Cutting costs is a never-ending quest and topic of discussion for legal departments. Like accounting, HR, or marketing, Legal is viewed as a cost center and often at the head of the line during cutbacks.
Of course, what makes the quest to bring down costs difficult is striving to do so without sacrificing quality and productivity. While there aren’t any magic tricks to make it happen, some tools and strategies are available to support the effort and help evaluate costs at the end of each period and at budgeting time. After all, the flip side of the cost-saving effort is demonstrating that spending has been carefully considered, determined to be necessary, and thoughtfully allocated and monitored.
1. USING LEGAL TECHNOLOGY TO STAY IN CONTROL OF OUTSIDE COUNSEL SPEND
One of the most effective techniques for controlling spend is establishing and adhering to a monthly budget and individual project budgets. Legal Spend Management software can make this task easier and more beneficial by allowing for input of more detailed information and more complex analysis of data without an unreasonable amount of time and resources needed for processing.
Such software can also support cost monitoring (and savings) by automatically flagging any out-of-policy billing that might pop up. Whether it’s an ignored cap on hours or total spend being busted, inappropriate staffing (why is a partner doing work an associate could do?), or charges for services and expenses that are not approved or reimbursable, a modern system can ensure that improper amounts don’t slip through. This is particularly important for fixed fee arrangements; you need to be able to ensure that you are still getting the proper staff attention on your matters and that not everything is going through junior associates and hidden in a fixed fee.
It also provides a good framework for setting expectations for the next project or period, whether in discussions with the same outside counsel or a potential new provider. A thorough report can point to cost savings, spending trends, and budget-to-actual comparisons during discussions between a general counsel and a CEO or CFO. This frank openness leads to stronger, more strategic relationships inside and outside the business.
2. DETERMINE WHO IS BEST QUALIFIED FOR THE JOB
Certainly, one of the most significant factors in cost control for a legal department is work allocation. Who is the best person, team, or firm for the job? It’s always a matter of assessing the matter and making the cost/benefit decision.
Whatever it takes: For some cases, there’s no alternative to top-dollar outside counsel with the experience and expertise to provide the best support possible in a critical matter. You need them on board, whether it’s the broad range of talent or the niche specialists they can provide. The key, then, is to provide clear parameters upfront regarding scope and expectations — and delegate support tasks as much as possible, to lower the cost-alternative resources.
Second tier: Some cases don’t justify the costs that come with the largest law firms. It’s not a “must-win” for the organization or a relatively straightforward matter with settlement in sight. There’s a reason that smaller firms exist, and it’s essential to utilize them wisely.
In-house option: Insourcing, when possible, is an obvious way to reduce outside counsel spend if the proper resources are available. Unbundling to leverage technology and in-house personnel is commonplace and the intelligent way to do business today, even if it wasn’t the case historically.
Expanding in-house capabilities: There may come a point where the volume and consistency of work requirements indicate that hiring additional resources will be the most cost-effective action. Make this decision when clear data, such as through Onit’s European legal spend management solution Busylamp eBilling.Space legal dashboards, demonstrates a need for particular in-house options in the future.
3. CONTINUOUSLY MONITOR AND MANAGE QUALITY
If you have instructed new law firms or implemented different billing rules for your existing panel, you want to be sure the quality of work and advice you receive stays consistent with the norm.
Modern Legal Spend Management solutions provide surveys or other similar functionality, providing reliable metrics that provide insights to your in-house team for review. This allows them to score and evaluate firms and make data-driven, informed decisions that ensure you get the most value for your money — and secure your return on investment.
Additionally, Legal Spend Management solutions allow you to track the outcome of cases and how compliant a firm was with your billing guidelines. This is a key advantage for budgeting, reporting, and spending. Having proven, verifiable data about law firm performance allows you to make an internal case for spending more on expert counsel when only the best will do. The key is not to reduce costs for the sake of it but to control costs and get the best value for money.
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