In turning from the current reactive, makeshift approach to Legal, to a financially sustainable and operationally coherent strategy, what options does the business have?
I suggest three kinds.
This Matters to Your Business
1. Where a task is best done by a lawyer, get one deeply experienced in the relevant practice specialty; avoid inexperienced add-ons pressed on you by law firms. And, because the law is increasingly complex, be cautious when assigning an in-house generalist to a task that might call instead for a specialist partner in a law firm.
Hire a partner specialist + associate team from a law firm, and pay all of them by the hour; or assign an in-house generalist lawyer full-time for salary & benefits.
(1) Transition from hourly billing to fixed fees with the law firms you use. Abrupt change will likely be unwise, but steadily move to from time-based to value-based pricing.
(2) Hire partner specialists from smaller, boutique firms (e.g., Salazar Law), “distributed” firms (e.g., FisherBroyles), or other law firms that offer services of a partner specialist with minimal involvement of less experienced associate lawyers.
(3) Hire veteran corporate attorneys, who come without the baggage of less experienced lawyers to “assist” them, on a temporary basis for a fixed fee, (e.g., Axiom).
2. Scale corporate Legal’s capabilities for routine, recurring tasks at lower cost, more speed, and greater accuracy, using efficient business processes, and — where appropriate — tech-enabled systems.
Use less experienced law firm associates or assign in-house generalist lawyers to perform such tasks manually.
(1) Employ legal operations specialists who are expert in the systems design and technology adoption for performing such tasks for less money, at higher speed, and with greater accuracy than status quo manual efforts by law firm associates or in-house generalists can provide (e.g., Innolaw Group).
(2) Hire alternative legal services providers who bring professional expertise and their own technology capabilities to corporate Legal functions (e.g., Unitedlex).
3. Move from fighting fires to disciplined prevention.
Legal’s prevailing M.O.: react to events.
Legal can lead the business units and other functions in systematic prevention of legal problems. On a proactive basis.
Patrick Lamb, co-founder with Nicole Auerbach of the boutique law firm ElevateNext, describes the value offer this way:
“Think about how much it would have been worth to General Motors to not have the ignition switch problem [covered here and here]. How much would it have been worth to Volkswagen to not have the emissions problem [covered here and here]. There’s a huge enterprise value in the resulting impact on the stock price of the company and the distraction from the main business mission of the company to deal with this problem … You get an idea of the value of a prevention culture in these companies.”
With skyrocketing legal costs, it’s vital that corporate Legal be managed to financial sustainability.
And amidst the legal system’s ever-proliferating demands on the enterprise, it’s imperative that corporate Legal have an operationally coherent strategy.
But restoring corporate Legal to the disciplines and accountability demanded of other functions won’t happen unless executive management demands it. The lawyers have shown that they’re not interested.
In Part IV of this series, I offer my recommendation for a financially sustainable and operationally coherent strategy in Legal.