The in-house dilemma: labour v capital
I was intrigued by the high level numbers coming out of the Australian Corporate Counsel report '2017 Benchmarks and Leading Practices' on what in-house teams were spending their money on.
The report suggests that in-house departments are spending 94% of their internal budget on salaries and related costs, with only 4% on technology and 2% on workflow improvements. You would expect that as the legal profession gets on board the innovation bandwagon, the numbers on technology and workflow improvements would be much greater. Instead, the expense line for in-house teams still looks like that of a law firm circa 1980.
The dilemma is obvious. With industry trends pointing to tighter budgets for in-house teams, coupled with ever growing demands on the legal function as businesses grow and become more complicated, it takes a leap of faith for an in-house team to lose a lawyer in favour of investing capital into something new. The labour vs capital dilemma is resolved in favour of labour simply by doing business as usual - so what will it take for this to change?
First, these numbers suggest that in-house teams don't perceive there to be a burning platform for change. Intellectually we might see what the future might look like, but the old professional services model based on labour is still seen as serviceable.
Second, perhaps the options available for in-house teams to establish different ways of doing business are simply not that compelling. This is not surprising given the cost reduction interests of in-house are not aligned with their main law firm suppliers. Also, technology suppliers are fragmented, still learning the industry and don't yet have the language to make a clear business case.
Lastly, I wonder whether there is a cultural element - the conservative, risk-averse course of action is to do nothing, rely on existing resourcing models and the lawyer stereotype will naturally tend towards this.
It all points to opportunities for in-house vision and leadership, and external firm and tech offerings that sensibly address the cost pressures experienced by in-house teams.
For further information or advice please contact:
Paul Gray
Principal Lawyer
T 03 5225 5231
E pgray@ha.legal
