25 October 2021

Innovative Approaches to Legal Spend Management

Insights

Continuing with the theme of innovation discussed in recent articles here and here, this article explores spend management and discusses how Lawcadia’s innovative approach can enable legal departments to bring structure, transparency and collaboration to the entire matter life-cycle in a way that takes the focus AWAY from the billable hour and TOWARDS better instructions, scoping of matters, alternative fee arrangements, project management, collaboration and metrics.

But first, what is legal spend management?

In short, legal spend management is the process through which a legal department understands, allocates and controls financial expenditure to external law firms and/or legal service providers. It allows General Counsels and their legal team to have oversight of legal costs and importantly, ensure costs remain within budget. Accordingly, it requires a combination of both strategic sourcing decisions and innovative budget management to make the most efficient and cost-effective use of the resources that are at the legal department’s disposal. Effective legal spend management has become increasingly significant as legal departments have faced budget constraints, mounting workloads, and forced to ‘do more with less.’

Strategic Sourcing

As mentioned above, a key component in managing legal spend is making informed and strategic sourcing decisions, otherwise known as right-sourcing. In our article, ‘Right-Sourcing Legal Matters: A Strategic Approach’, we outlined three steps through which a legal department could formulate a right-sourcing strategy to determine the most effective way to manage workloads, procure a service or complete a task. Strategic right-sourcing contributes to innovative legal spend management as it optimises available resources through triage, and further, creates a clear, repeatable, and structured framework for allocating external budget expenditure.

Budget Management with Lawcadia

Traditional approaches to spend management focus on the output: the bill and its primary levers, rates and time. However, Lawcadia supports an alternative approach to spend management and focuses on optimising the inputs and process across the entire matter life-cycle, reducing unnecessary waste, and aligning client and law firm. This promotes value, quality, accountability, collaborative relationships, and importantly, a focus on data-based decision making and continuous improvement.

Best practice workflows and process automation technology support this approach with structured intake, triage, strategic law firm engagement process, optional RFP, structured scope, and agreed budget, ensuring all elements are considered and given priority at the relevant stages of the matter life-cycle.

The logic supporting Lawcadia’s approach to legal spend management are comprised of six key elements. We discussed the six elements in greater detail in our article ‘6 Success Factors for Matter-Based Fees’. However, in short – they include:

  1. Instructions

Lawcadia uses structured intake forms to allow more detailed and accurate instructions to be prepared. When briefing matter to outside counsel, the legal team can either send instructions to one law firm or opt to send a competitive brief (RFP/RFI) to multiple law firms to obtain competitive quotes based on fixed fee, fee estimate or capped fees.

  1. Scope of Work

Subsequently, the legal department then selects and engages the successful law firm with consideration to the scope of work using comparison tables to determine which is most suitable based on their criteria (price, experience, project management etc).

  1. Sharing of Expectations

Once the budget and scope-of work is agreed upon, Lawcadia provides a shared interface for the client and the law firm allowing them to collaborate on the matter, share documents, expectations, and the strategic importance of certain decisions to ensure all parties are on the same page.

  1. Framework for managing change

Fees based on a scope of work require a consistent and structured approach to managing changes and controlling ‘scope creep.’ If the scope-of-work (and budget) needs to change, this can be managed in-platform on Lawcadia through a change request that must be proactively approved by the client, which keeps the law firm on track and accountable for how they are spending their client’s money.

  1. Efficient Transfer of Information

With Lawcadia, all matter and budget information can be shared accurately, securely, and efficiently. Specifically, invoiced can be received, approved, and tracked and compared against the budget by both the client and law firm through the two-way shared and collaborative interface, Gantt Charts and status updates.

  1. Transparency

Lawcadia’s Client Collaboration workspace prioritises transparency and allows for all authorised parties to monitor and review the progress of the matter through the entire matter lifecycle.  Additionally, customised BI reporting captures all data and metrics across helping legal operations and general counsel identify areas for continuous improvement.

Conclusion

In summary, innovative approaches to spend management allow legal departments to demonstrate value whilst reducing waste and increasing savings. Importantly, clear, repeatable, and structured frameworks for allocating budget expenditure will ensure accountability and can strengthen relationships with clients by promoting transparent procurement decisions, predictable spend and delivering better legal outcomes.

 

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