2022 Legal Budgeting Strategy Amid Ongoing Uncertainty
A 7-step playbook for agility-based budgeting.
This paper covers:
- Different legal departments, universal pain points
- How legal departments are addressing pain points: An imperfect response
- The problem with hiring FTEs to address emerging risks and improve cost efficiency
- The legal budget-building process: A potential tool for minimizing pain
- The playbook: 7 Steps for Implementing ABB in 2022
A More Modern Model: Agility-Based Budgeting (ABB)
ABB combines the best of precedent-based budgeting (PBB) and zero-based budgeting (ZBB) models, while avoiding the pitfalls and problems of each. ABB enables GCs to leverage an incremental model to address the majority of legal budget line items (including technology, allocations, education and accreditation fees, travel, team events, miscellaneous, etc.). Building from historical norms for most line items limits the burden of the budgeting exercise on an already overtaxed GC.
Like ZBB, it empowers the budget owner to more thoroughly investigate disproportionately large line items within the budget. As it pertains to legal budgets, the two disproportionally bigger buckets of spend are always headcount and law firm fees. Unlike ZBB, however, ABB does not require the GC to build a budget from scratch. Its focus is instead on shifting spend: How can GCs transition from fixed costs to more variable, cost-effective spend?
ABB’s (healthy) fixation on removing the fixed costs that create obstacles to legal department performance, agility, risk mitigation, and operational efficiency makes it the perfect tool to address the now-universal GC pain points. For that reason, as we enter budgeting season, ABB should be considered as a modern solution for infusing the legal department with the agility and variabilization of spend required to minimize costs, address specialty needs, mitigate risk, and improve legal outcomes.
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