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New US report: Legal Department Operations Index—Dedicated legal operations comes home

REUTERS/Tatyana Makeyeva

In the United States, the pace of change within corporate legal departments has not always been swift. Indeed, over the course of several years’ worth of analysis of these departments in Thomson Reuters Legal Department Operations (LDO) Index report, little in the way of significant change has been recorded. Until now.

The fifth and latest edition of the Legal Department Operations (LDO) Index 2020 chronicles a dramatic change in how legal departments are operating, and notes a very strong increase in the number of departments that now have dedicated legal operations staff.

The report shows that the portion of legal departments with dedicated legal operations staff now represents 81 percent of all legal departments surveyed, a jump from 57 percent of legal departments with such operations in the 2019 report. (Last year’s number was only six percentage points higher than that in the first LDO Index, in 2017, underscoring how dramatic the growth has been over the past year.)

Indeed, these numbers clearly demonstrate how employing dedicated legal operations teams has quickly become table stakes for legal departments in a corner of the industry in which rapid change rarely happens.

The business infrastructure of legal services

With the aim of optimising the delivery of legal services to an organisation, legal operations can be described as the business infrastructure of legal services. It is a multi-disciplinary function that comprises strategy and financial management, which oversees the fee arrangements between the business and outside counsel. This component of legal operations impacts decisions on whether outside counsel even need to be hired for a certain matter at all.

Analytics and metrics are playing an increasingly important role in legal operations, as legal departments look to collect and analyse data that demonstrates their efficiency in handling legal tasks. For example, this data could show how quickly certain documents are drafted, or how well processes for delivering documents and obtaining appropriate signatures are working. Data analysis such as this allows organisations to compare the effectiveness of both in-house and outside counsel to achieve the best outcomes at optimal cost.

The growth of legal operations is largely tied to economic changes as well as the diversity of matters dealt with by legal departments. The issues that companies face today involve cybersecurity, domestic and international regulations, corporate competition, trademarking, licensing, consumer and client privacy, intellectual property and reputational risk, just to name a few. Indeed, many of these issues were not as prevalent in the past as they are today, and companies need to be much more responsive to these current challenges and assess these multiple risks accordingly.

The report indicates that companies are facing those challenges head on, as 55 percent of legal departments surveyed now call their current pace of change ‘moderate’, indicating demonstrable change, or ‘fast’, indicating large-scale advancement.

Priorities remain constant

Despite this new-found appetite for change, the top priorities cited by corporate legal departments remained relatively consistent to past surveys, according to the latest report. Not surprisingly, controlling outside counsel costs is at the top of the list, with a heady 89 percent of departments calling this a high priority. As part of this, 92 percent of legal departments say they now routinely report on total spend, breaking down the totals by law firm.

Other high priorities identified by more than 50 percent of legal departments surveyed included data security, internal efficiency, use of technology, and a focus on legal operations.

Turning to the challenges they face, legal departments say a growing workload continues to top the list, with 68 percent of departments reporting an increasing volume of work (as defined by the growth in the total number of legal matters undertaken over the past 12 months). As a result, many departments are raising their level of outside counsel spending and expanding the number of law firms they employ.

In the COVID-19 world, the need to work more efficiently is even more pronounced. In-house legal departments already had a steadily increasing workload before the current crisis, and have been learning first-hand, under the pressure of remote working, just how resilient their systems are and how adaptable their people need to be. To thrive going forward, they will need to prioritise both technology and people, building and refining systems that increase the efficiency and value of both.

Among these technology plans, tools that allow for spend and matter management are on top of the departments’ shopping list, with contract management, document management, legal hold, and legal research rounding out the top five. Nearly half (44 percent) of legal departments have increased their use of technology tools in the last 12 months, while 30 percent have increased their legal technology budget, according to the report.

The role of technology will play an increasingly important role as companies are increasingly tasked with controlling and predicting their legal spend on a matter level. Technology promises so much: cost savings; efficiency; better, faster data analysis; clearer decision-making; and the ability to streamline repetitive tasks.

Download your copy of Legal Department Operations (LDO) Index: Dedicated Legal Operations Comes Home.

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