April 13, 2020

 Philip Harris

legal tech elevatenext covid-19 higher ed cost reduction

The current environment is spawning conversations about reducing costs as a means of responding to the loss of revenue that many businesses are experiencing. Many businesses already have laid off and furloughed employees and cut their compensation. No one seems to know how long this will last.

The pressure to reduce costs now and in the near term will affect all businesses and institutions in this country, whether they are for-profit or non-profit. And that includes higher education. Already, experts in higher education are predicting that there will be significant cost reductions because of the loss of revenue from tuition (including from declining enrollments), room and board, endowments, philanthropy, athletics, and media deals. Just last week, for example, the NCAA announced that it will reduce its June distribution to Division I members by $375 million. That will have an enormous impact on many universities and raises the specter that the conference media deals will generate less revenue than expected.

The loss of revenue will impact more than the Power Five schools. Division II and III members will be impacted as well.

Based on my nearly 30 years of experience in higher education, including as a general counsel at an elite private university, I believe that a demand to reduce costs will materially impact legal departments in colleges and universities across the country.

This raises a question that is of fundamental importance to us all: Can legal operating budgets and budgets for outside counsel be lowered enough to meet expense reduction targets without painful layoffs, furloughs, and compensation cuts?

Obviously, it is difficult to answer this question without evaluating each specific situation. But there are a number of ways to reduce costs dramatically. Here is a partial list:

1. Rethink your process for reviewing contracts. Technology is available which makes it unnecessary to have attorneys review many written contracts. If your office is reviewing thousands of contracts, that could be a sign of inefficiency rather than usefulness.
2. More aggressively explore early resolution strategies before litigation becomes too expensive.
3. Evaluate whether routine work can be performed on a contract basis at a substantially lower cost—which frees up members of your team to work on more pressing and complicated matters.
4. Seek an independent review of your outside counsel spend: are your attorneys following your guidelines for outside counsel with respect to budgeting? How are they performing against your budgets?
5. Use technology to reduce costs.
6. Triage work so that you can better prioritize the utilization of resources.
7. Develop metrics that show your direct report that you are managing your office efficiently and effectively. And lowering costs!

When I was in private practice, I often heard partners say that there were too many variables to provide meaningful budgets. Or else they would say that certain tasks needed to be performed to “educate” the judge. My partner Patrick Lamb, in a recent blog post, observed that lawyers often file motions to dismiss when they have a zero percent chance of being dispositive. I am not convinced that they educate judges any more than they educate your opponent about how to replead. But even if that virtue was realized, is it worth the cost when resources are limited? The answer is rarely, if ever.

These seven recommendations are only some of the things that you can do to reduce costs. And to prove to your direct report that you can reduce costs. In my experience, maintaining the status quo from an operational perspective and asking outside counsel for bigger discounts will not do the trick. You will need to do much more.