Slip ‘em some truth serum (or a few scotches), and most General Counsel will tell you their jobs are getting tougher in today’s global economy. For decades it was enough to be a knowledgeable lawyer with superb legal judgment.  Today, however, top management requires them to be both great lawyers and savvy members of the executive team. They must be an instrumental contributor to their company’s strategies and operations, and they also must manage a specialized business unit and service organization – the legal department – efficiently and cost-effectively.

It’s About the Business, Stupid

When you’re in a law firm, “practicing law” is the be-all and end-all of your attention: you naturally focus, seriatim, on specific legal tasks, matters and engagements. However, the minute a lawyer assumes senior in-house responsibility, there must be a fundamental shift in the way he or she understands the company’s legal function: it is not a country unto itself; it exists to support the complex environment of business strategies, operations, production and sales. Rather than focusing only on unique cases and singular events, it is built around multiple recurring and interrelated legal processes.

True, the legal department is a cost center and not a profit center, but the fact is that like their counterparts “on the business side,” today’s GCs must focus on productivity. They must track costs, purge inefficiencies, manage metrics and keep a tight rein on the budget – all while providing excellent support to their company’s business units and internal clients

For many, this is an uphill climb and a break from the past.  As Paul Lippe, a former General Counsel and now CEO of Legal OnRamp puts it, “historically, most General Counsel were lawyers first and operating executives second.  But what we’ve seen over the last decade is that the operationally focused GCs don’t just deliver better efficiency, they deliver better results. ” Lippe is but one of many trying to help GCs morph into their new business-centric identity, and he emphasizes that

“there is an enormous gap between GCs practicing more effectively and those practicing more conventionally.”

A Mighty Lever

One key to increasing productivity and efficiency is the effective generation and utilization of performance-related knowledge. Such knowledge does not spring fully-realized from the ether; it is the product of the transformation of millions of data points into a coherent body of information, which, in turn, forms the foundation for operational knowledge, wisdom and judgment.

Never have legal departments had better tools for mining operational and financial data, scrutinizing it rigorously, and creating a coherent understanding of all the factors and variables that affect costs and benefits. The good news is that there are a plethora of new software products to help chief legal officers drive greater accountability and efficiency into legal department operations.  The bad news is that relatively few are using them.

Take e-billing, for example, an area where technology has provided a way to transcend traditional matter-by-matter legal bookkeeping and produce extraordinary ability to aggregate, analyze, slice and dice all kinds of legal information. However, surveys suggest that today less than 10% of corporate legal departments use e-billing and its built-in data mining horsepower.

Internal Client Accountability

Marc Frohman, former General Counsel of Vishay Intertechnology, a global public technology manufacturing firm, emphasizes that skilled data mining includes looking inward at the legal department’s dealings with its internal clients – the business units that request legal services and often lack the information needed for legal cost accountability

Frohman’s department soon learned to apply its e-billing software to internal metrics and legal service delivery, as well as paying the bills. “Business units can be inefficient requesters and consumers of legal support,” Frohman says, “particularly if it is not provided on a charge-back basis.” He notes that many business unit heads often do not connect service requests with legal budgets and costs, regarding the legal department as a no-cost resource. “E-billing software makes it easy to data mine external counsel utilization trends and cost-benefit consequences, matter by matter, lawyer by lawyer, and business unit by business unit.”

At Frohman’s company, this capability led to the ability to measure and allocate costs and, as appropriate, push significant costs back to the business units in a rational and transparent manner.  “We saw real behavior change, in terms of more disciplined use of internal and external legal resources and a greater stake in budgetary efficiencies. Our software allowed us to call our clients to account with enormous specificity.  We now use phase and task codes to track all external legal services and our software enables both near-term and historical information management.  It is a tool of unprecedented value to any legal department.”

“It also substantially improved the quality and consistency of our reporting,” Frohman says, “and it improved transparency and helped us to rationalize our voluminous patent and trademark demands. Simply stated, it really let us get our arms around all aspects of our legal operations.”

There is no reason why what works so well for public multi-nationals will not produce similar efficiencies for legal departments of all shapes and sizes.  As Paul Lippe points out, “too many lawyers operated under the illusion that you could either have quality or efficiency but not both, and that the value of law was so high that legal departments did not have to be well managed, but that simply is no longer true.”

© 2012, Edge International US, LLC. All rights reserved. No part of this article may be copied or reproduced without advance written approval.