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 (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 of particular importance for fixed fee arrangements, you need to be able to make sure that you are still getting the right 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 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. This level of frank openness leads to stronger, more strategic relationships inside and outside the business.
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.
Using legal technology to manage quality
If you have instructed new law firms in order to save money, or put in different billing rules for your existing panel, you want to be sure the quality of work and advice you receive doesn’t dip compared to the norm. Surveys that allow your in-house counsel to review firms mean you can make sure you are still getting value for money, while software also allows you to track the outcome of cases and how compliant a firm was with your billing guidelines. Often, you can pay less and still get good value. Sometimes, the saying ‘you get what you pay for’ is true though, and having 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 to not reduce costs for the sake of it, but controlling cost and getting the best value for money.