To meet the needs of fast-changing business, legal departments must transform the services they offer and the ways they deliver and source them.
In-house legal teams everywhere are struggling to keep up with the rapid pace of business changes. The general counsel (GC) of one telecommunications company sums up the danger: “Our legal department was slow to adapt when the company completely shifted its growth focus. It hurt legal’s credibility, and mine personally.”
For GC — challenged to manage the routine and participate in strategic business decisions — the focus has to change. “Legal has traditionally focused on delivering value by building the legal department’s capacity to support more decisions,” says Ross Gardiner, Director, Advisory, at Gartner. “Instead, legal needs to build the organization’s capacity to make better decisions.”
To build this enterprise capacity, legal teams will have to transform the services they offer, and the ways in which they deliver and source those services. Making these three adjustments will help legal respond more quickly and effectively to the pace of business.
From high-touch to best-fit service portfolio
The average legal department lawyer spends 25% – 40% of their time on work that doesn’t need to be done by a lawyer
In the current operating model, the needs of internal business clients drive the legal service menu, so legal’s priorities skew toward urgent requests and routine work — which crowds out important strategic work.
The average legal department lawyer spends 25% – 40% of their time on work that doesn’t even need to be done by a lawyer — at an annual cost of $2.7 million, assuming an average legal department size of 20 lawyers with spend on in-house salaries, bonuses and benefits of $7.6 million
At the same time, high-value work on key issues like risk management goes by the wayside. Only 15% of legal departments integrate legal risk requirements into business workflows, and only 21% track the efficacy and impact of risk mitigation plans.
Instead of focusing on client needs, think about your department’s comparative advantage (legal expertise) to rationalize your service menu and identify the best-fit provider of those services. To get there, during the next 12 – 18 months streamline your service portfolio, inventory the work done by your legal department, create clear decision principles to determine what services your department should provide directly, and discuss service priorities and trade-offs with internal clients.
Scale service delivery and distribute routine work
Two out of five employees lack access to the legal information they need to make appropriate business decisions
Today’s focus on direct interactions with internal clients might seem to be a good way to build client relationships and increase lawyer influence, but it limits the scalability of the legal department and creates operational risks and losses.
Two out of five employees lack access to the legal information they need to make appropriate business decisions. Forty-two percent of business decisions experience “drag” (squandered effort and resources) and operational delays due to management uncertainty. Forty-eight percent of business decisions incur losses due to a poor understanding of risk appetite.
Build a network of low-cost providers capable of executing specific legal workflows
Instead, aim to enable business ownership of routine legal work by codifying legal decision making and providing business owners with access to critical legal knowledge. To scale the delivery model in this way, create incentives for knowledge management, identify recurring business problems and embed scalable solutions in business workflows like red-flag checklists and contract playbooks.
Read more: Empower the Business to Own Compliance Risk
Rely less on brand in sourcing services
The sourcing of legal services is biased toward scale and brand, with GC assuming that all work must be done by the highest-quality legal firms. Seventy-five percent of external legal spend goes to a few preferred law firms. This move may be an effort to control costs and quality, but the reliance on brand comes at a high cost.
Only 12% of law firms rightsize their guidance (not too much, not too little), so legal is drowning in information. And only 28% of companies receive actionable work product from outside counsel. Only one in six GC feel law firms understand their company’s risk tolerance. Legal departments have to revise a huge amount of the work handled by outside firms — wasting $2.3 million at the average organization.
To address these issues, build a network of low-cost providers capable of executing specific legal workflows. Source new capacity from external providers. Select and standardize legal processes for outsourcing, unbundle legal services among a variety of external providers, and pilot, experiment and learn from emerging providers.
Gartner for Legal and Compliance Leaders can read more about the new legal operating model.