Total Spend Management

This article was originally published by Legaltech News.

Good attorneys know how to understand and follow complex legal processes that may seem baffling to others. For instance, they know how to break down the elaborate rules of civil procedure into tiny chunks, analyze each chunk, and identify subtleties that ordinary folk might fail to notice at all. They take these procedures very seriously and work hard to follow them. But they also think about them critically and may notice areas that could be worded more clearly or that reflect an antiquated viewpoint that might benefit from an update.

Corporate law departments (CLDs) need to apply that same rigor not only to legal processes but also to business processes designed to manage and control legal spend. It’s no longer enough to say, “Well that is what we’ve always paid” or “That’s how we’ve always done it.” The financial impact of business processes needs to be critically examined every step of the way, from the moment an organization becomes aware of a potential legal issue to when the matter is closed. Furthermore, the costs must be examined not only at the matter level but also at the macro level, where the law department is faced with the daunting task of managing an ever-evolving portfolio of disparate legal matters that have to be handled in different ways.

Get Smarter About Spend

Traditionally, people have worked without any help from tools or technology to complete the rather painstaking job of reviewing law firm invoices. Due to limited attention spans and the sheer drudgery of the work, in many cases, those invoices were not reviewed as well as they might have been.

Today, artificial intelligence (AI) can be used to digest piles of invoices in a fraction of the time it takes human reviewers alone. AI-assisted bill review systems can then serve up just those parts of the invoices that need the attention of human reviewers, further streamlining the workflow for the people involved in managing legal spend.

Following the basic steps of due diligence to the invoice review process is one piece of what we call “total spend management.” This concept is really a shift from spending review to spending management with a holistic approach to controlling and overseeing outside counsel legal spend. Total spend management addresses the pain points operations and legal teams face every day by combining the best characteristics of e-billing and other solutions, including AI and machine learning (ML). Together, these solutions provide a complete—or total—view of your legal spend.

Saving money and/or ensuring billing guideline compliance with more efficient processes is the overall goal of this effort. It should be clear to all involved—including internal staff, outside counsel and vendors—that this process is not a “gotcha” situation, where management is looking to blame vendors when outcomes have been suboptimal. Rather, smart spend management benefits the CLD and the vendor alike by ensuring that the right people are spending the right amount of time on the right tasks. In the end, everyone saves when work processes are examined and streamlined.

Validate the Data

Despite advancements in AI, smart people are still needed to make sense of the information the machines are parsing. Think of the “A” in “AI” as representing the word “augmented” rather than “artificial.” For example, machines can evaluate X-rays and tell a doctor a bone is broken, but we still need a doctor to validate the finding and treat the patient.

Similarly, in the legal field, people must still review and make the ultimate determination about what to do with invoices flagged by the AI as potentially problematic. Machines can do the grunt work of gathering stacks of historical data, but humans still need to review and apply experience and logic to create an action. AI and ML solutions can quickly pull in historical data and overlay it on current matters.

With a total spend management approach, data can be presented in simple dashboards, allowing legal teams to make better and faster decisions. For example, machines can quickly pull historical data, apply it to a current matter, and display the findings as a graph or chart that a human can quickly digest and make the final call on what to do. Costs become clearer. The benefits can go well beyond billing, too; for instance, decision-makers may be able to use the data to make a determination on whether to settle a case or see it through the legal process.

Measure, Monitor and Review Regularly

No legal professional ever got promoted for being a really good invoice reviewer, so the motivation to dig in remains low—and invoice fatigue is a real issue. It’s easy to get 30 or 50 invoices stacked up. At that point, it may feel easier to simply block approve (click a “select all” checkbox in an invoice approval system to approve all outstanding invoices) or just keep hitting “accept” on every invoice to get through them quickly.

Therefore, invoice review needs to be monitored and managed. When that is done correctly, the process becomes more profound and reveals trends that can help lead to long-term efficiencies and savings that truly help improve companies’ bottom lines. That is a bigger benefit to the organization and a better motivator of individuals.

Remember: What gets measured gets managed. Once the inefficiencies and problem areas are defined, they need to be continually measured to ensure changes are adhered to and effective.

Most organizations are doing bits and pieces of this holistic look at total legal spend, but until all of the pieces are brought together in an operationalized process, the full cost savings will never be realized. There’s opportunity here to gain better insight into the overall cost, quality, value, and efficiency of legal services. To get there, CLDs must move beyond traditional invoice management. They must find ways to make data actionable and put in place mechanisms that will allow them to make the best possible business decisions to improve not just their legal spend but their value within their organizations.

 


About The Author

Nathan Cemenska

Nathan Cemenska, JD/MBA, is the Director of Legal Operations and Industry Insights at Wolters Kluwer's ELM Solutions. He previously worked in management consultancy helping GCs improve law department performance and has prior experience as a legal operations business analyst.

In past lives, Nathan owned and operated a small law firm and wrote two books about election law. He holds degrees from Northwestern University, Ohio State University, and Cleveland State University.