Efficiency is the name of the game when it comes to how corporations will handle their legal spending in 2009.
Given the economic turbulence expected over the next year and beyond, business consultants agree that it is time to rip apart the company budget and make every department examine every cost. And that includes the otherwise sacrosanct legal staff.
In its 2009 Cost Control Survey, legal management consultants Altman Weil Inc. reported that 75 percent of the corporations surveyed will cut their legal budget in 2009, and the bulk of legal budget cuts will be targeted at outside counsel costs.
Legal experts say it is essential that every member of the legal community take this process seriously. That means firms should review their internal methods, update their client management procedures and consider adding temporary or project-specific attorneys as a way to control costs.
So where do you start? Scott Sarasin, director of business development for legal staffing firm Lumen Legal, believes the first thing firms and corporations should do is to define what areas of their legal spending budget are essential. Having this discussion with management can help define what must stay and what could change.
Secondly, every business today needs to establish a realistic budget. Granted, quickly changing financial markets – along with lenders’ vise-like grip on credit lines – has made this more challenging than ever before. But having guidelines for spending will help legal departments internally and externally adhere to cost expectations.
Finally, firms as well as corporations should look at ways to innovate in any way they can. That could mean using firms in less costly markets to try to find lower billing rates or cancelling all unnecessary travel and using video teleconferencing exclusively. And Sarasin believes contract counsel should become an integral part of every decision when it comes to legal spending.
And Lumen is not alone in this opinion. In its January 2009 Client Advisory, Consulting firm Hildebrandt International in conjunction with Citi Private Bank recommended more businesses consider temporary staffing as a way to improve overall performance.
“Over the long term, it is possible that the right economic model for success could well be a firm with relatively fewer partners and associates than today, but with expanded categories of other lawyers (some of whom would be temporary or project specific),” the note said. “Such a model would not only allow firms to be more flexible in responding to client concerns about cost and efficiency, it could also reduce associate attrition by allowing firms to be more selective in their recruitment and more focused in their development of younger lawyers.”
At Lumen Legal, the financial and economic malaise has been beneficial in that more companies are open to using the firm’s legal staffing services as a way to trim costs, noted Sarasin.
“We provide alternatives to how corporations have traditionally used their outside law firm, with many tasks now done at significantly lower rates using contract attorneys or project services,” Sarasin said.
For example, Lumen Legal recently launched its “LASER” managed services program which is designed to quickly identify areas for immediate savings.
“The goal of this program is to provide practical solutions to address this growing focus on cost containment and increased control on legal tasks. Once implemented, cost savings are realized from inception,” Sarasin said.