Strategies For Legal Department Efficiency
Efficiency for today’s corporate legal departments has moved from “nice to have” to “essential.” In fact, failing in this critical area will have a profound impact on the company bottom line, and perhaps life threatening to the department.
Legal departments are growing in workload, but not necessarily in resources to handle the additional work. The growth resulted from several factors, including the economic issues flowing from the 2007 collapse, the rapid advances in technology and the commoditization of some areas of legal work.
No matter the cause, the result has been increased demand by the market (clients) to become much more efficient.
The good news is that the recession is behind us, and the very technological forces contributing to the mindset of “better> quicker>cheaper” can also be leveraged to make legal departments highly efficient business units, satisfying client demands while making legal practice less stressful and more satisfying.
But this not a technology article. It is, at bottom, a roadmap to fusing the substantive and analytical skills of business and law professionals with in-sourced and out-sourced technology to solve the critical problem at the heart of the better> quicker>cheaper conundrum.
A Current and Growing Problem-General Counsel Under Siege.
There is enormous stress on today’s inside general counsel. They are tasked with containing costs while at the same time handling more and more legal work inside.
Consider these recent findings:
- 44% of directors find US Compliance/Regulatory risks are their greatest oversight challenge (2016 PWC Annual Corporate Directors Survey 31);
- Corporate counsel face continuing pressure to deliver more and more business value, while budgets continue to shrink, according to BTI Consulting Group’s 2016 Legal Spending Benchmarks; and
- Other than highly complex and bet-the-company matters like class actions and regulatory proceedings, legal work continues to move inside, while GC’s are tasked with reducing internal spending, in part through lower staffing numbers, according to the BTI Benchmark;
Adding these together equals unhealthy stress on a company’s legal managers.
Unhealthy for their personal health, for sure, but also unhealthy for the company, because it leads to higher turnover rates, the inability to attract quality legal talent, and the increased risk of legal errors.
And there is every reason to believe these trends will continue. The legal industry is simply not immune to the tectonic forces unleashed by the technological revolution.
Applying business disciplines and utilizing In-Sourcing/Out-Sourcing
Forward thinking legal managers are tackling the problem with a combination of technology and resource allocation. Like these:
- Let your most valuable assets do the most valuable work.
Understand first what those assets are and where they add the most value, and the rest of your decisions will fall into place. For a legal department, it should be its staff lawyers.
Employed, full-time inside counsel are unique resources.
Immersed in the company’s business, they quickly become intimately familiar with it.
Immersed in the legal issues facing the operation, they become legal experts.
Combined, these traits make the inside lawyer a very valuable resource to the company, because he can foresee potential legal harm and proactively protect the business from it (or at least minimize its impact), assess and quickly deal with real threats, and, to a large extent, forecast and manage future legal spend.
And, because lawyers are by training analytical, the above combinations, when applied to quasi-legal business strategies are a valuable added resource.
I call this bundle of skills Critical Counsel for this article, but really, these are the traits of all well trained in-house counsel. I’ve assigned a special term here for illustration, to make the point that any activity that distracts them from these tasks is wasteful.
That is, any task not utilizing the lawyer’s intimate knowledge of the business, her legal expertise or her refined analytic skills will be an expensive distraction from what she is uniquely qualified to do.
For example, if the total hourly cost of a department lawyer (salary, benefits, taxes and insurance divided by the number of working hours in a year) is $200, then any hour spent by that lawyer costs the company $200. Given her special knowledge of the business and the applicable law, it will make no sense to have her handling simple/repetitive tasks, when another person, or technology, inside or outside, can do it cheaper.
- Re-Examine Workflows-(what are you doing, and why?).
Is the legal department handling all the legal work, most of it, or only directing traffic to outside counsel? Only after identifying the universe of work can a legal manager begin charting out work flow for her staff, insuring her Critical Counsel are adding the most value to the work effort, whether that is handling a transaction, trying a case, or finding the best fit outside to do the work.
- Leverage technology-(think of the technological revolution as happening For You, rather than To You).
Advances in technology have pushed up speed and precision, and pushed down price, which has added to increased work and demand on legal departments for speed, efficiency and cost reduction.
But that same technology can also be liberating. Today’s regulatory environment provides the opportunity for Critical Counsel to become the driving force in bringing stakeholders, management and legal counsel together for shared systems and processes.
So, for example, a centralized entity management platform made possible by technology allows for efficient collaboration and communication among department members and prevents compliance gaps.
And e-billing and contract management tools, and harvesting the data they provide, can help predict future legal needs (and thus staffing/outsourcing, etc.).
- Utilize In-Sourcing and Out-Sourcing.
Legal departments are utilizing in-sourcing and out-sourcing for tasks that would distract from Critical Counsel’s work, and which are not otherwise suitable to be handled by in-house support staff, such as routine and repetitive legal work, time sensitive projects, certain regulatory matters, etc.
Understanding the universe of work and workflow of the legal department will allow the legal manager to utilize in-sourcing and out-sourcing to maximum advantage, preventing distractions from the work of Critical Counsel while saving the costs of a full-time employee.
- Master the business risk profile. And be courageous!
Good commercial business teams have always aggressively pursued new business, and that is probably truer today than ever.
Management will be called upon to assess the business risk, and more than ever, Critical Counsel will be called upon to assess the legal risk, giving a balanced assessment of where the project lands on the legal risk continuum.
If the department is functioning in a highly efficient manner, then Critical Counsel will have the time, experience and, one would hope, the courage, to honestly assess the legal risk component of the venture, in a way that truly helps the company make the best decision under the circumstances.
The days are gone, or should be, where counsel is viewed as the “deal killer” because he saw no way to guaranty a risk-free environment.
Doing more with less means working smarter, which means lawyers doing (appropriate) legal work and (where their skills add value) quasi business work in which their analytic skills and unique insight into the company adds real value.
To do that, to make sure they are available to management, and not distracted by administrative tasks and routine legal work, legal managers must consider when to say no. But “no” doesn’t mean the work will not get done; rather, it means it will get done more efficiently, and at less cost, than having the department’s prized possessions (their Critical Counsel) distracted.
This can be done by thoroughly understanding the universe of work to be handled by the legal department, leveraging technology, and strategically partnering with outside vendors to do legal work that could be by the legal department, but for the reasons above, should not be.