The fast-growing Legal Operations movement is spearheaded by large multinational companies on a mission to optimize legal service delivery models. - We’re entering the period of change when all those folks who will be second are stepping up to the plate – I think you’ll see change accelerate in the next few years, says law department operations expert Susan Hackett.
It's been repeated over the years that that buyers of legal services want more transparency and cost efficiency. Reports indicate, however, that few actually pressure advisors to innovate and that law firms feel little need to do so. But what happens if corporations that employ hundreds or thousands of lawyers and spend billions on legal services make a concerted effort to modernize the way they organize and buy legal work and services?
This is, in essence, the aim of the Corporate Legal Operations Consortium, CLOC. The organization defines Legal Ops as "a multi-disciplinary function that optimizes legal services delivery to a business or government entity by focusing on twelve core competencies", including strategic planning, vendor management, data analytics, knowledge management and technology support. A Legal Ops director might manage budgeting, staffing, outside counsel and tech investments for example, typically using metrics as the foundation for his or her decisions.
CLOC was founded by Connie Brenton, at the time employed by Oracle and now by NetApp, and Stephanie Corey, who has since left Flextronics to found a legal ops advisory firm. The organization is now run by, among others, Connie Brenton, Mary Shen O'Carroll (head of Legal Ops, Google), Brian Hupp (head of Legal Ops, Facebook) and Lisa Konie (efficiency and process change agent, Adobe).
While Legal Ops directors have been around for a while, the movement seems to have gained real momentum only recently. A thousand attendees showed up for CLOC's second annual conference in May, doubling the size of the first installment's audience. And in a study carried out by the Association of Corporate Counsel this year, almost half of the respondents stated they now have a Legal Ops director.
We've heard about changing client behaviour for a long time, but there's been little actual change when it comes down to it. Will Legal Ops be the tipping point?
- I think that change is always slow in the legal profession – we are slow to understand the need for change (“it’s hard to convince a bunch of millionaires they’re doing something wrong”), and lawyers are even slower to adapt to it, says Susan Hackett, founder and CEO of Legal Executive Leadership.
- Frustrating as that is, it still is progress, says Hackett.
- And there are an ever-larger group of law departments and law firms who are actually starting to work differently: they are creating benchmarks and best practices that are influential – when clients see them, they begin to push their legal teams to try them. Most lawyers are risk-averse, arrogant about the superiority of their professional skills, and anything but innovative in their service delivery practices … but they are very smart and very competitive, so when they see other firms and departments succeed in trying these new ways to work, they are much more willing to imitate success than to be responsible for innovation themselves or to allow competitors who are serving their clients to get too far ahead of them. This is what I often refer to as lawyers preferring to be first to be second.
"Most lawyers are risk-averse, arrogant about the superiority of their professional skills, and anything but innovative..."
- We’re entering the period of change when all those folks who will be second are stepping up to the plate – I think you’ll see change accelerate in the next few years as a result.
What is holding firms back?
- You’ve alluded to it in your question: many in-house teams are starting to demand that their outside firms do better – or move faster – or work cheaper … but they aren’t really all that interested in how firms get there. So a lot of the pressure to change that firms feel in the market isn’t to change, but to lower their cost, which you can only do for so long by simply giving a discount, or by bidding for work that they promise will be done differently, but then excusing themselves from performance and delivering below expectations.
- They haven’t really changed. And many clients really want to continue working with their legacy-relationship firms (even tho those firms can’t deliver what the client is asking for), and thus, clients aren’t really rewarding firms that have made internal changes with more work, says Hackett.
"What other marketplace requires the customer to invent the products they want suppliers to provide?"
- Perversely, it’s not uncommon for a client to demand a 10% price reduction across all of their firms, so that the firm that is still operating on bloated costs and inefficient processes takes a hit to the size of their profit, but the firm that has actually made their work more efficient and that is charging the client less and delivering better service for lower profit gets hit to the bone with the same request for discounted pricing. To my mind, this doesn’t really change until law departments make many of the same service/delivery improvements they’re asking their firms to provide – simply stated: if law departments don’t re-engineer their own practices to drive value, they will never succeed in retaining, leveraging or rewarding outside providers who do.
- It would be nice if law firms were better at being in charge of their own business models without their clients being forced to drag them into the 21st century. Really: what other marketplace requires the customer to invent the products they want suppliers to provide? What may change the game is alternative providers: at some point, non-law firm legal service providers will become powerful enough in providing valued service to clients that an even larger share of “traditional” law firms become irrelevant while they were ignoring market realities and waiting for their clients to instruct them on how to change.
What companies are at the forefront of this movement?
- I have been very impressed with HP’s interest in and work around a number of issues, including re-inventing how they use talent. But Cisco’s work in knowledge practices is stellar, and Vodafone has done an incredible job applying automation and AI to largescale legal functions.
Where do you start with all of this as a buyer of legal services? Do you have any advice on how smaller businesses in smaller markets can adopt these methods and tools?
- My answer depends on whether you’re thinking of the buyer as the smaller legal department in a mid-cap-sized company or the buyer as a business person who doesn’t have any lawyers on staff. We know that the business is the client in corporate legal service markets, but the business may be purchasing legal services from outsourced providers directly, or they may have delegated that responsibility and management to an in-house team.
- Either way, you’re onto an interesting topic since a lot of what is seen as innovative or more efficient practice delivery tools and tech tend to be the projects of larger law firms and larger in-house departments where there is more money and more talent to devote to pioneering new ways to work. But as those groups succeed, and legal tech continues to expand its reach, many of the solutions that would have been far too expensive or expansive for a smaller department or a client without onsite legal help to manage on their own can now be scaled to smaller department practices or assigned to workers trained to run the systems (even if they’re not lawyers).
- Indeed, this may be the very place that AI is most influential in changing the legal tech market – with options like voice recognition systems (so a legal consumer or an modestly well-trained manager can simply issue a command, and not have to know how to find or sift the result), or machine learning systems that not only learn how to generate, execute and track 97% of the company’s contracts, but also to flag the 3% that actually need a trained professional’s review because of something non-routine about them, … you may start to see more and more smaller departments and even clients without a full-time in-house team, able to perform functions internally that previously were only done in 1,500+ person law departments for the largest companies in the world.
What skills should a legal ops manager have, if you can appoint only one? And if you can put a team together, what kind of people would you ideally want?
- Boy, if I could answer that question I’d be rich. Both of the largest and most sophisticated networks for operations leaders made it a priority to work on defining the role of legal ops as they got rolling, in part because so many people wanted the answer to this question and there were so few models of operations functions that were visible to those interested in learning more, or that seemed relevant or scalable to the department that was interested in getting started.
- Everyone can recognize that a legal ops function may cover a large universe of tasks and responsibilities, but which ones are done or prioritized will depend on the industry in which the client operates/their business needs, as well as the size of the team: as you note, is it one person who’s performing many roles, or a large team devoted to a very large agenda. So some of the first legal ops teams I worked with back in the mid-2000s were in financial service companies like banks and insurance companies – they had hundreds or team members, most focused on tech, data and dashboarding kinds of functions. The tech companies started building ops teams, and they were focused on innovation and knowledge practices, as well as collaboration. The manufacturing/brick & mortar companies like Big Pharma or heavy industry were focused like lasers on outside counsel management. Companies with a heavy regulatory agenda have a team prioritizes training and litigation management. And so on. ….
- When an ops function is formed, it will not likely have more than a few people (or just one) working full-time on the role (which suggests that others’ talents may be called upon by the new ops leader on an ad hoc basis). So I would start by hiring or promoting someone who is equipped to perform the role of Chief of Staff, who has the trust and ear of the GC who can help pull together teams of law department members, consultants, and other corporate employees with particular talents to get early projects off the ground – once they’re in place, the pitch can be made for staff to be added who will have full-time responsibility to move each of the disciplines forward.
- That first leader should thus have business skills. It’s great if they’re also a lawyer from the department, but not if they don’t have great executive skill sets and a strong emotional quotient since they’ll be driving behavior change: financial management/budgeting, valuation, strategic planning, team and staff member development/collaboration, experience in performance evaluation, worker productivity and measuring competency, and setting continuous improvement standards and expectations such as KPIs or metrics to measure success.
What about tech skills?
- Tech leadership and focus will be incredibly important, but not until after the leader has spent time in the department assessing current workflows, staffing patterns, measuring efficiency, developing project and process management initiatives, and so on. The way I see it, tech is a tool to help you solve problems or manage processes that you already understand – it’s not designed to diagnose your current needs for you. And it’s putting the cart before the horse if you buy tech before you’ve determined where you are currently and improved workflows and work processes. It may be possible to have someone from corporate tech assigned to help the legal team as they get rolling. But I would hire a project and lean process efficiency manager before I’d hire a tech expert. You can get tech expertise from consultants, vendors and other internal resources to cover you.
When it’s time to consider hiring in tech experts or managers, it would be wise to have folks who can also help with the data on which your tech will run and from which more data that is relevant will be generated … this will be the next generation of value that the department will see from its ops team, after they get a better handle on and re-engineer the work already being done by the legal team (inside and outside counsel.
Should these skills - tech, management and so forth - be taught at law schools?
- Yes, but obviously, this will require a re-thinking of not just the curriculum, but the manner of teaching. You can have a tech class, or a finance or valuation seminar. But the only way to learn collaboration and cross-functional teaming is by doing … by incorporating into the curriculum the need for students to work in groups and team to solve problems that are presented to them, or to demonstrate how they would staff and attack a challenge.
Is the legal profession too insular overall?
- Yes – this is not only a problem for lawyers thinking that they alone have the answers to client problems and that their way of working is best, but also the flip side of that coin, which is an inability to recognize the value of other disciplines, professionals, and approaches. Until lawyers learn to get over their need to divide the world into lawyers vs non-lawyers, and until they learn how to leverage the disciplines of other professions in their work, they will always fall behind other multi-disciplinary teams in their ability to approach the “known unknowns” and solve problems that require the application of more than legal analysis alone.
"General Counsel need to walk the walk as well as talk the talk"
How do you gain trust and get mandate to change things internally, how do you deal with skepticism and resistance to change?
- You need buy-in and support from the top – namely the GC and even the corporate management in order to make this happen, and that means more than simply mouthing the words at a law department retreat: it means changing evaluation systems for lawyers to measure their performance to goals and mandate their need to change the way they work and develop new competencies. So General Counsel need to walk the walk as well as talk the talk. But you also need support from leaders in roles such as operations, to work these issues from the bottom up – to create initiatives and staff them with team members so that change is built internally and by consensus. The tools and training have to be there, as well as a sense of collegial support so that those who go out on a ledge to try new things, even if they fail, will not be punished or ostracized for taking the risk.
Do you think this development will lead to legal tech vendors shifting focus from law firms to in-house law departments?
- It already has. It didn’t take long for a number of vendors to realize two things: if they asked in-house lawyers and teams what they want and then build it, those teams are more likely to buy it than if the vendor simply takes the law firm application and changes some words and the functions at the edges; and second, if they focus on selling major platforms to law departments that include functionality that allows them to collaborate on the system with their firms, the departments will mandate that firms buy the tech. So one sale to a department could lead to tens or hundreds of sales to law firms that support that department.
Podcast: Legal Ops