- David Galbenski, EVP of Strategic Initiatives
New year. New challenges. And also new opportunities. As we draw closer to the end of the year, it’s important to pause and reflect on the gauntlet we’ve all run in 2020, and what’s coming next.
For corporate law departments, the new year will bring with it a need to do more with less. That’s a key finding from a new report issued by HBR Consulting that found that legal departments are focused on resource management and cost optimization. A Corporate Counsel magazine analysis of the report states that: “84% of legal departments indicated they would continue to see an increased demand for legal services for the foreseeable future while being constrained by decreasing budgets.” Again, more to do, less to do it with.
What this means, in practical terms, is that in-house attorneys and support staff are having to adapt and become more nimble and flexible in order to get legal work done. A greater emphasis is being placed on legal operations, controlling costs, prioritization of key initiatives, and project management. Every decision being made by in-house teams must be viewed through the lens of whether it is likely to deliver maximum value to the organization—which was always a priority but is a particularly important concern in the COVID-19 environment.
In many instances, this means that in-house teams are increasingly looking to outside resources, from law firms to alternative legal service providers (“ALSP”) like Lumen Legal, to help with discrete projects or wholly outsourced solutions. This, in turn, allows in-house professionals to be better utilized and focus on what they do best.
Using Data to Drive Better Decision-Making and Resource Allocation
At a time when it’s a priority for corporate legal departments to drive down costs, a common starting point to squeeze out savings is strict enforcement of billing guidelines and the negotiation of lower billing rates from outside counsel and other vendors. This can help move the needle, but often not by much.
Greater opportunities to achieve cost efficiencies, as well as increase the effectiveness of an in-house legal department, are possible through a more holistic approach. What’s needed is a new model of operating, not merely finding efficiencies within an existing model.
The building of a new model begins with examining information, from legal spend analytics to commercial contract data, that helps clarify the obstacles and opportunities that exist within a corporate law department. The purpose of such an analysis is to determine how finite resources can be allocated—internally and externally—more effectively. The end goal is to move from a rigid business model beset by high fixed and variable costs to a more flexible, lower-cost model that delivers the same or better performance.
The starting point for reallocating resources is internal—aligning the right people on an in-house team to the right projects and objectives. This requires a clear understanding of the component parts of a legal matter. Rather than insourcing or outsourcing projects in their entirety, the unbundling of projects allows the allocation of discrete tasks to the right resource. Work that allows in-house lawyers and other professionals to operate at their highest and best use should be handled in-house. What remains should be outsourced to external resources.
The Pivotal Role of ALSPs in Driving Down Costs and Improving Performance
A data-driven approach improves the external allocation of work as well. To meet tomorrow’s challenges, corporate legal departments are focusing more intently on not just Who can do what? but more importantly Who should do what? when allocating work.
By exploring these questions, and the relevant data underlying them, legal departments are increasingly turning to ALSPs to help build more flexible business models. One of the key findings of Deloitte’s recently released 2020 Legal Department COVID-19 Survey is that ALSP utilization by in-house teams continues to grow:
“More than half of all respondents expect to increase engagement with alternate legal service providers (ALSPs), whether ALSPs were part of their model prior to COVID-19 or not. In short, moving from response to recovery, legal departments continue to be focused on technology investments and operating model changes that will help them move forward and emerge stronger from the pandemic.”
By offering the rapid deployment of legal talent, technology, services, and processes that can be plugged-in to support existing infrastructure, ALSPs are enabling legal departments to more nimbly adapt to market circumstances, rather than being bogged down by under-utilized or misallocated resources.
The driving force behind innovation in the legal industry in recent years has been a desire for more value in the delivery of legal services. While controlling fees is a factor in value creation, the most important driver of results is building more flexible business models that ensure the effective allocation of talent and other resources. ALSPs will continue to play a pivotal role in the process of optimizing the performance of corporate legal departments in 2021 and beyond.
About the Author
David Galbenski is the EVP of Strategic Initiatives at Lumen Legal (now Lexitas). Dave founded Lumen Legal 27 years ago. He enjoys providing his thoughtful, creative, and innovative counsel to law firms and corporate law departments looking to solve problems and reduce costs. He also enjoys staying abreast of all developments in the legal industry and has contributed to the dialogue with two books: Legal Visionaries and Unbound: How Entrepreneurship is Dramatically Transforming Legal Services Today. He is a frequent speaker at conferences.