How In-house Legal Departments Reduce Spend
As many corporations expect an increase in legal costs annually, General Counsels and Chief Legal Officers are responsible for managing legal budgets and minimizing expenses.
Below are select ways corporate legal departments reduce legal costs:
Implement a Legal Spend Management Strategy
Legal spend management is the practice of collecting, reviewing, analyzing, and organizing costs associated with in-house and outside legal services. Many scaling and established companies today have a legal operations function to drive greater transparency and efficiency on legal spend while identifying ways to build long-term, sustainable savings. Often, legal ops and in-house departments rely on legal management platforms, or a suite of integrated software, to help reach these goals.
Legal departments can benefit from one-time reductions in cost at the time they implement legal spend management software platforms and move away from manual processes, but the benefits are often long-lasting. Benefits include efficiencies in billing automation, invoice review (often with the use of AI tools), integration with procurement processes, and data analysis that supports whether work should be kept in house or sent to outside counsel.
Establish Data-Based Budgets
To create savings and efficiencies legal departments begin with a thorough review of legal spend on both in-house and outside counsel, which helps to form a clear forecast. With this forecast, legal can determine a realistic budget, and define budgets for each area of legal focus, in addition to a defined budget for outside counsel. Budget awareness with each team helps to manage and encourage cost savings within each practice area.
Benchmark Vendors for Quality and Cost
Companies are motivated to find the most cost-effective and high-quality vendors. They often rely on billing and software platforms to collect, analyze, and report data on the quality and complexity of services provided by legal vendors. Comparing the quality and cost of legal services across all vendors with the use of these platforms can help internal business teams quickly identify vendors that can match the complexity, quality, and budget for each matter.
Hire In-house Counsel for Day-to-day Legal Work
Most companies reach a stage when relying on outside counsel to negotiate each NDA or customer contract becomes inefficient and unscalable. In-house counsel can reduce legal spend on day-to-day matters that do not require law firm expertise. This may look like inbound and outbound commercial contracts, advice and counsel for product teams, or ensuring compliance with regulatory issues such as privacy. Hiring a lawyer with the right level of in-house experience who understands the company’s risk profile and business initiatives is critical to reducing legal spend. Additionally, in-house attorneys who can work closely with product teams are in the best position to advise on matters related to new and existing products as we’ve previously discussed in the blog “Lawyers’ Role in Product Creation.”
Building a panel of interim legal resources (e.g. ALSPs) will help bridge gaps between full-time employees, cover leaves of absence, support overflow, and staff special projects that may not justify full-time hire. FLEX attorneys often step in for clients that are restricted on spend, are in hiring freezes, or only need temporary help. Using interim counsel reduces overhead costs associated with permanent employees and provides flexibility, which can free up capital for key initiatives.
Finally, in-house counsel can implement, streamline, and closely maintain processes that establish the long-term cost savings discussed above. For example, investing time in form agreements, playbooks, and contract management platforms can allow well-trained staff to own lower-risk commercial agreements, which frees time for in-house counsel to handle larger initiatives.
Applying the above strategies can help in-house legal departments reduce spend, scale legal services, and build predictable budgets.