While there are many areas of a legal department that typically fall within the scope of responsibilities of the head of legal department operations (LDO), almost none impact the legal department’s finances as profoundly as outside counsel spend and legal vendor management. In fact, most law departments spend more than 60 percent of their budgets on outside counsel and legal vendors. Efforts encompassing outside counsel and legal vendor management may involve the identification, selection, utilization, measurement, or some other aspect of a legal department’s law firms and other vendors. Optimizing outside counsel and legal vendor management only results when the general counsel and LDO make productive changes to the internal and external relationships that consist of the right mix of in-house professionals, outside counsel and clients.
Types of outside counsel and legal vendor management initiatives
Developing and implementing creative programs to manage outside counsel and legal vendors is a critical aspect of the job of LDO professionals. Building world-class outside counsel and legal vendor management programs that aligns the work of outside service providers with the objectives of the client should always be a top priority among LDO's. By focusing on substance rather than form, LDOs can develop and implement outside counsel and legal vendor management initiatives. Ultimately, outside counsel and legal vendors will be able to take on more of a strategic business advisor role, and contribute to goals such as cost savings, improved relationships, increased service quality, reduced risk, efficiency, and better decision making.
Initiatives and programs falling under the umbrella of outside counsel and legal vendor management include the following:
- The convergence of firms and vendors (or other preferred counsel or vendor programs);
- The development and maintenance of outside counsel and legal vendor guidelines and engagement protocols;
- The administration of standardized rate request processes;
- The development and management of matter budgets and other aspects of financial and spend management to ensure that baseline budgets are set and are modified as needed throughout a matter;
- As a part of financial and spend management, initiatives involving robust company-specific spend data analytics, with an eye toward learning from both current and historic spending data;
- Resource allocation planning, optimization and management or similar programs to ensure that the right service provider is providing the right work, with appropriate risk tolerance and alignment with business objectives;
- The development and management of alternative fee arrangements appropriate for an organization’s matters and related goals;
- The design and implementation of technological tools involving outside counsel and legal vendor management, such as matter management and e-billing;
- The development and administration of counsel and vendor performance scorecards and similar performance assessment initiatives;
- The development and management of RFI/RFP programs, e-auction processes and similar innovative competitive bidding programs;
- Periodic comparative benchmarking initiatives related to outside counsel and legal vendors, which may include a regular analysis of spend based upon business industry, geography, subject matter, and other factors;
- Additional strategic, people, process, or technological initiatives and programs focused on outside counsel and legal vendors.
Goals of outside counsel and legal vendor management initiatives
Under increased pressure to deliver value, legal departments, often work with corporate finance and procurement to become even more sophisticated in building and managing centralized, comprehensive, and world-class outside counsel and legal vendor programs. This collaboration helps to achieve certain goals such as reducing costs, improving relationships with outside counsel and vendors, increasing service quality, reducing risk, improving departmental efficiency, and making better and more informed decisions.
While cost reduction should never be the only objective, when programs are properly developed, implemented, and administered, a legal department can save millions of dollars that could be reallocated to the needs in other departmental areas. As demonstrated by the recent results of the Blickstein Group’s Sixth Annual Law Department Operations Survey, saving money is viewed by nearly 70 percent of LDO’s as one of their top three priorities over the next few years. In fact, the majority of LDO's are focusing on some of the “low hanging fruit” in the area of outside counsel and legal vendor management, believing this will help them accomplish their cost saving objectives.
In the next part of this series, we will give you four considerations to ensure the success of outside counsel and legal vendor programs.
Editors note: that the views expressed in this article are the personal views of the authors, and do not necessarily reflect the views of either Archer Daniels Midland Company or Baxter Healthcare. You can contact the authors at David.firstname.lastname@example.org and Aaron_van_nice@baxter.com.