Legal departments face increased workloads and declining budgets: Thomson Reuters report

Legal departments are facing multiple challenges including growing workloads, shrinking budgets, and a need to increase their use of technology, according to the Thomson Reuters 2023 Legal Department Operations Index.

Legal departments are increasingly under pressure to do more with less, the report found. Seventy-percent of departments surveyed report higher volumes of work – compared to 65 percent who reported an increased volume in last year’s survey. However, 66 percent say that their budgets are flat or declining.

At the same time, many law departments are trying to handle an increasing share of their workload with internal resources rather than outside counsel. The percentage of work handled in-house has either decreased or remained flat for 58 percent of surveyed law departments.

Interestingly, the outside resource of choice appears to continue to be law firms rather than alternative legal service providers. Only 22 percent of respondents report increasing utilization of ALSPs, while 47 percent 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 percent of respondents report working with a higher number of law firms than a year ago.

While new technologies, including AI, could help improve efficiencies, legal departments say they are facing what the report terms a “technology conundrum.”

Increasing use of technology is a high priority for legal departments with a majority of general counsel (57%) saying that leveraging technology automation is one of their top cost-control strategies.

As a result, using technology to improve workflow efficiency is their second-highest priority, ranking behind controlling outside counsel costs. In fact, 72 percent of survey respondents see using technology to simplify workflow as a high priority, while 90 percent say their department makes only slow to moderate progress in adopting new tech.

Only 32 percent of legal departments report that their budgets for legal technology are increasing.

“Corporate legal departments continue to face challenges in making the up-front investments in technology needed to keep pace with expanding workloads,” said Laura Clayton McDonnell, president of the corporates segment for Thomson Reuters.

“Efficiency is more paramount than ever as the volume of work continues to increase, and many legal departments are seeking to bring more work in-house. Technologies, including AI, can not only improve efficiency, but potentially position legal departments to move from being cost centers to growth enablers by assisting in the development of new products and services.”

The report was based on an online survey of legal department operations professionals in the US, conducted in June and July 2023.