HBR recently held its annual Procurement Roundtable, an invitation-only gathering of 25+ law firm procurement leaders. In connection with the Roundtable, HBR surveyed the participants on a variety of procurement-related topics ranging from organizational information for benchmarking through current front-of-mind topics / priorities, including investment in procurement technology solutions. These technology solutions are a key tool that can help a procurement function on multiple fronts. They improve operational efficiency and, through controls, mitigate risk, as well as help with tracking, monitoring and reporting key performance metrics that can aid in promoting the procurement function’s value proposition.
Based on the Citi Client Advisory Survey, early 2015 showed tepid growth (0.1% increase) in demand, with firms benefitting from a 2.3% increase in revenue driven by a 2.8% increase in rates. While the overall revenue growth was positive, according to the recent survey, those gains were offset by a 3.9% growth in expenses which starts to chip away at Profit Per Partner and cash flow. Compensation grew by 5.8% which was the key factor in the overall increase in expenses. However, operating expenses were up 2.5% which is slightly higher than overall revenue growth, and highlights the challenges firms are facing in managing their non-revenue based expenditures.
Law firms are continuing to navigate and adjust to the “new normal” of the legal business environment. Firms are exploring a variety of strategies, including leveraging technology, reviewing alternative staffing structures and exploring new service delivery models, in an effort to make fundamental long-term changes. Each of these tactics not only requires a significant amount of time, but often a substantial upfront investment before the benefits can be fully realized.