One of the drivers behind GCs asking more of their relationship firms is that more is being asked of them!
The mandate from the CFO’s office is often simple: reduce the overall level of legal spend. But GCs and their teams can’t afford to allow themselves to be measured by that one solitary KPI. If they do, the likely outcome is unhappy relationship firms, an unhappy in-house team and increasingly impossible to achieve targets as budgets continue to shrink.
Rather, one of the most important roles of a GC is the establishment of a framework and tools so that the in-house legal team isn’t seen purely as a cost centre, because there’s only one way to improve if you’re a cost centre. It’s essential to be seen as adding real value to the business.
This is easier said than done, but certainly possible and necessary. How? A lot has to do with data and metrics - the buzz words today across many businesses. The ability to demonstrate improvements in performance by adopting a data oriented approach puts the GC and his/her team miles ahead of reporting on intuition or general impressions.
Break down exactly what it is that your in-house team and your external lawyers do and why, and identify what outcomes your company seeks to achieve for that work by reference to the risk profile of each. Then report and measure against those objectives and outcomes.
Basic examples include external legal spend per matter, total internal time spent per matter, total cost per litigation or settlement outcome, reducing the cost per hour for legal services etc. The aim should be to categorise similar legal matters, to assess things like how long such a matter should take, what it should cost, and the signs that indicate a particular matter will fall outside the norm.
Perhaps the most important thing is to tie the in-house objectives to the corporate’s overall business objectives. The better an in-house team is able to do this, the further away it will move from perception that it’s only a cost centre. My sense is that in-house teams have some work to do, particularly some mid-size corporates. In some respects, they’re falling behind the law firms, who more recently have been proactive in working on their own internal challenges by hiring expertise in pricing as well as legal project and process management.
Richard Stock from Catalyst (a Canadian based legal consultancy firm) summed it up nicely when he referred to the ‘knowing-doing gap’ among corporate GCs and said: “Most law departments could do much better on at least 12 counts: crafting a robust business plan; forecasting demand for legal services; changing work intake and allocation protocols; using strong quality-assurance practices; investing in LEAN and other process-improvement measures; implementing KPIs and data analytics; buying into collaborative technologies both internally and with external counsel; legal project budgeting for complex matters; formalising knowledge transfer; advanced sourcing for external counsel and other providers; and making use of performance-based pricing”. Very valuable advice.
And there is a growing support network for the in-house team to bridge that ‘knowing-doing gap'. The most recent example is The Corporate Legal Operations Consortium (CLOC), an association of in-house counsel and legal operations executives, whose mission is, “To help legal operations professionals and other core corporate legal industry players (e.g. tech providers, law firms, LPOs, law schools, etc.) optimise the legal service delivery models needed to support the needs of small, medium and large legal departments”.
Although started in the US, CLOC has recently moved to set up its Australasian chapter, with its inaugural meeting having taken place this September. CLOC will be taking its first step in Australia to share best practice on collecting legal department data to demonstrate value. (See https://cloc.org/what-is-cloc)