3 legal operations benchmarks for both law firms and legal departments
The notion of legal operations is commonly associated with corporate legal departments, but it may surprise some in the community that legal ops got its start within law firms.
According to McKinsey, legal ops “began with practice groups and operations management within law firms” before being adopted by in-house legal teams.
That bit of modern legal history is part of what makes the 2022 Legal Ops + Tech Survey by Bloomberg Law interesting. It shows both sides of the legal table have some operational benchmarks in common.
Below are a few of the findings that stood out to us.
1. Who leads the legal operations team?
Most respondents said a lawyer leads the legal operations function – as opposed to an operations professional. This was largely true for both legal departments and law firms.
Here’s how the answers to the survey broke out:
- 71% said a lawyer leads the legal operations function;
- 30% said an executive leads the legal operations function; and
- 25% said an operations professional leads the function.
Fewer than 10% of respondents said an MBA or a business development professional leads the function. Similarly, some respondents said no one was designated with the responsibility.
Observations: This is somewhat surprising from a law firm perspective because as the business of law has grown more complex, law firms have openly welcomed subject matter experts to help with specialized tasks. Billing, pricing, strategy, technology and business development are classic examples of areas of expertise where law firms have become increasingly dependent on allied professionals.
We see some variety in the backgrounds of legal ops leaders among our corporate customers. For example, the function is led by a lawyer at Phoenix Group, while at Royal London it is not. Both organizations have done exceptional work – so the key takeaway is to keep an open mind and implement what works best for your organization.
2. What are the goals for legal operations?
The survey asked respondents to identify what their organizations have tasked their legal operations team with achieving. This is one question where the answers are segmented by law firm and corporate legal responses.
Respondents from law firms identified their organization’s legal operations goals as follows:
- 43% said increase profitability;
- 40% said increase revenue;
- 36% said business development;
- 24% said increase efficiency;
- 22% said reduce costs; and
- 21% said diversity and inclusion.
Respondents from legal departments identified their organization’s legal operations goals as follows:
- 48% said increase efficiency;
- 34% said reduce cost;
- 25% said implement technology;
- 25% said manage contracts;
- 25% said manage knowledge; and
- 20% said manage budgets.
Observations: The law firm goal of profitability and the client’s goals of efficiency and cost reduction are not mutually exclusive. Clients don’t typically have an issue with a law firm making a profit. They do have an aversion to the opacity around billing and invoicing because it inhibits them from understanding the efficiency of their legal operations and accurately forecasting spend. The solution to this problem is transparency which we’d add is a two-way street.
In addition, we thought it was noteworthy that just 34% of respondents on the client side identified cost reductions as a primary goal of legal operations. We believe this is supported by our own research which found predictable legal pricing outweighs lower cost – particularly in high-end legal work.
3. How do organizations measure legal operations value?
The survey asked respondents, “How does your organization measure the value of legal operations?” The answers are modestly different depending on whether the respondent worked for a law firm or a legal department – but they do have one measure in common.
The top ways law firms measure the value of legal ops:
- 43% said lawyer time spent on billable matters;
- 42% said write-downs of time on routine tasks;
- 29% said time spent on non-billable tasks;
- 24% said time spent per legal matter; and
- 20% said budget-to-actual spend comparison.
The top ways legal departments measure the value of legal ops:
- 55% said outside counsel spend
- 46% said in-house legal spend
- 29% said budget-to-actual spend comparison
- 28% said matters handled internally
- 25% said total cost of resolving a legal matter
- 23% said legal spend as a percentage of company revenue
Observations: More in-house teams have outside counsel spending on their list of metrics than do those that have in-house legal spend. Yet research from the ACC suggests these teams are increasingly taking more work in-house and spending more legal budget internally. Legal ops may feel more pressure to get a handle on total legal spend, including inside and outside spend.
Separately, the one measurement of value both law firms and legal departments have in common is comparing the budget-to-actual legal spend. It’s here that legal spend management tools, like Apperio, can go a long way to helping build a collaborative and common operating picture as to the status of matter, budget and work-in-progress.
See how Apperio makes life easier for Legal Ops.
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The survey polled 190 legal professionals from both law firms and legal departments. The full report is freely available for download without registration: 2022 Legal Ops + Tech Survey.
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