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Long-term cost reductions through personnel management

The law department of a large financial services company had to deal with a mandate from the CEO to reduce costs by a certain percent year over year. Of the many measures this large department adopted, a set of them had to do with bringing compensation costs down. Typically, compensation-related costs account for close to three-quarters of a law department’s internal budget.

One step in the campaign was to adopt something closer to an up-or-out program. If a lawyer was deemed not to be capable of being promoted to a certain level – think of it as the partner level – the law department took it upon itself to counsel that lawyer out. Another step was to scrutinize the work the lawyers were doing and match that work to their compensation. A lawyer’s base rises every year, but if the work done and the productivity displayed remain stagnant, it’s an incremental cost this department wants to think about and possibly reduce.

In a like manner, the department moved aggressively to have everyone delegate work to the lowest cost but capable level of person (See my post of Aug. 26, 2005 about measuring delegation to paralegals.). Finally, the law department pursued flex-time opportunities so that it could more closely match its costs with the services it needs doing.

With all of these methods, it may take several years for the budget to breathe easier, but it is a set of techniques that all law departments can contemplate.