More worryingly, half of business development leaders reported that these inefficiencies have resulted in lost business. In the current economic environment, any lost revenue is a major cause for concern.
General Counsel are aware of these challenges with only 52% reporting that their department’s day-to-day work is aligned with the broader business strategy. The same percentage report their department is effective at adding value to the business.
“Enabling growth will be a crucial priority over the next twelve months,” notes John Knox. “To maximize growth opportunities, law, procurement and commercial contracting departments will need to ensure they are focused on the key risks and that their processes are optimized.”
How law department leaders are addressing CEOs’ priorities
To respond to CEOs’ priorities for 2021, law department leaders and business leaders from across the organization will need to embrace new ways of working. Indeed, a majority of law departments (92%) report they are already changing the way they operate using a range of approaches.
Slightly more than half of departments (51%) are implementing tactical solutions designed to target specific problems. The same percentage have programs in place to re-engineer their legal function. Thirty percent are considering creating a co-sourcing or outsourcing relationship with a third-party provider to manage parts of the legal function.
This alone demonstrates that there is no one-size-fits-all route to transformation. Indeed, many organizations choose to run multiple strategies in parallel — combining outside counsel management, insourcing, process and technology optimization, and co-sourcing/outsourcing. Yet there is often little coordination among them or systematic analysis of which strategy to use when.
Optimizing use of outside counsel
Many law departments see the benefits of external lawyers — including that they bring significant legal expertise. However, they typically come at considerable cost and consume a large part of a law department’s budget. Given the current cost-reduction environment, it’s unsurprising that law departments turn to outside counsel management programs. The key to these initiatives is supporting them appropriately and using them as part of an overall balanced approach.
While outside counsel management programs can involve a wide range of strategies, the most widely used relate to controlling fees, such as hourly rate freezes, greater use of alternative fee arrangements and an increased focus on securing better rates from provider negotiations. Fifty-nine percent of General Counsel believe that a focus on negotiating better rates creates some opportunity for costs savings.
Other approaches include managing outside counsel more closely, through outside counsel guidelines, or consolidating spend into fewer providers. Seventy-two percent of General Counsel believe reducing the number of providers can achieve cost savings.
At the same time, only a minority of General Counsel believe these strategies offer significant savings. Law departments’ challenges with outside counsel management programs shed light on why that is the case. Eighty-three percent say they have too many providers to manage and eight-one percent don’t have the resources to effectively manage their existing providers. Seventy-nine percent of General Counsel say their guidelines are not detailed enough and eighty-five percent report providers don’t follow their guidelines.
