A recent study from the Blickstein Group reveals that law department operations are not extraordinarily concerned about ongoing pandemic-related impacts to business — instead, they’re more concerned about funding, diversity and cost savings.
The 13th Annual Law Department Operations Survey focused on the impacts of 2020. The annual survey seeks to provide law departments with a consistent platform for benchmarking themselves and shedding light on trends.
“This year’s survey offers what may be the first real data on the pandemic’s impact on law department operations,” the survey states. “And as respondents noted, the impact so far has not been too substantial — in some cases it even provided opportunities for the operations functions.”
PANDEMIC CONCERNS, OR LACK THEREOF
While the COVID-19 pandemic is still on the minds of LDO professionals, the survey claims that it is not at the top of their minds. Although this might come as a surprise to those familiar to industry downturns, survey respondents said “COVID-19 was not even close to the biggest” of their top challenges.
In total, 60.3% of survey respondents reported their current top challenge was cost containment and managing a budget — however COVID-19 budget cuts didn’t even make the top three — only 11% considered COVID-19 related budget cuts as a concern. The results show that COVID-19 budget concerns are instead near the middle of the list. Survey respondents reported that business process improvements and departmental resources, such as funding personnel, was their second highest concern, followed by tech and retention.
This placed COVID budget cuts not only behind the top three concerns but also below the challenges of staying abreast of law department tech and IT issues, service providers, such as outside counsel, intra-departmental relationships and performance.
In fact, the only COVID-related issues reported by survey respondents were COVID-19 budget cuts, which was noted by 11% of respondents, and pandemic-related expense pressures and work from home/return to work, both at 9.6%. These COVID-19 concerns were ranked above concerns on handling international matters, promoting diversity and inclusion, compliance issues and regulation.
Further, only 6% of respondents said that they had noticed a diminished ability of their internal legal team to deliver work product due to COVID-19 and working from home. “Almost all respondents were able to serve their clients seamlessly,” according to the survey.
“And when asked to rank how much the legal operations function has changed due to or since COVID-19, most reported that there had been little impact,” according to the survey.
FINANCIAL IMPACTS
The survey notes that LDO Survey Advisory Board member Amy Yeung, a general counsel and chief privacy officer at Lotame, said the companies involved with the survey often have more mature legal operations processes or departments, so there might not have been a need to pivot “as sharply” as other departments for technical outlays in order to adjust to the COVID-19 pandemic.
A key metric of the industry during economic downturns is the impact on law firm hourly rates, according to the survey. Current data shows a “major shift” from the impacts of the 2008 recession. In 2008, rates stayed flat and were sometimes reduced before rebounding.
This time, it might be a different story. The survey reports that only 9% of respondents expected rates to go down in 2021, and roughly 46% expect to pay more this year. “While that represents a significant decrease from the 70% of respondents that got hit with rate increases last year, it is clear that, despite the downturn, many LDO professionals are not planning to hold the line on rates.”
A big fear for law firms at the start of the pandemic was clients pushing for discounts, according to the survey. But LDO professionals didn’t seem to be asking for them at an increased rate, or if they are, “they are not getting them.”
The survey notes that data around discounted bills didn’t change “significantly” from 2019–2020, and in 2020 respondents reported that 96% of their firms discounted hourly bills — a small increase from 91% in the previous year’s survey.
Roughly two-thirds are getting discounts “on more than half their bills.” The survey states that is not a pandemic-sized increase from 2019 when LDO managers reported 56% of discounts on over half of their bills.
“Other expected cost-saving measures have barely been impacted as well,” the survey states. Although LDO professionals showed concern about budget pressures and moving work “offshore” but when actually asked whether they plan to move work only 16% reported yes, barely budging from 2019’s survey.
The survey quotes Yeung’s explanation that the results of the survey indicate senior leaders are recognizing that “a shortsighted approach to cost savings can ultimately cost more.” The 2020 economic environment was a good chance to pivot the organization, she said, but not necessarily at the cost of short-term gains.
“Companies still need to be in a strong position—or as strong of a position as they can relative to others in the industry—coming out of this,” the survey quotes Yeung. “That includes the talent footprint.”
While the legal function has traditionally been placed in the corporate office, as companies become more global, there’s more pressure to recognize and provide support consistent with cultural events and time changes that affect the commercial calendar, according to Yeung.
OTHER IMPACTS & DIVERSITY
And while legal department operations weren’t changed drastically by the pandemic, the survey predicts that fallout from the pandemic could stick around for some time.
According to the survey, 70% of respondents say the pandemic accelerated their moves toward automation and digital transformation. Because using data more effectively is a long-term vision for some law departments, the ability to focus on these initiatives for extended periods may help departments catch up to other business units.
LDO managers were offered a chance to comment on what the pandemic changed. The survey says many cited new opportunities with working from home, and one respondent said that there’s been a new cultural acceptance of remote work. Another respondent claimed that working from home worked just as well, if not better, than in the office.
Some others reported that legal operations are now playing a larger role than before the pandemic.
The survey also noted the other “major storyline” of 2020 was diversity and inclusion. Throughout the year, the emphasis placed on racial justice in some areas was noticed by corporate America, according to the survey.
Despite the many statements about diversity and inclusion from companies, the survey states that improving D&I still is not a priority for many survey respondents. When asked to rank top challenges, only 8% of respondents put D&I and civil justice in their top three.
“In fact, for many it ranked among the least important,” according to the survey. “And few expected that to change in the next three years, either.”
Still, law departments are making some efforts to move forward on D&I, according to the survey. Roughly three-quarters of respondents reported tracking department diversity efforts — an increase from previous years. Inside of diversity programs, more than half focused on recruiting, mentorship and training.
Roughly three-quarters of respondents track how diverse law firms are overall, and 65% track hours spent on matters for diverse attorneys while 50% of respondents provide clear mandates and expectations for outside counsel. Only 6% have financial penalties for noncompliance or lack of diversity and inclusion for their law firms, and less than half of respondents, approximately 42%, frequently reassess their programs to improve their efforts.
“At a time when every company in the United States should be considering social justice and equity, the focus on D&I remains markedly low,” the survey states.
—Avery Martinez