GLS Legal Ops: Legal department Cost Reduction Tips

All in-house legal teams are being asked to achieve more with less. All too often this objective is framed in terms of how to reduce external law firm costs.

Whilst an important (and often major category of expense), it is only part of the answer to overall cost reduction.

By pursuing select legal team value generating legal team initiatives, meaningful and tangible cost savings to your team and your business are the natural byproduct.

In this Blog we seek to highlight that a focus on legal department value creation is a far better strategy than a myopic focus on cost savings.

How to reduce Legal department costs

A strategy for reducing legal costs in your next legal department budget starts with identifying the major buckets of internal legal department costs. The major buckets of legal department costs area:

1. In-House Counsel & Staff: the costs associated with the personnel in your in-house legal team - this might include use of temporary manpower from providers like Plexus or Lawyers On Demand
2. Law Firm Fees: the costs (time and dollars) spent on sourcing and managing your external counsel law firm relationships
3. Legal Team Management: the associated activities of running a legal team that are necessary but which do not relate directly to servicing the client (eg. management meetings, etc)
4. Legal Dept. Resources: the infrastructure need to operate your legal team
5. Legal Team Training & Development: the training and development costs associated with keeping your legal team performing optimally
6. IP Management Costs: costs of managing your IPR asset portfolio
7. Other External Providers: other providers that you might need to support your internal legal team

Each legal department will operate by reference to their own distinct legal cost buckets. If you wanted a really detailed breakdown - see GLS Annual Legal Dept. Budget Builders.

From there you need to develop a strategy to create legal department value from each and every category of costs. Lega departments cost are not a generic blob of costs.

However, which expense category tends to get the most attention ....? Well the poster child for legal department expenses is most definitely external law firm costs.

A word on managing law firm fees

The vast majority of the industry discussion around costs reduction seems to focus on how to reduce law firm costs.

Whilst this is an "out of control" area of costs for many in-house legal teams, the almost myopic focus on this area risks distracting in-house legal team leadership (e.g. Head of Legal, General Counsel, etc) from the more powerful proposition of value drive cost efficiencies.

Your ability to improve the management of external law firm costs is actually quite meaningful. Your regular providers need to be placed into a performance managed construct which will increase value and drive cost savings (See our Blog https://www.gls-legaloperations.com/know-how/performance-manage-external-counsel).

If you rely extensively on external counsel then taking a performance managed approach is quite simply a must and can result in substantial savings on external fees, not to mention far better performance.

However, it is often missed that by focusing on a range of internal legal team value creation initiatives, extensive internal savings become readily accessible and can be reported.

If your legal team can do things better, faster, safer and more efficiently, then think about what that means in terms of internal man hours saved within your organization.

For example, if your templates were far simpler to use and took less time to negotiate and close, involved less disputes, and took less time to administer - then what is the cost saving here?

And, these kinds of cost savings can be readily captured and evidenced - along with the value add that such initiatives bring to the business.

The point that we want to make here is that for most legal teams - the opportunity to create far greater savings for your business extend well beyond than just focusing on reducing legal fees.

Below are 10 simple cost reduction tips for you to consider to help your team identify and pursue and benefits form value creating strategies that ultimately reduce costs in a meaningful way.

By focusing on legal team value creations scenarios the opportunity to achieve strategic redirect of your in-house team is incredible valuable.

10 Legal Cost Reduction Tips

Below are 10 initiatives that do not require extensive/additional budget and show how focusing on legal department value creation actually delivers cost savings as a residual benefit.

1. Group Sourcing: if in a group, consider whether the advice you source can benefit the entire group
2. Value Sourcing: request that the byproduct of relevant advice scenarios is a tool/resource you can use internally going forward
3. Internal True Cost: Assess how many actual hours your in-house legal team spend on genuinely productive work. Add in the fully loaded costs – and assess their hourly rate. Not much less than a law firm
4. Document Production: challenge your law firm to not use lawyers on document production tasks – watch your invoices default. This is a great ready to reduce external law firm costs. Lawyers should not be paid to type or proof read. Watch your legal fees plummet.
5. Performance Management:
6. Select Advisory: try following the individual advisor and not the firm for certain work areas. World class leaders can be found in boutiques and mid-tier firms
7. Your Instructions: high quality instructions and access to your group legal policy requirements can massively reduce the work effort of your external advisors
8. Automate Processes: automating basic legal tasks can recover substantial “less productive” hours incurred by your team
9. Template Blitz: few initiatives will save you more time than upgrading your in-house legal dept templates. Learn more in this Blog.
10. Better Training: lawyers can acquire and apply new information pretty easily. Developing a strong in-house training program to address actual client workflows is a winning strategy.

However, we identify the above 10 initiatives as they do no require extensive budget and show how focusing on legal department value creation actually delivers cost savings as a residual benefit.

Limitless cost reduction strategies, but focus on value

There are literally countless strategies that in-house legal team can initiate to reduce costs and which may vary depending on the size of your in-house legal team.

For example all legal teams can be deploying all efficient operational practices like smart use of office space, reducing waste, cutting costs, justifying business expenses, good practice management, and long terms efficiency just make good sense.

For larger and well heeled legal teams, leaning heavily on advanced legal tech such as CMLS and legal e-billing solutions might also make good sense .

However, we are firmly of the view that any initiative that that focuses solely on cost reduction is like letting air out of your tyres – the journey will just be longer and harder.

Your focus should always be on the legal team's value creation – and your North Star should always be initiatives that shift the strategic focus of your in-house team to more productive areas.

Remember - cost reduction and value creation can absolutely co-exist – a focus on value creation will reduce costs in the mid-term. If you set up systems and processes that reduce/streamline effort - that manifests in substantial man house and dollars saved.

Ready To Transform Your Legal Team?

Please check out the GLS solutions and know-how resources listed on the right side of this page – they might assist your legal team with the issues explored in this Blog. 

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