How Small and Midsize Businesses Can Optimize Legal Spend During Economic Downturns
By Axiom Law
A recessionary economy is disruptive to most companies, but the effect it has on small and midsize businesses (SMBs) can be devastating. How can legal departments at SMB companies better optimize spend during economic downturns?
Just because we aren’t officially in a recession doesn’t mean that SMB companies aren’t already feeling the financial crunch. Many enterprise companies have already started laying off large portions of their staff, and as some SMBs begin to follow suit, the ramifications are especially burdensome on remaining staff. In fact, according to CEO coaching and peer advisory organization Vistage, SMB CEO confidence “declined more than 36% in the second quarter of 2022 when compared to the year prior.”
What does the current economic downturn mean for legal departments within SMB companies? How can GCs of SMB legal departments optimize their spend and demonstrate fiscal leadership in a recessionary economy?
Employing smarter legal budgeting and taking advantage of digital hiring options allows GCs of SMB legal departments to better position their team for success, despite decreasing budgets and increasing workloads. Here’s how:
My SMB legal department doesn’t have room for additional fixed headcount in our budget. How does digital hiring fit into the budget?
Not only do economic downturns mean decreased budgets, but they often mean increased workloads for legal departments, as navigating a recessionary economy presents unique and often more complicated challenges for SMBs. This means there are novel, more complex issues that legal departments within SMB companies are having to tackle, often without the budget to hire fixed legal talent.
This is where digital hiring comes into play: digital hiring allows GCs at SMB companies to build a virtual bench of on-demand lawyers whose experience aligns with the emerging risks and more complex tasks legal departments are dealing with. The purpose of the virtual bench is to support the core, full-time in-house legal team as a flexible extension that can be utilized as needed, when needed, eliminating the need for more costly additional fixed headcount.
A virtual bench also cuts down on law firm spend, too, allowing GCs to lean on law firm support only for issues such as litigation, enterprise benchmarking, or other exceptional circumstances. This is welcome news to GCs, as law firm costs continue to rise and aren’t anticipated to slow down anytime soon. Law firm billing rates increased nearly 4% in 2021, and billing rates are expected to continue to increase in 2022.
How does the virtual bench differ from the in-house legal team?
When utilizing a virtual bench, GCs should think of the full-time legal team as being responsible for the SMB company’s core competency work, while it’s up to the virtual bench to handle overflow work and novel issues the in-house team might not have experience with. The virtual bench can also help minimize the workload sent to law firms.
What’s significant is that the virtual bench should be curated, built, and onboarded before specific needs arise. Essentially, GCs are left with a standby team who has existing institutional knowledge and are ready to ramp up as soon as a need arises.
How can I ensure I’m building a virtual bench I can trust?
At Axiom, we understand how important it is to GCs to have a partner they can trust, and who values risk mitigation as much as their SMB company does. That’s why our lawyers are pre-vetted for education, experience, and commercial acumen across all practice areas.
“When the provider can address the trust, risk, and complex needs of the corporate legal audience, digital hiring opens a window to a full universe of legal talent in a resource-constrained environment,” explained Derek Kan, Vice President, Product, on Axiom’s Talent Product Management team.
Many legal departments within enterprise companies are already utilizing a virtual bench, and it’s expected that legal departments within SMB companies will follow suit. “As the twin challenges of talent shortages and accelerating volumes of legal work continue to shape the legal future, my expectation is that the enterprises already using digital hiring platforms will be joined by smaller companies,” Kan continued. “For example, a company with a three-person legal department whose workload is exploding, whose budget has been slashed, and with only one open position will be more likely to use a digital hiring channel because its flexibility allows them to adapt easily to current and future needs.”
How do I begin to build a virtual bench?
Building a virtual bench begins with a close examination of the internal legal organization chart and identifying which positions are best suited for flexible legal talent. For GCs who have never utilized flexible legal talent or a virtual bench before, though, this task alone can be daunting.
Identifying a trusted external partner, like Axiom, that can help not only provide talent to fill the virtual bench but also support GCs at every step of the process is critical. Not only can the Axiom team help identify positions within the SMB in-house team and legal matters that are best primed for flexible talent, but they can also design a pilot program for SMB companies and help create a budgetary framework and KPIs to continually measure the benefits of the program.
Learn more about the benefits of a virtual bench, read a SMB legal department case study, and get a step-by-step playbook for building a virtual bench by downloading our whitepaper, How Can Legal Departments at Small to Mid-Sized Companies Navigate a Recessionary Economy?
Ready to begin building your virtual bench? Get connected with top legal talent.
How Can Legal Departments at Small to Midsized Companies Navigate a Recessionary Economy?* Required
This episode of the Higher Bar explores how the economic downturn and inflationary economy are impacting the legal industry and legal departments.
Some of the biggest law departments in the world are embracing innovation, but what exactly does that entail? How are legal departments remaining innovative during the economic downturn?
How Flexible Resourcing Can Help GCs within Enterprise Legal Departments Better Address Pain Points, Navigate Recession
The recession is looming. How can enterprise legal departments navigate hiring freezes, minimize fixed spend, and pivot in response to a fluctuating economy?