Budget constraints in the legal department can sometimes feel like literal chains on your ability to investigate and pursue different lines of argument in a legal matter as thoroughly as you might like. But it's possible to turn these budget challenges into opportunities and develop a more efficient and effective internal culture in the process. Read on to learn more about how to improve your legal department's budgeting and forecasting procedures and maximize the efficiency of your staff.
Conceptualize Your Strategy and Goals
Today's digital environment can make it easier than ever to data mine your historical spending patterns and determine the what, where, and why of expenses incurred in each type of case you handle. But without some pre-determined goals in mind, you could find yourself spinning your wheels when it comes time to analyze the data you've collected.
Your goal may be to ferret out waste in your department's budget without cutting a single staff member's hours, or even to free up enough currently-encumbered funds to hire an additional investigator or paralegal. Regardless of what you'd like to accomplish, having a target in mind can provide you with the framework to begin working on a strategy to use any historical data as efficiently as you can.
A recent Lexis/Nexis CounselLink white paper, "Corporate Legal Department Matter Budgeting and Forecasting: a Strategy for Success," reports that about 3 in every 5 companies use "matter budgeting," or budgeting based on the projected cost of each unique legal matter, to keep their department on financial track.
"It can be tough to undertake a lean processes analysis if you're worried the results may point toward getting rid of jobs"
Historic budgets can provide you with an objective look at matter costs, which can give you a better idea of how much you can reasonably expect to invest in a matter and what you can expect in return. If your attorneys and paralegals already keep records of billable hours, it can be fairly simple to extract case-by-case data to see how much time each step is taking. Once you have some more information on what you'll be expected to expend at the outset of a case, you'll be in a better position to look at the different options for controlling these costs.
Identify Waste in Your Budget
The most efficient budget review processes usually begin with a top-to-bottom analysis of the procedures you use when receiving, researching, and pursuing or responding to a legal claim.
- Understand the ROI for All Expenses
One of the quickest ways to sink a legal department's profitability is to invest a significant amount of your annual budget into a matter that doesn't go anywhere—or into a marketing campaign that just doesn't bring in the customers you expected.
Something as simple as asking prospective clients how they've heard of you during the intake interview can give you a far better idea of how various outreach efforts are landing. And web analytics can show you everything from the number of recipients who have opened a marketing email (or deleted it without reading) to the number of times your business's name was typed into a search engine.
By analyzing information about the direct and indirect returns on expenditures your legal department makes, you'll be far better able to eliminate unjustifiable expenses while putting more resources into those that have a proven positive return.
- Ferret out Redundancies
One of the biggest sources of waste for any business can be redundancy. Having two or more people perform the same task doesn't usually make sense, but this type of arrangement often naturally evolves over time as a workforce expands and each position takes on more responsibilities. It's important to make sure the right hand knows what the left hand is doing, so to speak, to ensure tasks are timely accomplished without using an inordinate amount of staff time.
Generating busywork that adds no value and sucks up time can also be a tremendous source of waste. Often, procedures can be passed along from employee to employee with the explanation, "that's the way we've always done it" without much surrounding context. Unpacking the "whys" of various processes can help you identify more streamlined ways to achieve the desired result.
- Formalize Efficiency Processes
A one-time analysis of your processes can lead to a major boost in short-term efficiency but isn't as likely to have a long-term impact unless it's memorialized. By working with your HR and compliance specialists, you can ensure that processes are put in place to regularly review your legal department's efficiency and eliminate waste.
Improve Your Budget While Keeping Staff
It can be tough to undertake a lean processes analysis if you're worried the results may point toward getting rid of jobs—not to mention the difficulty of getting employees to comply with an analysis when they fear their positions may be on the chopping block. Instead, it can be important to analyze the information and analytics you collect with an eye toward keeping people, if not positions.
- Ask Employees for Job Descriptions
This can often be one of the simplest ways to identify redundancies or inefficiencies. By asking employees to log and submit a basic list of the tasks they perform every day and week, you may discover you have one process inadvertently split between several employees or a gap in information when a case moves from one employee to another. By rearranging and reassigning certain duties, you may be able to keep all your current staff members while freeing up their time for new projects and relaxing the pace of your workplace.
- Focus on Forecasting
Forecasting future expenses and putting a price on each new matter is just as important as tracking ongoing expenses. Implement a strategic plan that focuses on increasing the accuracy of forecasting or even offers incentives (like bonuses or profit-sharing) for budget savings to give everyone in your legal department an incentive to make wise use of their company resources.