How to Reduce Legal Spend and Still Address Risks

Companies of all sizes face real legal risks that can directly impact the sustainability of their operations. Rising or unexpected legal spend can impact the bottom line of any company. At the same time, not all types of legal work can be effectively brought in-house. Thus, companies often face a balancing act in determining work allocation between outside counsel and the overhead of an internal legal group.

Addressing this pertinent issue requires an objective and holistic analysis. Here are three crucial steps to consider when evaluating whether to utilize outside counsel or build out a legal department.

  1. Assess Actual Needs

Small and mid-size companies face many of the same legal risks as large, multi-national corporations. These risks include issues such as cyber security, taxes, and contractual risks. The only difference is the impact they may have on the bottom-line. Small and mid-size companies have a lower threshold to successfully absorb the risk of an adverse judgment or failed transaction.

An objective analysis of the business is the most effective way to avoid that “bet the company” impact. There is no universal formula, but important factors to consider when analyzing each company include:

  • Nature and cost of any prior or current litigation
  • Historical data of any legal spend
  • Role of intellectual property and impact on the profitability of the organization
  • Industry-specific regulatory factors and climate
  • Complexity of employment or labor matters
  • Sophistication of IT department and organization’s utilization of technology
  • Trajectory of organization in terms of growth, cultural changes, and evolving business lines
  • Size of footprint and anticipated changes – regional, national and global

Routinely performing this analysis is critical to a realistic business plan. Legal spend can be unexpected but it does not have to be a total knock out (TKO). In fact, proactively navigating the legal risks can be the most efficient way to beat the competition in the long term.

  1. Look for Creative Options

The next step is to assess options to meet the legal needs of an organization. Companies that proactively demand creative solutions rather than look to outside counsel for answers are most likely to save money in the long run. The options can be entirely customized to the organization or a particular need and include features such as:

  • Long-term contract attorneys that provide substantive legal support (I.e. Contract management, franchise and corporate governance)
  • Outside non-traditional legal partner that provides part-time General Counsel (GC) or Assistant General Counsel (AGC) for a growing company
  • Leased employees that provide due diligence or other Mergers and Acquisition (M&A) support
  • Contingent paralegal that compiles all real estate or leasing documents
  • An attorney that serves in dual roles (I.e. Supervises HR department and provides counsel to resolve employment related disputes)

Legal professionals working in-house are more mobile than their counterparts in private practice. Substance and flexibility are powerful lures for the most talented pool of legal professionals. Businesses that embrace this changing legal culture are more likely to capitalize on the skills of the best available individuals without incurring unnecessary expenses.

  1. Compare Costs of Strategies

Traditional legal service models are astronomical in comparison to the evolving options in the current market. These costs and savings can vary dramatically across markets and practice areas. A basic comparison of the economics to draft a purchase agreement and oversee related UCC filings could look like this:

Provider Hourly Rate Total Cost(for 10 hours)
Associate(Outside Counsel) $200 $2,000
Leased Attorney(Working In-House via Staffing Partner) $50-$150(Variable based on function within project) $500-$1500
Savings   $500-$1500

Alternatively, not every need can be cost-effectively met in-house. Volume, time required, infrastructure, available talent, and existing resources are key points to consider when determining whether to continue without outside counsel or to build out the company’s legal department.

Shifts in operational strategies may unexpectedly alter even the best laid out plans. Migrating the provider of the legal services in-house, even if just temporarily, can be an efficient way to reduce legal spend and mitigate risk. Solutions to these changing legal needs can range from bringing on a temporary legal professional to help close a deal to hiring a general counsel. At the same time, performing this analysis and sporadically shopping the options is time-consuming. So, companies like Tower Legal Solutions can help with all aspects of this process including performing the underlying analysis, assisting with RFPs, and providing experienced professionals to meet the internal legal needs for any duration. Alternatively, not every need can be cost-effectively met in-house. Volume, time required, infrastructure, available talent, and existing resources are key points to consider when determining whether to continue without outside counsel or to build out the company’s legal department.

BY: L. KATHLEEN HARRELL-LATHAM

ABOUT TOWER AND THE AUTHOR

TOWER LEGAL SOLUTIONS AND TOWER CONSULTING SERVICES HAVE SPECIALIZED KNOWLEDGE AND EXPERTISE THAT HAS PROVEN TO HELP LAW FIRMS AND CORPORATIONS REDUCE LEGAL SPEND WHILE MEETING CHALLENGING DEADLINES. TOWER HAS A NATIONAL PRESENCE WITH OFFICES IN NEW YORK, WASHINGTON D.C., ATLANTA, CHARLOTTE, DALLAS, MINNEAPOLIS, AND LOS ANGELES. KATHLEEN IS AN EXPERIENCED ATTORNEY LICENSED TO PRACTICE IN MINNESOTA AND KANSAS. SHE IS CURRENTLY THE MANAGING DIRECTOR OF THE MINNEAPOLIS OFFICE OF TOWER.

Learn more about Tower Legal Solutions: www.towerls.com

 

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