5 Tips for a Cost-Effective Legal Department

Catherine Dunn

Corporate Counsel

02-20-2013

Ever have a sneaking suspicion that other legal departments know something you don't about how to save on costs? Well, maybe they do. But you don't have to be out of the loop, according to a new analysis by the Corporate Executive Board.

The member-based advisory company works with 1,150 legal departments around the globe, and recently surveyed 180 in-house departments (88 percent of them at companies based in North America) to examine the different practices amongst comparable departments with the highest expenses and lowest expenses.

The result is an analysis called "9 Efficiency Trends to Watch for in Legal." CorpCounsel.com caught up with CEB managing director Sampriti Ganguli to discuss some of the survey's top findings.

1. Perform more work in-house.

Yes, it's true: to save money, try doing more in the legal department — as opposed to outside of the department. At most companies surveyed, legal departments devote about 60 percent of their spend to outside counsel. But, says Ganguli, "the most cost-effective department can get that number down to 40 percent." So start thinking about a 60 (in-house)/40 (outside counsel) split.

2. Use non-lawyer professionals more often.

CEB finds that 42 percent of survey respondents employ at least one non-lawyer professional for every two in-house lawyers. Those personnel can free up an in-house attorney's time and keep a law department from having to outsource certain tasks to (more expensive) outside counsel.

Non-lawyer professionals can tackle items that are more administrative in nature and/or require urgent turnaround — tasks like reviewing contracts and preparing filings. "For a senior attorney to spend their time on that, it's just expensive," says Ganguli.

3. Invest in legal operations capabilities

More and more, CEB is seeing people with titles like "business manager" and "chief legal administrative officer" showing up in law departments (especially large law departments). Whatever the title, "they are responsible on a day-to-day basis for the management of that department," says Ganguli, adding: "We often think of them as the key chief of staff of the GC."

Legal operations managers take on a range of responsibilities, such as implementing e-billing systems, analyzing outside counsel fees, and even tracking in-house attorneys' CLE credits. As these managers carry out large technological or cost-reduction projects, it allows the general counsel to focus on giving "pro-active legal advice" to the company, says Ganguli.

4. Invest selectively in legal technologies.

More than 90 percent of law departments use some type of legal technology, like document review or e-billing, according to CEB's data. But where in-house attorneys tend to become dissatisfied is in actually putting those technologies to work for them. "They have a tough time in the implementation," according to Ganguli.

Her advice? First, law departments that invest in technology also need to be willing to invest in the kind of "change management" initiatives that will get the new tech to stick. Second, benchmark the product to "make sure you're selecting the right vendor for your specific needs," Ganguli says. And, she adds, once you've purchased a product, keep working with the vendor to get your department's needs met — don't simply chalk up the product as a lost cause.

Best-practice legal departments put in place a multi-year IT strategy, says Ganguli, and they work with their company's IT department to develop and implement it.

5. Unbundle legal services.

Do you really need to pay a law firm for services like photocopying and research? "These are areas where there are more cost-efficient alternative providers," says Ganguli.

CEB recommends that legal departments pick a practice area and then examine which activities within that area can be unbundled. Patents and litigation are two examples of "narrow practice areas where there's a more mature market for providers," Ganguli says. A legal department can start there, for instance, and use it as a testing ground for how services could be unbundled in other areas.

And remember, Ganguli advises, to determine the business case for unbundling, such as noting when litigation costs begin to exceed 15 percent of a legal department's total budget. "There has to be a business need, as opposed to just doing it for cost efficiency," she says.