Reese Arrowsmith (left) and Adam Ciongoli, Lincoln Financial Group
Human beings are creatures of habit, and it takes a lot to shake us out of our routines. Law firms have operated in a particular fashion for decades, and most corporate law departments adopted similar practices to those employed at firms. Thus, the law department was frequently seen as the one area of the business that did not function according to the rules of business.
Nowadays, with law departments being asked to do more with less, general counsel are focusing on initiatives such as analytics and spend management to drive efficiency. In many cases, they are spearheading these initiatives by creating legal operations departments and bringing in individuals with business experience to serve as chief operations officers (COO) within law departments.
“It begins with a mindset that you are going to run the department like a corporate support function—or like a business,” says Adam Ciongoli, executive vice president and general counsel, Lincoln Financial Group (LFG). “In the context of the legal department in particular, the duty of running it like a business is going to fall to the GC, so having a COO is invaluable.”
To fill that role in his legal department, Ciongoli brought in Reese Arrowsmith, who had been serving as a management consultant for the head of litigation at LFG, Kelley Grady. “[Grady's] goal was to get a handle on spend and to implement processes, policies and procedures in litigation. We took a deep dive into talent, headcount and capabilities and came up with a strategy, developing new litigation policies and procedures on matters like holds, discovery, reserving and the biggest piece: outside counsel management,” explains Arrowsmith. With his help, the litigation department was able to reduce spend and implement a Strategic Attorney Relationship program, designed to decrease the number of firms that LFG used and streamline billing and rates.
Ciongoli saw the value that Arrowsmith's operations perspective brought to the law department and saw immediate results across the board. But LFG is not the only company that has gone down this route, as more and more law departments have implemented business tactics and brought in operations experts. COOs from those companies have formed a tight professional network, sharing best practices and success stories, and all have found that an operations focus can make a difference.
The main function of the law department, according to David Cambria, global director of operations—law, compliance and government relations at Archer Daniels Midland, is to create or preserve value for an organization. “In order to know how to do that, you need data and processes to better serve clients,” he says, noting that having an operation function in the law department “frees up practitioners to focus on craft.” In this way, the legal minds can focus on managing legal problems, and the operations personnel can work on business problems like managing legal spend, reducing risk and maximizing resources.
Jeff Paquin, president of the Institute for Law Department Excellence, a networking organization dedicated to supporting and equipping in-house legal department leaders in their pursuit of operational improvement and business alignment, identifies seven distinct metrics that, in his experience, demonstrate the value of operations: “demonstrating the value to the business units, freeing up practitioners, closely aligning legal and business, making better decisions, reducing costs, improving efficiency and minimizing risk.”
By applying legal knowledge and wisdom to business problems, the law department, aided by the operations support, can align more closely with the larger organization. In this way, they can manage risk, leverage data and drive real change.
Operations officers in a legal department can indeed drive change, and their first task is usually to cut spending. “The largest talking point that tends to get attention internally and externally is budget control. We cut outside spend by 60 percent in the first two years,” says Ciongoli, who also noted savings in the company's insurance program and overall budgets. But, he says, “It's not just about budget. It reflects an overall focus on operations; it reflects a business-orientation approach.”
To this end, the operations department can undertake a number of projects to increase efficiency. “It's about aligning resources to the problem you are trying to solve,” says Cambria. “You have to look at what is happening in the legal department from a financial perspective as well as a matter perspective, a headcount and a risk perspective. You have to deliver your messaging in the same way to clients and ensure it is consistent with your ways of measuring success.”
These change initiatives can be broad, encompassing programs to decrease outside counsel spend as well as promoting efficiency within the law department itself. In relation to outside counsel spend, Arrowsmith says, “Our motto is, get the right person for every matter every time, and every task within the matter.” To that end, the LFG legal department isn't so much focused on “cheaper” law firms as it is with moving matters from firm to firm when appropriate. Some lawyers in the department might have been skeptical of this strategy at first, but Arrowsmith's team has taken a deep analytical dive into this practice and found that it has lowered legal costs dramatically.
In addition to helping control outside spend, an operations focus can help rein in costs within the law department itself. “We also deal with staffing issues constantly,” adds Arrowsmith. “We are centralizing that through an operations view of the world, constantly focused on when people are retiring or leaving, what the impacts are across the organization.”
At the heart of any business decision, including the drive for efficiency in the law department, is a wealth of data. Without that foundation, it's difficult for the law department to determine if its initiatives are effective.
“With data, you can make fact-based decisions as opposed to shooting from the hip,” explains Doug Ventola, managing director at Huron Legal. Good data can provide a strong foundation for change initiatives. As Ventola puts it, “The nice thing about data is that good data is indisputable, an actual, accurate reflection of history or experience with spend. The value is, it can provide business insights that can help you form and support spend decisions.”
While data don't lie, it's not as easy as flipping a switch to get the numbers you need. As Paquin points out, “All things can be measured, but how do we do that? Before anything, get a baseline. Figure out what tangible metrics you can get a baseline on in order to implement your initiative, then use the same metrics on a continuing basis so you can see where you have been, where you are and where you are going.”
Once you have the right data, you can use it to start implementing the change initiatives that your operations people identified in the first place. “Once you have insight into legal spend, that changes your perceptions of the law firms you work with,” says Ventola. “I remember one client who noticed that there was a particular attorney they had negotiated a good hourly rate with. They were managing the rate with that partner efficiently, but the firm was shifting more work to that partner rather than using associates, and that increased the average blended rate.”
Reducing spend is a laudable aspiration, but most general counsel would tell you that they would not sacrifice the morale of their staff to achieve a budgetary goal. So it was pleasant news for Ciongoli and Arrowsmith when they got reports that morale was better than ever.
“LFG does an employee engagement survey every two years across the entire company and its 9,000 employees. Legal gets the best results,” says Arrowsmith. These engagement scores, coupled with the reduction in legal spend and the results the LFG legal team has achieved on cases, has shown Ciongoli—and top LFG executives—that the operations focus has done wonders for the legal department.
The role of technology
One of the reasons why the marriage of operations and legal is getting so much attention from companies these days is the confluence of need and opportunity. Most U.S. companies were affected by the 2008 financial crisis, either directly or as a result of the recession that followed. While businesses were looking to save money, tech companies were releasing and perfecting technological solutions that could aid in these endeavors.
According to Aaron Katzel, head of the legal operations center at AIG, while law departments of different size and complexity will have different needs, there are certain core technologies that can benefit all law departments. “If you start from the premise that, unless you understand the data, it's difficult to have confidence that you can understand the impact of the decisions you make in the legal space, the way that is most effective to collect data is through e-billing and matter management systems, the foundation of most companies’ operations approach,” he explains. “As you go up the complexity curve, there are tools that can be incredibly useful, such as workflow automation tools, that basically serve as a way to receive requests for services, process those requests and hand them off from one person in the process to another in a way that helps you measure where things are from beginning to end.”
While technology is not the sole tool in the operations toolbox, choosing the right solutions is key. Often, though, legal experts are not technology experts and therefore must rely on other business entities to help facilitate the adoption of this technology.
Center of the web
The legal department touches all aspects of business; therefore, whoever is in charge of operations for legal needs to be able to interface with other units throughout the organization.
“I am interacting with three groups on a daily basis: information technology, human resources and finance,” says Arrowsmith. Because LFG operates in a highly regulated space, Arrowsmith and his teamregularly interact with IT, discussing legal and compliance matters. In many ways, a good working relationship with IT is as important as support from finance.
Lawyers are expected to be good at, well, lawyering, but they don't always have the breadth of business experience that is beneficial in an operations role. Katzel, who does have a legal background, understands that his team needs support. “We don't have all of the skills that we need in order to deliver our services to the legal department and the claims litigation function, but that is by design. We recognize that there are other groups within AIG or externally that are experts in their areas, and we should not try to duplicate their expertise. It's better to leverage them.” He notes that his team, which is large at about 70 members, does have experts in business areas like IT development or design, project management and process excellence.
At the end of the day, though, “a big piece of the equation is that the GC needs to empower the COO,” explains Arrowsmith. “That changes the way I interact with peers throughout the organization.” With a properly empowered COO and a team to support him or her, the law department can transform itself from a tired relic to a cutting edge business unit and agent of change.