Blog Post

How to Take Back Control of Your Legal Spend

September 24, 2020

Legal spend is once again under the spotlight. But without visibility over your panel firms, it’s impossible to drive deep cost savings. Legal Spend Management could help. Here’s how.

Your CFO/procurement director has just emailed to ask how may law firms you’re working with. The most common answer? No clue!

But now more than ever, organizations are probing areas from across the business to achieve greater efficiencies and cost savings, so questions around legal spend will become more and more frequent, especially during this time.

De-centralized legal departments and various teams asking various law firms to perform different tasks have resulted in a long roster of panel firms for many companies.  That list keeps growing because those relationships aren’t managed centrally and before anyone is aware, you’ve lost track of how many law firms you’re working with. Is it 10? 20? 40? According to a recent ACC report, the average number of panel firms is 40.

While on the face of it, this might not seem like a problem – after all, your organization is getting the legal services it requires from the panel firms who specialize in the work. The departments are happy working with their preferred law firms and together they are mitigating risks and keeping the company compliant.

However, the latest GC Round Table and Thought Leadership Research from KPMG, identified that: 75 percent of CEOs believe their legal functions do not deliver sufficient value to justify the time and money spent. Given the current environment, this is not sustainable.

The challenge is that without any visibility of exactly how many panel firms you’re using, what you’re using them for, and how much money you’re spending with them, your legal spend is leaking cash for services that are more than likely also not achieving the value they should be.

For example, when these relationships aren’t centrally managed, SLAs with your panel firms won’t be checked or monitored, resulting in a lower standard of service than what you are paying for. When was the last time you checked any of your law firms’ SLAs or investigated an invoice from a law firm to check the service delivered was as per the cost?

And the revenue leakage goes much further than just value for money. With so many panel firms involved, it’s unlikely you know what rebates you’re entitled to, let alone regularly claiming those rebates from each firm.

Not only that, but any negotiating power you have is disregarded – without knowing what services you’re already receiving or from whom, you’re unable to negotiate with anyone new or consolidate and renegotiate your existing agreements.

At a time when costs are being scrutinized more than ever, Legal Spend Management is helping legal departments put process and discipline around their spend, prevent maverick spending, and plug revenue leakage. It also generates money for your company from the rebates because you’ll know instantly what you’re entitled to from your panel firms.

The real benefits of legal spend management are far more extensive than just finding out how many law firms you work with and what you’re spending with them.

By combining spend management technology with human intelligence, you have the support to centralize your legal spend, improving control, and vitally giving you an overview of what and how you’re spending and where you could be making savings, depending on the type of legal work you require and which law firm you are using.

For example, you can drill down to discover what the percentage difference is between what the panel firm delivered in the original quote and what the final invoices were on average and find the discrepancy.

Alternatively, by analyzing the usage of different law firms for different legal disciplines such as field support or litigation, it allows you to do some comparative analysis to understand which law firm is the best value, and for what service. With law firms, there is no one-size-fits-all approach, so knowing where you purchase specific services, combined with insight into what they charge, and what you get for your money is essential for value-based decision making.

This kind of actionable intelligence can also be used to predict what a panel firm is likely to charge for a specific service, such as complex litigation, or understand that for e-discovery a firm is likely to come in 20 percent over budget, based on historical data. This predictive element means not only are you plugging the revenue gaps today, but you’re focused on achieving the best possible rates and service for the future.

Legal Spend Management can also help you with right-sourcing – ensuring you have the best person for the job, both internally and externally, and discover the right ratio in terms of the type of legal work being done compared to the type of legal professional doing it. If you’re undergoing due diligence for a merger or acquisition you would expect that to require the attention of partners and senior associates. Whereas if you’re doing E-discovery, you would want that to be conducted by more junior legal staff work – and be charged accordingly.

This then has repercussions for your own legal team. By highlighting areas you could better utilize your external law firms you can free up your team to focus on more strategic plans for the business. And with the data from the spend management tool, you can be confident that your decision makes commercial sense.

All organizations are facing growing cost pressures, for obvious reasons. And the legal team will not escape the need to be more efficient, examine their spend, and make savings where they can. Legal Spend Management is a starting point that can plug those revenue leaks quickly and then pave the way for greater visibility and insight into the future by giving forward-thinking GC’s the ability to deliver decisive and tangible change. To learn more about how Exigent can help curb your legal spend contact us.