In Part 1 of this series, we looked at the recent history and current role of Procurement in the purchase of legal services. I suggested that Procurement is struggling in this new role and there may be a better approach. In Part 2, I suggest that approach. Again -comments are encouraged.
My counsel to in-house counsel when it comes to working with Procurement is Be Proactive. I have an old saying, “The guild was broken in the General Counsel’s (GCs’) office.” Which is to say that in 2008 when the CEO came in for the annual ‘save money’ talk, s/he didn’t take “I Can’t” for an answer. Instead, the CEO introduced Procurement to the GC and let them know they were there to help. What this demonstrates is that GCs have been waiting too long to get in the cost savings game. Waiting means someone else is going to come in and address that need for you: Procurement in this case.
In what I would consider to be a best case scenario – Procurement serves as an adviser to the legal department. In this scenario Legal must take a very proactive role in cost savings. This means directly confronting the issue with outside counsel and working in partnership with them to achieve this goal. There are numerous examples of GCs who have taken on this challenge and succeeded. One often quoted example (for good reason) is Jeff Carr at FMC Technologies. Jeff’s company has grown dramatically in the past five years, while his total legal spend has gone down. He did that by aggressively taking on a cost savings role.
Recently I moderated a panel with another GC who is taking on this challenge. He made a very good point about holding Procurement at bay. He commented that Procurement is very comfortable about achieving savings, but when it comes to living with the result of that effort, the legal department is left holding the bag. Legal not only has to deal with securing legal services, they also have to manage the services over time. This GC sees tremendous value in embracing a cost savings role so that his client (a.k.a. the company) will receive the right level of service as the best possible price.
Taking this thinking to the next level, I suggest a GC set savings targets and refocus the conversation with outside counsel on that goal. Merely saying you want to “save money” and “realize efficiencies” as requested in numerous RFPs is not enough. Instead, pick a category of work and set a savings goal for the year. For arguments sake, let’s say this is 10%. Then the GC can sit down with its trusted, outside firms and ask them how they can help meet that goal. This would lead to a conversation about scope and a meaningful dialog on how costs can be reduced, the nature of desired efficiencies and most importantly, how the GC and the firms can meet this goal together.
I believe a partnership towards a cost goal will be far more productive than a one-sided request. On numerous occasions I have seen engagements go over budget based on the client’s actions instead of the law firm’s. Admittedly, the firms do need to take serious steps towards reducing costs at the fee level, but that can be a bigger challenge when the client is not aligned with that goal.
Part 3 of this series will look at the value of being proactive and working to ensure alignment of interests between client and law firms.