In-House Legal Departments

Six Types of Law Firm Clients
Six Types of Law Firm Clients

As the legal market remains flat for law firms, the focus naturally turns to clients.  How they think. What they care about. How they spend their budgets. Etc.  Yet, to the extent that clients vary in significant ways, the generalizations aren’t particularly helpful.

Six Types of Clients

There are many ways to categorize clients, but by my lights the most useful is size and organizational structure of the in-house legal department. As shown in diagram above, this metric varies from zero for individuals (Type 1) and business owners (Type 2), to the equivalent of a specialized law firm embedded inside a large corporation (Types 5 and 6). Continue Reading Six Types of Law Firm Clients (005)

A lot. The trend is large and longstanding.  Over the last two decades, the number of lawyers working in corporations has more than tripled, growing from 34,750 in 1997 to 105,310 in 2016. The chart above shows the trendlines.

Most people working in the legal industry know that in-house legal departments have been growing, but has there been an accurate sense of the magnitude — 7.5x faster than law firms over the last 20 years?

It took a fair about of time to pull these data from the Bureau of Labor Statistics and put them into the right format to generate the above chart. Yet, the chart itself raises more questions than it answers.

  • Why are corporations in-sourcing a non-core function? During this same period, outsourcing of various business processes has been growing.  Why is legal treated differently?
  • How long into the future will this trend continue? What might curtail this trend?
  • What are the age demographics of in-house legal departments compared to law firms? Law firms are graying. Will in-house departments avoid this same problem, or will it hit over the next 5 to 15 years?

The orange “in-house line” is so far above the other two sectors that is obscures another unexpected finding.  Since the mid-2000s, government has been growing faster than law firms – what’s causing this rise?  Either the government’s been on stealth hiring binge, or law firm hiring has flattened out in a way that cannot be characterized as cyclical.

Subsequent posts will return to these questions.  Before doing that, however, I want to time build out a simple theoretical framework that we can apply to legal industry data. This framework in rooted in diffusion theory.

What’s next?  See What is the Rogers Diffusion Curve? (004)