Legal Operations: have you drunk the Kool-Aid?
In his latest column for GC, David Burgess, Publishing Director at The Legal 500, considers the role of legal operations within the wider legal community.
Impact of legal operations
The Legal 500
For this quarter’s column, I’m going to take a look at legal operations, which appears to have replaced ‘innovation’ as the main buzzword in legal circles. I attended the third annual conference of the Corporate Legal Operations Consortium (CLOC) recently and have had a little time to reflect on where the market is with legal ops. If you were in Las Vegas with me, you would be absolutely convinced from the passionate speeches being made that every lawyer in the world is aware of this brave new world. The reality is somewhat different, as many people I have spoken to around the world have pretty much shrugged their shoulders with disinterest at the mention of it. But for those who are involved, it seems the revolution is coming.
Briefly, for those who haven’t stumbled across it, legal operations aims to drive greater efficiencies within corporate legal departments through strategic planning, financial management, vendor management, outside counsel management, technology management, and legal data analytics. Some say that the head of legal ops is the chief executive or chief of staff of the legal department – not the finest description, but I guess we will go with that for now.
Both CLOC and the ACC’s Legal Operations are fighting to gain traction in this area – to a degree this is a good thing, as finally the ACC may be understanding that they cannot be the only game in town. The downside, of course, is that there is a lack of unified voice, as the ACC focuses on its members, and CLOC struggles to move on from the perception that ‘this is mainly a West-Coast tech thing’. CLOC says that it currently has 30% of the Fortune 500 as members, with a $50bn annual legal spend, and next year it wants 50% of the market. That was the measure of next year’s success from the leadership, as opposed to trying to get that 30% to reduce the $50bn spending. When it comes to industry bodies, plus ça change, plus c’est la même chose.
Back to the conference. According to CLOC, there were over 550 unique in-house legal operations functions – just from that alone we can see that we are very much at the nascent stage. And of the 2,000 or so attendees, approximately half would have been vendors and suppliers. A few law firms were there, and I could see some were very much engaged with the market, whilst others seemed to be hedging their bets a little in case this ops-thing takes off. But a huge number of attendees were from tech suppliers, with ‘cutting edge, innovative, game-changing’ solutions for contract management, e-discovery, knowledge management and the like, essentially, companies that can make your existing tasks simpler and quicker using technology. Again, legal operations is in danger of getting pigeon-holed into being a tech solution, rather than the all-encompassing change agent it wishes to be.
There was some New Law there, mainly the usual suspects. At the conference, Elevate and ElevateNext announced a collaboration with Univar to reduce the legal department’s spending by 50%. Loud applause, excitement for the future, but… at the same time as this was being trumpeted as the future, Big Law kicked back hard. The latest Am Law 100 results came out showing revenue up by 5.5%, PEP up by 6.3% and a record 31 firms now above the $1bn revenue mark. Big Law is in rude health, with the largest law firm (Kirkland & Ellis) recording a revenue rise of half a billion dollars. It’s no wonder that most of the partners and BD teams at these firms have no engagement with legal ops. Indeed, the talk amongst senior commentators was of the shift in the balance of the law firm/client dynamic, which for the past five years has been all in the client’s favour. The new thinking is that it has shifted back to law firms, measured by profits and the manner in which most hourly rate increases have been accepted so meekly by in-house counsel.
One note of caution for all the New Law fanatics too. John Schultz, chief legal and administrative officer and corporate secretary for Hewlett Packard Enterprise, called out the new kids for not doing their bit for the profession, especially in the pro bono arena. He said, ‘New Law needs to be responsible to the profession and do pro bono. You can’t be just in it for profit. You have to help more people get access to justice’.
Now, the tone of this column has been critical. And that’s partly because everyone needs a reality check and there are some of us who haven’t drunk the Kool-Aid. Yes, there were too many tech vendors, too much repetition of sessions and not enough big-hitting GCs supporting it, but I’ll give CLOC a pass for this. It’s a new organisation finding its feet, and the commitment to change is genuine. There is a real call to arms; make no mistake, this is going to get bigger. Mary O’Carroll, head of legal operations at Google stated it was ‘irresponsible for a company not to have legal ops’. It remains to be seen how much this trickles down to medium-sized enterprises, or whether it simply evolves into a different kind of outsourced model for legal departments. So far, legal ops has been mainly focused on tech, so how far the banks and institutions dive into this will also be a key indicator of success.
But the real threat is for those firms who are currently looking at consolidation as a means of survival. The ones that are the potential losers in ‘right sizing’. Legal ops is coming to eat your lunch, and they don’t feel the slightest bit of guilt around it. After all, with the legal industry’s near total dismissal of procurement as nothing more than ill-informed accountants just pushing down on price, this could be the cold dish of revenge.