Managing Legal
The Point
1. Corporate Legal has a lot more work to do than budget to do it with.
2. In-house and in law firms, corporate Legal persists in its decades-long emphasis on custom work, done manually by one or more attorneys, in response to a one-off request.
3. Corporate Legal avoids adoption of process-based systems and related technologies needed to increase its capabilities at scale.
4. Absent an unlimited budget, Legal’s current practice of assigning more lawyers from law firms or in-house, as demands on corporate Legal increase, is not sustainable.
5. C-suite executives and business owners need to stop exempting corporate Legal from common sense standards that every other function has to meet, and start holding it accountable to core management disciplines.
This Matters to Your Business
Technology expert and LexFusion Chief Strategy Officer D. Casey Flaherty wrote the following about the state of corporate Legal:
- “75% of GCs recognize workloads will outpace budgets (problem)”
- “80% [subscription required] of in-house lawyers are burned out (consequence)”
- “70% of law departments are not investing in digital transformation (unavailable solution due to resource constraints)”
- “70% of law departments are asking law firms about technology usage (attempt to cope within resource constraints).”
Citing independent, reputable support for each of the above statements (as linked), Mr. Flaherty acknowledged corporate Legal’s untenable position: “I would prefer that the first three statistics were less depressing … I know how much pressure in-house departments are under. I recognize this will only get worse.”
Because …
In-house departments and law firms, with few exceptions, reject core management disciplines by their acceptance of the following:
- The billable hour business model, which pits lawyer against client in a zero-sum game, instead of aligning their interests: Rewarding gross time spent while penalizing efficient work, needlessly proliferating attorneys assigned to tasks, and placing recent law grads who require supervision alongside fully qualified attorneys — all to maximize a law firm’s total time charges; and
- Rejection of process-based systems for the performance of routine, recurring legal tasks, foregoing the technology that would enable their automation, and loss of the time savings, cost efficiencies, and greater accuracy such systems and technology could afford to Legal.
Legal’s current operating model is based on (1) emphasizing custom work, done by manual labor of individual attorneys, on one-off tasks, (2) incentivizing waste by paying for that manual labor according to the billable hour business model, and (3) avoiding automated systems that could increase Legal’s capabilities at scale. As long as the U.S. legal profession in-house and in law firms accepts this status quo, tweaking modest changes at the margins won’t suffice to bring Legal’s budgets into line with Legal’s workloads.
A couple of modest, but important, first steps toward applying core management disciplines to corporate Legal:
(1) Use alternative fee arrangements (AFAs): Pay for lawyers’ services by fixed amounts agreed to between business client and law firm BEFORE work begins, rather than pay by the hour in an amount unknown to the business client until AFTER the work has been completed; and
(2) Engage alternative legal services providers (ALSPs) to implement process-based systems for performance of routine, recurring legal tasks, automated by technology where appropriate.