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In-house Access Insight & Commentary for In-House Counsel Worldwide

Benchmarking: No Surprises with These Efficiency Trends*

Posted in Value & Innovation

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.

The chance to benchmark against your peers is one of the many reasons to join ACC. After all, the association offers an unparalleled global network and a wealth of resources.

Earlier this year, the Corporate Executive Board (CEB) 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. But, this can be a useful checklist when you begin an initiative to reduce your legal expenses and become more efficient. Here are the CEB trends and links to ACC resources that can help you fill in the gaps:

1.         Perform more work in-house. No shock here. Generally, bringing work in-house is less expensive, and there can also be a quality upgrade since in-house counsel should have a better understanding of the company’s culture and strategic goals. 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. By allowing paralegals and other skilled staff to handle the more routine and administrative work, lawyers are able to 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 percent) 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; however, it frequently 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 who 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 United Kingdom might say. Of course, always remember that what you unbundle you have to bring back together at some point. 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 who provide comparable quality at significantly lower rates. Additionally, there are new model law firms that have different business models that enable 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 (i.e., its value).

The omissions may be what strike me most about this list, with the two most notable being legal process management and knowledge management — each of which has the potential to greatly reduce legal expenses.

This list may be helpful as far as lists go, but never forget that being efficient is not necessarily the same as being effective. Being exceptionally efficient at doing something the wrong way is not a good thing. So, your first question should be: Is that something I (or the law department) should be doing?

*This is a revised version of a post that originally appeared in the March 2012 online edition of Canadian Lawyer InHouse.