We are addressing two letters to you, our esteemed colleagues in legal departments. The first letter debunks typical prejudices and clichés about collaborating with your colleagues in procurement.
In our second letter, in an upcoming Insight, we will provide facts that prove why collaborating with procurement might be the best thing for you and your in-house counsel colleagues. These facts are based on findings from the Buying Legal Council’s 2019 Market Intelligence Report Legal Services.
Companies using procurement to buy legal services on average save 17.1% on their outside legal spend. Here are some questions to ask yourself.
How much did you save last year?
In many countries around the globe, particularly in the United States, United Kingdom, and Switzerland, as well as in certain industries, including big pharma, large banks and insurance companies, legal procurement managers work alongside their colleagues in the legal department and legal ops to get more value from their providers. They are brought in when the organization needs to buy legal services, alternative legal services, ancillary legal services, and legal technology. Procurement helps and supports. Procurement professionals analyze and negotiate.
Do you include your colleagues in procurement or do you try to keep them out of purchasing legal services?
The arguments against bringing in procurement are (almost) always the same: “Legal” is different; buying legal services is not like buying widgets; the legal department/legal operations can do it perfectly well without procurement’s involvement; only lawyers know and understand the nuances and particularities of buying legal services; only lawyers know how to “buy” lawyers; legal operations doesn’t need procurement’s support.
Buying any type of complex professional service necessitates knowledge and typically follows a relatively complex process. Guidelines have to be followed, purchasing decisions need hold up to internal scrutiny and compliance audits. What’s more, you have to stay within your budget. Clients need to carefully manage their roster of law firms and other legal services providers and show robust cost management.
All of this takes time. Time that an in-house lawyer better spends doing legal work for their employer, keeping the organization out of legal trouble or reducing its risk. Time that the legal ops professional could spend on managing the legal department even better.
Instead, the in-house lawyer or legal ops person has to work on a request for proposal, negotiate with outside counsel, law companies, legal process outsourcing companies, legal tech companies, consultants, court reporters and so forth.
Did you push them hard for better conditions or did you consider that you’ll have to work with them afterwards?
Think about your last negotiation with a law firm. Wasn’t it rather uncomfortable and perhaps counterproductive having to start the relationship with tough pricing negotiations?
Let’s not fool ourselves. Before the last recession, there was little cost control in legal departments. Legal tech barely existed (other than eDiscovery perhaps and eBilling). Few in-house counsel took a robust business.
But the market has significantly changed in the last decade. We now see complex data analytics in our industry, data-driven decision making, project management and process improvement have become standard. We apply design thinking to find solutions, use machine learning and artificial intelligence. Once unthinkable, all these “modern” business approaches have also had an impact on legal departments.
Of course we know that lawyers are particularly intelligent and able to do many things. We’re not doubting that in-house counsel could learn how to effectively and efficiently buy legal services while carefully managing cost and guaranteeing quality. But why not work with specialists who are trained to do this, who do this type of work for a living? (Who would you consult if you had a heart issue? Would you see the cardiologist or your general practitioner? Many of us would say cardiologist, we wager.)
In most large and multinational corporations, procurement is quite experienced and skilled with buying complex and valuable professional services. Your colleagues in procurement buy tax services, HR services, and financial services. They buy management consulting services, auditing services and IT consulting services. They know how they can get better value from their professional services providers for their employer. And they are particularly skilled when it comes to price negotiations.
Is “Legal” really different?
We don’t believe in the “legal is different” argument. What does that even mean? Legal services are more complex? Less predictable? It may look this way because for many years, we didn’t measure anything, we didn’t look for patterns. Would it not be much better to take on the challenge, take a business-driven approach and make “unpredictable” predictable? Make the “unplannable” plannable? Reduce complexity? Assess and reduce risk?
We all know that we’re talking about big money here. Not just millions of dollars, euros, and pounds of legal spend, but for many of you, hundreds of millions. Because of these large numbers, it is extra important to know market prices, to understand who, in which area and which industry can create the most value. Benchmarks help better assess the market and competition and make the right decisions. Did we mention that all of these tasks are the core competency of procurement?
Don’t worry: You will continue to be the ultimate and final decision-maker. In-house counsel will continue to select the law firms or other providers they want to hire. But procurement helps you make the right decisions in a way that also makes your decision defensible to internal audits.
And procurement relieves you from tiresome paperwork, long-winded processes, unpleasant price negotiations. Working with procurement doesn’t mean destroying relationships with important firms and lawyers. On the contrary: working with procurement the right way means aiming for strategic partnerships with outside counsel and other legal services providers.
We can vouch for this. Just like in previous years, the international trade organization Buying Legal Council conducted a survey among buyers of legal services. Our insights are part of our “2019 Market Intelligence Report.”
Let us stop here for a moment to give you time to contemplate. We’ll get back to you shortly.
Silvia & Evelyn
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Dr. Silvia Hodges Silverstein is CEO of Buying Legal Council, an international trade organization for professionals tasked with sourcing legal services and managing legal service supplier relationships.
Dr. Evelyn Paetsch is head of indirect procurement, legal and digital services at Deutsche Bahn AG and a Buying Legal Coucil board member.