4 Ways Law Firms Can Evolve Their Procurement Strategies Beyond Savings

Spend Matters welcomes this guest post from Clay Fox, senior director at HBR Consulting.

New technology and regulations, increased client scrutiny into risk management protocols and interest in supplier diversity programs, along with expectations around improving law firm operations and internal controls, have all spurred recent changes in law firms’ procurement functions, making one thing clear: procurement’s value can no longer be judged by savings alone.

As we navigate the early months of 2018, law firms looking to set themselves apart in the market need to think well beyond the status quo. As HBR Consulting’s 2017 Procurement Roundtable Executive Summary indicates, there are clear and abundant opportunities for procurement to take the lead as firms try to navigate the future. By focusing on four key areas in 2018, procurement can prove that its value extends far beyond savings.

Dedicate Resources to Initiatives that Matter Most to Executives and Clients

For firms with more established procurement functions, executive leadership expects procurement to play a more significant role beyond just driving savings. Mitigating risk and implementing effective internal controls are two key areas where executives are increasingly asking procurement to focus, but striking a balance between day-to-day practice group requests and broader firm-wide strategic initiatives can be challenging. Prioritizing requests based on broader strategic value — as opposed to department, person or supplier — will help shape an approach that elevates the impact of the entire procurement function.

Savings will continue to be an important focus for procurement — after all, it is the most tangible measure of value. However, those savings that are core to procurement’s function help fund more strategic and impactful investments for the firm.

Compliance and Risk Mitigation are an Opportunity to Demonstrate Value 

Organizations today are highly focused on improving third-party risk management and data privacy — further proving why this area is becoming a top priority for firms and an opportunity for procurement to play an active role.

The average law firm works with several thousand suppliers spanning multiple regions and experiences an average supplier turnover of 30% per year. Coupled with ever-changing regulations, proper supplier management is becoming increasingly critical. HBR’s annual procurement survey found that 79% of respondents have had a client request third-party risk documentation from their firm, yet only 42% of firms stated that they have a formal third-party risk management policy in place.

In today’s risk-prone environment, it is critical for law firms to have visibility into their supplier relationships. To do so, firms should ensure they effectively manage contracts, have a solid understanding of each supplier’s inherent risk and have processes in place to monitor high and critical risk supplier relationships.

Clients are Making Supplier Diversity Programs a Necessary Initiative

Along with more clients requesting third-party risk documentation, law firms are also being tasked with providing information and statistics about their supplier diversity initiatives as part of requests for proposals (RFPs) or in conjunction with outside counsel reviews. According to HBR’s survey, 53% of firms do not currently have a supplier diversity program. Without a process for evaluating suppliers’ diversity, it can be challenging for law firms to respond to these types of client requests.

To solve this, procurement teams must take inventory of their master supplier list and determine how many diverse suppliers they engage with. It is important that procurement keeps this information up to date and ensures it is easily accessible for reporting purposes. Being able to quickly and effectively demonstrate a commitment to doing business with diverse suppliers can give firms an edge with potential new clients, and by being proactive, procurement demonstrates its ability to support the revenue side of the firm.

Beyond understanding the current landscape of diverse suppliers, procurement also needs to help establish a vision for its diversity supply programs that aligns with a firm’s broader social responsibility initiatives. For firms that do have a supplier diversity program in place, 89% are tracking supplier spend, but only 11% have established targets for the program. This demonstrates that most diversity programs are in their early stage maturity when compared to more robust corporate programs. This also offers an opportunity for firms to distinguish themselves in the market through established diversity programs with clear annual goals.

Technology Can Significantly Improve Procurement’s Capabilities  

As the scope of procurement responsibilities expands, teams must find ways to become more efficient. At leading firms, technology is being leveraged effectively to automate processes across multiple procurement activities including: supplier on-boarding, supplier risk assessment, purchasing, contract management and spend management. Further, these tools can be utilized to provide simple reporting to the c-suite on ongoing activities and performance metrics.

It is important to note that while the procurement function may have ownership over the technology its team uses, the systems can provide benefit far beyond procurement. By emphasizing these benefits to firm leaders and key department stakeholders, procurement can gain internal support for these investments.

Procurement teams that develop strategic plans and concrete goals in these four key areas ultimately set themselves up to align with broader firm leaderships’ goals and objectives. What’s more, demonstrating these improvements to firm leadership inspires confidence in procurement and proves significant value beyond savings.