Managing Legal
The Point
Part I of this series concluded:
” … In most companies, corporate Legal is a business function without a strategy … without objectives and metrics by which to assess its effectiveness .”
In other words, most corporate Legal functions neglect to target specific results for which executive management can hold them accountable. And they lack measures against which to assess their results (other than generalized cost complaints).
Nevertheless, most corporate Legal functions have what amounts to a substitute for a strategy, implicitly adopted by default. As the article cited in Part I (“The One Thing You Need to Know About Managing Functions“, Roger L. Martin & Jennifer Riel, Harvard Business Review, July – August 2019) put it:
“You have a strategy whether you like it or not … The goal may be implicit … The choices may have emerged without discussion or exploration. The actions may be ineffectual in achieving the goal. But the strategy exists nonetheless.”
So the typical corporate Legal function’s implicit, default substitute for a coherent strategy that actually amounts to a set of tactics:
- Respond to events ad hoc; don’t commit Legal to achieve particular outcomes, and
- When a legal need arises, simply assign lawyers to whatever task needs doing.
This Matters to Your Business
How did American businesses end up with this reactive, makeshift approach to Legal?
Historically, when businesses faced a legal problem, they asked a licensed attorney to handle it: when a lawsuit was served, when they needed to document a commercial agreement, where a government regulator appeared at the door, or where management had to make an important decision and needed legal advice.
Until the 1960s and 1970s, businesses facing such needs looked to law offices outside the company. In the 1970s, and increasingly in the 1980s, they looked to lawyers both in law firms and in-house. By adding in-house lawyers to their options, corporate America accessed lawyers who cost less than those in outside firms. As Gartner analyst Ron Friedmann put it:
“Sizable legal departments only started forming in the 1980s … companies built internal law firms without rethinking what a [law] firm should be.”
Yet, despite the legal system’s skyrocketing demands on business, and resulting spiraling legal costs to companies, corporate Legal’s implicit, default substitute for a strategy has not changed. As lawyer and law practice authority D. Casey Flaherty put it:
“The lawyer theory of value states that the key to value is having smart lawyers … The constraints of the lawyer theory of value have trapped us … The only conceivable solution to the interlocking challenges of scale and complexity [is] to throw bodies at them.”
Because …
Escalating legal burdens, with escalating legal line-items to match, make “throwing bodies” an unsustainable game plan in 2023.
Meanwhile, alternative legal services providers, “legal operations” professionals, and numerous legal technology applications have emerged in the past decade, to name just three new resources. In the small percentage of cases where Legal has adopted one of them, they have yielded lower cost, faster execution, and greater accuracy in work product (see here, here, and here). Especially for routine and recurring legal tasks.
But their acceptance by law firms, and in-house, has been meager (see here, here, and here).
In Part III of this series I address possible strategies for a sustainable corporate Legal function.