It is not surprising that lawyers like to benchmark. After all, we frequently rely on precedent when we make decisions. Of course, at its simplest, precedent (like benchmarking) merely compares what someone did previously to help decide what we do today. Many law departments use this technique to see how they stand relative to their peers and recognized leaders in key areas. The challenge is to identify a meaningful standard and actually take action when or if you come up short in the comparison.
Earlier this year the Corporate Executive Board posted the results of an analysis of over 300 legal department budgets entitled “9 Efficiency Trends to Watch for in Legal.” They deemed lower costs in law departments to be a proxy for efficiency and using this standard identified nine trends. What surprises me most about the list is the lack of surprise. You may find this to be a useful checklist if you seek to reduce your legal expenses and become more efficient.
Here are the trends and my comments:
1. Perform more work in-house. No shock here. Bringing work in-house is generally less expensive. The quality can be better as well since in-house counsel should have a better understanding of the culture and the strategic goals for the company. Of course, there is a limit as to just how far you can go with this one.
2. Use non-lawyer professionals more often. Unfortunately, lawyers may become comfortable with routine administrative matters that could be performed by other less-expensive personnel. Paralegals and other skilled staff can handle more routine and administrative activities, letting lawyers focus on high-value activities. When you do a careful review of law department process (what, how, and who) you likely will achieve significant savings, improved quality, or both.
3. Invest in legal operations capabilities. Not surprisingly, many large law departments now have business or operations managers (according to CEB more than 80 per cent) who handle budget, technology, outside vendors, and related matters. They focus on the “business” side of things and bring skills that most lawyers do not have.
4. Invest selectively in legal technologies. There is a lot of technology out there that can help: matter management, e-billing, and more. We love it when it works; frequently it fails when we do not change our habits. Be selective as changing habits and workflow can be difficult.
5. Unbundle legal services. Disaggregation has become increasingly common as departments use legal service providers and vendors that are more cost effective than law firms for matters such as document review, copying, research, and patent filing. “Horses for courses” as our friends in the U.K. might say. Of course, always remember what you unbundle at some point you have to bring back together. This is why legal process management and business skills have become so important.
6. Focus on litigation matter budgeting and oversight. Budget management can be critical in this area. Not withstanding what your firm may tell you, litigation can be separated into distinct tasks and budgets that mean something can be created and (more importantly) followed. There are increasing numbers of firms willing to operate this way. You have to be willing to change how you operate and use them.
7. Use smaller law firms more often. Increasingly, law departments have moved business from the larger firms to regional or mid-size firms that provide comparable quality at significantly lower rates. Additionally, there are new model law firms that have different business models that allow them to provide services at predictable and significantly lower costs.
8. Reduce the number of law firms. Convergence has been around for a long time mainly because it works. If you concentrate your work with fewer firms you can negotiate better arrangements be they fixed fee or simply lower rates. Additionally, as the firms get to know and understand your business better, the quality and learning curve should rise.
9. Be judicious with alternative fee arrangements. CEB notes these arrangements can be useful in reducing costs but how they are managed and administered is more important than the specific type of fee arrangement. I would agree because much of the value comes from the process of analyzing what you need and what you are willing to pay for the service (its value).
Check out these ACC Value Challenge resources [http://www.acc.com/valuechallenge/index.cfm] for some tips and examples about how to implement many of these efficiency trends.
The CEB list is helpful as far as it goes but never forget that being efficient is not necessarily the same as being effective. Being exceptionally efficient at doing the wrong thing is not a good thing. So your first question should be, “is that something I (or the law department) should be doing?”