The shock of the new

At a recent event for senior in-house counsel in London, two clear messages emerged. Firstly, that there is a rapid professionalisation in the way that major legal departments are managing themselves. Secondly, there was agreement that much of the support for change was being driven from the ‘alternative’ legal market. Despite this, there was a lack of agreement as to what lay behind this process and how alternative providers were supporting it. In this article we explore these two issues. Firstly, what are the changes in-house legal departments are looking to bring about? And, secondly, how can the alternative marketplace help support them?

Transformation of in-house legal functions

There are common operational challenges faced by in-house lawyers. Simplistically, lawyers are being asked to increasingly provide their work in a consistent, process-driven manner using data to help demonstrate the value being achieved. And, of course, to provide these legal services at a stable or lower cost point, despite often rising volumes.

The in-house view

The increasingly pervasive influence of compliance, growth in sectoral regulation and effects-based antitrust legislation has resulted in growth in the demand on in-house departments, which has not necessarily equated in a commensurate increase in resources. In deregulated markets traditional in-house activities such as negotiating contracts have intensified and become more complex and time-consuming as parties seek to trade price, risk and the apportionment of the regulatory burden. Technology is also changing working practices whether it be facilitating remote working, increasing digitisation and adoption of data to process routine tasks.

The choice for in-house lawyers is stark: continue existing working practices with the inevitability that change will be imposed or embrace new working practices, acquire new skills and processes and be clear about what is core to their business and what can be undertaken in a different way or by a specialist third party.

The merits of the ABS regime are often debated but it has helped fuel the growth of a new breed of organisations who do not fit the traditional law firm model. The organisations are not encumbered by legacy economic models and can act nimbly and provide opportunities for highly-skilled lawyers (such as parents returning to work after parental leave) whose skills may otherwise may not have been utilised within traditional organisational structures.

The choice for the uninformed can potentially be daunting and potentially discouraging but can be overcome if time is spent defining a clear purpose for the legal department, how it supports competitive advantage and consequently how best to embrace and exploit change.

Process optimisation is not an activity to get the heart racing but inefficiencies and unnecessary cost are frequently embedded in functions.

Key skills for in-house lawyers

For in-house legal departments, it means mastering four key skills:

• managing change – as legal departments balance delivery of legal services with an enduring requirement to change how they work;
• optimising legal processes – as lawyers look to standardise
  and simplify the work creation process including proactively deploying automation;
• optimising resourcing – as spending is leveraging with the full legal ecosystem; and
• managing operations – as legal departments run themselves like businesses with all the accountability that entails.

Managing change

Change for many legal departments (and law firms) has, historically, been marginalised. But increasingly, we see law departments take a long-term view of the changes they need to bring about to react effectively to client or regulatory demands while driving efficiencies.

The key disciplines that we see brought into mainstream legal activity are: a) strategic planning of operating model design; b) programme and project management; and c) business case management. Typically, these are not skills lawyers have been trained on and external support helps ensure discipline as well as bringing a fresh viewpoint. The options open to general counsel include the Big Four, niche legal sector consultancies or alternative providers with a consultancy arm (see page 43).

The in-house view

Being clear about the drivers for change and how any change is going to be managed is essential if you are to achieve your goals. Articulating the value of the internal legal function, the result that any change will deliver and the legal team’s unique purpose are essential ingredients of any change programme and should be fully documented. Any strategy needs to be underpinned with a communications plan to ensure that staff are kept engaged at a time of inevitable uncertainty. At BT, we defined our own purpose as ‘enabling and protecting value for BT’ and linked how we did this to the way in which the BT Corporate strategy is delivered. Doing this enabled us to focus on core and non-core competencies, necessary skills, prioritisation, career development, use of third parties and target areas for automation. Just as employee communication is essential so is stakeholder engagement and linkage of any change activity to the underlying corporate strategy can help mitigate concerns about the impact on service of any change as well as demonstrate the legal team’s commitment to directly support the broader corporate objectives. Unless time is spent planning and managing change at the outset benefits won’t be realised, employees may become demoralised and stakeholders dissatisfied.

Optimising legal processes

The drive to optimise legal processes typically starts with a business requirement to improve throughput – for example, in the contracting lifecycle. It begins with developing consistent processes and standard operating procedures while understanding key data sets such as volumetrics and turnaround times. Once these are understood and mapped, optimisation can take the form of alternative sourcing options (see next section) and automation, often in combination. The consultancies who provide support on strategy definition typically will also have specialist legal process improvement teams.

The simplest changes can have the biggest impact.
Chris Fowler – BT

 

Given the likely long-term nature of process improvement endeavours, it is an important skillset to build internally. Often there are central teams in corporations with process improvement expertise who can be cross-trained by external consultancies who subsequently play a reduced role.

The in-house view

Process optimisation is not an activity to get the heart racing but inefficiencies and unnecessary cost are frequently embedded in functions that take an artisan and individualistic approach to activities that are done often and inconsistently for no obvious reason. The amount of time and engagement with business colleagues to establish and refine process is frequently underestimated or done after the ‘day job’ has been completed. Alternative providers can help evaluate current processes, introduce industry best practice, challenge established ways of working and break down the attitude that ‘it has always been done this way’. The simplest changes can have the biggest impact such as recording data on instructions for new work which can facilitate the management of peaks and troughs in workload across the department or capturing the narrative of instructions, which if the right information is provided initially can result in a quicker response time and a happier internal customer.

Optimising resources

Cost-cutting is a key theme for in-house legal departments, particularly in highly-regulated industries where compliance has driven up operating costs. New resourcing options are the cornerstone of the emerging alternative legal market, whether through different employment models, cheaper locations or the use of non-lawyers to support work previously handled by lawyers.

The first area is the use of contract lawyers to provide variable resourcing. Historically, in-house legal departments may have paid law firms (or used secondees) to fulfil variable resourcing requirements. However, with nearly all legal work technically being discretionary, there is a regular need for contract lawyers at more competitive price points. There are a number of organisations that provide these services from law firms to new providers and across a range of seniorities – whether law firm, law firm spin-offs or alternative structures. Different providers have different focus areas – some of whom are using technology to lower the cost of delivery for certain sectors of the market, eg paralegals.

The second area in which alternative providers are supporting change is in providing managed and project services. These services are often delivered using a combination of onsite, nearshore and offshore resources, as appropriate to the nature of the work being supported. Key areas in which managed services are being provided include:

• e-discovery and document review;
• contract lifecycle management support;
• contract management, including obligation tracking;
• contract remediation/re-papering exercises;
• financial contracts, eg ISDA documentation;
• M&A support, eg due diligence, post-merger integration;
• IP support; and
• compliance.

E-discovery has many providers in both the technology and document review field although this market is rapidly consolidating. Traditional legal process outsourcing (LPO) models are being replaced by more sophisticated tech-enabled and multi-shore service provision.

While it is easier for large organisations to justify a discrete operations function, smaller legal teams can benefit by taking modest measures.

Jake Diggle – Elevate Services

The in-house view

The alternative supplier market continues to evolve from a starting position of cost arbitrage towards suppliers utilising technology to fundamentally underpin their services. The benefit for in-house departments is that these suppliers can frequently bundle the technology with the services when many in-house departments may struggle to source their own technology if they do not have a specific IT budget. In-house teams can configure these services to their needs such that delivery is provided from a variety of locations with associated management information made available in real time via web portals. The recent emergence of eastern Europe as a destination of choice is of particular interest as it enables services to be provided in a variety of European languages (particularly German) which has not been apparent from many offshore locations outside Europe. While many of the services comprise activities that have been outsourced by legal teams, the development of more sophisticated data analytics will facilitate greater automation and facilitate services that will be more technology-led.

Managing operations

A key development in the market has been the formalising of legal operations functions within legal departments. The range of skills that we see being developed in-house include:

• project and change management capabilities;
• outside counsel management, including invoice review;
• technology strategy;
• financial and business management;
• management information/data analytics;
• people management and development; and
• knowledge management.

Many legal departments will build internal teams and augment them with external service providers.

The in-house view

The approach to resourcing an in-house operation function will depend on the size and scale of the function which an alternative provider can help define. While it is potentially easier for large organisations to leverage scale to justify a discrete operations function, smaller in-house legal teams can benefit by taking modest measure such as consistent reporting/key performance indicators, external spend management and use of enterprise IT systems such as SharePoint to manage workflows. Even collecting a small amount of data consistently or using SharePoint to store all documentation can enable teams to drive continuous improvement and eradicate single points of failure.

We anticipate the market will continue to grow and potentially consolidate into established market leaders with core competencies but regardless we believe it will remain fundamental for in-house legal teams to clearly define and implement a strategy that maximises value to the business and identify the skills needed to support that if they are to maximise the opportunities offered by alternative providers and technology more broadly.

Chris Fowler is GC for the UK commercial legal services division at BT.

Jack Diggle is head of consulting, EMEA at Elevate Services.