Finding True North: How Corporate Legal Departments are Leading the Legal Industry Forward

by JD Supra Perspectives
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“Legal operations can tame the chaos of running the legal department...”

For over 25 years internationally renowned legal futurist Richard Susskind has been researching and opining on alternative ways law firms might work best with their clients.

In his book Tomorrow’s Lawyers Susskind writes, “Law firms in the coming decades will be driven relentlessly by their clients to reduce costs.” All of his books, lectures and keynote addresses have intimated for decades that law firms must change from the traditional billable hour and become more focused on service delivery based on client preferences, creating better efficiencies, using more technologies and offering predictability.

During the last several decades many have felt law firms were and are calling the shots. They primarily bill by the hour, grudgingly discuss alternative ways of delivering their services, and raise their hourly rates almost annually.

[In-house counsel] want predictability and efficiencies not championed by the billable hour.  

From the legal department’s vantage point an hourly fee-based model does not encourage true partnering, rather it tends to focus on profitability for law firms. Creating true alternative fee arrangements generally turns out to be disappointing for in-house counsels as typically nothing more gets offered than perhaps a 15% discount on the hourly billing rate. In-house counsel have been frustrated not being able to change processes and service delivery options. They want predictability and efficiencies not championed by the billable hour.  

Out of their frustration, about five years ago, a group of in-house counsel from larger corporations started to meet informally. They expressed their specific frustrations with how their departments were run and also surfaced issues surrounding the way legal services were being delivered from law firms. Up to this point legal departments owned a fair share of blame for the dysfunction and inefficiencies in the system as they didn’t know what to do to change things, they just wanted to create an easier and more productive way to work.

These soon-to-be change agents started to share information, processes, and technologies such as e-billing, e-discovery and knowledge management to create better efficiencies. In addition they discussed how they might work with outside law firms more proactively and in a way to minimize costs, frustrations and repetitive tasks. They wished law firms would approach them to ask what would make the delivery of services better for the client.

These visionary leaders became the founders of the Corporate Legal Operations Consortium (CLOC) and included Connie Brenton from NetApp, and includes Mary O’Carroll from Google, Jeff Franke from Yahoo, Christine Coats from Oracle, Lisa Konie from Adobe, Steve Harmon from Cisco, and Brian Hupp from Facebook.

[CLOC] has become one of the fastest growing nonprofit legal organizations in the world...

In 2016, CLOC incorporated as a nonprofit trade association and it has become one of the fastest growing nonprofit legal organizations in the world. Since incorporating, CLOC has grown to include over 1200 members, 600 member companies, 26% of the Fortune 500, and spanning 40 states and 36 countries.

“Everybody keeps saying the legal services industry is broken, that radical change is badly needed, but only a few, like industry thought leader Richard Susskind, were even looking at the issues industry wide. No one had tried to set forth what true north is for this industry. Most legal departments focused on law firms as the only ones really needing to change,” said Jeff Franke, Assistant General Counsel of Global Legal Operations at Yahoo and founding member of the Corporate Legal Operations Consortium (CLOC).  

"We need lots of change..."

But the challenges the corporate legal services industry face go way beyond the billable hour; beyond the intransigence of law firms to change their basic operating model.  Said Jeff Franke, “We need lots of change with respect to the six core ecosystem players.”

  • Corporations 
  • Law firms
  • Regulators 
  • Law schools 
  • Tech providers 
  • Outside service providers

Corporations have started making changes and we will see more radical change over the next three to five years than we have seen in the last twenty years.

The industry has come a come a long way from the days when GC’s were seen primarily as risk managers who relied almost exclusively on outside counsel to support a corporation’s legal needs. 

...forty to sixty percent of all corporate legal work is done in-house.

Today, forty to sixty percent of all corporate legal work is done in-house.  As GCs have brought legal support in-house to meet the mandate to deliver strategic, efficient legal support, operations excellence has become a critical necessity. Unfortunately, historically the only way to develop that excellence was from the ground up: legal operations did not exist as a discipline. No one offered a “how to guide” on this complex topic.

With the mandate to “Run legal like a business,” thoughtful in-house operations professionals got to work defining the space. It was initially a slow evolution of legal ops. CLOC, through its members and leadership, quickly created a thoughtful, effective base of knowledge, templates, benchmarking capability, and best practices anywhere to help solve the frustrations they were feeling. Their efforts led to the creation of CLOC’s 12 Core Competencies, a reference model for legal operations excellence. 

Among the many resources CLOC offers members, and the industry as a whole, its annual Institute offers a deep sharing of resources, templates, training ideas and implementation strategies. The CLOC conferences, 12 Core Competencies, templates, articles, and materials, are helping  legal departments and other core ecosystem players better understand what corporate legal departments need and want. 

 The Association of Corporate Counsel (ACC) has jumped into legal operations in a big way as well. Amar Sarwal, Chief Legal Officer and Senior VP of Advocacy and Legal Services, spearheads the ACC Legal Operations program and has aligned it fully with the ACC Value Challenge.

In addition to supporting and advancing the legal operations profession, ACC views its role as assisting the general counsel’s office to fully leverage legal operations. According to Amar, “Our role will not only make the legal operations function more coherent, but also help unify the process for its stakeholders. We help many legal departments that have previously not had a legal ops function open up to the possibilities. Wherever a department finds itself in this process, we can share concepts, leadership strategies, conferences, tools, and written guidelines to enhance the legal ops function. Both the ACC program and CLOC are committed to the success of the legal department.”

ACC legal ops focuses in two areas. It offers assistance to onboard new legal ops professionals sharing and leveraging materials and knowledge with a foundational toolkit. ACC also helps advance those legal operations counsels already immersed by providing continued assistance, strategies and information to get them to the next level.

What Your Department Can Do 

As lead operations counsel for Yahoo, Jeff Franke added, “Many in-house legal operation counsels feel a legal department might begin by defining the largest areas of frustration working with outside law firms, vendors and legal project management. Ask your law firms to step up. Invite them to visit and share ideas how you might work together to create better communications and stronger relationships. Legal ops in-house counsels anticipate more and more law firms will get the message and proactively come to them to find ways to create mutually beneficial strategies.

"Ask your law firms to step up..."

“As an example, we spend money just to pull stats for our quarterly reviews. It would be wonderful if law firms proactively did this for us. Come to a quarterly review with statistics. Law firms need to understand that as legal departments are tasked with running a business within our company’s business, we need law firms on board too.”

Those working in-house looking to deepen their involvement might explore CLOC’s 12 Core Competencies selecting just a few to start the analysis process. What technologies do you already have and which ones are most important? Which will relieve your biggest frustrations and headaches with outside firms? Do you have a legal operations team in-house devoted to creating better efficiencies and partnering with outside firms? How might you start this process?

"Without legal ops, lawyers are forced to develop the business aspects of their function in self-service models or in silos..."

Pratik Patel, VP of Innovation and Products at Elevate Services, says without a legal operations function, the result is often overworked teams and inefficient practice of law.  

“Legal operations can tame the chaos of running the legal department,” says Patel, who provides consulting services and technology implementation to in-house legal departments. “Without the legal ops function, lawyers are forced to design and develop the business aspects of their function in self-service models or in silos, often leading to limited or non-existent processes and fairly pedestrian use of technology.”

Pratik explains that developing a framework around legal operations and prioritizing the competency areas can build efficiencies that better align with a company’s business objectives.  

 He recommends four simple steps to get started: 

  1. Identify the law department’s business objectives.
  2. Gauge each core competency’s ability to influence those objectives.
  3. Assess the overall levels of maturity in each area.
  4. Focus on the maturity areas most likely to “move the needle” towards your objectives.

A Growing Force in the Competitive Landscape

Today, the legal operations function at major corporations has migrated from an uncoordinated disparate set of actions by individual players to a more carefully defined, cross-disciplinary profession loosely aligned across hundreds of companies and government entities. 

The focus is on changing not only the way corporate legal departments deliver legal services but on the way the whole corporate legal services industry should function. Corporate legal departments are in the driver’s seat.

The first CLOC conference in 2016 drew 500 registrants. In 2017 there were 1,000 attendees and CLOC leaders predicted that the April 22 to 25 Institute in Las Vegas would secure more than 2,500 attendees. 

There is no doubt that legal operations is a growing force in the competitive landscape for law firms to keep and expand client relationships. CLOC leadership predicts 2018 will be a watershed year in which we see many more legal departments jump into legal operations and for those already involved, the prediction is the level of use of legal operations will significantly deepen. Legal operations is a partnership between legal departments and their outside law firms.

If the steady and impressive growth of CLOC membership and legal operations professionals who take advantage of the numerous legal ops offerings from ACC continues, it will not be too many years in the future when law firms who resisted learning about legal operations will wish they hadn’t. 

*

[Merry Neitlich is managing partner of EM Consultants located in Irvine, CA. She can be reached at merry@EMconsults.org or 949-260- 0936.]

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