Inventing the Future

Strategic Acumen, Tech Savviness and a Progressive Mindset Will Keep Legal Departments a Step Ahead, Experts Say

If you are in-house counsel, what exactly is your role? Do you consider yourself a lawyer first and foremost, or a business executive? In an era of widespread organizational belt-tightening, how do you do more with less? What do you want your legal department to look like five years from now?  How should you reorganize your staffing and technology to meet today’s challenges? What does it mean to operate in a global economy? These were among the thought-provoking questions that general counsel and other senior in-house counsel debated at a recent Washington, D.C., event to mark the culmination of the 2011 Generals of the Revolution™ series, presented by Datacert, Inc., in collaboration with InsideCounsel and The General Counsel Forum. Generals of the Revolution is an exclusive network of in-house counsel focused on identifying actionable plans to confront current industry challenges and develop strategies to mitigate those likely to surface in the future.

“Following the overwhelming success from the smaller Generals of the Revolution groups that met in cities across the country in 2010 and 2011 to discuss their changing roles, the pressures they face and how they can lead the change in their departments and organizations, we thought it would be advantageous to convene members of the network again to debate those issues further, share best practices and gather insight from industry leaders,” said Mark Poag, general counsel and senior vice president of Datacert.  Among the event’s featured speakers were Richard Susskind, author, professor and lecturer; and Peter Beshar, executive vice president and general counsel at Marsh & McLennan Companies (Marsh). The Q&A session with Susskind and the presentation by Beshar afforded participants an opportunity to explore meaningful metrics to manage legal departments and to discuss the specific strategies that are currently being implemented in leading global law departments, like

Marsh, that are “revolutionary.” Factors such as the growth of the global legal function, the evolving role of the GC, the challenges of technology and information growth, and the responsibility of measuring and managing legal performance for shareholder value aren’t making life for in-house counsel any easier, acknowledged Jim Tallman, president and CEO of Datacert. “Today’s general counsel must find the balance between being a lawyer and being business executive," he said. "Once you grasp that more than 800 billion gigbytes of digital information is used annually, 35 percent more than the capacity exists to store it, and you consider that most of the information is discoverable and therefore impacts a company’s legal risk, it is easy to see how technology will be a key driver in successfully balancing both the lawyer and business executive roles.”

Overcoming those and other formidable challenges will indeed require progressive, if not revolutionary, strategies and solutions, many rooted in emerging technology, according to Tallman. “Today, in-house counsel often have to defend the value of the legal function. To successfully tackle the changes on the horizon, legal departments will need advanced technology tools that can make day-to-day operations easier and user-friendly integrated pla0orms that make it simple to manage, share and analyze information and knowledge.” For two days in the nation’s capital, participants pondered how to rise to those challenges and drive change, not just to survive it, with technology working as their ally.  “This was the first time we convened Generals of the Revolution for two days, and the extended time allowed us to have provoking discussions in large and small group settings,” said Poag.

The Future for Lawyers

Susskind is well-known in legal circles for publishing such thought-provoking books as 2008’s compellingly titled The End of Lawyers? Rethinking the Nature of Legal Services®.  During his comments, he noted the question mark in the book’s title. “Lawyers do have a future,” he said. “But there will be fundamental changes to the profession.”

He also remarked that the recent economic changes aren’t just a bump in the road, they represent the new reality for legal departments, one in which they face pressure to reduce head count and legal spending while doing more — and often riskier— work.  Something has to give, he said. “The answer is that we must do more for less. And sadly, this will underpin the rest of our careers as lawyers.”

Susskind outlined a timeline showing how he envisions the future of lawyers playing out over the next few years:

  • From 2007-12: Denial, hoping for no change
  • From 2003-15: Re-sourcing, alternative sourcing and business process outsourcing
  • From 2016-17: Computerization, intelligent discovery, automated document production, e-legal marketplace

With inevitable change looming, Susskind challenged participants to rethink their fundamental roles and reassess the value they deliver to clients. To help guide participants in this process, he recounted a thought exercise undertaken by workers at a tool-making company. When asked what their mission was, most employees said it involved making drills. But that wasn’t exactly accurate. Actually, their mission involved making the holes in customers’ walls — the drill was simply the means of making the hole. That same way of thinking can hamper in-house counsel, according to Susskind. “Lawyers tend to have a power tool mindset, but they should take a step back to see what we provide.” According to Susskind, for legal departments, the equivalent of the hole in the wall should be legal knowledge management, legal risk management and legal process management. In-house counsel are in the knowledge business and they need to think in terms of the knowledge they possess that their clients lack. “In many ways, knowledge is our most valuable commodity,” Susskind said.

The challenge then becomes how to deliver knowledge most effectively and efficiently. As compared to other professions, such as accounting and/or consulting, the legal industry is severely lacking when it comes to sharing knowledge, according to Susskind. Embracing the new wave of communication tools, including online communities, instant messaging, blogging, and social networking, can help address that shortcoming, he said.

Legal departments also suffer from a disconnect with their clients and shareholders. “Attorneys are too reactive,” said Susskind. “Companies, boards of directors and shareholders don’t want dispute resolution, they want dispute avoidance.” Or, as Susskind said, clients don’t want an ambulance waiting for them at the bottom of a steep cliff — they want a solid fence at the top of the cliff to prevent potential falls.

Managing and Measuring

Beshar of Marsh & McLennan discussed that disconnect during his address. “There is a chasm between lawyers and businesspeople,” he said. “The businesspeople think of us as weird and risk-averse.  When lawyers look at deals, they tend to think, ‘How can these deals go wrong?’”

Client surveys can be very helpful in bridging that gap, he said. “The mere act of asking someone’s thoughts is positive,” he told participants. “The second step of the survey is to follow up and to respond to concerns.” 

As part of the interactive format of the event, in-house counsel discussed some of their experiences with client surveys. At one company, so many different departments were conducting surveys that employees began to feel overwhelmed. The general counsel at that company decided to hold focus groups, rather than risk over-surveying their business clients. As part of the pulse-taking process, members of the law department would periodically have lunch with business clients to gauge their thoughts and concerns and see how their legal needs could be better served.

That type of interaction with clients is critical for in-house counsel, according to Beshar. “Lunch is almost the most important meal of the day. Lawyers shouldn’t eat every lunch at their desks.”

Along with client interaction and surveys, the right data and metrics can also help align the legal department with other business units. Finding good data for legal departments can be a challenge, but it’s extremely important. “Metrics allow us to distribute responsibility for driving change throughout the organization,” Beshar said. 

The right data can also help in-house counsel see patterns and trends and identify emerging issues and problems before they become major issues. “It’s very helpful to have trending data with a three-to-five-year view, so you can see what has happened in that time,” Beshar said. “We all tend to live in the here-and-now.”

With the right data and relationships, in-house counsel can help revolutionize their legal departments. “To be good at your job, you need to be as impactful as you can,” said Beshar. 

So how can you use that data to be as impactful as possible? The issue of how to develop meaningful metrics was top of mind for participants during the event. Accounts from several in-house counsel during the event indicate varying approaches and levels of progress in the development of metrics. Some departments reported they are just starting to gather data; others had sophisticated mechanisms already in place. 

With the right technology tools, such as a comprehensive platform that consolidates data from multiple systems, in-house attorneys can gain visibility into data and information in their departments and across the enterprise.  When they are equipped with quantitative information, in-house counsel can help to drive down overall costs. They can also improve collaboration with their internal business clients and their outside counsel, while better focusing on the work that truly makes an impact. The best platforms will integrate seamlessly with other software applications the department uses and allow for easy and more advanced reporting. 

While there was consensus on the importance of metrics and reporting, the measurement targets were widely varied. For some, it came down to justifying the headcount in their departments. Others were looking to identify trends, not just events. Larger companies wanted to know if issues applied across multiple divisions or were isolated in a single division.

While there is no one-size-fits-all approach, Diana Massaro, vice president of marketing at Datacert, described several widely-used industry strategies and reporting areas for applying metrics:

  • Cost containment
  • Organization/timekeeper management
  • IP management
  • Matter management
  • Operational reporting
  • Risk and compliance

Cost containment was one metric that particularly resonated with participants. As one general counsel remarked, “We shouldn’t have to babysit our firms, but I don’t really trust them. I feel like their job is to separate me from as much money as possible.”  Working across systems and non-user friendly systems ranked high on the list of the challenges participants indicated they face in gathering information for metrics and reporting. As one participant said, “If data isn’t correctly inputted, you can’t get meaningful data out.” Several participants struggled with the idea of requiring in-house lawyers to track their time, while others had issues getting staff and attorneys to input data into whatever system they were using, whether that was about time spent working with businesspeople or with outside counsel.

Along with encouraging or requiring members of the legal department to input information, user-friendly tools are imperative, according to Massaro. “It’s really, really hard to do this without technology,” she said.

Working Differently

Going forward, Susskind emphasized, there must be a mutual embrace of technology among legal departments and their law firms. Doing more for less means in-house counsel and law firms need to pursue two strategies: efficiency and collaboration.  Many legal departments have tried the efficiency route, which calls for cutting the costs of lawyers. The focus on cost-efficiency has fueled the move towards alternative fee arrangements and away from the billable hour. Yet Susskind said he isn’t ready to completely abandon the billable hour convention, particularly as it relates to “bespoke” matters, the tailoring term for handcrafted, customized work. “There is something rather daft about penalizing efficiencies, but in some cases, hourly billing makes sense,” he said. “For bespoke work, you don’t want to limit what your attorneys need to spend sufficient time.”

Susskind also questioned how far alternative pricing can actually go in terms of reducing overall fees. “The truth about alternative pricing is that no law firm I have ever seen has suggested reducing costs, passing those on and becoming less profitable,” he said. “And if they can’t do this, they won’t change anything. Pricing differently will not be enough. We need to work differently.”

Susskind also expressed reservations about the idea that law firms seem to be waiting for their in-house counsel to suggest changes to current models. “I can’t think of a market in the world where the customers are expected to innovate.”  As one participant noted, not every type of law firm has trouble understanding costs and risk— successful plaintiffs’ firms have a good grasp of their cost structures. “Maybe those are the ones we should be imitating,” the participant quipped. 

Since cost-efficiencies will only take law firms and legal departments so far, it’s time to try the collaboration model, according to Susskind. “Sharing costs is a more radical approach,” he said.  And it’s an approach that will succeed only with an embrace of new technology and improved processes. Don’t underestimate the power of tomorrow’s technology, Susskind advised. “There is a tendency among lawyers to think that technology has advanced as far as it can. But there will be exponential growth. What we think of as tremendous growth has been minimal.”

To underscore his point, he cited a statistic that by 2050, the average desktop machine will have more processing power than all of humanity. “There is no finishing line in IT.” 

“How deep is our arrogance to think that IT will transform every sector, including accounting and medicine, but not the law? I don’t accept it,” Susskind said.

Managing Legal Knowledge

Susskind also stressed the importance of knowledge management— how departments and firms capture, expand, nurture, share, and reuse knowledge.  Knowledge management brings greater efficiencies, enables in-house counsel to exert greater leverage and allows departments to deliver the expertise of their entire team to the client, not just one attorney.  “Businesses expect and deserve to benefit from the collective expertise of their lawyers,” he explained. With knowledge management, legal departments can make their own knowledge available to non-lawyers.  One example of that could be creating a legal FAQ page on a company’s intranet to minimize the calls business people make to corporate attorneys when they have simple questions.  “Knowledge management in the law is in its infancy,” acknowledged Susskind. “Most leaders don’t take it seriously. The main challenge is cultural.” Yet even as the practice of knowledge management spreads, Susskind warned that there are no easy solutions, nor is there a single panacea, to the management issues confronting in-house counsel.

Susskind pointed to several practical pi0alls that legal departments face when implementing knowledge management systems. These include letting the “technology tail wag the dog,” and underestimating the cultural challenges. Legal departments also trip up when they assume that one size fits all or they fail to get support from the top. A lack of integration between knowledge and training, and a failure to adequately plan for client access, are proving problematic as well.  Legal departments are looking for effective knowledge management from their law firms too. They see a perceived cost savings and believe they could benefit from a firm’s collective expertise. Many law firms are developing their own systems and, according to Susskind, some are collaborating with each other.

Developing a Strategy

Amid all these challenges, lawyers, law firms and corporate legal departments are struggling to develop strategies for thriving during the coming years.  Lawyers tend to lag in developing strategies because they haven’t had much practice. As Susskind pointed out, until 2006, most law firms had double-digit growth without relying on any sort of strategy. Those days are over. Legal departments and law firms need to ask themselves where they want to be in three to five years and develop a plan to get there.  “I’ve found that many lawyers are not good at setting priorities,” Susskind said. “The greatest leaders are fanatical about setting two or three very well-stated priorities. Lawyers, on the other hand, often have 30 priorities, and none of them get done.”

“Inertia is a very strong force,” he continued. “Change is just as much about management and taking people with you as it is about good ideas.”

The type of strategy makes a huge difference, though, according to Susskind. Lawyers need to develop strategies that are vision-based, not legacy-based. A vision-based strategy should be based on the dreams you have about where you and your organization would like to be in five years. With legacy-based strategies, departments and firms look at the people they currently have, then figure out the income they need. “A legacy based strategy is one that looks backward into the future,” he said. “The best businesses have a vision based way of thinking, but about 99.9 percent of law firms have legacy-based strategies.”

Susskind outlined four strategic options for legal departments to consider pursuing:

  1. Law firm management only.  With this strategy, legal departments focus strictly on managing their firms more aggressively. According to Susskind, this makes sense for small departments with few lawyers that rely heavily on their outside counsel.  With this strategy, general counsel spend time on RFPs, alternative pricing and preferred provider lists.
  2. Internal review.  With an internal review strategy, legal departments don’t focus on their outside counsel, figuring the marketplace will take care of that. Instead, they concentrate on their own internal resources, efficiency and sourcing. This approach doesn’t make much sense for small legal departments with few internal resources. Instead, it’s one that larger legal departments tend to adopt.
  3. Large-scale legacy-based. This strategy combines the first two, with in-house counsel trying to determine the right balance between internal and external resources.
  4. Full-scale vision-based. In this model, legal departments put to one side their current law firm relationships and their own existing structures. Starting from the ground up, they look at what the legal service organization actually needs. This top down approach is driven by a legal needs analysis. Here, legal departments focus on what work actually needs to be done in order to best serve the business, then determine the best ways to source that.

“With number three and number four, there can be huge morale issues,” warned Susskind. “But within a few years, number four will be expected of you.” Attorneys may initially balk at some of these predictions. However, following the scientist,

JBS Haldane, Susskind said acceptance of these kinds of progressive approaches usually unfolds in four stages:

  1. This is worthless nonsense.
  2. This is an interesting, but perverse, point of view.
  3. This is true, but quite unimportant.
  4. I always said so.

 Real generals of the revolution need to take the initiative to drive their departments, attorneys and clients into the future. As Susskind said, quoting Alan Kaye, “The best way to predict the future is to invent it.”

Learn more at www.insidecounsel.com/gcevent.

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