How general counsel identify and overcome challenges to effectively move forward.
Since 2012, dozens of workshops have focused on increasing legal output and quality whilst simultaneously reducing costs by using the Smarter Legal Model. These workshops, consisting of senior in-house practitioners, range from four hours to two days, from the US to China and involve all industries and department sizes.
Each workshop starts with the same open-ended question: What’s on your mind?
This discussion identifies the agenda for the problem-solving process to follow (with perhaps some group therapy involved!). Despite often feeling isolated and specialized, general counsel (GCs) express very similar challenges across the world, such as:
- “How can we demonstrate value, be a business partner and earn our place at the business table?”
- “Workload prioritization. The more we do, the more we’re burdened with.”
- “How can I get my law firm to have a more proactive approach?”
- “How do we give simple solutions to complex legal problems?”
- “How do we use metrics and set client expectations?”
- “Department design, finding the right people and keeping them motivated.”
- “What is our role between ‘Compliance Police’ and an enabling function?”
Forget about in-house being easy compared to private practice; these are uniquely difficult roles due to seemingly irreconcilable tensions between the commercial, operational, behavioral and, oh yes, legal imperatives. These can be summarized:
Coverage of legal work – essentials and enablers
Coverage of legal work output includes contracts, licences, registrations, litigation … a.k.a. the “day job.” These essentials are enabled by activities such as legal research, precedents, training and client engagement. Each legal function has its own coverage workload demanded by its stakeholders: clients, regulators, external customers and staff.
Whilst not the sole causal factor, higher levels of legal coverage drive higher levels of legal compliance. If every commercial and personnel relationship is bound by up-to-date terms and conditions, a fully enforceable ethical code of conduct and implemented through systematic training, there is a better chance of complying with legal and regulatory obligations or – at the very least – stronger mitigation in the event of failure.
All of this has to be achieved in a user-friendly, responsive manner that satisfies the client. (One GC asked: “How do we change client opinions from being a ‘barrier’ to a business partner?”)
Legal staff Head Count
Legal staff Head Count, their development and deployment are crucial in maximizing Coverage; individual talent also fosters Client Satisfaction.
Net Cost – including legal fees, fines and business losses
Underpinning (or undermining) these imperatives is not just the cost of legal services (in-house, law firms, technology, etc.) but also the additional cost of not having adequate legal Coverage or Compliance, namely fines, business losses and penalties. The real calculation is the net cost of both: success and failure.
In practice, these five imperatives separate into three directions of travel that are universally recognizable: more, less and/or neutral.
- More: No legal function realistically achieves 100% Coverage so it must always improve output, quality and responsiveness, especially as the regulatory bar of Compliance rises inexorably.
- Neutral (More or Less): Head Count is either under pressure to decrease, or increase to take advantage of insourcing economies, or stay neutral with pressure to achieve more Coverage.
- Less: Net Costs must always decrease by reducing primary legal spend or the secondary cost of Compliance failures – the smartest being both.
These three potential directions mean that the modern legal role has a fundamentally triangular quality.
The modern legal imperatives
In-house lawyers do this daily triangulation without even thinking about it: managing the vertical tension to do more with less or striking the horizontal balance between make (Head Count) versus buy (Net Cost). Smarter Model data shows average insourcing costing $130 per hour versus $442 for the same lawyers in private practice, but businesses often choose flexible external fees over fixed internal costs.
Imperatives meet reality
Over 250 Smarter case studies show that legal department performance is often out of balance.
These departments are under-resourced and their staff not equipped or deployed to deal with the highest value work; as a result, legal Coverage only reaches half of the stakeholders’ needs, leading to several financially significant incidents of legal, contractual or regulatory non-Compliance. The resulting Net Cost is an excessive combination of regular legal costs, remedial legal work and compensatory payments or fines. This distorted performance (in orange on Figure 2) is called a “False Economy Model” wherein neither lawyers nor stakeholders succeed.
The Smarter Legal Model’s methodology uses world-class performance transformation processes, metrics, benchmarks and proven techniques to balance and improve any legal function starting with a five-step cycle in Figure 3 that all professionals can apply:
Transforming inefficient imbalance
This process branches out into more sophisticated approaches, including:
- Stakeholder analysis
- Performance gap analysis
- Establishing true business legal spend beyond the legal department
- Legal resource heat mapping versus business complexity and risk
- Legal work convergence and disaggregation
- Intelligent RFPs
- Win:win alternative fee arrangements with law firms
- Optimal legal resource distribution versus the “pyramid” of legal value
- Legal organization design steps
- Make versus Buy decision gates
- Deploying legal technology for ROI
- Maximizing talent using an Action-Attitude-Ability Matrix and Neuro Linguistic Programming
Using such techniques, all inefficient imbalances – False Economy and others – are transformed.
Imperatives achieved by working smarter
This typical transformation demonstrates that nothing “earns the lawyer’s place at the business table” better than adapting the best business processes to improve the all-round performance of the legal department and thereby the companies they represent.
Meet the author
Trevor Faure is an advisor on legal
management and transformation. Faure is
President of the Global General Counsel
Academy; former Global General Counsel
and leader of legal services, Ernst & Young.
The second edition of his book, The Smarter
Legal Model, is due to be published late 2016.
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