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In-House Report: Flat Fees Up, Travel Down

News flash: Corporate law departments are tightening their belts.

That may strike you as a bulletin on par with "Dog Bites Man." But it is useful every so often to get some hard-and-fast data to confirm what we all suspect -- and even to shed some light on what is happening out there in the real world of law department spending. In this case, the news comes from the Hildebrandt consulting firm, which just released its 2009 law department survey.

The survey paints of picture of spending internally and on outside counsel. For the latter, the survey shows what many have suspected -- more companies are asking their outside lawyers to ditch the billable hour in favor of flat-fee pricing. More than half the 231 companies surveyed said they have implemented or will implement non-hourly fee arrangements. Another 27 percent said they are considering them.

As Amy Miller at Corporate Counsel magazine writes, even the survey's editor is not surprised by this. "Everyone wants to do it," Lauren Chung, director of Hildebrandts' law department consulting practice, tells Miller. "But the question is: to what extent? Will they make up 5 percent of legal spending or 100 percent? It will be interesting to see to what extent they will be utilized."

In terms of inside spending, law departments are cutting corners by reducing non-essential spending. The most common cuts are in travel, with 82 percent of departments reporting reductions in their travel budgets and another eight percent weighing them. Next to go are meetings, with 77 percent of companies reporting cuts in spending for meetings and training.

While travel and meetings may be the most common cuts, salaries and staffing could be the biggest. Surprisingly, 90 percent of companies say they have no plans to reduce salaries for in-house legal staff. If that's the good news on the salary front, the bad news is that over half have plans to freeze salaries or already have.

At least those who face a salary freeze still have a job. Some 27 percent of law departments have reduced staff and another 10 percent are considering cuts. Still, 63 percent of companies have no plans to cut the number of in-house lawyers they employ and 59 percent have no plans to reduce support staff.

Of course, if the economy remains weak, the belt-tightening will continue. Hildebrandt's Chung predicts this will lead even more companies to pursue alternative fee arrangements with outside counsel. "Alternative fees might not work for every type of matter or case," she says. "But I think the number will certainly increase going forward."

Posted by Robert J. Ambrogi on November 24, 2009 at 01:00 PM | Permalink | Comments (2)


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