Better Budgeting Analysis, Better Predictability

March 31st, 2016

#BetterLegalBudgets

LLMinc.com

Introductions

Vince Cordo

Global Sourcing Officer

Paul Meyer

Managing Counsel E-Discovery

Lindsay Stevens

VP of Technology

lstevens@llminc.com

#BetterLegalBudgets

LLMinc.com

Agenda

• Role of the Corporate Counsel

• Why Budgets Matter

• Budget Basics

• Knowing the Numbers

• Reporting – Per Matter

• Outside Counsel Collaboration

• Reporting – Big Picture

• Benchmarking, Analysis, Taking Action

• Q&A

#BetterLegalBudgets

LLMinc.com

Corporate Counsel Role and Goals

We’ll see a continuation of the trend toward general counsels who report directly

to chief executives and function as high-level advisers to CEOs and their boards.

To manage outside law firms, general counsels will have to develop new

strengths in strategic and business knowledge, financial skills, and collaboration.

They will also need the agility to explore alternative fee models while maintaining

the quality of legal services provided

- Harvard Business Review – The New Path to the C-Suite – 03-2011

• Working with IT

• Compliance

• HR

• Security

• Practice Law

• Manage and lead a team of legal

professionals

• Manage outside teams (counsel, vendors)

• Manage a department including budgeting

• Advising and reporting to the C-Suite and

Board

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Why Budgets Matter – The Big Picture

• You are not a revenue source…

• …but you must show value and ROI

• Your company is asking you to…

• …reduce cost

• …do more for less

• …establish metrics to measure success

• Risk Management and Informed Decisions

• Predictability

• Guard against company risk (exposure)

• Identifying inefficient / risk-filled business practices

• Internal vs External resource usage

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Why Budgets Matter – Individual Matters

• Litigation work is reactive / responsive to events

• Avoid surprises within an individual matter

• Be in position to control the current matter

• Inform decisions during the matter and in valuing the

settlement

• Predict cost of future comparable matters

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Budget Basics

• Identify expectations and scope proportional to task or matter

• Plan budget – anticipated cost and time of matter

• Communicate plan and expectations to matter team both inside and

outside counsel

• Track spend – consistently and accurately

• Use technology

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Knowing the Numbers

• Establish metrics to measure success

• What numbers are you tracking?

• Duration / Life cycle of matter

• Actuals or spend for matter

• The Granularity Question – How low do

you go?

• Task Level = e-billing

• Track at a higher level

• Firm, Vendor and Inside spend

• Cost Drivers / Big Bucket Tasks

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Actuals v Budget#BetterLegalBudgets

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Outside Counsel Collaboration

• Work with outside counsel to provide updates to budget and status

• Create a single point of shared information

• Coordinate deadlines and decision points

• Review spend regularly

• Discuss unexpected costs

• Technology! – Alerts for approaching budget thresholds

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Actuals v Budget - Forecasting#BetterLegalBudgets

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Avoid Surprises, Gain Control

• Forecasting – based on current matter spend what will happen 2 months

from now?

• Avoid surprises

• Proactive and transparent discussion

• Address inefficiencies

• Set expectations and align goals

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Reporting – Big Picture

• Spend v Budget by category

• By Matter

• By Matter Type

• By Firm

• By Fee Arrangement

• By Cost Driver

• Outside vs Inside spend

• Litigation exposure by matter

• Metrics and trend analysis for:

• Diversity

• Jurisdiction

• Judge

• Win / Loss

• Expenses

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Actuals v Budget (By Cost Driver)#BetterLegalBudgets

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Comparison and Gaining Insight

• Questions to ask

• Are rates appropriate?

• Are budgets regularly over or under estimated?

• What if these trends continue?

• Are you getting good ‘value’?

• Where can we optimize and implement efficiencies?

• More data = better predictability and insight

• Have a way to compare current metrics to base level

• Exm: Set benchmarks for rates, duration, spend for firm, matter type, AFA, etc.

• Exm: Use shadow billing to evaluate success of AFA arrangements

• Use current spend to forecast against the budget

• Use data and trends to predict budgets for new matters

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Analysis and Positioning

When asked how serious CLOs think law firms are about changing their service delivery model to provide greater value to clients the result is a median 3 out of 10

- Altman Weil CLO Survey 2014

• Use knowledge to gain leverage over and incentivize outside counsel

• Take control of the process

• RFPs, Bids

• Negotiate billing policies and guidelines

• Don’t be afraid to move work

• Use niche firms for specialized work and lower prices

• Simply reduce the number of firms you work with to gain more leverage

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Analysis and Positioning

• Alternative Fee Arrangements –

AFAs

• Monthly / Yearly / Project /

Portfolio fixed fees

• Caps, Not-to-exceeds

• Success fees

• Use reports to compare and

validate AFAs

• Shadow Billing

• Take action on rates

• Reduce hourly rates

• Gain volume discounts

• Where tasks are fixed can

you commoditize work?

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Showing Value

• Evaluate Firms’ performance – rate, value added, outcomes, etc.

• Streamline and evaluate outside relationships to get best ROI

• Evaluate whether inside vs outside counsel should be used

• Be smarter about how and when engage

• Be aware of internal head count and importance of growth

• Generate reports for C-Suite to show efforts and tie in to the business plan

• Spend vs budget for department

• Cost savings due to process changes

• Costs avoided due to legal department decisions

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Conclusion

• Legal is not a stand alone entity

• Aligned goals and shared success between…

• Inside counsel and outside counsel

• Inside counsel and internal clients

• Corporate legal and C-Suite / Board

• Track spend against the budget to give you knowledge at your fingertips

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LLMinc.com

Q&A