Creating the Budget for Legal Automation
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Though it’s changing quickly, many organizations still lack a budget line for legal technology or automation initiatives. A compelling business case convinces the CFO to add one. Building a business case shows you’ve performed due diligence, and the money spent on automation will produce greater business value than it would elsewhere.
The IACCM evaluated the salaries of parties involved and estimated that the average cost of drafting, negotiating, and signing a basic contract recently rose by $1900 to a high of $6,900 each. However, where automation created greater efficiency, the cost had risen only $300, creating a savings of $1600. Here are five steps to show the same type of ROI effectively:
Tips for Building a Strong Business Case for Legal Automation
Discover top tips for building a strong business case for legal automation.
3 Hacks on Getting Budget for Legal Technology
Get legal tech budget by showcasing business benefits, leveraging automation, and collaborating with vendors.
Show how legal automation can solve an existing problem. For a quick win, automate a repetitive, high-volume, time-intensive workflow such as drafting and signing basic service agreements.
An effective business case demonstrates ROI in terms of time and cost savings for both:
Legal team members
The business users of legal services
Use the following formulas to identify your “green dollar savings,” i.e., real dollars your organization can reallocate or save.
To determine your Net Benefit (the top line of the ROI equation), start by calculating the total human hours and cost spent working on service agreements each year.
How often do we work with service agreements?
How long does the entire workflow take each time?
How many lawyers and staff are involved in the workflow?
Use the average lawyer’s salary to calculate the cost.
Automation reduces the time and cost to complete workflows, but it doesn’t eliminate them: to pinpoint the differences before and after automation, calculate the time, frequency, and cost twice.
Determine your investment cost, which is typically vendor licensing fees.
Subtract the investment cost to discover your Net Benefit.
Multiply the Net Benefit by 100% to find your ROI percentage.
ROI Example #1
Sally is considering an automation technology that costs $25,000 pa.
Before
3 lawyers hours per service agreement
240 agreements per year
$90/hour
After
0.5 lawyers hours per service agreements
90/hour
Capture the benefits of legal automation that extend across the business. The example on the next page includes an additional $20,000 yearly investment to implement, configure and update the software. You may also include the time and effort spent on training and change management.
In the “before” state, the example includes one hour business users spend manually piecing together a service agreement from old templates and calling the legal department for direction on appropriate language.
In the “after” state, automation enables business users to generate a pre-approved agreement with a few clicks via a self-serve process, drastically reducing the hours and costs involved.
ROI Example #2
Sally is considering an automation technology that costs $25,000 pa and $20,000 pa of human cost to maintain.
3 lawyer hours per service agreement
$90/hour (lawyer)
1 business user hour per service agreement
$70/hour (business user)
90/hour (lawyer)
0 business user hour per service agreement
Get creative in finding alternate factors to calculate the Net Benefit. For example, also calculate legal spend savings and SaaS savings.
Legal spend savings: Automation frees lawyers to apply legal expertise and strategic thinking to higher-value, complex work. You keep more higher- and lower-level legal work in-house, reducing external spend on both outside counsel and other legal service providers.
SaaS savings: With automation better fitting your purposes, you can replace multiple existing technology tools to eliminate licensing fees.
As mentioned above, you can find a nearly unlimited number of use cases for legal automation. Multiply your Net Benefit by the number of use cases you plan to implement to discover your total quantitative benefit.
Consider qualitative ROI: Driving organizational strategy
Legal automation excels at helping to meet the strategic needs of the wider business, often leading to “blue dollar savings,” i.e., profits from benefits like:
1 Standardization and process enforcement: Templates and guided workflows embed accuracy, consistency, and uniformity into company culture. Lawyers establish document language in advance, codify company policies, and add workflow rules to ensure users adhere to internal guidelines and industry regulations.
2 Risk mitigation: Standardization, process uniformity, and embedded controls help mitigate risk. Coca-Cola Europacific Partners automates vendor evaluation and bank guarantee management to avoid fines. As a GC, you can provide moral leadership and navigate risks earlier in executive decisions.
3 Operationalize organizational values: Automation allows you to reliably embed corporate policies and values into everyday operations. Leaders at HESTA apply affirmative action principles to their automated procurement processes to ensure the company works with and supports women-led enterprises.
4 Knowledge management: Achieve consistency and continuity as automation processes codify, maintain, and distribute institutional knowledge across the organization. The legal team manages automation directly, enabling swift responses to rapidly changing regulations, evolving business needs, and user feedback.
5 Improved client experience: Self-serve tools increase accessibility to legal services and speed turnaround times to improve the legal department’s relationship with the rest of the organization. The legal department becomes a helpful facilitator as business clients receive fast answers to legal and policy-related inquiries and gain visibility into matter statuses.
6 Accelerate deals: Business teams can move more quickly to capture fast-paced opportunities when you eliminate legal bottlenecks and speed approvals. Business users easily access critical legal help to accelerate time to market for new products and hasten other profit-driving initiatives.
7 Metrics-led decisions: Automation digitizes your workflows, enabling you to collect and track data and report on monitored activities using a variety of analytics techniques. HESTA’s procurement team accesses various data points on centralized dashboards that serve as early warning mechanisms. Telstra plans to use its data to identify and prioritize situations that require legal expertise.
See how Checkbox can help you:
Gain visibility and control over requests and operations
Reduce the burden of manual, administrative work
Spend more time on complex matters & strategic initiatives
Are you ready to elevate your legal service delivery?
“One of the biggest use cases we have for Checkbox at Telstra is our legal intake and triage portal… it was really simple and clean and removed tonnes of effort from the legal team.”