No longer gifted a limitless budget for outside spend, GCs are under pressure to deliver the smooth running of all moving parts in the department (and beyond), plus timely and watertight legal advice. General counsel must therefore fine-tune their mechanisms with a discerning eye for both quality and economy.
It’s a far cry from years ago, when the in-house lawyer, a general superintendent of sorts, leveraged outside counsel to do much of the hard legal graft. In 2018, it’s becoming increasingly common to see corporate general counsel running an in-house army similar in size to a top-tier law firm – with some legal departments stretching to as many as 1,000 lawyers, others even more.
As GCs and CLOs embrace corporate leadership, flexing their strategic muscles as an extra ‘C’ in the c-suite, they are increasingly delegating a significant chunk of the legal department’s day-to-day running to a new function on the block – ‘legal operations’.
Jeff Franke, former chief of staff to the GC at Yahoo!, describes the role as one that ‘ultimately leads the legal department from lacking operational discipline, to running with efficiency and effectiveness.’
‘It’s about making sure that you’re getting value for the dollar that you’re spending, both inside on systems and human resources, but also externally,’ adds Mary Shen O’Carroll, head of legal operations at Google.
‘The legal ops role is one that can be the right hand to the GC; the person who really manages all the functions that take place in the legal department that are separate from the true substantive delivery of legal advice.’
A broad remit
Economic pressures stemming from the global financial crisis and the concurrent entry of technology-based solutions, as well as disaggregated and alternative legal service providers, have inundated in-house departments with options away from the traditional model of external legal advice from a tried and trusted law firm. ‘The different ways to instruct work are creating not just one answer anymore,’ says O’Carroll.
President and CEO
Rather than one overloaded GC managing all work streams, it made sense for many in-house leaders to follow the lead of the marketplace, and unbundle internally.
Unsurprisingly then, the legal operations role is multi-faceted, necessitating a broad lens to spot opportunities for impact.
‘My main responsibilities are: strategic planning, financial management (both internal operating budget and outside counsel budget), vendor management, internal resource management, technology management, process improvement, knowledge management, and metrics and analytics. At times, I focus on compliance, discovery, contract management and anything that comes up daily,’ explains Reese Arrowsmith, head of legal operations at Campbell Soup Company.
Eye on the CLOC
But rather than being daunted, an increasing number of professionals within legal services are opting to enter this burgeoning profession – so much so that an industry body has formed to support them. The Corporate Legal Operations Consortium (CLOC for short), began seven years ago as a group of around 40 meeting informally, growing to a global legal association with 1,000 members, which it expects to expand into an attendance of 2,500 at its annual conference in the US later this year.
Although the function was first seen in the financial services and technology sectors, it can now be found across all industry sectors, demonstrated by the variety of industries to be found within the membership ranks of CLOC.
‘There was obviously a gap in this space,’ says Connie Brenton, CLOC president and CEO, and also chief of staff and senior director of legal operations at NetApp. ‘It’s a relatively new industry and it has hit the tipping point.’
‘We used to see one or two job postings in this role a year, now we see ten a month. It used to be the really large companies, Fortune 50-type companies with legal departments of at least 50 people that would be large enough to consider having a legal operations person,’ adds O’Carroll.
‘What we are now finding is that even start-up companies or departments of one after the GC – maybe the GC’s first hire will be a legal operations person rather than another attorney. So we are really seeing a sea change in the industry.’
The youth of the sector, added to its all-encompassing character, means that it is taking steps to schematise. CLOC has taken a leading role in creating an industry definition and relevant standards with the intention of guiding and training its members, devising 12 ‘core competencies’ that map out the role and provide the gold standard for professionals entering this field.
‘In many cases, when legal departments grow the role, early on there’s a lawyer taking the informal lead. That person – certainly in my case – ultimately slots into that operations/chief of staff role,’ says Franke.
Those with legal training are a natural fit for the role, with their implicit understanding of the processes and language used an advantageous starting point. However, both Brenton and Franke agreed that legal qualifications are by no means a prerequisite, with finance, technology, business and leadership backgrounds also seen as having a good grounding for the space.
‘It’s quite odd for a guy with a Bachelor in Environmental Science and Biology to be the head of operations for a Fortune 500 legal department,’ jokes Arrowsmith, in recognition of the sometimes circuitous route into the role. But, with stop-offs as a litigation manager, a legal management software consultant, and then a strategic management consultant focused on the legal department, Arrowsmith’s pathway to legal operations actually ticks a few of Franke’s suggested boxes.
Although the number of legal ops roles on the market is growing, they can be difficult to fill. Not only do the 12 competencies demand a diverse skillset, there’s a personality requirement to the job description too – that of being tough as nails, but also gentle and persuasive.
‘It’s all unprecedented – it’s not like you’re going into an operational role where you know what you are supposed to do: “I need to put this process in place, put that policy in place”. You have to look around and figure out what’s broken to try and fix it on your own, and there is no playbook, there is no standard,’ says O’Carroll.
The change management component in particular can be testing, because the work that is done to embed change necessarily takes place outside the function’s direct span of control.
Case study: Reese Arrowsmith, head of legal operations at Campbell Soup Company, describes how legal ops can add value to in-house teams
‘The general counsel and the head of legal operations should benchmark themselves and determine what they want to focus on first.
They can then align resources to mitigate upcoming legal and compliance risks by reorganising, hiring talent with particular skills, and engaging law firms and/or consultants. There is always an eye on cost containment. The goal is to get the best possible results at the lowest possible cost. In my experience, this is best achieved by ensuring that the right lawyer, both internally and externally, is assigned to every matter, every time.
I always suggest that the head of operations starts with the internal operating budget and outside counsel budget. Implement a vendor management (outside counsel management) programme. Negotiate rates with firms. Look at which firms are doing what kind of work and at what cost. Evaluate settlements and total case cost. Understand the drivers at a macro and micro level. Look at how the internal team is staffed. Then, look to reorganise the department, make sure you have experienced attorneys driving strategy with outside counsel, negotiate rates with firms, implement retainer agreements, implement billing guidelines. Assess where, how and if you should consider alternative fee arrangements. If you do these things, the company will almost always see a reduction in spend.
In my opinion, companies should have an approval policy in place before outside counsel is engaged. The process should include assessing whether the right attorney is being engaged on every matter. For example, at a prior company, I looked at minimum, maximum and average outside counsel spend, minimum, maximum and average settlement cost, and minimum, maximum and average total case cost, per firm and per jurisdiction, for similar type and size matters. The differences were significant. The company set out on a path to engage firms with lower average total case cost going forward.
Once the right attorney is engaged, the in-house team should be working with the business and outside counsel to set and drive strategy, set budgets, and manage to the agreed scope and budget as long as it is relevant.
At a prior company, I assisted in reorganising the department, implemented an outside counsel management programme, implemented technology, better leveraged matter management, e-billing and metrics. The results were a reduction of outside counsel spend by over 60% in two years, while the number of new and significant matters per year over the same period remained consistent.
Another non-financial example is related to regulatory compliance. A company I worked with was inundated with changing regulations. They were behind on assessing the impact of regulations, couldn’t keep up with compliance, and had no metrics to show what had or had not been done and what was outstanding. We engaged a vendor to help us evaluate regulations faster, which resulted in us becoming compliant faster, and gave us the ability to provide reports and metrics on our status. The vendor provided three elements: relevance questions (to understand whether each rule applied to the company), action items (as a map to achieve compliance), and tools (for example, forms that would needed to be filed). Finally, the content/information was supplied through a software application, which allowed the compliance team to collaborate with the business and track metrics in real time. The company caught up on past regulations quickly and remained compliant going forward. The compliance team and business team became more efficient, more organised, and were aligned on strategy. The services and tools supplied by these vendors are going to become mainstream and table stakes in the coming years.’
This is a role that requires almost absolute alignment between the legal operations professional and the GC, but negotiating the politics of change can certainly cause friction between team members – especially those with different expertise.
‘The lawyers at Campbell are top talent and some of the most supportive people I have worked with regarding the types of projects and initiatives I bring to the table. Operations professionals at other companies aren’t always in the same situation. I regularly get questions on how to gain rapport with lawyers, or the general counsel and leadership team,’ says Arrowsmith.
‘In some companies, the issue is related to the operations professional being a “non-lawyer”. I am not a lawyer. I recently spoke on a panel at a conference and I made reference to being such. My good friend and fellow panellist (a lawyer) schooled me and suggested I never say “non-lawyer” again. I believe the issue is tied to change management. No one likes change or being told what to do and lawyers are no exception.’
Only the full support of the GC can extend to recruits the gravitas and the seat at the leadership table needed to realise the transformational potential of the role. An embraced and empowered legal operations professional should be informed and fully involved in strategic decisions involving the department.
‘Many of my peers at companies with empowered operations professionals already own service delivery. Freeing the GC to focus on mitigating current risks and foreseeing future risks, while also helping to make the company as profitable as possible, should be every legal professional’s goal. Centralising operations and service delivery into the ops team frees up the GC to be more strategic,’ says Arrowsmith.
And there are little ways that the GC can help, too, he adds: ‘Think about everything from the placement of their office to the way you introduce them the first time.’
Even if the sell is a slow one, any recalcitrant team members will eventually appreciate being liberated from the need to search for information, reinvent the wheel unawares by duplicating research or spend energy on engaging and negotiating rates with counsel.
The legal ecosystem
Quality services at the right price is the mantra of efficient legal services, and as legal ops and chiefs of strategy closely scrutinise the range of available offerings in the newly competitive marketplace (traditional and disruptive alike), law firms are, to some extent, feeling the turn of the dial. But that doesn’t mean law firms are out.
Former chief of staff to the GC
‘We’re providing them with our thoughts on what they’re doing well – and they are doing lots of things well. Law firms are still exceptional at delivering legal services, they’re the best of all the players in the field in a lot of areas,’ says Franke.
‘It does mean that they have to look very carefully at their role in the marketplace, their mission and purpose, and how they deliver – just like all the other players.’
‘But if we don’t have all of the participants from the legal ecosystem in the room together, collaborating, growing and innovating together, the solutions don’t work,’ adds Brenton.
CLOC has identified six fundamental players in that ecosystem: corporations, law firms, legal service outsourcers, technology companies, law schools, and regulators. It already opens its annual conferences to non-legal ops attendees, with plans to add a CLOC membership category for law firms in the near term.
‘We are going to, over time, evolve the membership profile and the way we engage from one that is currently focused on legal ops professionals, to one that really allows input, feedback and contributions, in a very open way, from all of these players and also looks to engage them to push for change,’ says Franke.
CLOC’s ambitions extend beyond spearheading a corporate legal efficiency drive, to a full sectoral evolution. Its 12 core competencies are a starting point for further refinement and evolution, working towards both driving and communicating best practice models. CLOC even hopes that its content could be distributed outside the profession, as it plans to work with law schools and other training providers to develop a formalised curriculum for legal operations, and for delivering legal services in a corporate environment.
‘As companies experiment more, and share the knowledge learned through successes and failures, we will all learn faster. Companies are going to need more ops professionals evaluating the need for these technologies, implementing technologies, training systems, training legal staff on how best to use the systems, monitoring results and tweaking input to get better output,’ says Arrowsmith.
Mary Shen O’Carroll
Head of legal operations
At present, legal ops is still behind the scenes, keeping the legal team ticking over. But it’s quietly marking a new age in service delivery. This growing movement is just beginning to scratch the surface in overhauling the in-house legal team, making demands for greater efficiency and flexibility from the external legal services market in the process.
As the legal services sector re-tools and equips itself for both the challenges and opportunities presented by technological and structural changes of the 21st century, legal operations continues to develop itself along the way. Bodies such as CLOC are developing a previously unstructured career path into a well-defined profession, leveraging a multiplicity of skills into a potent combination, poised to empower not only the GC, but themselves, to become business leaders of the future.