Organisational spending is under greater scrutiny than ever, which in turn puts internal departments and teams under pressure to prove return on investment. For in-house legal teams, this is particularly tough, since many of the successes of legal departments can be hard to quantify and the business often won’t see the huge risks a high performing legal team helped them to avoid.
As a perceived “costly” internal service, a legal department typically gets involved in far more than their colleagues in other teams are aware of. How, then, can in-house legal teams really demonstrate the value they add to an organisation?
1️. Calculate how much money you saved your firm by managing disputes or litigation in the last 12 months
Check out how much the claimants sought - and how much you ended up settling for or paying out at trial. The difference…well that's the value you can attribute to your team, for managing the dispute.
Has there been a marked decrease in litigious activity? Or has there been an improvement in the success rate of disputes since this work was brought in-house, compared with when it may have been dealt with only externally previously?
2️. Look at how many contracts you have negotiated or signed this year
Work out how much it would have cost to send a contract negotiation to an external supplier - and multiply this figure by the number of contracts you have worked on.
Some might be too small to send externally, so you can exclude them from your numbers. However, do ask your external law firm partner how much they would charge for a typical negotiation, and use this as a benchmark.
3️. Think about any new clauses you've added into your agreements lately
Certain contractual amendments can lead to significant cost savings for a business. For example, if you added an inflation escalator clause, liaise with your Finance department and see how much additional income that has generated.
Or, maybe you have contractually reduced your responsibility levels of an agreement? Investigate what impact this has had; perhaps it’s time saved, fewer materials used or a smaller insurance premium.
4️. Do an audit of what you have brought in-house
Typically, as in-house legal teams grow, they take on more work that was historically outsourced.
Maybe a new hire has brought new expertise to the team, such as in employment law - so you now handle more of this work internally or you’ve implemented some new legal technology to reduce the need for some external legal spend
5. Drive efficiency
Implementing new processes and systems that streamline legal operations will result in savings of both time and money, in the long term. This includes automating repetitive tasks, standardising forms and templates, and investing in AI solutions. Take a look at how much it would have cost to hire an extra team member to do the now-automated tasks, and you will instantly see a significant difference.
6. Do some benchmarking
It is worth looking externally, to benchmark your performance against comparable organisations. There are various organisations which run annual benchmarking surveys, such as the ACC Law Department Management Benchmarking Report.
According to this report, the average spend of an in-house legal team as a percentage of company revenue increased from 0.63 percent in 2023, up from 0.56 percent in 2022.
The median total legal spend as a percentage of revenue is 0.63 percent, slightly higher than last year’s, 0.56 percent. However, this is an average across firms of all sizes and industry verticals.
Acritas, part of Thomson Reuters, discovered that on a global level, companies in the real estate industry spend by far the highest proportion of revenue on legal costs at 0.89%. This is followed by banking (0.48%), tech / media / telecoms (0.45%), hospitality / leisure (0.42%), and not-for-profit (0.41%)
7. Do your own internal PR
Take any opportunity you can to detail your team’s achievements. While much of the work undertaken might be confidential, there is nothing to stop you sharing success stories and cost-saving initiatives. Keep in close contact with your internal communications department and be sure to get involved in newsletters, intranet content and internal events to maximise your internal exposure.
By proactively demonstrating their value in these ways, in-house legal teams can enhance their credibility, build trust within the organisation, and ensure ongoing support and resources to fulfil their obligations effectively.
Leonid has recently expanded its recruitment service for in-house legal roles. If you are looking to bolster your in-house legal team or you are looking for your next career move, please get in touch with Phil Redhead for a friendly discussion!