How CFOs and GCs can Partner to Navigate a Recessionary Economy
GCs are experiencing a parallel crisis of budget cuts and increasingly complex workloads. According to a recent Axiom survey of in-house legal leaders, 99% report an increase in the volume and complexity of legal matters. But 92% say they are already understaffed and 98% are facing further budget cuts. They can’t just hire away their problems: 94% are anticipating hiring freezes. All this while law firm rates rise to their highest levels in 15 years.
How can GCs navigate the storm? Here is one unexpected answer: By partnering with the CFO to get more value out of every budgeted dollar. The following five tips can aid you in creating a successful relationship.
Step 1: Identify Legal "Levers" and Establish KPIs
By tracking data against similar-sized legal departments and companies, legal leaders can gain insight into benchmarking metrics, allowing them to follow best practices regarding line items like the percentage of revenue spent on headcount and outside counsel. These KPIs will also help GCs and CFOs have visibility into all the resourcing, automation, and cost-cutting levers at their disposal (and how each will impact risk mitigation).
Step 2: Establish a CFO Meeting Cadence
In this unstable environment, it’s more important than ever that legal leaders embrace a partnership with their CFOs so that they can work together consistently to ensure they’re getting the most value from every budgeted legal dollar.
Step 3: Articulate the Business Risks of Reductions (especially RIFs)
Considering these tensions that often arise when a CFO is recommending downsizing a legal team, it is essential that the GC communicate the business-related risks in terms the CFO can understand.
Step 4: Consider the Cost Implications of all Legal Resourcing Options (Law Firms, In-House Staff, and Flexible Lawyers)
Educate the CFO on various legal resourcing options, while at the same time helping them better understand the factors at play when considering an in-house hire. Explain why law firms are sometimes necessary, but are – more often not - the more inefficient resourcing choice.
Step 5: Lean On Business Leaders For Legal Needs During Times of Misalignment With Your CFO
While many GCs are fortunate to work well with their CFOs, some may hit roadblocks during the process. It's wise to partner with your company's business leaders in approaching the CFO when they need legal support. Together, you can determine which team’s budget to spend on legal requests.
Get the full guide for more details.