Show me the money

Mark Hynes offers a personal reflection on how legal  teams can make cost  savings without damaging the service they provide.

Legal Services Directors up and down the country are no doubt keen to be seen to be positively responding to the corporate rallying cry to identify cost savings .

But should we be concerned or indeed embarrassed if there are no ‘real’ savings to be had?  The challenge surely is to ensure that if and when cuts from Legal Services budgets can be made there is a strong business case supporting such cuts. We need to avoid being forced into taking a blunt approach of salami slicing budgets across the whole council with each division taking its share of the pain merely to deliver a saving on paper that may, in fact, deliver no tangible saving at all, or worst still actually increase costs.

I am certainly not advocating a reckless denial of the dire financial predictions about the future of local government finance, and readily acknowledge that regardless of which political party is in government by early summer the clear signal has been received loud and clear that significant savings will have to be made.  Nevertheless I believe that from such a financial crisis opportunities can present themselves and this is surely the time for local government lawyers to try and influence the debate about avoiding cost cuts on paper which could actually translate into increasing costs.

Less=more

A potential knee-jerk reaction to delivering costs could be simply to reduce the number of lawyers within a legal team. If your Finance Director is asking for a 20% budget reduction then you could simply offer up savings through reducing 20% of your lawyers, but is that really a saving?  

Legal Services tends to be in the main demand driven whether that be in contentious or non-contentious legal work. Prosecutions will still need to be undertaken, property transactions completed and support to corporate legal projects provided.  If this is not being done in-house because you have delivered a 20% saving in reducing the amount of lawyers you have in your team, this doesn’t mean that the work goes away. If you have no capacity in-house as a result of the cuts, in order to deliver on those pieces of work you will need to rely on your external contractual arrangements with legal partners.

Most authorities will have these arrangements in place and the work will go out. Herein lies the conundrum. While private sector firms provide a valuable service in complementing the in-house resource of legal services they do tend to be more expensive.

Consequently, far from delivering savings, a 20% cut to the in-house department means the authority as a whole has now incurred a greater cost in the provision of legal services as a result of the work going out.    

More=less

This therefore calls for more innovative thinking from lawyers if we are to genuinely contribute to the cost savings agenda. If we accept that reducing the number of lawyers in-house is not an option, then an alternative strategy could actually be to increase the number of lawyers in–house and this is an approach that I have taken at Lambeth.

This is predicated on the business case that it may be cheaper to do things in-house than rely on current external arrangements. Provided assurances can be given that there would be no diminution in the quality of legal advice provided, then I think Directors of Legal Services should be looking at the extent of their current external legal spend and to what extent that can be reduced.

While one can envisage the look of incredulity on the face of a Chief Executive or a Director of Finance when they discover that you are looking to increase the number of full time solicitors, this  “invest to save model” may provide a much more fertile ground for genuine cost savings than simply cutting staff.

Other options rather than staff cuts

Other potential areas for contributing genuine savings could be around the support services that Legal Services rely on. I think that it is vital that there is a forensic analysis of all costs associated with running a team to see what can be scaled back. You will be surprised how many options start to readily present themselves as being relatively easy wins.

For those of us who still rely on the traditional audio typists/secretarial support, what consideration has been given for this to be outsourced to online typing services in international jurisdictions? Lambeth have arrangements with a South African company which are able to turn around the audio typing requirements at a fraction of what it would cost to employ an audio typist to do so.

Review of administrative and support costs

Administrative support to fee earners can also be expensive but is vital in terms of allowing lawyers to deliver an effective service to clients.  Indeed, scaling back too much on administrative support results in that work then being put onto a lawyer where again, under scrutiny, the case would not stack up. Why should a lawyer who is paid far more than an administrative support officer be doing their own typing, their own filing, indeed the bulk of their own administrative support? They are paid too much to do this and need to concentrate as much of their time on genuine fee earning work, with appropriate levels of administrative resources put in place to support them.

That said, there are many of us who have a wider remit in terms of operational involvement beyond Legal Services and this in itself may present opportunities for rationalising means of support across a number of Divisions rather than it being segmented. Within Lambeth we are looking to offer up genuine savings around administrative support by rationalising co-administrative support arrangements between Legal Services, Committee Services, Scrutiny teams, the political group offices, the elections team, the Mayor's office and so forth. Harnessing economies of scale through rationalising administrative support arrangements may well present opportunities for genuine savings.

Invest to save through New ways of Working

Other areas where small savings can be offered without there being a disproportionate and adverse impact on the delivery of legal services is around ‘New Ways of Working’, ie, harnessing current technologies to allow lawyers to work more efficiently and effectively by advocating an approach to business which is ‘paper-light’ rather than paperless. There are significant cost savings in the reduction of paper and photocopying that would otherwise be incurred.

Electronic scanning of documents and a greater reliance on email also has a significant impact on the reduction of the cost of posting hard copy materials. However, the biggest savings are around office accommodation and Facility Management costs, with staff accommodation costs being reduced by up to 40% through accommodating only 60% of your staff at any given time.

Potential avenues which could provide for significant cost savings is around more robust contract management arrangements. Notwithstanding the fact that we have significantly increased the number of in-house lawyers working within the teams, we have a large number of external legal suppliers at Lambeth and although there may be further savings that can be made in terms of reducing the amount of work and instructions provided to such firms, savings could still be made around the actual cost of the work undertaken.

Too often there is very little scrutiny paid to the invoices submitted and robust contract management arrangements need to be in place to ensure that such invoices are challenged where appropriate and reduced. This is particularly true on some of the larger corporate projects where in my view there is greater scope for tighter financial control and challenge.

Shared services

Other authorities have attempted to deliver savings through joined-up legal services but in my view there still remains a significant question mark over the tangibility of real savings delivered unless we are looking at collapsing management structures.

To take a hypothetical example: if I were looking to have a shared service arrangement around my employment law team with my neighbouring borough and one assumes for these purposes that we both have four lawyers each working on employment related matters. If we decide to have a shared service then the shared service will only deliver a saving if we reduce the aggregate number of employment lawyers to seven. Can we reasonably expect to make a saving by deleting one post and push the additional work that was occupying eight lawyers when we have now reduced the team to seven? I suspect the answer would be “no”, on the basis that some if not all of the work would find itself being outsourced. Again, this presents the conundrum of where are the genuine savings?  

In my view the opportunity for savings is within the management tiers – having fewer principal and senior lawyers where possible by rationalising teams through shared service arrangements.

This principle of course goes right up the chain of management. It has not escaped me that the current flavour of the day in relation to Chief Executives is to look at authorities sharing them. Rugby and Nuneaton councils are the latest ones to throw their hat into the ring in that regard. That model has now been followed at Hammersmith and Fulham where the Monitoring Officer has agreed to take on a role as joint Monitoring Officer of the neighbouring Kensington and Chelsea.

In my view I think this could set a dangerous precedent if it were to be followed as the norm but one can understand authorities looking at such models if other savings were not being offered up. Indeed the Communities Secretary John Denham has recently unveiled a taskforce to look at management structures and pay with a remit to offer fundamental options for change rather than just tinkering with budgets. Sharing senior management might become very attractive, particularly in the context of ‘Total Place’.

In conclusion, lawyers do have a significant role to play in contributing to the thinking around corporate savings but imagination is called for rather than the blunt approach to simply offering up jobs or salami slicing budgets. Too much complacency could result in you being reorganised out of a job to a neighbouring authority. We really do have to “show the money” through imagination and innovation in a radical shake up of our budgetary thinking.

Mark Hynes is Director of Legal and Democratic Services at the London Borough of Lambeth and Third Vice-President of ACSeS