Law Firms Should Evaluate Their Procurement Function’s Maturity Level To Remain Competitive

The current landscape requires companies to contain costs, mitigate risks and deliver a higher level of service. In turn, corporations are projecting similar expectations on law firms and incorporating these types of goals into broader business reviews.

As law firms strive to remain competitive in these conditions, improving and maturing the procurement function is emerging as a valuable focal point to reduce spend and mitigate risk. Based on my years of experience working within the law firm procurement space, about half of the Am Law 100 have formal procurement programs. However, the size and scope of this function varies greatly, and leans toward being less mature and strictly cost-focused, as opposed to more mature and forward-looking.

Competition is showing no sign of slowing, and law firms that want to position themselves as leaders need to shift their procurement strategy away from a purely transactional approach. Instead, law firms should move toward a more holistic function that sets goals, streamlines processes and gives procurement a louder voice in conversations about budget and overall business strategy.

A mature procurement function also is increasingly important as law departments grow impatient when evaluating outside counsel’s third-party relationships. It is no longer acceptable for law firms to delay or struggle to provide accurate answers to corporate clients about the third-party providers they work with and the risks they present. This is especially true in an era where regulations like GDPR can make or break a business. Answers about these providers must be given quickly and accurately if law firms wish to be seen as leaders.

Given these increasing demands from clients, assessing the maturity of law firms’ procurement functions should be a priority for firms seeking to advance their procurement capabilities. Four key questions can help firms determine where they fall on HBR’s procurement capability continuum (pictured below) and take the right steps toward advancing in maturity.

Graphic Credit: HBR Consulting

Graphic Credit: HBR Consulting

Four Key Questions to Ask When Evaluating Procurement Maturity

#1: Is the current strategy simply savings-focused? Cutting costs is a perennial concern for the modern law firm, but the procurement function must think beyond dollars when evaluating performance. Mature procurement functions invest in supplier diversity programs, prioritize risk mitigation and compliance efforts and keep the goals of both the firm and its clients in mind. Most importantly, a mature procurement function has insight into every provider and every service line agreement, ensuring it can meet the increased demand for transparency from clients.

#2: How is success measured? A mature procurement function has clearly defined goals with the data to back up and measure progress. This information helps the procurement function influence executive leadership’s budget decisions and plans for the future. By gaining a full picture of all costs and establishing KPIs to set goals, procurement can prove to senior leadership they can make a measurable contribution to the business.

#3: What technology is being leveraged? A complete view of all service level agreements and contracts is critical. When this documentation is kept in disparate systems and updated inconsistently, it is a sign of an immature procurement function. Implementing technology that can integrate all systems to give a complete view of spend and make reporting more digestible is a sign of a more mature procurement function. This also helps the procurement function prove its value internally as well as to firm clients.

#4: Are internal stakeholders true champions? Highly satisfied internal stakeholders alone will not help procurement elevate its value within law firms. But procurement leaders who turn stakeholders into true champions of the function will gain the support of thse champions for future goals and objectives, such as expanding the procurement team or securing buy-in for new technology. The best way to convert stakeholders into internal champions is for procurement to take the lead within the firm to help other departments understand how they use certain suppliers, assist with RFPs and even negotiate with providers on their behalf.

A mature procurement function looks beyond simply cutting costs and institutes a forward-looking and comprehensive strategy for making the law firm more efficient and capable of achieving goals beyond spend reduction. By asking the four questions above, law firms can assess their maturity and move up in the capability continuum.