Learn from Top-3 External Legal Spend Control Mistakes
Lots has been said about the challenges of External Legal Spend Control, but its importance was never a question. The subject has been duly highlighted over the past few months with a large number of expert pieces of advice on how to address it correctly. To put some numbers on the table, when we talk about Legal Spend Control, in most cases we mean savings of millions of dollars. Yet, there is an evident lack of information provided by specialists and advisors in the field when Legal Spend actually comes in to play. Spend management refers to not only costs but the deployment of suitable technologies, expert resources with a detailed understanding of procurement, the right people within the law firm with access to respective relationships and so on. Based on our experience and expertise gained through years of practice, we have shortlisted some significant mistakes that could be avoided at the early stages of Legal Spend Control process.
Although Legal Spend Control prioritises cost-saving activities, it is important not to overlook steps that might affect its success rate. It includes keeping focus within the relationship management between general counsel and outside counsel. An early-stage legal spend assessment of European financial institutions conducted by Morae revealed many additional issues including poorly planned relationships with panel firms, lack of communication and absence of a unified strategy with a strong emphasis on discounted rates and profitable offers. To help clients avoid these issues, law firms need to undertake a client-oriented strategy and aim for a win-win outcome. From the starting point, effectively tuned relationships help to minimise the risk of poor resource alignment, expensive low-level work whilst developing deeper insight into the potential legal spend.
… or passive Legal Spend Management. This is usually found with “do something” rather than “do nothing” approach and spend management efforts do the job at first glance. However, the door to the largest room for improvement is found here and is often associated with a lack of transparency, misuse of panel policies and decentralised data management. Experience shows that a large number of companies ignore a structured and well-placed Legal Spend Management approach until unmanaged spending reaches a critical point and immediate transformation and rescue is required.
It is still a surprise to some companies that Legal Spend Management goes far beyond discounted rates, negotiations and panel selection. Moreover, despite some positive trends, few realise the importance of (or prioritise) data control and analytics, legal project management, matter-level strategic planning and pre-matter scoping. The utilisation of appropriate legal technologies is as important as maintaining high-quality relationships with the panel, and outcomes are optimized when both are deployed together. According to our research, the deployment of just one tailored legal spend management tool can reach 25% discount per matter, resulting in millions in savings for large corporates. On the other hand, lack of automated levers and a fragmented and superficial understanding of work being undertaken erodes confidence in outside counsel, creates trust issues and is often the reason for the dreaded bill-shock.
There is a number of other issues involved in External Legal Spend Control, and others might feel some of them are more significant, but these are the tricky ones from our perspective and experience.
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