Optimizing Spend Through Efficiency and Compliance—Here’s the Key for Legal Teams

Have you ever thought of Legal as a revenue center? Because it is. Here’s the one thing Legal can do to better optimize spend internally and externally to deliver more value and better service to the organization as a whole.

At the end of last year, the Corporate Legal Operations Consortium (CLOC) completed a study on legal spend. Encompassing organizations from thirty states, and more than thirty industries, including Fortune 500 companies, the study found these key statistics regarding internal and external amounts of legal spend:

  • $60M average external legal spend
  • $221K average internal spend per legal department
  • $607K average external legal spend per in-house attorney
  • $0.62 of every $1 spent on legal costs goes to external legal costs

What do all these numbers mean? Opportunity. As the GC of Equinox, Yen Chu, said at a recent Chief Legal Officer Forum in New York, “Cost is always a consideration—add value through it.”

For Legal, adding value through spend has traditionally been achieved by being cost consciousness in the form of funds allocation—intelligent vendor selection and only outsourcing when it’s imperative to do so. However, funds allocation is only one piece of a larger spend puzzle. The bigger picture moves Legal away from merely managing spend (allocating funds) to optimizing spend. For Legal, being able to optimize spend is comprised of two parts: efficiency and compliance to drive savings and revenue.


In a recent webinar on emerging technology trends and their implications for legal teams, one of the panelists gave an example of how leveraging online conferencing tools, such as GoToMeeting, had enabled legal teams to save money by hosting virtual conferences instead of spending money and time flying around the globe for meetings. While great as a one-off savings opportunity, truly optimizing spend requires a look at the bigger picture and understanding where to put money to have the biggest impact to the bottom line. That place are your contracts and contract processes.

The last manual process in an organization, contracts, instead of being one of your most lucrative resources becomes a bottleneck, making it hard for legal teams to keep up with the demanding pace of business in a digital landscape. Automating contract processes increases efficiency—teams can work smarter, not harder, and gain more time back in their day and are able to more value-producing work. Able to essentially to do more with less, resources are freed and a core area of spend is able to become optimized—spend on outside counsel.

So that’s one example of internally optimizing spend, but how does Legal extend savings and revenue throughout the larger organization? The answer again is automation. The first place to start: examine all buying processes, i.e., Procurement, because it’s where all buy-side contracts originate.

For buy-side contracts, the first step is to create a central repository for all documents. Having all contracts in one place, and true not just for procurement purposes, makes it easier for Legal to have oversight into an entire contract portfolio. Legal can then quickly run analysis to ensure contractual obligations are met, identify duplicate purchases, find opportunities for renegotiation or strategic partnerships to secure better pricing, and review terms and conditions including payment terms, all clauses including financial and risk. Which brings me to my next point.


The second part of this spend optimization equation, compliance, is also met through automation.

By automating and standardizing processes through the use of templates and approval workflows, included in many contract management platforms, Legal can be confident that regardless of who is creating contracts, all relevant and key information (clauses and terms and conditions for example) will always be included and all appropriate approval signatures will be secured internally before a document can be shared with a third party. Creating a contracting process and then ensuring that it’s followed is the best way to mitigate risk, and if all documents are centralized, again giving Legal oversight into the entire contract portfolio, risk and compliance concerns are easier to manage, saving money on fines and fees. With the addition of deadline and renewal alerts, also features within automated contracting processes, organizations can save even more money on missed renewals.

The answer to every question raised in this post—optimizing spend, increasing efficiency, maintaining compliance, delivering more value—is automation. Every other process in an organization has already been automated and commoditized, yet, when it comes to contracts the process is still fragmented and manual. It’s time to change all that.

Legal is a revenue center and can be a revenue leader. What do you think Legal can bring to the table if contracts are signed faster, approved faster, negotiated faster, and manual processes are eliminated? Automation is achieved by leveraging technology. The best place to start? A contract management platform—enable growth and scalability.

Get the Essential Guide and find out how Legal can help Procurement, and drive more value to the organization, using your contracts and contract processes.