Playing the Hand They're Dealt
Lean Times are Testing Law Department Operations Managers, Forcing Them into Tough Trade-Offs and Out-of-the-Box Strategies, Latest Survey Findings ShowFor years, the mantra among legal departments has been, "Do more with less." Faced with a battered economy and pressure from the C-suite, law department operations managers and their teams have been leaving open positions unfilled, limiting travel and pushing law firms to reduce rates, all in the name of creating efficiencies and cutting costs.
Now, however, it appears many legal departments are finally reaching their limits. Instead of doing more with less, they are now realizing they have to do less with less, according to respondents to the Fourth Annual Law Department Operations Survey.
"We are leaving the era of efficiency and entering the era of prioritization," says Brad Blickstein, principal at the Blickstein Group, publisher of the survey.
That sentiment was echoed by several law department operations managers and consultants, who recently gathered in Chicago for a roundtable to discuss the survey results, the challenges their own departments are facing and the best practices they have instituted to address them.
While they are still continuously striving to improve their own processes, today's law department operations managers are also working to prioritize what in-house counsel can and should do. In many cases, that means pushing more work out to the business units. In other situations, that means re-evaluating basic litigation strategies and whether legal should even be involved in some matters.
"When you freeze headcount, the work doesn't go away," points out David Cambria, previously director of operations in the law department at Aon Corp. and now senior director enterprise information management at CDW. "In the legal department, we don't look for work. It finds us, based on what the business is doing."
Since their workload isn't getting any lighter, some legal departments are rethinking how they approach that work.
"We've been trying to become more efficient, more effective and do some things differently," says David Dresden, senior director, legal administrator with McDonald's Corp. "However, we've finally gotten to the point where this is more difficult to do, so you have to look at prioritizing the work."
Along with making a business case to add more legal staff, McDonald's is also becoming more strategic about cases. "When it comes to outside counsel spend, litigation is the bulk of our expenses," says Dresden. "We're trying to be more strategic, particularly with the larger cases. We are taking a look at whether we should fight cases over a period of years or if it makes more sense to settle and realize an overall net savings."
Deciding whether to fight or settle lawsuits often entails making highly complicated, emotional decisions within companies, roundtable participants agreed. How a case is prioritized strategically often hinges on publicity issues, the amount of money involved, the number of claims, corporate strategy and other factors, according to Aaron Van Nice, director of legal operations in the law department at Baxter International.
According to Van Nice, Baxter has also looked at other ways to prioritize and spend money intelligently. One way is by carefully considering whether attorneys need to be involved in every legal-related task. "We've worked to identify the right resources and look at processes to determine whether other resources can do a particular assignment. These are resources that are less expensive than attorneys," he says.
The appropriate person for a task may not even be in the legal department. Several participants report that their companies are directing more work to other departments, such as purchasing, or directly to the businesspeople. This can be particularly effective with contracts.
"Abbott business managers work on lower-risk contracts with Global Purchasing," says Terri Martorana, senior manager, legal division, at Abbott Laboratories. In order to make that process more effective and minimize potential risks, Abbott legal has instituted training for the businesses and provided contract templates on the company's internal SharePoint site.
"With proper preparation, more contracts can be handled at the business level. Their advising attorney doesn't need to be involved in every contract," she says. "The business managers are given prepared materials and templates, legal guidelines and the ability to execute terms already determined acceptable."
This points to a movement among legal department operations managers to assess and weigh the risks involved with work that in-house counsel have traditionally – and automatically – done, then to allocate and delegate accordingly. "Legal departments have to get better at tiering risk," says Dresden of McDonald's. "They shouldn't manage everything as if it has the same risk. In the environment today, we don't have enough resources to be involved in everything. In-house counsel have to analyze risk and decide if this is something the client can do instead by utilizing templates and training provided by legal."
Bowing to the Bottom Line
Stretching budget dollars for tech functions and other purposes remains a challenge for survey respondents and roundtable participants, some of whom shared the various ways their organizations approach the budgeting process.
Some use a shared services model; others have dedicated IT staff embedded in the legal department. Some retain their budgets throughout the year, while others regularly revisit and revise theirs to reflect ongoing matters and needs. The same economic conditions that have been driving the "less is more" mantra are also making it difficult to work proactively, according to some participants.
"It's been a challenging economy, and we end up sacrificing some of the things we would like to do proactively," explains Van Nice. "We have to make the pitch every year for resources that will allow us to work proactively. In some cases, the value may not be apparent for a few years, but my view is that we can spend the money now or we can spend it later."
Some legal departments are still finding efficiencies and technologies that can help stretch limited budgets. "Many companies are moving to the cloud for email and document management," says Rich Seleznov, managing director of Huron Legal. "That's part of the trend to maximizing the value of IT resources. So many organizations are trying to move away from basic infrastructure, so they can use their resources for a more strategic approach."
Budgeting can also be complicated by the slack billing habits of some law firms. Aon worked to solve that problem by imposing time limits, according to Cambria. "If a law firm submits an invoice line item that is older than 90 days, we don't pay it," he says. "That's the rule built into our e-billing system, and if it's that late, the system kicks it out."
Since the first Law Department Operations Survey, e-discovery has been an ongoing challenge for legal department operations managers. The good news is that for many roundtable participants, it has become a routine part of operations.
Generally, participants say they have developed the internal expertise and technology to collect their own potentially responsive documents from custodians. The bad news, though, is that most are still buried in data and haven't yet taken the step of hosting their own review platforms, leaving that to either law firms or service providers.
"We are spending a lot of time on information management, understanding our data and documents and trying to decide if we can delete it," says Van Nice of Baxter.
Most organizations have problems deciding when it's safe to delete data, according to Blane Erwin, vice president of research for Bridgeway Software. He likens it to hoarding, saying, "Organizations are trying to find out why people hold on to things. A hoarder holds on because they are afraid they are going to need it someday. It's the same dynamic in over-preserving data."
Deleting information that has been on legal hold is particularly challenging. "Despite escalating storage costs, it's very difficult to get the litigation team to take custodians off of legal hold, unless they are absolutely comfortable that there is no longer risk associated with that decision," says Martorana of Abbott.
The holds issue will continue to challenge legal departments, predicts Cambria. "The question is, when should organizations release holds? The legal team is focused on risk avoidance, and they are always going to err on the side of keeping data," he says. "When the IT team and the records management people don't get an answer from legal, they just buy more storage and do more of what they've been doing. So you end up with email storage and other data growing and growing and growing, and I just don't see it going away in the short-term."
As legal holds become more extensive, organizations are devoting more resources and people to implementing and managing them, according to Bobby Jahanbani, a director at Mitratech. "Four or five years ago, a few people managed the legal hold, even in a very large organization. Sometimes there was only one person– one very busy person. Today, an organization can have 50 people trained to manage or administer the process, so it is much more dispersed."
Data and Metrics
Approaches to tracking data and metrics vary widely among survey respondents and roundtable participants (see charts 3 & 4). At Baxter, for example, in-house counsel are increasingly responsible For managing outside counsel work. "We look at individual cases and hold internal attorneys accountable for managing outside counsel," says Van Nice. "We do annual budgets and a budget for the life of a matter, then attorneys defend how they are managing outside counsel work and budgets. If budgets need to change, then the deputy general counsel needs to approve that.
"It should be inside counsel managing outside counsel on the work that needs to be done. But many times in the past, outside counsel would just provide updates on the case," he says.
Alternative Fee Arrangements
Respondents and roundtable participants also approach alternative fee arrangements in varying ways (see chart 5). Some companies are bundling related work and sending out the bundle for RFP.
McDonald's, meanwhile, is engaging in some fixed fee arrangements by matter stages, then evaluating how to proceed with the matter, reports Dresden. The company is also beginning to explore other AFAs. But Dresden sees that approach as being a fairly limited one for his organization. "One struggle we have is that we use firms based on matters, and our top 10 firms shift every year," he says. "That makes it more challenging to broadly use these types of arrangements."
Faced with these and many other formidable challenges, legal department operations managers are finding new and creative ways to remain productive and proactive, according to Blickstein. "By prioritizing and evaluating risks," he says, "law department operations managers will be able to bring their expertise and highest value to their clients."
InsideScoop Daily eNewsletter
You have been subscribed! You will receive a confirmation email soon.
- May 30, 2013 at 1:00 pm ET
- June 4, 2013 at 2:00 pm ET
- June 12, 2013 at 2:00 pm ET
- June 18, 2013 at 2:00 pm ET
- June 26, 2013 at 2:00 pm ET
New York City, Gotham Hall
In this on-demand webinar, learn how to counter the challenges of litigation with predictive analytics...
We have developed best practices for lowering your e-Discovery costs, shortening the length of your...
Understanding the legal fee budgeting paradigm and following seven simple strategies will help you control...
Packed with practical advice, this white paper discusses best practices for meeting eDiscovery challenges across...
This white paper addresses the need for companies to reevaluate their current collection policies in...
Strategically shifting more matters to in-house counsel has proven to be an effective strategy to...
Find out five ways that organizations can promote responsible sharing of content among employees by...
Predictive coding is only one of many ways organizations can make eDiscovery faster, cheaper and...
Adoption of Cloud computing continues to gain momentum. How can IT and Legal Teams avoid...
With the deployment of Proofpoint Enterprise Archive, organizations have realized significant cost savings in automating...