Cost-cutting to remain high priority for legal departments
With a potential recession on the horizon and the need for efficiency at an all-time high, legal departments are continually asked to do more with less — something this pair said is only likely to continue as the economy declines.
Mark Dodd is the head of market insights at LOD, and Helena Kolenbet is a senior legal counsel at LOD Legal. Speaking on a recent episode of The Corporate Counsel Show, produced in partnership with LOD, the pair discussed how in-house lawyers can thrive in cost-cutting environments, particularly in times of economic volatility and uncertainty.
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In terms of the state of affairs within law departments right now, Ms Kolenbet said that legal teams have had to grapple with cost-cutting measures for a “long time”.
“Ever since COVID, there’s been a lot of change, there’s been a lot of dynamic movement within legal teams and external to legal teams that are forcing people to rethink and change the way that they were doing things once upon a time,” she said.
“The pressure with increased workloads has been slowly escalating, and I think right now, we’re coming into the real thick of that, where people are looking down the barrel and going, ‘This isn’t going to change anytime soon. It’s something that is here to stay for the immediate future, and how we’re going to make some permanent changes to be able to address the increased pressures on our legal teams’.”
LOD is currently hearing from lawyers who are in “pressurised environments” due to increased cost sensitivity, added Mr Dodd.
“What does that actually mean? Well, it means a lot of the time that budget spend for outside counsel’s cut, which means they need to do a lot more in-house, which is difficult when your BAU and your plate is full, so to speak, but now you need to do more. And in times of cost-cutting, you also see things like restructuring happening, supplier renegotiation, employment law matters, and this is all extra stuff on the plate.
“We’ve seen a lot of this since COVID, but even now, I think in the cost of living that we’re finding in Australia and even more so in the UK and the US, it’s really heightened the pressures that we’re seeing, because businesses are having a little bit less money than they had before,” he explained.
“We’re about to do a global survey, and I will have that information in a couple of months, but right now, based on my conversations with our UK colleagues, I think we are actually probably doing a bit better than them in terms of budget constraints. I think over in the UK, the cost-of-living pressure, well, we know, is a lot higher. Inflation’s a lot higher. Energy costs are soaring. So, I think overall, on balance, we’re probably doing better, but I suspect we’re potentially just a little bit behind.”
Cost-cutting is also consistently ranking high on the agenda of legal departments, despite increasing environmental, social and governance (ESG) and cyber security concerns.
“Legal teams do feel the pressure because you’re a cost centre of the business, and as such, there is increasing pressure to do more with less. So, the ability to prioritise as a member of the legal team is quite challenging because you’ve got your stakeholders that have what’s hugely important in their world, which may not necessarily be aligned with the priorities of the legal team as a whole,” Ms Kolenbet said.
“Because as a legal team, you are at the centre of the organisation, you have visibility across what the organisational priorities are, but that’s not to diminish the importance of what’s going on with your individual stakeholders because what they’re sending to you and what they need from you is at the crux of what they need to be able to do to function. So you’re going to have input from your stakeholders, which they consider are crucial and urgent, you’re going to have input from the more senior members of the legal team and in the organisation with what the organisational priorities are.
“So, trying to balance that can be very challenging. And trying to interrogate so that as legal counsel who’s going through your inbox and trying to ascertain where you’re going to align your priorities today, that takes a bit of time, and it can take a little bit of planning as well, take a little bit of question asking. And it’s sometimes a very tricky thing to try and do while being able to manage the expectations of everybody who’s knocking on your door at the end of the day.”
As to what is required in such a cost-cutting environment, Mr Dodd said that while there can sometimes be a disconnect in communication, for the most part, legal departments aren’t naïve.
“There is sometimes a lag between what the leader understands needs to be done and how the team delivers it. But from speaking to in-house counsel, from reading a lot of online discussions and articles about it, I think people are quite aware of it. I don’t think there’s a lot of naivety,” he noted.
“I think where people are probably falling short or where they want more help is because they are in siloed teams, they don’t understand potentially how other peers are doing things. It’s not like a law firm where you can walk down the aisle or the corridor and speak to someone. There is that potential, particularly in smaller teams, of feeling isolated.”
Ms Kolenbet agreed — and added that open communication within legal departments remained important as cost-cutting is likely to stay high on the priority list.
“I think this has been something that’s been on the radar for quite some time as things have continued to take a turn. At different organisations, the stage that you are at in terms of this will depend on the leadership within your legal team and how important or how much value the leaders in that team place on these strategies,” she said.
“So, I think it’s very important as an individual working within that team to try and equip yourself with the tools that you need to be able to manage and efficiently organise your working day according to the priorities that you personally hold. But whatever influence you have with the overall team or with the team leaders, if there are strategies that you think your entire team can implement, please speak up. Because chances are if you’re struggling with something, the other people in your team are struggling with the same things and across the organisation as well.”
The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Mark Dodd and Helena Kolenbet, click below: