Future Growth
The size of legal departments can be expected to grow in the coming years, partially because of the autonomous growth of legal work within large organizations, and partially because they may insource more work that they previously outsourced.
However, there will be a natural limit to this growth. A larger department offers in-house counsel the possibility to specialize in different subjects, but there will always be work that does not come around often enough to justify specialization. Although legal departments may not grow much larger, to the detriment of law firms, this does not mean that the relationship between them will not continue to change. Legal departments are increasing their demands on law firms, and procurement of legal services by outside counsel is likely to professionalize further in the near future. Recent years have seen legal departments sometimes making drastic choices in panel management. The market in which law firms operate can be expected to become even more competitive, but it is not likely that we will see “the end of the law firm” in the near future. Outsourcing work to law firms will continue to have inherent benefits, providing a more objective view that will often be demanded by organizational stakeholders when it comes to important decisions. Also, most companies will have a natural tendency to prefer a percentage of variable costs (outside counsel) over fixed costs (in-house counsel), making it easier to cut back in costs when necessary.From the above follows the challenge that legal departments face. With limited resources, they have to support large and complex organizations in optimizing the legal function. As a complicating factor, law schools have not prepared in-house counsel optimally for this task, and research into this subject is relatively scarce. The organizations they serve will regard the legal department as a cost center—and not as a profit center—that provides services that are difficult to evaluate on efficacy and quality by outsiders and are sometimes seen as hindering business. A manager of a legal department will ask the question: “How do we continuously convince the organization of our added value, while it is hard for other departments to completely understand what we do and what the quality of our services is, but easy to see what we cost?” To successfully take on this challenge, a shared view of the legal function and a legal department’s strategy will be essential. Consistently communicating this view will reduce the information asymmetry that inevitably, by the nature of the services rendered, exists between the legal department and other organizational constituents.
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