{"id":5084,"date":"2018-09-19T11:00:07","date_gmt":"2018-09-19T15:00:07","guid":{"rendered":"https:\/\/gutenberg-atl.staging.breakingmedia.com\/legal-innovation-center\/?p=5084"},"modified":"2018-09-20T09:46:47","modified_gmt":"2018-09-20T13:46:47","slug":"the-data-driven-legal-budget","status":"publish","type":"post","link":"https:\/\/abovethelaw.com\/legal-innovation-center\/2018\/09\/19\/the-data-driven-legal-budget\/","title":{"rendered":"The Data-Driven Legal Budget"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-5083\" src=\"https:\/\/abovethelaw.com\/wp-content\/uploads\/sites\/4\/2018\/09\/SmarterOperations_Blog.jpg\" alt=\"\" width=\"700\" height=\"401\" srcset=\"https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/09\/SmarterOperations_Blog.jpg 700w, https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/09\/SmarterOperations_Blog-300x172.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/p>\n<p>It\u2019s not uncommon for the annual budget process to be the only time a Legal Department gets to dedicate time to planning: Recall that\u00a0<a href=\"https:\/\/corporate.findlaw.com\/human-resources\/legal-department-priorities-and-time-allocation-who-s-in-charge.html\" target=\"_blank\" rel=\"noopener\">nearly half of in-house counsel<\/a>\u00a0say they spend too much time \u201cfighting fires\u201d to achieve any long-term goals.<\/p>\n<p>Sure, budgeting isn\u2019t as inspirational as blue ocean strategy, but it has power that extends beyond the Excel spreadsheet. \u201cA budget is more than a forecast,\u201d as the\u00a0<em><a href=\"https:\/\/hbr.org\/1984\/07\/budget-choice-planning-versus-control\" target=\"_blank\" rel=\"noopener\">Harvard Business Review<\/a><\/em>\u00a0noted. \u201cA forecast is a prediction of what may happen and sometimes contains prescriptions for dealing with future events. A budget, on the other hand, involves a commitment to a forecast\u00a0<strong>to make an agreed-on outcome happen<\/strong>.\u201d<\/p>\n<p>In simpler terms, your budget is where strategy gets done.<\/p>\n<p>As you prepare next year\u2019s budget, think beyond \u201clast year plus five percent.\u201d Collecting and analyzing some simple data will help you not only forecast your financials, but refine your corporate legal operations.<\/p>\n<p><strong>External Spend<\/strong><\/p>\n<p>This is likely the largest portion of your budget: Law firms account for 49.3 percent of law department budgets, with non-law firm vendors taking another 5.2 percent, according to the latest\u00a0<a href=\"http:\/\/www.altmanweil.com\/CLO2017\/\" target=\"_blank\" rel=\"noopener\">Altman Weil Chief Legal Officer Survey<\/a>. It\u2019s essential to make sure you are spending these resources appropriately.<\/p>\n<p>You\u2019re likely collecting information on your litigation matters for both your \u201cbusiness as usual\u201d and project budgets. One more step could give your budget a little more horsepower. Indeed, an August 2017 article in the\u00a0<em><a href=\"http:\/\/www.accdocket.com\/articles\/how-to-create-and-execute-a-strategy-driven-budget.cfm\" target=\"_blank\" rel=\"noopener\">ACC Docket<\/a><\/em>\u00a0recommended sorting litigation activities into four categories for budget purposes, weighted on strategic value:<\/p>\n<ul>\n<li><strong>Costs relating to must-win activities<\/strong>. Examples: developing a dispositive argument that resolves the entire case, obtaining a physical demonstrative that makes arguments easier to understand, providing damages or other discovery early to accelerate settlement discussions.<\/li>\n<li><strong>Table Stakes.\u00a0\u00a0<\/strong>These costs include \u201ccompetitive necessities\u201d needed to keep up with rivals. Examples: investigating the background and motivations of the opposing side, retaining a damages expert for a major case, or using an IPR to invalidated an asserted patent.<\/li>\n<li><strong>Lights On.\u00a0\u00a0<\/strong>These are the costs you need just to operate. Examples: responding to pleadings and motions, collecting discovery, appearing at scheduled hearings.<\/li>\n<li><strong>Not Required.\u00a0\u00a0<\/strong>As the name suggests, these are unnecessary expenses. Examples: developing alternative theories your business won\u2019t pursue, completing work prematurely, engaging outside counsel in the wrong level of work.<\/li>\n<\/ul>\n<p>Is your department paying premium rates for work that\u2019s simply \u2018lights on\u2019? Are one or more of your firms spending too much time on work that\u2019s not required? Once you have this kind of intel, you can talk with your firms in advance about the year ahead; set boundaries and limits on less valuable work; and better predict spend.<\/p>\n<p>There are more opportunities to align your external spend with your strategic direction; we\u2019ll explore this topic with a special guest contributor in another post.<\/p>\n<p><strong>Internal Activity<\/strong><\/p>\n<p>If you\u2019re familiar with Xakia, you will recognize this chart, which maps a department\u2019s legal matters by complexity and strategy: How challenging is this project, and how important is it to the company\u2019s objectives? If the size of each circle is proportional to the dollars at stake, or the resource intensity, you can add a third dimension.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-5082\" src=\"https:\/\/abovethelaw.com\/wp-content\/uploads\/sites\/4\/2018\/09\/QuadrantXakia.png\" alt=\"\" width=\"464\" height=\"393\" srcset=\"https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/09\/QuadrantXakia.png 464w, https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/09\/QuadrantXakia-300x254.png 300w\" sizes=\"auto, (max-width: 464px) 100vw, 464px\" \/><\/p>\n<p>Charting your matters in this fashion allows for a meaningful snapshot of department activity, but it also provides visual guideposts for your strategic budget:<\/p>\n<ul>\n<li><strong>Complex + Low Strategic Value:<\/strong>\u00a0In the upper left quadrant, matters are legally complex but not strategically significant.<\/li>\n<\/ul>\n<p>Budget considerations: Is there a pattern to this work? Are we paying too many firms to \u201crelearn\u201d this work when one boutique may handle it more expeditiously?<\/p>\n<ul>\n<li><strong>Simple + Low Strategic Value:<\/strong>\u00a0In the lower left quadrant, work is routine and low-risk.<\/li>\n<\/ul>\n<p>Budget considerations: This category may have the most potential for budget impact. What could be automated? What could be bundled to an inexpensive firm or LPO? What types of projects could be eliminated altogether with \u201cself-help\u201d tools for business clients or just basic training?<\/p>\n<ul>\n<li><strong>Simple + High Strategic Value:<\/strong>\u00a0In the lower right quadrant, matters require familiarity with the company\u2019s strategic goals.<\/li>\n<\/ul>\n<p>Budget considerations: What could be insourced to a paralegal or junior attorney? If outsourced, should the work go to one or two firms to cultivate institutional knowledge?<\/p>\n<ul>\n<li><strong>Complex + High Strategic Value:<\/strong>\u00a0Your most exciting work is in the upper right quadrant; it\u2019s also likely to be the most expensive.<\/li>\n<\/ul>\n<p>Budget considerations: What are the company\u2019s strategic goals in the year ahead, and are we adequately funding these projects? Are we adequately staffed for this work?<\/p>\n<p><strong>Smarter Budget, Stronger Position<\/strong><\/p>\n<p>Starting the budget process with a strategic look at both your external spend and your internal workload will result in a better financial picture, to be sure: You\u2019ll align your law firm spend with actual value, and you\u2019ll demonstrate to the Finance Department that your budget is more than guesswork and rounding. But better yet, you\u2019ll enter the new year with new, informed ways to deliver more value to your business and a commitment to make them happen.<\/p>\n<hr \/>\n<p><strong><em><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-5094 size-thumbnail\" src=\"https:\/\/abovethelaw.com\/wp-content\/uploads\/sites\/4\/2018\/09\/JodieBaker2-e1537450872750-150x150.jpg\" alt=\"\" width=\"150\" height=\"150\" \/>Jodie Baker is Founder &amp; CEO of <a href=\"http:\/\/bit.ly\/2GDcO9D\" target=\"_blank\" rel=\"noopener\">Xakia<\/a> and an innovator, entrepreneur, business builder, and advocate of #LegalTech. Jodie has a background as an in-house lawyer and financial analyst, is a Founding Member and Deputy Chair of the Australian Legal Technology Association and Co-Chair of the College of Law Centre for Legal Innovation. Jodie was the architect, founder and MD of Hive Legal \u2013 winner of many of Australia\u2019s leading innovation and law awards.<\/p>\n<p><a href=\"http:\/\/bit.ly\/2prqHRb\" target=\"_blank\" rel=\"noopener\">Download Xakia&#8217;s Legal Budget White Paper and Budget Template<\/a><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p class=\"summary\">Use Legal Data to Improve Your Budget &#8211; and Strategy.<\/p>\n","protected":false},"author":73229,"featured_media":5083,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[96,3475,2974],"tags":[1292,2445],"class_list":["post-5084","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-in-house-counsel","category-legal-operations","category-legal-technology","tag-legal-operations","tag-xakia-technologies"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - 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