To increase accountability for cost reductions, general counsel should assign portions of the overall external budget to the chief lawyers for business units or legal specialties, such as litigation and labor/employment. With a cascade of responsibility for reducing costs down one level, more lawyers will have a personal stake in controlling legal costs.
Another advantage of segmenting departmental budgets comes from hearing from the newly-charged overseers what problems they foresee. When a lawyer’s bonus depends upon coming in under budget, that lawyer will sharpen the pencil on assumptions and circumstances that might confound the budget.
(See my posts of May 30, 2005 about setting special budgets for extraordinary SOX expenditures and two on July 30, 2005 about what should be included in internal budgets, Aug. 3 on stock option grants and budgets, Oct. 4 on insured litigated matters, and Sept. 27 on variance of outside counsel budgets.)