An increasing number of companies today involve procurement when selecting outside counsel and ancillary legal services providers. This is particularly true for companies with significant legal spend and in regulated industries; banks, insurances and pharmaceutical companies were among the first to bring in procurement professionals. Now, many Fortune 500 companies and international equivalents bring in legal procurement to support the legal department cut costs, ensure quality and drive efficiency in legal services.
To better understand legal procurement practices and detect trends, the Buying Legal Council®conducted a survey in January 2016. This research represents the view of 92 legal procurement and legal operations professionals.
What the Findings Mean for Law Firms
Legal procurement is still a new profession, but increasingly influential for buying legal services. We expect that legal procurement’s influence will continue to grow in the next few years.
Procurement gaining influence means that firms need to show more efficiency and cost-consciousness. In particular, the large corporate client expects firms to behave like a prudent business partner who continues to innovate and evolve. For many firms, traditional approaches that treat every matter like a unique scenario will have to give way to a more professionally managed, industrial approach. Clients are increasingly expecting firms to apply the learning curve principle to the delivery of legal services. Here’s a list of what you need to do to evolve:
- Speak with your clients to learn more about how procurement works in their organizations, what influence procurement has and how legal and procurement collaborate. Law firms should be aware of procurement’s goals, objectives, challenges and strategies.
- Start building a relationship with your clients’ legal procurement professionals. Most are open to engage with their firms and happy to discuss ways to manage spend and getting the best value from the right firms.
- Embrace the business side of the legal practice: rethink how you market yourself, as well as how you deliver and manage legal services. Procurement professionals demand predictability and project and budget management even more than most general counsel. Understand which metrics are used by procurement when evaluating law firms. Procurement believes that if you know your business, you should know how long it takes to deliver your services and how much something should cost.
- Understand what your client’s procurement department wants and values. Firms can win “points” if they can demonstrate that they solved a similar issue for another client and can hit the ground running without needing to conduct extensive – often expensive – research. Procurement also likes to see industry experience and a robust project management approach as they promise the efficiency procurement seeks. Procurement looks for compliance with billing guidelines. Make sure you deliver what you promise.
Read the article on the Legal Marketing Association’s website and check out the beautiful info graphics!
In more and more corporations, legal procurement are taking over what is traditionally viewed as a central function of corporate legal departments: the sourcing and pricing of legal services., says Melissa Maleske in her article Legal Procurement Changes Rules Of Law Firm Engagement.
“As law departments continue to focus on spending, procurement has become a key piece of the puzzle, stepping into a role that many lawyers aren’t trained in — namely, making well-informed purchasing decisions and negotiating with and managing the work performed by outside service providers.”
“The legal department typically sees its role as managing the risk and keeping companies out of trouble, and they’re not typically trained to reduce cost. It’s not necessarily part of their mindset,” says Silvia Hodges Silverstein, the executive director of the Buying Legal Council, a trade group for legal procurement professionals. “Whereas when the CEOs and CFOs look at how much companies spend on legal services, they’re thinking, ‘That is so much money.’”
Across industries, corporations focus on disciplined, informed decision-making about law firms and law firm management that stresses value and efficiency. “That’s procurement’s wheelhouse to a T, so it’s no surprise that legal procurement is becoming another new normal, rather than the novel proposition it once was.”
Read the rest of Melissa Maleske’s article in Law360.
The concepts of efficiency and productivity have been largely ignored in the professional services context: Professional services are complex in nature due to the relatively higher degrees of buyer-seller interaction and their relatively higher degrees of customization. Efficiency, on the other hand, is driven by the potential for standardization in the process. Efficiency in a professional services setting, therefore, sounds counter-intuitive, says Jas Kalra, Doctoral Researcher in Operations & Supply Management at Alliance Manchester Business School, the University of Manchester, in his recent blog post “Insights from the ‘Buying Legal” conference on our most recent legal procurement conference in London.
Jas notes the triadic relationship between the legal department, procurement, and the law firm. “This was one of the most discussed issues at the conference and highlighted some of the issues that could emerge because of the differing expectations of the budget-owner and the procurement department from the service-provider.”
He explains that this triadic relationship results in the client sending mixed signals to the service-provider and negatively affecting the satisfaction levels. “It is the communication-gap and the instances of maverick buying in these triadic relationships that leads to the service quality breakdowns. This triadic relationship needs to be managed in order to manage the quality of these service relationships.”
Jas says that this reminds him of a study on the purchase of marketing services that recommends that the procurement department should take on a role similar to that of an internal consultant and operate in the advising capacity to the budget-owner and should control the outcome by investing more time in the service-specification processes.
However, Jas notes that few companies today “actually leverage their procurement departments in the early stages of the professional service procurement.”
He believes that procurement departments still have some way to go before they can exercise a more active role in the procurement of professional services. “Understandably, there is an element of resistance from the budget owners, but Supply Managers need to develop and demonstrate project management and risk management competencies and practise a form of internal selling and get a level of ‘buy-in’ from the budget owners and the senior management.”
Read Jas’ further observations and recommendations here.