The role of legal operations in corporate legal departments has been an increasingly popular topic in the industry for the past few years — and in our current economic state, justifying such a cost within a corporate legal department, at first glance, might appear to be more difficult in the near term. Are legal operations worth the expense?
A new report from Wolters Kluwer and ACC shows that in-house counsels and legal operations departments are critical to keeping companies competitive in these difficult times. While the study focuses on corporate legal departments rather than law firms, it is always good to have a pulse on trends affecting clients, and there are some good insights that might be applied to law firms, too.
Here are some of the key takeaways for corporate legal departments:
Legal operations professionals make a difference. Departments that employ at least one legal ops professional are more advanced across all 15 functional areas compared to those with no dedicated legal ops professional.
Not all functions are equal. There is significant variation in maturity levels across functions. Compliance and Financial Management are most advanced on average, while eDiscovery & Litigation Management and Innovation Management are least advanced.
Company size matters. Legal departments in large organizations report higher maturity levels on average. This is consistent when examining company revenue, number of staff, and legal spend.
Departments face diverse challenges in their maturation process. Budget limitations, leadership skepticism on the added value provided by legal operations, and general resistance to change hinder the efforts of legal operations professionals to advance maturity.
Best-in-class departments are in an advanced stage but still have room to grow. The top 10 percent of departments showcase an advanced stage of legal operations maturity, but none recorded being advanced across all 15 core functions.
Applicability to law firms. There are several observations that law firms should consider too when looking at this study of client legal operations.
Compliance and regulatory monitoring. First, as corporate legal departments become more efficient, firms will demand greater efficiency or improved outcomes from outside counsel. Let’s look at regulatory monitoring as an example. The top rated area in which in-house counsel are most mature is Compliance. Rethinking regulatory monitoring may be a consideration for a law firm as clients are effective in managing compliance activities. Clients are going to continue to expect more from firms when speaking or advising on regulatory compliance issues. So it’s important that regulatory changes that affect a client are at attorneys’ fingertips when a client reaches out.
Align law firm metrics to support client metrics. The clear value that corporate legal departments receive from legal operations is evident across all 15 functional areas of the ACC model. As a strategic operational goal, corporate clients may seek more alignment with their law firms as they pursue greater value, improved performance, and enhanced relationships. This may be achieved if the law firm understands and incorporates the operational goals of the corporate legal department into the management of their relationship. If a corporate legal client has a goal to incorporate key performance indicators (KPIs) that allow it to track, manage, and benchmark performance, then it will need data from its law firm partners. If the law firm can’t provide that information in the manner the client requires, or has inconsistent approaches across practice areas or offices, it could impact the relationship.
Consider adding or expanding legal operations. The addition of just one resource focused on legal operations in a client’s legal department can increase the maturity and effectiveness of operations. With law firms adopting legal operations too, those that have been slower to adopt may want to consider adding to this function. Looking across functions, standardizing core processes and sharing best practices may be more important than ever in helping law firms identify ways to be more efficient and effective in serving clients. Additionally, a legal operations function can help in surveying clients across industries and practice areas to help inform what is important and actionable by a firm to better serve clients. Law firm legal operations can also help analyze the relative profitability of different clients and matter types. They may also help to achieve corporate legal client alignment with their in-house counterparts.
The overriding theme of these survey results is that legal operations professionals drive impact even as the economy is facing an unprecedented challenge. Nobody wants to be spending money on additional overhead during a job-killing pandemic. This is certainly the case within our industry — but the report demonstrates that sustaining legal operations, or perhaps investing more resources in legal operations, will drive better results.
While it may be counterintuitive to start a law firm legal operations function, or add professionals to an existing legal operations department during a pandemic, the results just may be worth it. Corporate legal departments are sure to come out of the pandemic stronger and more efficient. Law firms will need to do the same, and perhaps a greater focus on legal operations will be part of that equation.
Ken Crutchfield is Vice President and General Manager of Legal Markets at Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Ken has more than three decades of experience as a leader in information and software solutions across industries. He can be reached at ken.crutchfield@wolterskluwer.com.