Since the recession, businesses across the country have been pushing their employees to do more with less. Members of corporate legal departments have encountered the same challenge. Facing heightened performance expectations and heavier workloads, in-house lawyers and their staffs have had to alter their workplaces to conform to leaner budgets—all while maintaining productivity and excellence.
CEB, a member-based advisory company formerly known as Corporate Executive Board, terms this situation “the new work environment.” Its recent study found that legal department employees say they’re working 15 percent harder than they were three years ago. Meanwhile, only 24 percent of general counsel believe their staffs are currently performing at the highest level. Almost 70 percent of GCs say their teams need to become more adaptive and agile to respond to various trends, such as frequent organizational change, cross-organizational collaboration and the increased use of information technology. And more than one-fourth of GCs say their teams need to be more entrepreneurial.
With this “new work environment” in mind, legal department leaders must formulate action plans that will help them boost their internal efficiency and resourcefulness. Read experts’ tips for doing so on the following pages.
Stay tuned for Part 2 of this series, which will focus on cutting external expenses, in the April issue of InsideCounsel.
In many of today’s large legal departments, law department operations (LDO) managers play a significant role in cutting costs and streamlining operations.
“Somebody in this role is looking for opportunities to make the department’s service better and find efficiencies in the way the services are being provided,” says Mike Haysley, director of legal operations at Waste Management Inc.
Like many other LDO managers, Haysley’s background lies in consulting, and he has a law degree to boot. Some LDO managers have finance backgrounds and master’s degrees in business administration, too.
“You’ll often hear that we’re the business manager of the legal department,” Haysley says. “We’re enabling the lawyers to practice law and to work with the business to solve and prevent legal issues before they happen.”
Haysley, who reports to Waste Management’s general counsel, is in charge of creating the legal department’s budget and making sure the department sticks to it. Among other tasks, Haysley’s day job involves finance work, accounting work, managing invoices and acting as the project manager for any software-related projects. But LDO managers’ roles vary by department. “You tend to have your hand in a lot of different things—everything from IT, finance, HR, e-discovery, records management and compliance,” Haysley says.
Having such a wide array of responsibilities allows LDO managers to pick up on critical weaknesses within their departments and identify opportunities for improvement, including ways to cut costs. According to the Fifth Annual Law Department Operations Survey, published by InsideCounsel and Blickstein Group in cooperation with Huron Legal, LDO managers think their companies’ legal spend would increase by an average of 31.2 percent if their companies didn’t have LDO-related staff members.
Brad Blickstein, principal at the Blickstein Group, says LDO managers help legal departments complete a crucial task: goal-setting. “Goal-setting is the key,” he says. “Start with where you want to end—that’s business 101, but it’s not always legal 101. A process-oriented business person such as an LDO manager is exactly the right person to be setting goals, both financial and otherwise, for the law department. In terms of cutting costs and maintaining excellence, it’s about being able to figure out what needs to get done and when, and what processes to add while reducing costs.”
Experts say it’s important for GCs to fully understand the role of their LDO managers and support them by supplementing their own robust legal skills with business and technology know-how.
“Increasingly, law department lawyers ought to be looking at themselves as business lawyers who are managing a number of different resources—not just law firms, but also in-house clients, in-house experts, outside experts and alternative service providers,” says Shahzad Bashir, executive vice president at Huron Consulting Group and founder of the company’s legal group. “They ought to be looking at themselves as project managers who are trying to get the best business outcome in the shortest time frame at the cheapest cost while maintaining quality. With that mental model, it really becomes a whole new role as opposed to hiring law firms and trying to leverage them to get the best outcome.”
Rebecca Thorkildsen, senior director at HBR Consulting, agrees that though legal leadership may not be acting as departments’ project managers, they must grasp the importance of the role and back it up. “You need to look at how to shift gears to control the costs,” she says. “That isn’t something that lawyers necessarily do well, nor do they want to do it, nor should they necessarily be the correct people to do it. That’s part of the challenge—in this cost-management environment, the idea of adding additional headcount [by hiring LDO managers] is not really palatable, yet if you could bring in one or two people to help manage the budget and staff and save an extraordinary amount of money, it may actually pay for itself.”
“The new work environment” requires LDO managers and GCs to take a hard look at their departments’ inner workings in order to identify current workflows and how they can be tweaked for supreme efficiency while maintaining quality.
“Law departments must be doing work that is in line with corporate strategy and manages the legal risks of the business,” Bashir says. “The question is, who should do it? Should it be done by a lawyer? If so, how senior or junior should that lawyer be? If it’s not a lawyer, then what kind of person do we need?”
Haysley says there’s a term that’s being used to describe pinpointing the correct person to do the right work: rightsourcing. “That may mean we’re insourcing work,” he says. “For instance, we may hire an attorney and move a certain group of work that we were previously giving to a law firm inside. That lets us do it at a phenomenally lower cost and gives us a lot more control over what we’re doing. And if you have an attorney that’s working closely with the business customer, he’s going to spot any issues before they become issues.”
Regardless of whether a legal department decides to add staff by hiring LDO professionals, in-house lawyers, contract lawyers, paralegals or paraprofessionals, rightsourcing will cost money upfront. But Haysley says the payoff is worth it. “If you can do the math and show that you’re going to be able to offset outside counsel hours, the ROI on that is almost immediate,” he says.
Chuck Jarrett, Progressive Corp.’s GC, says his legal department has been taking on more work in-house with fewer resources, but it is doing so strategically. “One of the overriding strategies is to get higher-level managers to constantly relook at what people are doing and try to eliminate the lower-value work and push some of that back to the business where it’s appropriate,” he says. “We’re focusing on making sure that the people we have on our payroll are doing the highest-value work that they can do. We’re eliminating things that don’t need to be done by a lawyer; we have more paralegals per lawyer than we ever used to have. And we’re training the business to do things that they’re very capable of doing.”
Blickstein agrees that more legal departments should consider eliminating work by redistributing it within the company. “What can legal not do is a big question,” he says. “What can you push back to the business units? What can be done in some sort of safe, self-service model? Can standard contracts be set up in a way that they can be submitted without legal review? It’s easy to imagine giving your sales force a template and saying, ‘Here’s the contract, and here are the places you can move within the contract. As long as you’re doing these things, leave us alone. If you need to move outside of those elements, then get legal involved.’”
According to consulting firm Altman Weil Inc.’s 2012 Chief Legal Officer Survey, more than one-third of legal department leaders say greater use of technology tools during the past year has yielded the greatest improvement to efficiency within their departments. Although the finding is promising, experts say law departments should prioritize ensuring that they’re embracing the correct technology and maximizing the potential of the tools they use in their daily operations.
“Legal departments must get a greater return from the technology investments they’ve made,” says Sampriti Ganguli, managing director at CEB. “Technology often is seen as a binary outcome—we didn’t have it, and now we have it. But not a lot of departments spend a ton of time asking themselves how they can get more out of their systems. Better reporting capability, better investment in end-user awareness, forcing people to actually use the technology and taking away the manual process they have in place—those are all levers to make sure that you don’t walk away from technology investments.”
Some law departments are, however, making strides when it comes to harnessing the power of technology. Haysley says he doesn’t know of a large legal department that isn’t using a matter-management system. Jarrett says Progressive’s e-billing system is “effective for its purpose of giving us consistency in billing, the ability to provide efficient oversight of that and to hold firms accountable to budgets.” He said the system also makes it “easier to red-flag things that look out of whack.”
In addition to departments embracing matter-management systems and e-billing, Thorkildsen says she has seen a focus on technologies that help routinize processes. “Contract management, for example, can regenerate routine contracts more cost effectively,” she says. “In the intellectual property space, departments can use technology to help track more quickly and effectively all of their various portfolios of intellectual property and keep track of all the upcoming dates for renewals and activities that they need to do, as opposed to somebody manually updating spreadsheets and calendars. Additionally, there’s no shortage of tools that can help throughout e-discovery and the entire litigation lifecycle that help collect and process documents, prepare briefs and prepare for trial.”
Legal departments that are able to get the most out of their tech tools will also be able to capture and analyze data that will help drive the decisions they make around efficiency within their organizations.
“The challenge for LDO managers is figuring out how to turn the data into information,” Blickstein says. “General counsel do not want to look at report after report after report—they want to know what the highlights are, what’s trending, what changes can be made and what can be improved.”
Some legal departments are not only focusing on cutting costs—they’re beefing up the other side of the equation by generating profits.
“Something that is trending recently is recoveries—law departments bringing revenue into their companies,” says Brad Blickstein, principal at the Blickstein Group. “During the past 30 years, it’s been done largely by defending and licensing IP. But we’re starting to see some innovative legal departments get involved in those types of initiatives in areas other than IP.”
Recovery lawsuits have been a growing approach among legal departments on missions to generate revenue by recouping money from insurers, suppliers and other companies with which they do business. An early adopter of this aggressive litigation tactic was DuPont Co., which has seen hundreds of millions of dollars in earnings from recoveries in the past few years. The Wall Street Journal reported in 2011 that DuPont earned between $16,000 and $185 million on each recovery suit it filed in 2010. In sum, the company pulled in more than $450 million through 198 recovery suits that year.