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Law360 (February 3, 2021, 1:57 PM EST )
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| Lee Garbowitz |
Looking into 2021 and beyond, the future remains uncertain. The global coronavirus pandemic lingers, as does its associated economic disruption. Similarly, we are decidedly not done with our awakening to social justice issues or the need for ongoing awareness and progress.
These broad societal issues affect more than our personal lives — they also demand changes in how law firms operate. Last year, those changes included the abrupt shift to a remote workforce and the end of nearly all business travel. This year, firms need to be prepared to again roll with the punches and adapt quickly.
The procurement function holds the keys to preparing for and meeting whatever challenges the new year may bring. By focusing on three priorities — centralizing the procurement function, building a culture of agility and promoting supplier diversity — procurement can lead law firms to greater success.
But first, why the emphasis on procurement?
Procurement's Role in Law Firm Readiness
Law firms still tend to think of the role of procurement as limited to purchasing goods and services, locking in the best price, and then turning to the next deal. But procurement can be about so much more than saving money.[1]
Law firm procurement teams are central to decisions about vetting, selecting, purchasing and onboarding technology and other services. They are ideally positioned to monitor and manage supplier relationships, up to and including the provision of feedback or the termination or modification of services.
Procurement managers are relationship builders with keen insight on the firm's financial and strategic decisions. They can weigh and evaluate day-to-day decisions and map legal spending against the firm's long-term goals and priorities, as well as long-term decisions related to the firm's service delivery structure, evaluating core and noncore functions as firms examine the use of outside providers for noncore activities.
As a result, procurement teams are in an optimal position to help the firm not only manage costs but also detect and mitigate risks, implement effective internal controls, pivot rapidly when circumstances change, and achieve the firm's overarching strategic goals. Procurement can and should be involved before, during and after each purchasing decision, assessing value and risk at each stage.
Having a strong procurement function in a law firm is like having a well-thought-out, continuously updated budget at home. Without a budget, you have to make each decision in the moment, when you might not have the best information or the best perspective.
A budget, like a strong procurement function, helps you save money, but it goes well beyond that. It helps you set priorities, make informed and strategic decisions about spending, stay the course for long-term goals, resolve disputes, and make intelligent adjustments or trade-offs when circumstances change and things fail to go as you expected.
In short, procurement is the linchpin for the firm's strategic success — or at least, it has the potential to be. But for the procurement function to strategically guide law firms toward their priorities, procurement needs to be clear about its own goals and objectives.
Priorities for Law Firm Procurement in 2021
Following are three priorities for 2021 that will help firms begin to maximize procurement's potential and capitalize on related opportunities.[2]
Centralizing — and Broadening — the Procurement Function
The strength and resilience of the procurement function in any law firm are directly related to how centralized and informed procurement is. Without insights into the bigger picture of the firm's needs and goals, and without broad authority to act on those insights, procurement clearly cannot live up to its potential.
Centralizing spending — like creating a unified home budget — immediately improves cost management. But obviously, if the procurement team is never made aware of the firm's overall strategic goals because it lacks the personnel to manage strategic considerations, it will not be able to contribute to strategic decisions around cost management.
Similarly, all spending introduces potential risk. A centralized procurement function has the ability to not only vet vendors in advance but also to build monitoring and mitigation efforts into their contracts and to enforce those conditions.
If your firm's procurement function is sparse and disconnected, consider ways that you can consolidate different departments or roles. In addition, it is important to maintain close coordination and ongoing strategic alignment with the firm's executive team.
Centralizing and strengthening the procurement function creates synergistic benefits, enabling better coordination between its various facets. It also contributes to the other two priorities, fostering flexibility and promoting supplier diversity initiatives.
Promoting Flexibility and Adaptability
The last year has proven the value of agility, even for traditionally staid law firms that are slow to change. When the entire ground shifts beneath us, upending our usual ways of doing business — in person and face to face — law firms must be nimble and adaptable as well.
While some of the changes of 2020 are sure to be temporary, remote work at some level is here to stay, travel is likely to remain depressed for some time and supply chain disruptions can be expected to continue until the pandemic is thoroughly under control.
These changes have had trickle-down effects on law firms' priorities.
Well-equipped and fully staffed office space are no longer selling points; fast and secure access to remote networks and sufficient off-site software licenses are. One of the keys to weathering these changes is the culture of the firm and the degree to which it has prioritized agility.
Procurement is again well-situated to influence the firm's ability to be flexible. After all, procurement managers are the ones who make agreements and set the terms of engagements, which may lock a firm in to old ways of doing business or free it up for instantaneous adaptations to changing circumstances.
To that end, procurement should review the law firm's agreements to understand where the firm has existing rights and obligations and where it is possible to introduce flexibility and scalability into the terms of its contracts while staying true to the firm's needs and strategic priorities. There may be areas where procurement can realign spending by canceling agreements outright or renegotiating the type or level of services.
To the extent possible, focus on preparing for potential outcomes without committing to irreversible action until it is clearly necessary. This allows for continuous monitoring of federal, state and local conditions and adjustments to changing guidelines and regulations.
Increasing Supplier Diversity
Law firms have made strides in recent years in diverse hiring. Given that existing focus and fact that they are already navigating a global pandemic and what may be an unsteady economic recovery, is this really the right time to take on systemic imbalances in supplier diversity?
Yes, it is, unreservedly so.
Diversity encompasses many different variables: Diverse suppliers may be smaller or newer businesses, businesses in historically underutilized areas, or businesses run by women, underrepresented racial groups, people with various disabilities, LGBTQ individuals or veterans. Whatever the form, supplier diversity is a critical metric for corporate clients and consequently must be a key consideration for their law firm partners as well.
But diversity is not simply about indulging clients; rather, research shows that inclusion of diverse suppliers produces measurable benefits, including innovative solutions, improved resilience to supply chain disruptions and cost reduction fueled by increased competition.[3] Diversity and inclusion efforts also aid in attracting new talent and retaining existing talent.
Procurement teams, which typically source and fulfill all law firm vendor contracts, are again ideally positioned to take on the mantle of increasing supplier diversity. They can do so by intentionally focusing on diversity in identifying and engaging diverse vendors and providing thoughtful and constructive feedback to prospective and current suppliers.
Note that this requires a purposeful step away from the established connections that firms traditionally rely on and a broadening of the supplier network. Additionally, procurement should carefully review vendor selection and governance criteria to ensure that these are not written in such a way that they effectively preclude the use of smaller vendors or suppliers.
Conclusion
No amount of preparation can ready us for every difficulty our law firms may face in the future, which remains as opaque and unknowable as ever. But preparing for reasonably likely outcomes and recasting ourselves as nimble and flexible gives us the ability to adapt quickly, even to unforeseen events.
The procurement function, sitting at the nerve center of a law firm, can wield unique influence on the firm's strategic decision-making capability — but only if it is empowered to do so. By centralizing and strengthening procurement, fostering a culture of agility and promoting supplier diversity, firms set themselves up for success in good times and in bad.
Lee Garbowitz is managing director at HBR Consulting LLC.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the organization, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://spendmatters.com/2018/02/21/4-ways-law-firms-can-evolve-procurement-strategies-beyond-savings-2018/.
[2] https://info.hbrconsulting.com/2021-law-firm-procurement-priorities.
[3] https://hbr.org/2020/08/why-you-need-a-supplier-diversity-program.
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