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Legal Spend Management

How to Reduce Outside Counsel Spend Without Sacrificing Quality

Cutting costs is a never-ending quest and topic of discussion for legal departments. Like accounting, HR, or marketing, it’s looked upon as a cost center and often at the head of line when cutbacks are targeted.

Of course, what makes the quest to bring down costs difficult is striving to achieve the goal without sacrificing quality and production. While there aren’t any magic tricks to make it happen, there are some tools and strategies available to support the effort and also to 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.

A little technology to help in controlling outside counsel costs

One of the most effective techniques for controlling spend is establishing and adhering to a monthly budget in addition to individual project budgets. E-billing systems 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 might that pop up. Whether it’s an ignored cap on hours or total spend being busted, inappropriate staffing, or charges for services and expenses that are not approved or reimbursable, a modern system can ensure that improper amounts don’t slip through.

It also provides a good framework for setting expectations for the next project or period, whether it’s in discussions with the same outside counsel or a potential new provider. And in discussions between general counsel and a CEO or CFO, a thorough report can point to cost savings, spending trends and budget-to-actual comparisons.

Who should do the work?

Certainly one of the biggest factors in cost control for a legal department is allocation of work. Who is the best person, team or firm for the job? It’s always a matter of assessing the matter and then 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. Whether it’s the broad range of talent or the niche specialists they can provide, you need them on board. The key, then, is to provide clear parameters upfront regarding scope and expectations — and delegate support tasks, as possible, to lower cost alternative resources.

Second tier: Some cases simply don’t justify the costs that come with the largest law firms. It’s not a “must-win” for the organization, or it’s a relatively straightforward matter with settlement in sight. There’s a reason that smaller firms exist, and it’s important 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 in today’s world, even if it wasn’t the case historically.

Expanding in-house capabilities: There may come a point where volume and consistency of work requirements indicate that hiring additional resources will be the most cost-effective action. Again, this kind of decision can best be made when there is clear data accumulated, such as through Busylamp e-billing reports, that demonstrates a need for particular in-house options going forward.