Legal Departments Transitioning to Value-Based Budgeting: Insights from a Global Study

In a significant transformation, global in-house legal departments are shedding their role as mere risk management centers and are instead evolving into key players that create strategic business value. A recent report by Axiom, the 2026 Legal Budgeting Report: In-House Legal's Journey to Value, reveals that a noteworthy 29% of these departments have moved towards value-based budgeting approaches. This shift highlights a broader trend within the legal sector, which traditionally operated under a cost-centric model.

Key Findings from the Study

This comprehensive analysis, conducted by The Harris Poll and commissioned by Axiom, surveyed 530 senior legal decision-makers, including Chief Legal Officers (CLOs), General Counsels (GCs), and Chief Financial Officers (CFOs). Here are the major insights from the report:

1. CFO-Legal Partnership Paradox: While 89% of legal leaders rated their working relationship with CFOs as excellent, 50% of CFOs asserted that they are the ones responsible for setting the legal budget. This apparent contradiction reveals an underlying confusion about budget authority within organizations.

2. AI Implementation Challenges: In an era where AI solutions are becoming imperative, a staggering 78% of legal budget decision-makers expressed that they are under pressure to adopt legal AI tools without designated funding resources. About 31% indicated this predicament is a recurring issue.

3. Positive Transformation Trends: Nearly half (49%) of the surveyed legal departments have modified their budgeting models within the last year, with another 36% planning further adjustments in 2026. This indicates that the momentum towards embracing value-based performance is indeed growing.

4. Performance Measurement vs. Value Orientation: Legal departments have shown proficiency in performance measurement, scoring an impressive average of 73—yet they are falling behind on value orientation and strategic alignment with business goals, both hovering around a score of 58.

5. Alternative Legal Service Providers (ALSPs): The study found that 68% of legal leaders are open to switching from traditional law firms to ALSPs with cost savings of just 30% or more. However, only 36% of organizations currently have formal policies promoting the use of ALSPs, indicating a substantial opportunity for value generation in legal spending.

Bridging the Gap

The report also emphasizes that legal departments can significantly enhance their budgeting practices by incorporating well-established methods utilized by higher-performing teams. The Axiom In-House Legal Budget Maturity Index identifies five key dimensions where successful legal departments excel: budget decision authority, performance measurement capabilities, focus on value, alignment with overall business strategies, and the effective use of ALSPs.

Organizations across eight different countries displayed relatively consistent scores within a narrow range of 61%-67%, highlighting shared challenges to achieving excellence in value-based budgeting. David McVeigh, CEO of Axiom, summarizes the key to this transition succinctly: “The highest-performing departments are succeeding through disciplined resource allocation, CFO alignment, and flexible talent integration.”

This transformation, as outlined in the report, demonstrates that moving from a cost-oriented mindset to one emphasizing value creation can be accomplished with minimal effort by emulating the best practices of leading legal teams.

Looking Ahead

The findings of the Axiom report will provoke meaningful discussions among legal and finance leaders, especially during the upcoming webinar titled “Rewriting the Rules of Legal Budgeting,” set to take place on October 1, 2025. This session will cover not only the survey's insights but also practical strategies for legal departments looking to elevate their budgeting maturity. The Axiom Legal Budgeting Report is now available for download at their official website, providing further context on these findings and recommended practices.

In conclusion, as legal departments navigate this transformational journey, leveraging data-driven insights and adopting a value-focused approach will prove essential in reshaping their narrative from being viewed as mere cost centers to being seen as integral strategic partners in fostering business success.