COVID-19 has forced businesses to adapt to rapidly-evolving operating conditions and even establish new business models. Amidst these changes, legal departments have been called on to monitor continually changing regulatory requirements and devise new compliance plans.
Of course, many businesses are also dealing with reduced revenues and other financial uncertainties. To avoid reducing legal capabilities during a time when they are needed the most, businesses are understandably looking at cost optimization.
As with any business endeavor, strategically reducing legal costs requires a carefully crafted and well-executed plan. Below are a few considerations:
- Engage stakeholders: To ensure that your strategy optimizes legal costs while also meeting the company’s overall business goals, it is imperative to involve legal staff from all departments as well as stakeholders from other key functions (i.e. finance, compliance, and human resources). Getting input early in the process can also help ensure that the strategy can be implemented successfully across the business and that staff is invested in the overall success of the plan.
- Identify Areas to Target: Businesses should identify areas where costs can be eliminated, reduced, or otherwise reevaluated. The key is differentiating between “good" costs (those that can ultimately help fuel profit and growth) and “bad” costs (those deemed non-essential or inefficient). Obviously, the so-called bad costs should be targeted first.
- Look for Ways to Increase Efficiency: Minor changes rarely achieve significant cost reductions. While it is more challenging to implement large-scale strategic changes, they often reap more sizable benefits. Options include consolidating outside firms, exploring alternative fee arrangements, setting litigation budgets, retaining specialized legal providers, standardizing/streamlining legal processes, investing in technology, and auditing legal fees.
- Don’t Focus Exclusively on Cutting Costs: Cost optimization isn’t about simply cutting costs. When devising your strategy, it is also important to evaluate the risk to legal service delivery and the impact on long-term goals. Another point to consider is the time and resource investment required to make the proposed changes vs. maintaining status quo.
- Communicate Your Plan: Once you establish your strategy, it is imperative to communicate it to your legal team, including outside counsel. While it may be uncomfortable to question the fees and billing procedures of legal providers, most are cognizant of the strain COVID-19 is placing on businesses and should be willing to adjust their fee arrangements.
- Monitor the Progress of Your Plan: Senior management must work to set direction and maintain course, particularly when making tough decisions. Going forward, the effectiveness of legal cost reduction strategies should be regularly reviewed and updated. Staff should also feel empowered to look for additional opportunities to improve cost-effectiveness.
Scarinci Hollenbeck takes pride in delivering cost-effective legal solutions to businesses of all sizes. As we all work to adapt to the “new normal” brought on by COVID-19, we welcome the opportunity to discuss how we can help your business tailor your legal services to your current needs and budget.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Bob Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.