Every year, it seems as though budget owners are asked to do more with less. I’m sure a lot of us are familiar with the “better, faster, cheaper” mantra; and in the wake of a global pandemic, budget owners across legal organizations are bound to hear that mantra even more often this season.
Managers and leaders with budget responsibilities have an obligation to submit plans that support the financial targets of the organization. For many, that means meeting the targets that are assigned to them. The process can be frustrating and nerve-wracking, especially if a budget owner feels that the organization could benefit from a different approach to meet shifting needs or an unprecedented spend to drive innovation, rather than rehashing the same costs or complying with the same targets from past years. But what’s the best way to go about making a cohesive argument for changing how to approach your budget?
Innovation is about new ways to solve old problems. Here are a few ideas to consider as you develop budget plans for the upcoming year, especially if you feel that there might be a better way.
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Understand The Goals And Drivers Of Your Organization And Focus On Better Outcomes
Budget targets are often assigned based upon the numbers only. As you develop your budget, be sure you understand your organization’s strategic initiatives and goals for the year and for the future. Is growth part of the strategy? Improved service? Customer/client satisfaction? Improved productivity? Understanding the goals and the broader initiatives of your organization can help you position your budget more effectively.
One other point to consider is to examine other costs and benefits outside of your typical considerations for a budget. If you can identify how to assign value that ties to the organization’s broader goals, you can make the case for changes to your budget that support those goals. Here are two examples:
- If acquiring new customers is important to a corporation, perhaps the law department might highlight how reducing and streamlining the sales contracting through the implementation of a contract lifecycle management (CLM) tool could help the sales team acquire more customers with less effort. By attaching potential project benefits to what is important to the broader business, you might find that you get more budget.
- If a law firm is looking to strengthen client relationships, perhaps this budget season would be a good opportunity to entertain an improvement to the firm’s knowledge management system. Perhaps there is even a special projects budget that could potentially fund a portion of the project.
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Looking at the overall value outcome versus cost reduction can help you to identify value or savings elsewhere that can justify an expense or investment, particularly in technology. If you aren’t sure how to assign value to the broader organization, it is a great opportunity to reach out and network with others. Building relationships, establishing trust, and finding allies can provide long-term benefits to how you structure your budget to help your organization.
Understand The Market And What Your Competitors Are Doing
Facts and proof points can help persuade or change assumptions. How does your organization compare to others? As a law department, can you compare metrics with peers? Can firms or vendors provide any inputs that can help you explain where your workload is objectively higher than what the organization thinks it is?
In the findings from the “2021 Wolters Kluwer Future Ready Lawyer” report, 63% of law firm professionals surveyed indicated their intent to increase investment in technology over the next three years. For corporate legal departments, Gartner predicts legal technology spending will increase to approximately 12 percent of in-house budgets by 2025, a threefold increase from 2020 levels. Let’s say you manage an IT spend at your organization, and you are being asked to reduce the spend. Does a stat or data point from an external survey help to persuade or strengthen your argument against cutting your spend? Perhaps.
If you have a project or investment that has a fair amount of risk, consider asking a few vendors or consultants for case studies or data to help establish a budget range and what to expect for a successful project. Doing the homework and bringing in outside data points to inform the discussion can increase your credibility and help ensure that you have a budget that sets you up for success.
Present Options And Scenarios To Support Your Budget Proposals
Organizations naturally go through good years and “off” years, and COVID-19 created uncertainties and caused a lot of spending to be deferred or eliminated out of caution. In some cases, the spending never came back (think travel budgets), but in other situations, spending was increased out of necessity (think connectivity solutions for remote work).
Even if you are not asked for them, consider presenting options in your budgeting. This strategy can help you make a stronger case for a new project if you feel it would help your organization. As mentioned earlier, if you are able to attach your proposal to the organization’s priorities, your options might get a hearing. And even if they don’t, having them prepared and presented may put you in a position to bring those forward midyear if there are opportunities that make them more favorable.
So how might you share alternatives when you may not have permission to do so? One way would be to develop two budget scenarios, the requested budget (the expected, more conservative one) and one that’s more aggressive. The intent would be to submit the “requested” budget but also explain the impact and possibilities for the more aggressive version.
Another way to communicate scenarios is to submit your budget with commentary outlining opportunities and risks. In this situation, a budget owner would outline what might be included if there were an opportunity to spend more. Maybe there is a project that isn’t going to make the cut — but here is a chance to discuss the project and its benefits — and if the year goes better than planned, perhaps you’ll get permission to add to the budget under that condition. When discussing risks, the budget owner can explain what the potential downsides might be. Say you have a budget of $400K for an AI project, but when you queried a few consultants and vendors about it, each one provided you with an estimate of $500K to $750K. For transparency purposes, highlighting cost overruns, project delays, or partial success with the project should be communicated.
Every organization has its own unique culture, nuances and politics that impact the process — but an innovative budget owner can bring a unique perspective to those dynamics. Taking a thoughtful approach to how you advocate for investment in innovation could get you some wins to help enable better outcomes, as well as keep your organization competitive and ahead of the curve. Happy budgeting!
Ken Crutchfield is Vice President and General Manager of Legal Markets at Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Ken has more than three decades of experience as a leader in information and software solutions across industries. He can be reached at [email protected].