Legal Spend Part 1: Unlocking Legal Department Value
In this series of articles, we examine how legal departments can begin to demonstrate their value through their legal spend.
One of the biggest concerns when it comes to the legal department of any corporation is not only delivering legal services with limited resources but demonstrating value to the corporation in a language outside of legal.
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Legal services may not be the most exciting item on the corporate shopping list, but they are essential for any successful corporation. With legal budgets constantly under scrutiny, it’s crucial to track and analyse legal spend to ensure that every dollar is well-spent. But simply relying on accounting records won’t cut it. To truly optimise legal spend, corporates need to dig deeper and evaluate the value they’re getting from their legal costs.
Understanding Legal Spend
How many times have legal departments heard, “Why are we paying so much” from their organisation’s finance departments, management teams and executives, after receiving the statement of account from an attorneys’ firm?
These statements often come from a lack of understanding, about what the legal process entails and the time and effort that legal matters take to conclude. Whilst the organisation receives an itemised billing document, some of the items may be unclear or misunderstood which could result in the termination of the relationship between the organisation and its counsel.
Think about the legal spend calculation in the context of plumbing or electrical services. Most of the work being done is based on labour costs (time spent), compared to fees for direct expenses like pipes, cables, etc (sheriff’s fees, telephone calls, etc.) which are usually relatively low. Managing legal costs is further complicated when there is a specific SLA (service level agreement), that deals with:
- The experience of the person undertaking a piece of work,
- The specific cost for a specific piece of work,
- Cost per copy or kilometre travelled, etc.
For purposes of this specific example, legal fees include the following categories:
- Labour costs,
- Direct expenses,
- SLA or similar agreements which manage legal costs.
Even with the above understanding and presentation of an itemised bill, it is often hard to see the outcome of the process until its complete. This makes it feel like legal services are a black hole, wherein money is just being thrown, without anything to show for it, reinforcing the stereotype that the legal profession is a con.
In the next article, we investigate how our solution Matter Manager practically assists in managing and tracking legal spend. If you are unable to wait, find out more by simply calling us on +27 11 719 2000, emailing us on in**@le***********.com or booking a demo with us by following this link: Schedule time with one of our experts.
