely to rank it as their first or second most-effective strategy than last year.Discounts and matter budgets also remained popular methods for cost containment.However,i

72、n keeping with respondents self-reported levels of spend-management sophistication,more sophisticated methods of cost control were not highly ranked in terms of their effectiveness.It might be tempting to conclude that these methods are not highly ranked because they are not particularly effective.H

73、owever,given the relative lack of sophistication reported by survey respondents,a more likely conclusion is that strategies such as preferred panels,fixed fees,blended rates,or legal-driven RFPs are not as widely used and therefore are not as likely to be ranked as highly effective.The concept of al

74、ternative fee arrangements(AFAs)6 as a potential tool for cost management is one that merits a bit of further exploration.Figure 11:Non-hourly based AFA outside legal spendSource:Thomson Reuters 2023What percentage of your companys outside legal spend is structured as a non-hourly-based(i.e.,flat or

75、 fixed fee)alternative fee arrangement(AFA)as opposed to hourly rates?n=1071-20%AFA21-40%AFA41-60%AFA61-80%AFA81-100%AFANone56%11%7%2%22%2%Percent non-hourly based(flat or fixed fee)6 For the purposes of this survey and report,AFAs are defined as non-hourly based billing arrangements.Consequently,ho

76、urly billing arrangements such as discounts to hourly rates or volume discounts based on the number of hours billed would not meet the definition of an AFA even though these are commonly used billing methods.The most common responses among those surveyed regarding their use of AFAs were that such bi

77、lling arrangements accounted for less than 20%of total department expenditures,or werent used at all.It must be noted that the lack of adoption of AFAs really cant be blamed on LDO professionals.Agreements as to billing practices for matters are often heavily influenced by the in-house attorneys“We

78、want to do AFAs,but its been difficult to work out with our firms.”Thomson Reuters 20232023 Legal Department Operations Index 14assigned to matters,and sometimes even corporate procurement teams.The former,in particular,may be more comfortable working on an hourly basis as that is the long-standing

79、industry standard.Part of the blame must also be shared by the outside law firms.As one respondent stated,“We want to do AFAs,but its been difficult to work out with our firms.”Clients are not giving up,however as shown in Figure 5,over half of US general counsel are aiming to increase the pressure

80、they put on firms to offer AFAs.This is a common refrain among corporate legal teams.Despite more than a decades worth of discussion of AFAs,adoption has remained relatively stagnant due to inertia in favor of hourly billing that has proven difficult to overcome.It is worth noting that the current l

81、evel of AFA adoption was largely driven as the result of changes to the legal economy following the Global Financial Crisis.Current economic woes may spur a second wave of AFA adoption as clients look for more predictable and budget-friendly pricing alternatives.In particular,many law firms have beg

82、un to offer subscription-style pricing models,providing access to lawyers for a certain number of matters,a certain number of hours,or some combination,for a monthly fixed cost with heavily discounted hourly billing set to start once the subscription guardrails are exceeded.Such arrangements remain

83、relatively uncommon,but as clients look for new ways to control costs while also improving the sophistication of their spend management,such strategies may gain in popularity.Law departments in the US could look for inspiration to their counterparts in Europe,where alternatives to hourly rates are m

84、uch more mainstream.Simplifying work through technologyOnly slightly lower on the list of law department priorities is using technology to simplify workflow and manual processes,with 72%of respondents identifying it as a high priority.Legal technology is another area of large expenditure for many la

85、w departments.50%Figure 12:Annual legal technology spending by annual revenue Source:Thomson Reuters 2023Please estimate your companys annual spending for the areas below?If no spend-please indicate 0,if unknown please state unknown“.*Small sample size.$1B$1B-$5B$5B-$10B$10B+n=34 n=25*n=9*n=26*$50K$

86、50K-$100K$100K-$250K$250K-$500K$500K-$1M$1M+14%5%23%8%36%14%32%7%7%13%52%13%9%9%44%33%22%Legal technology Thomson Reuters 20232023 Legal Department Operations Index 15We can see a large variance in legal tech expenditures based on the size of the business.But regardless of the amount invested in leg

87、al tech,businesses of all sizes are looking for assurances that their investment will yield a strong return on investment,and that the solutions deployed will meet their business objectives.Please identify whether your department has a software solution for the processes below and rate the importanc

88、e of that solution to your law department.n=108 Source:Thomson Reuters 2023E-billing/Spend&Matter Managemente-SignatureLegal Hold/Litigation HoldLegal ResearchContract ManagementIP Managemente-DiscoveryLegal Business Intelligence/Dashboarding/AnalyticsDocument ManagementPractical know how-practicePr

89、actical know how-practice notes,checklists,standard documents and clause librariesLegal Project/Legal Task ManagementKnowledge ManagementLegal workflow automationContract AI for analysis,risk assessment,or due diligenceLegal RFPBots/Robotic Processing AutomationNo-Solution not importantNo-But lookin

90、g to procure in next 24 monthsYes-Solution underutilizedYes-Solution valuableFigure 13:Software solution and importance74%19%5%72%18%9%51%17%14%19%45%26%4%25%44%32%14%11%44%16%8%32%41%12%16%32%34%36%11%19%33%32%21%13%32%21%7%40%31%39%5%26%23%19%24%34%22%30%18%31%19%23%26%32%17%14%24%45%12%16%20%52%9

91、%14%15%62%Thomson Reuters 20232023 Legal Department Operations Index 16Once again there is a clear disparity evident in technologies adopted by corporate law departments.The vast majority have adopted solutions such as e-billing technologies to assist with spend and matter management and e-signature

92、 solutions,and the bulk of those adopting both find them valuable.From there,however,we see a dramatic dip in the rates of reported adoption of tech solutions.Roughly half of respondents report they have experienced value from the solutions they have adopted for litigation holds,legal research,contr

93、act management,and IP management.We also see several categories of solutions where a tech tool has been identified and deployed,but is underutilized by a fairly wide margin,including contract management,legal business intelligence and analytics dashboards,document management,practical know-how,and k

94、nowledge management.7 Here again,it is difficult to identify the cause of either slow adoption or underutilization.Figure 14:Pace of technology advancementSource:Thomson Reuters 2023How would you characterize the pace of change in terms of process or technology advancements in your law department?n=

95、108Fast-Large-scale advancement each yearModerate-Demonstrated progress each yearSlow-Few changes each year in how work is doneNon-existent-No change in processes9%56%33%2%Process/technology advancement changeWhen asked to characterize the pace of change in processes or technological advancements wi

96、thin the law department,there is a clear bell curve trending toward moderate or even slow progress.As defined by the results,law departments reporting moderate pace of change show some demonstrated progress every year,but not what the respondent would characterize as large-scale advancement,while la

97、w departments demonstrating slow pace of change make only a few changes in how work is done in any given year.The curve on these responses likely surprises few readers of this report.In-house law departments compete with several strong inertial forces when trying to drive change.First,the lawyers wh

98、o run the department are well versed in their work and very good at what they do.This calls to mind the old maxim that the greatest impediment to change is success.To compound this struggle,lawyers are naturally risk-averse.This is perhaps especially true of in-house lawyers,whose departments exist

99、primarily to protect the enterprise 7 Each of these listed solutions showed at least 30%of respondents reporting they had a software solution for the particular problem identified,but the solution was underutilized.Thomson Reuters 20232023 Legal Department Operations Index 17from risk exposure.Add t

100、o this mix the fact that many businesses are,themselves,slow to adopt changes to ways of working,and one finds a recipe for exactly what the findings here demonstrate an environment ripe for moderate pace of change at best.The relative lack of importance currently placed on advanced technologies,par

101、ticularly those employing artificial intelligence,is also of note in Figure 13.AI generally and more specifically,generative AI(e.g.,ChatGPT)is the hot topic of 2023.However,these survey results help to add a bit of context to many of the discussions happening across the industry.Generative AI is at

102、 the forefront of many conversations regarding the future of the legal profession,and indeed,work in general.However,for lawyers,many of the potential direct impacts remain largely hypothetical.As previously reported by the Thomson Reuters Institute,there is a high level of awareness of generative A

103、I among corporate law departments.8 However,only about 4%of corporate legal departments report they are currently using generative AI for department operations.9 A similar reality seems to be at play in terms of department priorities with regard to other AI-dependent technologies.Contract AI for ana

104、lysis,risk assessment,or due diligence;and robotic processing automation both of which are technologies that would be dependent on AI were among those most likely to be listed by respondents as less important solutions.This may be another example of AI technologies still being nascent enough to not

105、yet be perceived as ready for deployment and adoption.However,the importance placed on AI-based software solutions will likely increase rapidly in coming years.Focus on internal data securityRanking third for highest priority among LDO professionals,10 internal data security remains a large concern,

106、essentially unchanged from last year.It seems hardly a week goes by without news of a company suffering a data or privacy breach.As data privacy rules,like the EUs General Data Protection Regulation(GDPR),become more prolific,the risk presented by data security vulnerabilities expands.As reported in

107、 the 2023 State of the Corporate Law Department report,11 risk and compliance concerns are now the top challenge for corporate general counsel globally.This is likely a function of a few different factors.First,regulations continue to proliferate and may,at times,even be in conflict with one another

108、.A hypothetical company doing business in five states within the US,the UK,and two 8 According to the report“ChatGPT and Generative AI within Corporate Law Departments,”95%of corporate law departments are aware of the innovations surrounding generative AI.https:/ 9 Id.10 See Figure 4.11 Available at

109、 https:/ Reuters 20232023 Legal Department Operations Index 18countries in mainland Europe would likely find itself subject to potentially 10 or more sets of regulations based on the various jurisdictions,not all of which would operate in comity.Second,how businesses interface with their customers h

110、as fundamentally changed.Nearly any business today,regardless of the products or services it sells,is a data business.Customer mailing lists,e-commerce tools,customer loyalty programs,and even mobile apps all carry varying implications for customer data,which in turn carries a heavy regulatory burde

111、n.Failure of internal data security can be existential for a business,not only from the standpoint of regulatory penalties and legal liability,but from the standpoint of brand equity.LDO professionals looking to stay commercially attuned to their business would do well to consider the negative impac

112、t on the businesss brand that a security breach could have.Focus on legal operationsThe final priority identified by more than half of respondents as a high priority is a focus on legal operations.In one sense,this is unsurprising given this was a survey of legal operations professionals.But in a de

113、eper sense,it is a reflection of the number of functions LDO teams touch.Some of these functions,such as managing outside counsel costs,identifying and deploying technology solutions,and protecting data integrity have already been discussed at length.However,much about the role remains to be explore

114、d.First,it is worth noting that more than 60%of law departments report their number of internal headcount devoted to legal operations has remained unchanged for the past year.12Currently,overall legal operations staff numbers remain relatively small,particularly for larger businesses that are more l

115、ikely to have larger law departments.When given an opportunity to elaborate,several respondents commented that much of their legal operations work is handled by staff who are only partially Figure 15:Average LDO staffingSource:Thomson Reuters 2023Business size(revenue)Number of legal operations staf

116、fSmall(Less than$500M)4.4Moderate($500M-$2B)3.1Medium($2B-$10B)6.8Large($10B+)5.710 See Figure 3.LDO professionals looking to stay commercially attuned to their business would do well to consider the negative impact on the businesss brand that a security breach could have.Thomson Reuters 20232023 Le

117、gal Department Operations Index 19dedicated to legal ops functions,but such responsibility is not included in the job title.Given these current staffing trends,it seems likely that legal operations will remain a function challenged by the same“do more with less”mantra confronting the department as a

118、 whole.At least some of this challenge may come in the form of trying to get a better handle on the scope of some of the broader functions of legal operations and how to create meaningful improvements.Please select all of the important metrics that are routinely reported on in your legal department?

119、n=108Source:Thomson Reuters 2023Total spend by law firmTotal spend by practice groupTotal spend by business unitTotal spend by matter typeForecasted/budgeted spend vs.actual spendNumber of legal matters opened&closedLegal spend to revenueSavings from invoice review/reductionSavings/discounts from ti

120、mekeeper rate negotiationSavings by handling matters in-houseAverage matter spend by law firmTimekeeper rates-local marketSavings from alternative fee arrangementsCosts avoided-won case,settled quicklyQuality of legal outcomesSpend to budget by law firmSavings from using legal technologyLaw firm div

121、ersityCycle time-average period of time between opening and closing a matterOutside counsel evaluation resultsOther key metrics not listed(please specify)None of the aboveFigure 16:Important legal department metrics 87%57%56%53%49%48%47%37%32%32%30%27%25%22%20%20%19%18%18%15%3%3%Thomson Reuters 2023

122、2023 Legal Department Operations Index 20A well-known clich holds“you cant manage what you dont measure.”Unfortunately for many LDO professionals,many metrics outside of those related to costs are not routinely tracked.With one exception,number of legal matters opened and closed,any metric tracked b

123、y roughly 50%of respondents or more relates to cost control.Other“value”metrics such as costs avoided by quick settlements,quality of legal outcome,cycle time,or law firm diversity were tracked with much less frequency.This is reflective of a broader reality of the state of legal operations;metrics

124、tracked do not necessarily encompass the full spectrum of department priorities.Law department leaders have competing interests to balance,which can be loosely grouped into four categories.Figure 17:Four categories of law department interestsSource:Thomson Reuters 2023Highly unlikelyHighly likelyTal

125、ent challengesLaw firm performanceBusiness restructuringBusiness growthNew products/servicesInternational expansionEmerging risksNew regulationsBudgetary pressuresTechnological advancesLitigious environmentLaw DepartmentCost efficiencyProtectionEnablementEffectivenessAs evidenced by the survey resul

126、ts,tracking of metrics related to cost efficiency is quite common.Less common is the tracking of metrics related to the law departments effectiveness,how it enables the business,and how it provides protection.LDO professionals looking to expand their coverage in these latter areas should consider tr

127、acking at least some of the following metrics:Rate of staff turnover Volume of work automated Uptake of existing tech stack Thomson Reuters 20232023 Legal Department Operations Index 21Figure 18:Diversity informationSource:Thomson Reuters 20237%Yes-New in past yearYes-1-2 yearsYes-3-6 yearsYes-7+yea

128、rsNo-Plan to launch in coming yearNo18%10%4%16%46%Length of diversity initiative49%YesNoDont know42%10%Use diversity infoDoes your legal department require diversity information from law firms?If yes,how long has your legal department had a diversity initiative?(n=108)Do you use diversity informatio

129、n to determine firm selection?(n=41)Percentage of matter with desired outcome Department net promoter score by internal clients Risks mitigated Disputes resolved without litigation Advancements in DEI and ESG priorities Contacts with sales channelsThis is by no means an exhaustive list.The metrics t

130、hat would be of use to a law department are as varied as the companies served by those departments.But law departments can experience and deliver much greater value by leveraging metrics to encourage meaningful progress in key areas.Law firm diversity as a key metricLets explore the area of outside

131、counsel diversity as an example of a key area that can benefit from metric-driven improvements.Fully 46%of LDO professionals report their company does not have an initiative to require diversity information from law firms,with another 16%saying they do not currently have such a program,but plan to l

132、aunch one in the coming year.Of those law departments who do track outside counsel diversity metrics,only about half actually use that information in selection of outside counsel.Thomson Reuters 20232023 Legal Department Operations Index 22There are likely reasonable explanations for these findings.

133、Many law departments would object that they work with too many law firms for a diversity initiative to be practical,or that privacy regulations in some jurisdictions prevent them from asking for diversity information.These are legitimate concerns,but at least some law departments have found ways to

134、navigate them.Possible solutions could include starting an initiative with only a select group of law firms,perhaps with the top 10 or 20 law firms with whom the department does business,or those sited in jurisdictions where privacy laws are not an impediment.Similarly,law departments might respond

135、that,while they dont use diversity info as a selection criterion for outside counsel,they do in fact use it to help drive measurable improvements in terms of the diversity of their outside counsel.This would,in fact,be a desirable outcome,removing the potential stick for outside counsel concerned th

136、at they may lose work and instead creating a win-win scenario where client and counsel work together to create meaningful progress.However,evolution in this area remains slow.Last year,47%of respondents said they had a diversity initiative in place,compared to 39%this year.This does not mean that co

137、mpanies ended their diversity programs;rather,it is likely an artifact of different companies responding to the survey this year compared to last.However,it is indicative that adoption of diversity programs remains slow.The question of how we workAlthough it has been discussed for several years now,

138、the conversation regarding how law departments and legal professionals in general work remains filled with more questions than answers.Corporate GCs seem torn regarding return-to-office policies.They struggle to find a balance between capturing the long-recognized benefits of face-to-face profession

139、al interaction and the appreciation their staff has gained for the autonomy and flexibility of remote working.For many GCs,the decision is being made for them.Thomson Reuters 20232023 Legal Department Operations Index 23Figure 19:Todays work environment54+42+4AWork environmentLegal department work e

140、nvironment57%More flexible/more hybrid office&remote optionsMore time in officeFully remote/work from anywhereReturn full-time in officeOther25%12%5%1%What is the current work environment expected for your legal department?n=108Is your work environment primarily being driven by n=108Source:Thomson R

141、euters 2023Decisions made by the broader enterpriseDecisions made within the departmentDont know4%54%42%More than half of respondents state decisions regarding work environment and return to office are being made by the broader enterprise.For 42%of responding departments,however,the decision remains

142、 with the department,at least for now.But whether the decision is made by the GC or at a higher level,many of the same concerns regarding the outcome of the policy remain.The option to leave the company to join a law firm remains enticing and quite lucrative,as pay scales for not only lawyers but pr

143、ofessional staff at law firms are still elevated.Many law department leaders are concerned attorneys and staff may decide if they have to be in the office,particularly if they dont really want to be,they may as well be paid more for it.The long-term effects of return-to-office policies have yet to b

144、e seen,and some of the macro trends that have encouraged employers to feel comfortable pushing for more aggressive return policies may yet swing back in the other direction.For now,though,questions of what a law departments work environment looks like remain open.Thomson Reuters 20232023 Legal Depar

145、tment Operations Index 24The role of LDO professionals in todays corporate law department shows no signs of shrinking.In fact,it seems clear the part played by the professionals tasked with ensuring the effective operations of law departments is poised to grow.A key challenge will be marshaling the

146、resources necessary to deliver consistently higher value results for the department and the broader enterprise.Key among these resources will be:Vital data regarding outside counsel spend and performance New metrics both for outside counsel and in-house matters centered around value-added contributi

147、ons An ever-increasing level of sophistication around outside counsel spend management,including a greater fluency with AFAs An ability to drive adoption of new technology solutions to address departmental challenges Increasing familiarity with rapidly evolving tech options such as generative AI An

148、increased quiver of key metrics to gauge department performance broadly,considering the departments effectiveness and ability to enable and protect the business,in addition to controlling costsAdditionally,where and how LDO professional work will continue to evolve.But those LDO professionals lookin

149、g to take a data-driven approach to confronting rising challenges,and who are willing to take calculated risks as leaders,rather than simply waiting to see what approaches others have taken,will be in the best position to deliver innovative,impactful results for both their department and their broad

150、er business.Conclusion Thomson Reuters 2023Thomson Reuters Institute The Thomson Reuters Institute brings together people from across the legal,corporate,tax&accounting and government communities to ignite conversation and debate,make sense of the latest events and trends and provide essential guida

151、nce on the opportunities and challenges facing their world today.As the dedicated thought leadership arm of Thomson Reuters,our content spans blog commentaries,industry-leading data sets,informed analyses,interviews with industry leaders,videos,podcasts and world-class events that deliver keen insig

152、ht into a dynamic business landscape.Visit for more details.Legal Value NetworkThe Legal Value Networks mission is to accelerate evolution in the legal industry.LVN connects business of law professionals from law firms,corporate legal departments,alternative legal services companies,and technology p

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