“Do more with less” remains a key directive for in-house legal departments, nearly half of whom —47.3 percent, to be exact—have seen their budgets stagnate or decrease, according to the latest Altman Weil Chief Legal Officer Survey.

For those who did see budget growth, it was relatively modest: A large majority saw increases of 1 to 5 percent.

This environment demands smart resourcing—in the corporate legal department context, the allocation of legal work to internal staff, outside firms and non-law firm vendors. Sadly, when it comes to resource management, too many general counsel rely on intuition or law firm discounts … despite 57.9 percent telling Altman Weil they don't have enough buying power to effectively negotiate.

There's a better way, irrespective of the size of your department.

A straightforward data-driven approach will not only keep in-house budgets on track, but by better aligning the type of work with the provider, it will also lower risk and improve quality. And it's not as complicated as it sounds. Here are three simple steps for better resource decisions in 2019:

Step One: Know the players.

According to Altman Weil, on average, 48 percent of law department budgets are dedicated to internal expenses, including department compensation and benefits, while 52 percent goes to outside counsel and non-firm vendors. (Of that, 88 percent goes to law firms, with 12 percent allocated to vendors.)

Start with an inventory of the internal and external resources:

• Internal Resources: Who are the lawyers, paralegals and contractors? What is their experience level? What is their subject-matter expertise?
• Law Firms: It is helpful to chart the firm type (boutique, full-service), size (solo/small, midsize, AmLaw 200, AmLaw 100), expertise, geography and rate profile (low, medium or high).
• Legal Technology Vendors: Altman Weil reports that 47 percent of law departments are sending vendors work previously performed by law firms, including litigation discovery and document review. Although this represents a small portion of most budgets (around 6 percent), it could represent significant savings and efficiency.

Step Two: Assess the work.

There are myriad ways to categorize and classify legal work, but two questions matter most: How technically challenging is this project, and how important is it to the company's objectives?

Visualize matters by mapping their complexity and strategic value. This can be done on a graph like the below to provide an accessible analysis of department activity in a meaningful way. (The size of the spheres in this example can be proportional to the dollars at stake, or the resources required for resolution of the legal issue, adding a third dimension.)

Step Three: Match the work to the players.

Go quadrant by quadrant to identify mismatches and potential improvements:

• Complex + High Strategic Value: The upper right quadrant is the home of the most high-stakes work. It requires special expertise as well as institutional knowledge, and demands the most experienced (and expensive) firms and personnel.
• Complex + Low Strategic Value: In the upper left quadrant, matters may not be materially significant to the company, but they require special knowledge or are otherwise complex. These are often best handled by boutique specialists.
• Simple + Low Strategic Value: Audit the lower left quadrant to ensure none of this work is handled by the department's most senior staff or most expensive firms. This is the most fertile ground for efficiency opportunities, whether through junior staff, low-cost providers or even automation or self-help tools for business units. Speak to your legal technology vendors about how they can help here.
• Simple + High Strategic Value: In the lower right quadrant, matters require familiarity with the company's policies and strategic goals, and ripe to deliver the greatest return on investment for your organization if resourced correctly. Typically, these are best handled internally; junior or mid level department members may be the best option.

This information can be gathered automatically through legal department intelligence software or collected manually via spreadsheet and shoe leather; either way, the end result provides a knowledge-based framework for resourcing that helps legal departments meet budget and address boardroom concerns. Legal departments that can provide an effective account of how they have matched resources, strategy and risk are in a much stronger position when it comes to requesting additional funds for next year's budget. (And general counsel sleep better knowing their simplest work isn't going to their most expensive firms, nor are their most high-stakes matters being handled by their most inexperienced team members.)

Plus, it works. Altman Weil reports that 39.3 percent of legal departments started performing data analysis of their outside spend. Nearly half, 48.4 percent, said they already saw “significant improvement.”

Jodie Baker is the founder and CEO of Xakia Technologies, which provides legal data analytics software for in-house legal teams. Jodie also is the deputy chair of the Australian Legal Technology Association, co-chair of the advisory board to the Centre for Legal Innovation, College of Law and previously the architect and founding managing director of Hive Legal, Australia's first NewLaw firm.