Why Do Law Firms Exclude Procurement Professionals From the Budgeting Process?

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Procurement professionals are getting left out of the budgeting process at law firms in the U.S., Canada and the U.K., according to HBR Consulting’s third annual Law Firm Procurement Survey. Only 12% of the surveyed procurement professionals report that they are heavily involved in the budgeting process, whereas 65% say they have minimal involvement.

Although responses were similar across geographical regions, they tended to differ according to firm size. “The larger firms’ procurement organization is more mature compared to smaller firms, which means bigger procurement teams, greater investment in procurement technology and a broader scope of responsibilities and areas that are supported,” said Clay Fox, senior director at HBR Consulting. “We found that smaller firms tend to have procurement teams that are not as large and have a tighter focus of responsibility — or are in the early stages of developing a formal procurement strategy.”

For Fox, a few trends came to light over the three years that HBR Consulting has been conducting this survey. One is that law firm procurement functions are expanding the scope of spend they manage. Fox also noted that procurement is pivoting from being largely savings-driven in the view of law firm executives to being more multi-faceted — taking control of risk management, for example.

“We [also] saw a rapid increase in focus on third-party risk management, supplier relationship management and supplier diversity,” Fox said. “These are client-driven issues that are requiring firms to quickly establish programs and strategies to advance their procurement capabilities.”

Data courtesy of HBR Consulting

As you can see from the pie chart above, the majority of respondents said that their involvement in the overall business planning process is limited. About half participate only to a little extent, which means that procurement support is used rarely or on an ad-hoc basis. Thirty-eight percent said that they participate to some extent. These respondents may be “helping to develop budgets for specific CapEx projects or [working] with select area stakeholders to project costs based on existing contract commitments,” Fox said.

Fox suggested that a reason procurement is getting left out of the budgeting process is that there needs to be a business case for it. “Until that is done, it is hard for law firm leaders to rationalize adding another person or group to the process, which can already be fairly cumbersome,” he said.

Data courtesy of HBR Consulting

HBR Consulting also surveyed law firm executives, and they found that the executives and the procurement professionals differ somewhat in what they see as the biggest skills gaps in their company’s procurement function. Nearly a third of the procurement professionals chose as a major skills gap something other than the five choices given, and Fox said that these respondents had in mind staffing and resource constraints. Fox himself believes knowledge and vision to be the biggest skills gap, as it directly affects the procurement function’s ability to mature and demonstrate value.

Far from not wanting procurement to be part of business planning, two-thirds of the surveyed executives stated that procurement’s active involvement in planning and budgeting, as well as alignment with stakeholder goals, are key to being considered a trusted advisor. The executives also mentioned forward-looking market insights and being perceived as a change agent as crucial.

If both procurement professionals and executives want the same things, how can the former position themselves to expand their responsibilities? “[They] must demonstrate that they can make the budgeting process more efficient, enable better projections, increase transparency and visibility, and implement better controls on how the money is spent,” said Fox. “Then, they will earn a seat at the table for the budgeting process.”

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