‘Corporate law departments are under enormous pressure to change. The business has higher expectations than it once did, and law departments must manage more and riskier legal and compliance work,’ explains Jason Heinrich, partner at Bain & Company’s Chicago office and a leader in both performance improvement and legal and compliance operations.
That the GC position is evolving will by now be established lore for those in-house, as many have spoken of the rise to prominence of the role over the preceding decade (a sentiment which has frequently filled the pages of GC Magazine). But the wider mandate for change appears not only to include the role of the in-house legal department, but the expectations of the duties for which the GC is responsible within the business.
‘It is focused more on becoming a trusted strategic business adviser, especially as the businesses they serve come under increasing pressure from disruptive forces. The GC must win the confidence of the CEO and board, while finding a way to influence both legal and business situations more strategically,’ says Heinrich.
Despite this seemingly ever-increasing mandate however, external pressures are forcing GCs to work more efficiently and consider the resources required for running a lean, yet wide-reaching legal function. Since the advent of the Global Financial Crisis, the sentiment from a number of GCs has been that cost pressures are playing an increasingly important role in how they operate their department.
‘The question we should be asking is “how do you run this group like a business person would run theirs?”’ says Tim Murphy, general counsel at MasterCard. While now working as a GC, Murphy has the benefit of a decade’s experience in executive roles within MasterCard – an understanding he can use to drive his legal team with an inherent understanding of what upper management requires from them.
‘It should be about simplicity; caring about the execution and not just the advising. We are obliged to continue to provide good service. We need to establish how we optimise execution and how we achieve more scale, while managing costs. Lawyers don’t traditionally think like this, but we try to bring a business focus,’ explains Murphy.
That mentality was one which Heinrich says is common among the best-in-class in-house departments he has comes across.
‘Top-performing companies have top-performing legal departments that help enable the broader business strategy and objectives. It begins with the legal department investing the time to better understand the company’s business strategy and objectives. From there, in-house departments can determine where and how they can add the most value, and which legal delivery model makes the most sense,’ explains Heinrich.
To that end, Murphy, and a number of leading in-house counsel from a plethora of major corporates are endeavouring to evolve not only the role of their departments, but the service delivery models they use to engage with and serve the wider business. Central to that for a number of forward-thinking GCs are process management and metrics, not only a broad method for showing how resources are being allocated within the department, but – increasingly – a way to demonstrate the significance of the legal department from a value-creation perspective.
‘Law can no longer be an environment where you are siloed,’ says Murphy, adding: ‘The legal team are not exempt from managing ourselves effectively as a business. When you have a metrics-based conversation, this drives changes.’
For Christophe Marclay, head of legal group operations at Zurich Insurance, starting down this path was part of a wider initiative being enacted throughout the business, which was driving his own department’s procedures.
‘There is a focus on process improvement throughout the company, a focus on how we can become leaner, improve everything we are doing in terms of effectiveness and efficiency, and the methodology for making that happen. Within our legal department, we review all the activities and deliverables expected from us, we map them step by step – all the processes underlying these activities and deliverables; we identify all of the steps that are adding value; and we eliminate all steps for which we cannot identify value or a compelling rationale for performing the task. This forces people to think in terms of their legal work as being process-driven work and it ultimately helps us to become more effective and efficient,’ says Marclay.
‘We try to break down the work we are doing into processes and we have started measuring each type of activity we are doing. It could be measuring the time it takes from an initial request through to how long it takes you to provide an answer.’
How that information was captured and subsequently utilised varied significantly between the GCs we spoke to. One GC at a prominent technology and telecommunications firm in Asia explained that their implementation will be rooted in new technology, utilising real-time measurement and the ability to track processes instantly.
‘Looking at some of the things our IT department has been developing is exciting. We’re looking at utilizing automated dashboards with the instant reporting of metrics. With that level of data, we can look at things like the complete life-cycle of contracts and work out where we need to improve, where are there bottlenecks within the system and how do we reduce those?’ they told GC.
With instant output and automatic reporting inherent in a number of systems, the upshot was that the toolbox required for the modern GC is evolving. This meant that for many in-house counsel, particularly those in major corporates, technical skills are no longer ‘nice to have’, but a necessity for operating and managing a 21st century legal department. As the ability to automate and monitor processes through the use of technology becomes increasingly prevalent, swathes of new data and information are being produced, which can help drive new metrics within the department.
But, says Marclay, employing softer, more intangible measures also has a role when assessing the effectiveness of the in-house legal department.
‘Our main measurement is an annual customer satisfaction survey which gives an indication on many soft factors about how we are perceived by our stakeholders. Although it is a subjective measurement and not hard facts, it nevertheless gives us an indication of where we can find issues to focus on,’ he says.
Factors including customer satisfaction and culture were found frequently in the measures utilised by those GCs we spoke to. Qualitative metrics were also a good way to begin the process of managing and measuring how the legal department runs operationally.
‘Legal goals and metrics should be tied directly to corporate goals and cascaded into the departments.’
What those methods look like can vary significantly between companies, but one of the more popular structures for taking those preferred measurements and assessing the performance of the legal department was balanced scorecards.
‘In terms of performance management, effective scorecards serve a multitude of functions: they help set the context; translate the business strategy into operational terms for the legal function; act as change accelerators; support data-driven decision-making; drive appropriate resource allocation; and provide trend data to measure progress over time,’ says Heinrich.
Added Murphy: ‘If you look at most GC scorecards, they are fairly activity-based. We built a metric scorecard and report to senior management focusing on broader performance measures, not just activities.’
Scorecards have the advantage of being able to take both soft and hard measures and help the legal function assess their performance year on year. But whether hard or soft measures were given more weighting internally, the most important factor for their potential success was ensuring that they were properly linked to the overarching goals of the company.
‘Legal goals and metrics should be tied directly to corporate goals and cascaded into the departments. For example, if a company’s strategic goal is to increase the rate of new product introductions, legal should have a set of department goals and metrics related to partnering with R&D to accelerate legal support for patent and licensing contracting requirements,’ says Heinrich.
That speaks to one of the primary advantages of utilising metrics and driving this within an in-house legal department – the ability to align legal better with the wider business, senior management in particular. But that improved understanding of the organisation as well as its touch points, comes as a result of having carefully implemented metrics which tie into the wider goals of the company and show an understanding of the role that legal plays in helping to achieve them.
‘There is a lot of pressure on in-house teams, with both key performance indicators and the broad requirements of the company driving the department. But often, there can be something of a disconnect between legal and the wider business – it could be that they’re focusing on the wrong things or that expectations are out of sync. Taking a step back and looking at the whole end-to-end process, backed up by metrics, can help support the legal function while also identifying areas which can be improved,’ said the telecoms and technology GC from Asia.
Added Marclay: ‘The legal department is actively part of the whole process, and we are not just perceived as a pure advisory function. In many areas legal is seen as enabling the business, helping them to go to the market on time. Our stakeholders are incentivised to involve us early on. If you do get legal on board early, legal can help you avoiding or mastering delaying obstacles and ultimately accelerate a project timeline. We try to engage our stakeholders proactively and so do they with us.’
Bain and Company’s top tips for GCs
Jason Heinrich – Partner at Bain & Company’s Chicago office – is a leader in the firm’s performance improvement practice. With extensive experience advising legal and compliance operations, Heinrich offers an insight for GCs looking to improve process management within their own department.
The broad theme that has emerged in Bain’s work with CLOs and general counsel is that their role has become more multifaceted.
It is focused more on becoming a trusted strategic business adviser, especially as the businesses they serve come under increasing pressure from disruptive forces. The GC must win the confidence of the CEO and board, while finding a way to strategically influence both legal and business situations more.
Corporate law departments are under enormous pressure to change. The business has higher expectations than it once did, and law departments must manage more and riskier legal and compliance work.
At the same time, legal functions face increasing pressure to balance costs and outcomes – to control costs and achieve results in spite of evolving regulatory and compliance environments that add to their workload.
As legal departments are looking for new ways to manage costs better; the challenge is to reduce costs without trading short-term cost reduction for greater risk or poorer service.
In general, departments have to get better at unbundling and shifting work to the most efficient and effective model – whether that may be lawyer vs non-lawyer, law firm vs non-law firm, manual vs automated, in-house vs outsource, onshore vs offshore.
They may need new capabilities to manage new providers. In many cases, we advise our clients to simply start from the beginning with first principles, and fundamentally rethink how their legal department works.
Top-performing companies have top-performing legal departments that
help enable the broader business strategy and objectives. It begins with
the legal department investing the time to better understand the company’s business strategy and objectives. From there, GCs can determine where and how they can add the most value.
Our research shows that the highest performing in-house legal teams share
five common characteristics:
- They have clearly defined their role in support of the organisation’s core mission, and they leverage a high-performing and scalable delivery model to nimbly tackle new challenges.
- They use scorecards and metrics to measure and report success
against corporate and functional objectives.
- They make explicit trade-offs around cost and quality within the
service portfolio – in other words are they trying to be all things to all people?
- They deploy best practices for internal talent management and sourcing, and selecting outside counsel as well as other legal vendors.
- They invest smartly in technology to improve legal processes.
Conversely, under-performers often inconsistently track both time spent on different activities, as well as the productivity or results of outside counsel. Additionally, they have a philosophy of shifting work in-house even as outside counsel bills continue to go up. Poor e-discovery management and high manual processes are also red flags.
Murphy says that his staff have become better attuned to the principal goals of the business through the use of process measurement – a factor he’s especially proud of, considering it has comprised an integral part of his department’s overarching transformation agenda. He explained that metrics were an important tool that helped his department think and operate like a business.
‘It is essential we build a high-performance culture that advances the business. It is critical they lean into the company strategy, not separating it from their work, but understanding the strategy as a lawyer and knowing that it is as much their job as any other aspect of the work. They have to understand risks and be proactive in managing the issues, looking around corners, anticipating what may come,’ says Murphy.
While the process can require a changing mindset and would take many GCs out of their comfort zone, Marclay insisted it was a valuable process for any in-house department.
‘It is not always easy because when you think more about your work as being strategic, then it doesn’t seem as if it can be open for standardisation, but we try to prove the contrary. We say you can improve everything. The more complex the task, the more challenging it is to map or understand the underlying process. But ultimately each task has some sort of input and creates an output. In most of the cases, these tasks are based on a chain of activities with in and outputs and this chain of activities is a process that you can standardise and improve.’
While there were a multitude of ways in which processes could be measured and managed within a legal department, what was unanimous among the GCs we spoke to was that making a start down a path of effective process measurement and management was the most important step towards running a modern in-house legal function.