There is a noticeable uptick in interest among corporate leadership about legal spend management (LSM). More and more, not only CLOs, but CEOs and CFOs, are looking for ways to better understand legal expenditures and establish clear performance measures.
Heightened interest in LSM stems from several factors, including significant law firm rate increases, growing market competition, advancements in AI, and mounting regulatory pressures. At the same time, many recognize areas where efficiencies can be gained.
"Historically, there's been a gap between corporate legal departments and other functional departments in developing consistent KPI reporting and analytics that the C-Level needs," explains Rob Alston, a legal spend management expert at Bottomline.
Not so coincidentally, the role of Chief Legal Officer (CLO) has grown. In its 2024 ACC Chief Legal Officers Survey, the Association of Corporate Counsel found that 28% of respondents held the CLO title in the past year – an increase – even as the survey spotted a reduction in “General Counsel” as the most common title in that role.
It’s reflective of a broader trend spanning major industries. C-suite executives are demanding better LSM data, reporting, and decision support. They are shifting away from 'gut feel' approaches in favor of processes and priorities that can be measured with a P&L.
Need to Know
The drive for better legal spend management is not merely about cost-cutting. It derives from the need to gain a deeper insight into how resources are managed, and ensuring that companies are getting the best value and outcomes for their legal spend.
Given that Legal Departments are such large cost centers, C-suite executives “want to maximize performance everywhere they can, including legal operations and outside counsel management to optimize the value of their legal spend,” Alston said.
“They want to stay informed with consistent reporting to reinforce a legal spend strategy that is working," he said -- or know quickly if a legal spend strategy needs changing.
The Best Solution
To address these greater expectations, legal teams and law firms are racing to invest in advanced tools and technology. That will accelerate as the modernization wave gains momentum.
And though Alston cautioned that "Not all legal departments can afford the most sophisticated [technology] solutions," he also noted that, “Measuring law firm performance is crucial to better decision-making in legal spend management."
Control and Compliance
The balance between cost management and maintaining quality legal services is a delicate one. Alston describes that different companies have varying preferences and direction regarding control and compliance based on their situation and strategy.
However, most recognize the benefits of a data-driven approach to better managing the department.
"It's important to have data to back up legal spend strategies and make decisions based on rigorous analysis," he said.
As part of that, Alston advocates a holistic approach “combining system reviews with expert attorney audits to get a comprehensive view of legal spend and execute exactly on the control and compliance balance each company wants to achieve."
This usually results in giving more time back to staff for other strategic work in the department.
Many Forms of Know-how
The role of legal spend specialists has become progressively more important as tools keep improving and analysis yields results faster. These experts can help companies navigate the complexities of legal spend management, providing insights and skills that many teams may not have in-house.
"Client advisors play a crucial role in helping legal departments extract and interpret the necessary data for better decision-making," Alston points out. For example, this approach can help uncover spending trends, areas of inefficiencies, and ultimately match the right firms for the right matters.
As companies strive to optimize legal spend, partnerships with other legal service providers and smaller law firms are also becoming more common. These collaborations offer specialized expertise or more cost-effective solutions for certain types of legal work.
New Models for LSM
"Companies continue exploring ways to ensure they're getting the best value for their legal spend while striking the right balance between control and compliance to align with their specific strategy,” Alston said.
Trends in LSM bear that out, as data-powered predictive decision-making and operational efficiency, assisted by automation and the brisk uptake of GenAI, are becoming the norm.
"Demand for sophisticated reporting capabilities and strategic insights into legal spend is only going to increase,” Alston said.
Legal departments that adapt to these new expectations and provide clear, actionable data on spending and performance will be better positioned to demonstrate their value to the C-suite and, more importantly, to contribute clearly to organizational success.