Smaller in-house budgets can equal increased pressure to perform
In-house teams that operate on smaller budgets may find themselves staring down the barrel of more pressure to deliver results with fewer people and resources.
In a recent blog post, Xakia chief executive and Australian Legal Technology Association deputy chair Jodie Baker wrote that, with fewer lawyers, small teams are crunched to focus on ‘business as usual’ work, so it’s hard to devote time to big-picture budgeting and value alignment projects.
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This predicament is legitimate, she surmised, and with a new budget year approaching, in-house teams should consider a range of strategies to assist them in 2019, such as looking at what bigger legal departments are doing.
“Small legal departments are also far less likely to receive price reductions from their outside firms – 78.4 per cent of large teams said they received discounts, while 50.2 per cent of smaller teams did [in a recent Altman Weil chief legal officer survey],” she explained.
“On a related note, more than half (56.9 per cent) of small legal departments said they did not feel they had enough buying power to negotiate effectively with their law firms; only a third of large teams felt the same.”
The disparity between small and large teams is smallest with regard to budgeting, she said, with nearly 73 per cent of small teams require budgets for matters, while nearly 90 per cent of large teams do.
If one’s legal team is among the 27 per cent of small teams that is not asking for budgets for its major matters: “start”, she suggested.
“Just over half of small departments provide guidelines to their law firms for billing, expenses and staffing [and] almost all of large departments do. Having written parameters in place can curb out-of-control billing or inefficient staffing, like unsupervised junior associate research,” she wrote.
“Larger departments are more than twice as likely to review their outside spend [with] nearly 80 per cent of small legal departments not examining this data, despite the fact it’s likely their largest expense category.”
Legal department intelligence solutions can make this “fast and painless”, she posited, and even manual reviews of billing data can yield “actionable intel”.
“As for buying power, don’t underestimate your leverage. 95.8 per cent of managing partners believe that increased price competition will be a permanent trend in the marketplace. Law firms expect to compete on price,” she wrote.