How Legal Spend Analysis Transforms the Role of General Counsel

The role of General Counsel for an in-house team requires balancing competing priorities. They include protecting the business from risk, enabling strategic business decisions, and delivering legal services as efficiently as possible, just to name a few.

The secret that most GCs learn early on? Doing any of that becomes near-impossible in an environment where they lack visibility into day-to-day spend and matter data.

In this blog, we cover how GCs can achieve much-needed visibility and why legal spend analytics should be your first port of call for gaining insights and transforming how GCs work.

How Legal Spend Analysis Improves In-House Strategy and Resource Allocation

Legal spend analytics tools are often framed purely as a cost-control mechanism. But in practice, their greater value lies in supporting GCs and their teams to make smarter, more strategic decisions. Put another way, when you can clearly see where money is going, you can make better decisions about how resources — both internal and external — are allocated to ensure the best results.

Identifying spend patterns

General Counsel software, like an e-billing platform, helps GCs to recognise trends and answer key strategic questions like:

• Which matter types are consistently running over budget, and why?
• Which outside counsel firms are absorbing the most significant chunk of the budget?
• Are specific business units driving higher-than-expected amounts of legal spend?

Answering those kinds of questions allows GCs to move beyond just “controlling the budget” and to get a real handle on how to improve cost and legal service outcomes.

Insourcing vs. outsourcing

Analyzing spend can also provide insight into whether resources are being allocated effectively. For example, if low-impact work is consistently outsourced, there may be value in increasing in-house capacity, leveraging alternative legal service providers, and/or investing in legal workflow automation for routine tasks.

Conversely, rising spend in particular areas might justify conducting a thorough outside counsel spend analysis and consolidating work under one or two external firms, with the potential to unlock volume discounts that can drive real cost savings.

Prioritizing high-impact matters

Finally, better oversight of where team time and budget are going allows GCs to prioritize the time spent on matters with high strategic value. For example, matters that align strongly with broader business objectives, or that have a substantial impact on organizational risk or impact.

Transforming In-House Efficiency

Legal spend analysis tools can also empower GCs to change the relationship their team has with both departmental finances and legal matter data. Smart usage of tools and data can help teams:

Refine financial accountability

What gets measured gets managed. So when a GC starts capturing and analyzing a more detailed portrait of financial performance, internal matters are managed with greater cost efficiency.

That’s not to say your in-house lawyers aren’t already diligent financial stewards. It’s just that the deeper data sets generated by today’s legal spend analytics tools can help departments to understand costs more intimately and apply controls more precisely than ever before.

Develop a data advantage

With greater insight into data, GCs also gain the tools they need to engage much more deeply with business strategy (and the metrics they need to engage other stakeholders).

• Need to justify your proposed budget to the CFO?
• Need to negotiate a more favorable rate from a firm?
• Need to know which cost drivers to focus on next quarter?

Data visibility puts you on the trail to an answer sooner and makes it easier to get the support needed to roll out new initiatives or legal tech.

Transforming Outside Counsel Relationships

In addition to strengthening your financial fundamentals internally, legal spend analytics can be used to refine outside counsel engagements as well by:

Evaluating performance objectively and communicating expectations clearly

Analytics provides a more objective way to measure financial performance and immediately improves the dynamics of outside counsel relationships.

Having clear-cut metrics to point to instills upfront clarity and accountability, and can help incentivize the traits and performance you’d like to see from law firms. As a result, outside counsel will learn what you expect and value in a fraction of the time. Plus, they’ll feel reassured that you’re evaluating their services with a consistent, transparent, and unbiased rubric.

Helping your team to establish benchmarks

With performance data on hand, you’ll also be able to make clear, objective comparisons between firms and to benchmark what constitutes great performance. This will give your team the confidence to make more effective decisions at all phases of an engagement, including:

• Law firm selection
• Matter resourcing strategy
• Fee negotiations & AFA proposals
• Panel review & consolidation exercises

Helping you set price expectations

Finally, a thorough outside counsel spend analysis is the key to refining pricing and value in outside counsel engagements. It can help teams pinpoint factors like:

• How long should a matter like this typically run?
• How should we divide the budget across phases?
• How should we allocate the work among timekeepers?

It can also bring to light potential hidden budget constraints or unreasonable fee expectations — variables that can easily derail progress on any matter if discovered too late.

Transforming C-Suite Perceptions

Getting a firmer grip on legal spend offers a significant additional advantage for forward-thinking GCs. It helps build a very different view of both the legal team and the GC role where it matters most: in the C-suite.

Clarifying accounting

The complexities of corporate legal services just don’t lend themselves to simple spreadsheet summaries.

But with analytics tools specialized for legal spend management, GCs are in a much better position to accurately report and confidently defend their numbers to the rest of the boardroom. And that opens up the path to having an equal voice in the company’s most strategic conversations.

Underscoring impact

Spend analytics tools can also give legal teams the metrics and language they need to communicate accomplishments in a way that other stakeholders will respect and understand.

Did you resolve a matter months ahead of schedule? Help everyone else appreciate the significance of that result by modelling the costs your company would have incurred if the matter had run another quarter or two.

Did you recently complete a panel refresh exercise? Make it more universal by using benchmark data to contrast cost-efficiency between the old cohort and the new.

Whatever shape your victory takes, legal spend analytics tools can give you the data and dashboards needed to tell that success story.

Predict outcomes

Finally, nothing can elevate a GC’s boardroom profile quite like a reputation for predicting the future. And, at least in the realm of legal spend management, that superpower is more attainable than you might think.

Referencing historical benchmarks can get you at least halfway there, helping you set only realistic goals you feel confident committing to. Real-time reporting capabilities can push you the rest of the way, providing continuous feedback on whether your stated goal might be at risk — and what can be done to secure better outcomes.

Additional Benefits of Spend Insights for GCs and Their Teams

In addition to the outcomes discussed above, legal spend analysis can be a game-changer for tricky conversations with the finance team. By having real-time insights into internal and external legal spend, GCs can explain budgeting decisions to the CFO and their team far more easily, showing exactly where resources were allocated and why.

They can also demonstrate the risk and cost implications of in-house legal decisions in terms that other business stakeholders understand. All of which, in turn, makes it easier to prove Legal’s alignment with the priorities and concerns of different teams, and the business’s strategic direction as a whole.

Practical Steps to Improve Spend Visibility for In-House Legal Teams

We’ve covered all the ways legal spend visibility benefits GCs and their teams. But how does it look in practice?

It’s a big topic, but here are some general pointers for how in-house legal teams can improve legal spend visibility (have a read through our Ultimate Guide to Legal Spend Management for the in-depth take):

Centralized legal spend data

The most critical step your team can take is centralizing spend data in a single repository (like an e-billing tool). By having everything in one place, it becomes much easier to track where things are going off budget and to find opportunities for significant cost savings.

Standardized, enforceable billing guidelines

Having standardized billing guidelines (and a way to track compliance) is another important component of visibility. With clear insights into outside counsel guideline compliance, teams can quickly pinpoint unnecessary spend. And then have the conversations needed to rectify it.

Integration with finance and matter management systems

The ability to integrate legal spend data with existing systems, like matter management, finance or AP (accounts payable) tools, can also be a big boost to visibility. An important consideration here though is that there can be significant challenges in trying to “cobble systems together”. A better bet? Invest in a single platform that handles all aspects of ELM (enterprise legal management).

Clear spend KPIs

Finally, make sure your team is working with (and towards) clear spend KPIs. Everyone on the in-house team should be aware of the goals for factors such as cycle times, spend-to-budget, and cost-per-matter. And outside counsel should also be crystal clear on what’s within budget, and what’s expected.

Equipped for Success

A strong legal spend analysis strategy is the backbone of successful operations within your legal team. Combine it with the expertise of your lawyers, and your own as GC, and proving the strategic value of the legal function becomes as easy as looking up a few key metrics.

Want to make it even easier? Brightflag’s dedicated ELM platform is designed to analyze legal spend in real-time, keeping your team on top of challenges and opportunities as they arise. Book a demo today to learn more.

FAQs

What is legal spend visibility, and why is it important?

Legal spend visibility means having in-depth insight into both in-house and external legal spend. This visibility helps GCs motivate budget decisions, identify cost-saving opportunities, and operate more strategically in line with business objectives.

Can legal spend visibility improve outside counsel management?

Absolutely. With greater spend visibility, GCs can identify both outperforming firms and cases where budget is being spent unnecessarily. This paves the way to conversations around bulk discounts and better resourcing.

What tools help with legal spend analysis?

Teams should implement a comprehensive solution that includes legal spend analytics, matter management and other tools. This ensures maximum visibility into both spend and its impacts, and allows teams to make decisions based on all the available data.

How often should legal teams review legal spend data?

Ideally, continuously. Having a legal spend analysis solution in place that supports both real-time review and forecasting will enable teams to make the best possible, data-backed decisions about how to manage legal budgets.

What’s the first step to get better visibility into legal spend?

Centralizing spend data in a repository that makes it easy to access and analyze how the budget is being used. For more details on how in-house teams can improve legal spend visibility, see our comprehensive Guide to Legal Spend Management.