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Corporate legal departments of all sizes are restructuring their costs and rethinking their budget priorities to respond to anticipated changes in demand this year. According to the Association of Corporate Counsel’s annual survey, 45% of chief legal officers expect to hire more personnel in 2022 compared to last year in order to improve internal client satisfaction with the department’s delivery of legal services.
“In-house counsel are tasked with solving increasingly complex legal and regulatory compliance risks,” reported Corporate Counsel in February 2022, and yet “cost containment” and “managing the budget” rank among their biggest management challenges this year.
In fact, nearly nine in 10 general counsel report they are planning to reduce the overall cost of the legal function over the next three years — with pressure from the CEO and board ranked as the number-one reason — while they simultaneously expect their department workloads to increase by 25% over that same time frame, according to the 2021 EY Law Survey.
This corporate legal department challenge is ubiquitous, but it can be especially vexing for smaller departments that lack the budgets of the Fortune 500 corporations. These departments are starting with a much more modest pool of resources, so doing “more with less” rings especially hollow to these GCs.
If this describes your situation, the good news is that some of your peers at similarly sized organizations are discovering a few key strategies to help navigate the pressure to control costs despite increased expectations on their departments. There may not be a magic bullet to this dilemma, but there are some proven approaches that can help ease the journey.
The LexisNexis Practical Guidance team recently updated “Spending and the In-House Legal Department,” an article with tips for optimizing legal department spending practices amid rising corporate legal workloads. Here are some examples and excerpts from that article for corporate legal executives to consider, especially if you’re working without the benefit of a large budget:
Do some benchmarking
How do you know if your department’s targets for managing legal costs and leveraging headcount are reasonable? Are your legal resources being deployed appropriately given legal coverage, compliance and client service needs? One answer is to evaluate specific department benchmarks against your peers. Benchmarking can be a powerful tool to understand if your legal department is performing well compared to peer companies, such as companies with similar revenue in the same industry.
Leverage tech tools
Identifying, implementing and adopting the right technology solutions is fundamental for any corporate legal department, but it’s absolutely critical for those departments without large budgets. Just take a moment to consider the risk of being under-resourced in your department and how legal technologies can help mitigate this risk. Leveraging the right tech tools will pay back exponential cost savings while delivering increased efficiencies into your workflow. One survey by Alvarez & Marsal found that 44% of corporate legal teams increased their use of technology last year, but do the research to determine the upfront costs to implement the technology, as well as to estimate the ongoing costs required to stay current.
Get back to the big picture
You’re coming off an unprecedented couple of years when you’ve been consumed with putting out the urgent fires in front of you. Get back to the big picture of thinking ahead and doing long-term financial planning. It can seem overwhelming to start from scratch on a quest to reduce and optimize spending, so many GCs find the best place to start is to come up with basic plans of action that address both internal and external costs for the next few years. If you need some motivation to get moving, check out this free CounselLink white paper that lays out the key benefits and simple implementation steps for managing the process.
Review your staffing needs
Take a close look at whether a different staffing model — for example, sending certain types of work to paralegals, rather than lawyers — will enable cost savings. Start with the areas there it’s clear there is a need to reduce costs, relative to the value to the business, in order to build momentum and early wins. Many GCs are discovering that lower value work can often be automated or performed outside of the department, with appropriate guardrails.
Scrutinize your vendor relationships
This one sounds painful, but it can move the needle for many departments working without a big budget. Conduct an assessment of your outside counsel and external vendors to study how your compensation engagements are structured. Can some legal work be shifted to lower cost providers or even alternative legal service providers? Also, scrutinize your existing compensation models and look for new approaches that might optimize your spend, such as value-based billing arrangements.
Most corporate legal professionals have concluded that the most important strategy for doing more with less is to leverage technology and information tools that increase workflow efficiencies across the corporate legal department. When polled for the 2021 EY Law Survey, which was conducted with the Harvard Law School Center on the Legal Profession, 59% of GCs said that a greater use of technology is the key strategy to achieving cost savings opportunities.
To do more with less, today’s in-house counsel must have fast access to the information they need to shape legal strategy and adapt to changing circumstances. Lexis+® General Counsel Suite provides in-house counsel with a vast collection of legal resources, breaking business and legal news, and practical guidance content — such as the article cited in this post — that includes practice notes, templates and checklists. It is an all-in-one information resource designed for the modern GC.
Learn more about how General Counsel Suite helps you manage today and anticipate tomorrow by signing up for a free trial.