Vendor Management Best Practices For Legal Operations

Vendor management best practices vary from legal department to legal department. Regardless, the common threads among them all are to improve management of vendor relationships, manage legal spend and determine which vendors earn contracts.

These, and other considerations in vendor management systems best practices, are crucial for legal departments and legal operations teams seeking to optimize the law department. Putting a vendor management process into the core of legal operations helps streamline overall vendor relationships and provides those working in the legal department with the necessary guidelines to maintain quality standards.

Vendor Management Best Practices Begin With ELM Software

A vms vendor management system workflow begins with the right software. More mature and advanced legal departments utilize enterprise legal management software as the platform of choice to unify disparate systems. ELM software features a vendor management process as well as matter management, legal spend management, billing and invoicing, contract lifecycle management, and a vms vendor management system.

The goal of the enterprise legal management system is to control costs, make the legal department more efficient and productive, and maintain quality standards throughout the life cycle of matters and contracts. As outside counsel vendors empower legal services for their in-house clients, the legal department requires a vendor management process to unify collaboration.

Enterprise legal management enables dashboards and scorecards to manage vendor relationships. The billing application provides vendors with guidelines and rule sets so each vendor conforms to legal operations requirements when invoices are submitted. Moreover, smart billing tools automatically identify and correct invoice errors or invoices are flagged for further negotiation.

Before we go further, let’s start with explaining vendor management.

What is Vendor Management in Legal Operations?

Vendor management in legal operations encompasses the systematic approach to selecting, engaging, and overseeing external service providers who support legal department functions. External service providers include outside counsel law firms, enterprise legal and contract management technology providers, eDiscovery vendors, document review services, legal research, expert witnesses, and other consultants.

Why Implement a Vendor Management Process

As mentioned in the introduction, mature legal departments require data to drive more informed decisions. Implementing a vendor management process and a vendor management software system streamlines many aspects of legal operations and legal team collaboration. Here are other vendor management best practices to consider:

Set Up Cost Control and Visibility

Legal spend management is a critical component in any legal department. A vendor management system allows real-time tracking of legal spend across all outside counsel and expenses with software providers.

Invoices and billing are automated and digital. Elimination of paper optimizes invoice review and frees up time for legal operations managers and lawyers. Visibility into legal spend is captured in comprehensive analytics and reporting shared with leadership. This provides real-time tracking of spend and matter management across all vendors.

Risk Mitigation Simpler with ELM Software

Any time software captures data and centralizes documents for future audit, risk mitigation is more efficient. A vendor management system centralizes vendor compliance documentation and automates the tracking of certificates and licenses. Evaluation of respective vendors is automated with dashboards that score performance. Legal operations can evaluate vendor performance with pre-set categories so apples-to-apples comparisons are possible. Law firms in respective practice areas, size and geography are evaluated in the same bucket so that scoring is consistent.

Operational Efficiency Transforms Law Departments

The legal department runs better with more efficient operations and an integrated tech stack. One surefire method for greater efficiency is the vendor management process that consolidates vendor information and communications about the life cycle of a relationship, matter, contract, and invoice. For contract lifecycle management, having automated contract renewal reminders for all vendors is a major benefit. For matter management, knowing status updates from within one comprehensive enterprise legal management solution is a bonus. In the financial arena, automated invoices help flag errors and corrections while information leadership about legal spend in real-time.

Vendor Management Systems Best Practices

• Select the right vendor management system to evaluate vendors.
• Utilize the technology provider partnership to set up vendor dashboards with evaluation criteria included and the structured scoring system.
• Analyze legal spend, fair market value of hourly rates, timekeeper diversity (if applicable), the extent of partner billings, and more.
• Data from the scorecard can be used to evaluate performance. In regular performance review meetings discuss areas for improvement and set up tracking of KPIs.
• Maintain reports for future reference and contract review.

Develop a Strategic Vendor Selection Process

• Knowing how to evaluate an existing vendor requires clear criteria. If your legal department uses RFPs to recruit outside counsel, then create standardized RFP templates so everyone submits similar information for a more streamlined review.
• Understand all the details about current vendors and whether their hourly rates are fair market value.
• Note which vendors ask for annual rate increases that are above standardized rates. Also note invoices for these respective vendors to ensure that timekeepers are billing within reason, budgets are not exceeding an agreement, and flat fees are billed with appropriate hours against the budget.
• Set up relationship managers at the law firm.
• Depending on the size of a relationship with a law firm, appoint one or several relationship managers who become the points of contact inside the law firm. Conduct all communication through these individuals and encourage all outside counsel to first approach their relationship manager before communicating directly with the client.
• Together, determine the process for escalation procedures. While no one expects serious issues to arise, having the procedure in place alleviates future questions or conflicts.

Regular meetings with relationship managers are smart business practices. This enables situations to be headed off at the pass and furthers relationship building for both parties. In particular, a law firm that wants to grow its portfolio should be happy to arrange periodic meetings with clients. This opportunity helps resolve challenges and fosters collaboration for the long term.

• Work closely with finance to assess legal spend and budget.
• Implement smart financial management tools that identify invoice errors and correct them. These intelligence tools should be powered by AI.
• Review billing guidelines to ensure they are defined clearly and that every vendor is using them consistently.
• Periodic rate reviews help client and law firm understand where rates compare to market value. Most companies want satisfied outside counsel, but in this new era of rising outside counsel fees, fair market value is a priority.
• Alternative fee arrangements must be reviewed for their success. If something is not working, revisit and renegotiate.
• Ultimately, tracking legal spend is critical for the success of the law department. Look for areas to improve; evaluate vendors that are consistently higher than market value and renegotiate as needed.

Implementing Vendor Management Best Practices

We’ve explored how a vendor management process benefits the legal department. What are some implementation steps to reap those benefits?

Getting Started

• Assess and analyze current vendor management practices in the legal department. Look for patterns, areas to improve, successes, and challenges.
• This list of pain points and improvement opportunities is the target list for change management.
• Every program requires goals and objectives that conform to the department’s goals Secure leadership and stakeholder approval to relaunch focus on vendor relationship improvement with a phased implementation plan.

Change Management

• Communicate with internal teams and stakeholders that a vendor improvement initiative is underway. Provide comprehensive training for project staff, utilizing the enterprise legal management technology platform as the data driver.
• Create new resources including user guides, processes and procedures.
• Monitor adoption of the program and keep focus on any resistance. Address these challenges to keep attention on program growth, benefits and value.
• Maintain stories about successes and celebrate participants for their wins that influence ROI.
• Particularly, note ROI as it relates to the technology platform. These metrics can be cost savings, legal spend management, use of dashboards and scorecards that influence the bottom line, time saved, productivity, collaboration, and change in relationship influence.

Effective vendor management best practices come from a team approach with common goals and leveraged technology solutions, like enterprise legal management software. Change management can be successful with actionable data-driven insights from program proof points. Reach us if you’d like to learn more.