If you look up “cost center,” more often than not the accompanying example in the description will be in-house legal departments. Worse, company unit heads often see their legal departments in the same way American diplomats saw the aging Soviet leader Leonid Brezhnev in the 1970s and 80s, as the department of “Nyet” where ideas go to die. This is an unfair characterization, but still, it is indicative of where in most organizations legal departments land in terms of budget priorities.
This puts legal departments in a tough spot because in 2023, they’re being asked to contribute more in their organization. They are often called upon to provide opinions on diverse issues such as labor law, cyber risk, or third-party contract management – while, like most cost centers, being expected to manage costs (read: “resources”) downward. The math is simple: the volume of work for legal departments is up, while they are being asked to reduce costs – targeted costs such as outside counsel spend, but across the board as well. ALM’s Pacesetter Research team has been speaking to legal departments around the world, representing organizations ranging from mid-sized companies to Fortune 500 firms, and yet to our amazement dedicated legal operations resources are not yet the standard norm. To that point, a year ago we launched the first in a series of reports focused on legal departments, looking at how legal departments develop and utilize legal operations capabilities. The importance of legal operations (for both legal departments and law firms, quite frankly) nowadays was illustrated by the surprisingly large number of professional services providers we found building out and investing in their legal operations practices.
