Law departments all say “Our costs are driven by our client’s business activities!” True, but the obligation to manage those costs as effectively as possible remains the law department’s. To get some traction here, law departments need to measure inputs and outputs. That is to say, they need to track baseline activity, and show how they have wrestled at least this input to the fiscal ground, while at the same time to report total output, which rises with business initiatives. Reductions in the normal run-rate of the law department – the baseline spend – are more reasonable to expect than reductions in an overall figure subject to unpredictable major matters that crop up during the year.
When the CEO or CFO sets a savings quota, the figure from which savings should be calculated ought properly to be the normal, year-over-year amount. Paradoxically, then, a law department can demonstrate savings against the baseline rate even while its overall legal budget rises due to the expansion of business or extraordinary events.