Introduction
The 10th KPMG Law Legal Benchmarking Report has established itself as a standard work for general counsel since 2005 and offers comprehensive insights into the development of internationally active legal departments headquartered in Germany. This history enables a long-term view that tracks trends and developments over almost two decades and analyzes key performance indicators (KPIs). The report not only documents the current challenges and priorities of legal departments, but also the ongoing transformation of these departments through digitalization and process optimization.
With the participation of 165 companies from 16 different industries, the current report once again provides a comprehensive database that includes both large and small companies.
Fewer lawyers per billion turnover
A remarkable development can be seen in the number of lawyers per billion euros in tunrover. An analysis of the data from all participants shows that companies employ an average of 5.3 lawyers per billion euros in turnover. The differences are particularly striking: e.g., life science/pharma, has a high number of lawyers with over 10 lawyers per billion euros of turnover, while the automotive industry only has around 3 lawyers per billion euros of turnover, not to mention fast moving consumer goods, which ranks far below these figures. These differences reflect the different legal requirements and complexities of the respective industries.
However, a more precise target group is required to conduct reliable analyses. To this end, the report analyzes the top 150 German companies by tunrover. These currently end up with a sal esof around 5 billion euros p.a. The number of lawyers per billion euros of turnover in this group has fallen from 4.8 in 2021 to 4.5 in 2023; in 2020, the figure was still 5.0. Therefore, the key figure has been falling for four years (see figure 1). This is due to companies leaving their legal department staff unchanged but continuing to grow in terms of turnover. Others are reducing the number of lawyers. There are a variety of measures to cope with the huge workload, including increasing efficiency and specialization within legal departments, outsourcing simple legal activities to external service providers or internal shared service centers, and the increased use of technology and automation, which takes over repetitive tasks and thus reduces the need for large teams of lawyers. The trigger for the reduction is certainly the massive budget pressure that companies are facing.
The importance of paralegals and assistants has changed over the years. Whereas in 2005, 15% of employees in legal departments were paralegals, today it is 8%. This is a clear signal that repetitive and preparatory tasks can now either be (fully) automated or performed independently by lawyers with the support of AI. The need for traditional assistance tasks is declining even more significantly in the modern office environment. Since 2005, the proportion of secretarial and assistant positions at the top 150 companies has fallen from 30% to 7%. These changes are mainly due to advancing digitalization and the growing degree of specialization among lawyers.
Increase in legal operations managers
While the number of lawyers and support teams is declining, there has been an increase in the number of legal operations and tech specialists. In recent years, the proportion of legal operations teams has risen sharply. 7% of employees in legal departments are now entrusted with legal operations and 4% specialize in legal tech. This development underlines the importance of increasing efficiency and optimizing processes in modern legal departments. However, it is important to mention in this context that these teams do not always only carry out traditional operations/tech work. They are often responsible for assistance pools or manage internal contracting centers. A market-adequate size for “pure” operations/tech tasks is 3-5% of global employees in the legal department.
Technology on the rise
Technology and automation are also undeniably on the rise and are significantly shaping the future direction of legal departments. The use of legal tech is no longer seen as a replacement for human knowledge, but as a tool that supports lawyers in their work and takes over repetitive tasks. This allows lawyers to concentrate on more complex and strategic tasks, which ultimately contributes to an efficient and focused legal function.
The use of technology has provided strong impetus towards the best use of resources, faster services, and the improvement of overall quality. Technologies such as big data, predictive analytics, and digital contract management are playing a central role in this transformation. The proportion of companies using technologies such as document automation and contract lifecycle management (CLM) has risen significantly in recent years. For example, 46% of the companies surveyed now use CLM systems, which represents a significant increase compared to previous years.
The participants’ assessment of the potential of the various technologies is also interesting: 35% of respondents see a very high suitability for contract management, 45% a high suitability. For budget management, i.e., classic “legal spend management”, 34% rate the potential as very high, 59% as high, with 93% seeing potential savings as the greatest value proposition. Document automation is rated as high to very high by 91%. Artificial intelligence, particularly in the automotive and banking sectors, is attracting increasing interest, with 19% seeing very high potential and 63% high potential. Overall, trust in legal tech is noticeably increasing in every sector.
Savings through legal tech
The use of technology is leading to a significant reduction in costs. Companies that already use legal tech report average cost savings of around 10% while – at the same time – speeding up processes by 20%. The automation of back-office processes, i.e., digital files, spend management etc., and front-office processes, for example automated document creation or other self-service modules, is contributing to these efficiency gains. The report documents in detail how these technologies are implemented in companies and what specific benefits they bring.
Conclusion and outlook
The KPMG Law Legal Benchmarking Report 2023/24 impressively shows how legal departments in Germany have developed over the past 19 years. The increasing specialization of lawyers, the decrease in lawyer capacities with a simultaneous increase in legal operations managers, the constant optimization of legal advice, and the advance of technology and automation are the main trends that will continue to shape the future of legal departments. They are undergoing a far-reaching transformation process that goes far beyond the introduction of new technologies. It is about redefining the role of the legal department in the company and consistently questioning the way we work (“Don’t we actually still work the same way we did 10 years ago?”). The future challenges and priorities will be to drive this transformation forward and to align employees in legal departments even more closely with the dynamic requirements of the business world.
Author
Andreas Bong
KPMG Law Rechtsanwaltsgesellschaft mbH, Düsseldorf
Cluster Lead Legal Operations and Technology Services,
Partner
andreasbong@kpmg-law.com
www.kpmg-law.com
Author
Patrick Dornheim
KPMG Law Rechtsanwaltsgesellschaft mbH, Frankfurt/Main
Senior Associate