As the economy rebounds from the Covid-19 induced recession, law departments face a difficult challenge. In many instances, workflow in law departments has spiked to above pre-pandemic levels, but most law departments are unable to make permanent hires and remain under the budget pressure that existed during the pandemic. As a result, law departments are working harder than ever to keep up, with burnout and attrition as a common consequence.
The current state of law departments is similar to the first several years of the economic recovery following the 2007-2008 financial crisis when legal budgets and headcount were restricted while workflow increased significantly. During that time, many law departments turned to alternative providers for the first time. Those departments discovered that the in-house orientation and cost-effectiveness of lawyers provided by alternative providers (ALSPs) made them a viable solution for the challenge of keeping up with the pace of the business. And, once a department engaged an ALSP for the first time, multiple engagements often ensued. As a result, the flexible legal talent market became one of the fastest-growing segments of the ALSP industry and now exceeds $1.5 billion.
How does the approach law departments are taking today to address the challenge of workflow exceeding capacity differ from 2009-2010? The earlier period was the during the emergence of the legal operations function. As the legal operations profession has grown in size and sophistication, the “business of law” expertise of law departments has increased. As a result, the typical use cases for alternative providers in 2009-2010 have migrated from basic tasks such as negotiating NDAs to include the following:
- Renegotiating complex commercial relationships with customers, vendors, and strategic partners
- Drafting and executing “return to office” policies and procedures, all while accounting for the myriad of federal, state and local regulations
- Supporting regulatory responses across multiple practice areas including global privacy requirements and the LIBOR Benchmark transition
- Unbundling legal work from traditional outside counsel, such as assisting with M&A, including diligence and integration planning and execution
Another factor accelerating the use of flexible legal talent by law departments is the remote work environment resulting from the pandemic. Pre-pandemic law departments often insisted that lawyers from flexible talent providers be onsite. Although being onsite often helped a lawyer become integrated into the department quickly, the on-site requirement meant that only lawyers within a reasonable commuting distance to the client were a viable option. Because law departments are now working remotely, clients are open to assistance from lawyers located anywhere in the country. The willingness of clients to engage lawyers remotely has significantly enhanced the ability of ALSPs to provide a lawyer with the exact skill set and industry experience needed to assist the department. In that sense, engaging an ALSP is akin to engaging a law firm, and if that model continues, it will spark a new wave of significant growth.