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The red pill: How legal teams are embracing the freedom to be replaced

In 1954, The Westinghouse Electric Corporation unveiled the world’s first colour TV. With a price-tag of $1,295 – or nearly $20,000 in today’s money – the H840CK15 was the type of luxury purchase that stood as a solid signifier of economic success.

‘I grew up in a world where lawyers were among the few middle-class professionals who could afford the latest technology’, comments one senior lawyer at a large multinational bank.

‘Now, we are among the few middle-class professionals that ignore technology. It’s a strange thing that so many lawyers have chosen to overlook the transformative power tech has had on the world of work, and I am part of a growing number of in-house professionals that seeks to address the oversight.’

To rephrase the problem – well-known in economics – why does the cost of technology consistently fall relative to the rate of inflation while the cost of services, encompassing everything from healthcare to education continues to rise?

The answer, in short, is that machines cannot (yet) do what humans do. What machines can do, however, are the things humans do not want to do. From this perspective, technology is not a threat but an opportunity. It allows lawyers to move higher up the value chain. And, let’s be honest, no one wants to be stuck doing low-level work.

‘Lawyers are afraid of technology taking their jobs’, comments Lisa Marcuzzi, general counsel and country counsel for ArcelorMittal Dofasco in Canada. ‘But I don’t know of a single lawyer that feels unhappy that they will have to give up reviewing NDAs or sales agreements. As far as I can see, technology will free lawyers to do the jobs they trained for.’

The wider in-house legal community in the US and Canada clearly agrees. While 90% of respondents felt that technology had disrupted the legal profession over the last five years, and nearly all (97%) felt it would do so over the next five years, over three quarters (76%) said this disruption was a positive outcome for the legal profession.

Far from fearing tech, in-house lawyers are waking up to the freedom it can grant them – 87% of those we surveyed said their wider teams were receptive to the use of technology, while 78% said their businesses were supportive of finding new ways to work.

This widespread optimism, many respondents pointed out, was based on direct experience of available technologies. ‘I spent many years reviewing and negotiating documents that were up to 100 pages long’, commented one general counsel in the finance sector. ‘Typically, 90% of that document would either be boilerplate or unnecessary. If I add up the time I have spent reviewing superfluous material and account for cost then it comes to a shocking level of waste.’

In short, corporate counsel are looking forward to the freedom tech will grant them, and few fear their jobs are at risk. As one respondent commented, ‘The idea that lawyers will be replaced is just not realistic. Imagine a Fortune 500 company dismissing its legal team and saying, “we’ll just rely on technology to do all this stuff.” It won’t happen – it would be insane.’

What will happen is a continuation of the trends that have been in play for several years. The in-house legal team will move closer to the time-critical or economically important aspects of the business, law firms will be brought in to help with the types of matters where it just doesn’t make economic sense to employ a team of internal specialists, and technology will be used to remove a lot of the work that was never strictly legal work in the first place.

Eleanor Lacey, head of legal and general counsel for work management platform Asana, comments: ‘In the knowledge sector, tech never works by replacing people. It works by augmenting people and freeing them up to work on higher-value matters.’

‘There is a great sense of freedom now that we as corporate legal teams can really solve a lot of the problems we have seen time and again by introducing often inexpensive tech fixes. It’s a great time to be working in the legal industry. Anyone who says otherwise is just not seeing the big picture.’

Moving up the value curve

What are the grounds for this optimism?

Let’s take the single most important item an in-house lawyer deals with – the contract. Lawyers deal with contracts. Lots of contracts. So too do their employers. As Chris Young, general counsel for digital contracting platform Ironclad, puts it, ‘At a basic level, all lawyers are contracts lawyers and all the businesses they serve are contracts businesses. It’s the most fundamental unit that commerce is based on.’

In this contract-driven world, the central hub for contract review runs through the legal department. When a business grows, how does its legal department choose to scale? Does it add bodies, or does it use technology to scale up and meet demand?

For the last several decades, the answer to that question would have been the former. General counsel had one demand above all else: more staff. As our survey of legal teams in the US and Canada shows, attitudes are changing, and the answer is increasingly likely to be “new ways of working”.

Central to the evolving skillset of the in-house counsel is getting comfortable with communication. Those we surveyed were clear: documentation can be automated, and any lawyer who is essentially reading a document aloud can be replaced at will. But that, many feel, is a good thing. The rise of legal tech means the in-house team can finally sound like the rest of the company.

‘We don’t need to tell business, “The documents say this”’, comments one respondent, senior counsel at a large US medical services provider. ‘Any literate person can see what the documents say. We’re guardians of nothing but the obvious if we tell them what they can read for themselves.

‘That’s great – being freed from routine tasks is not a case of lawyers being replaced. It’s a case of lawyers being able to use their skills for the benefit of business. We should embrace it. Lawyers have been trained to do some very sophisticated work, but large parts of the contracting process are not that work. If we can relegate that to a system or use technology to complete it then we are going to have a lot more time to do the work that is expected of business leaders. The days of pushing paper around may finally be over.’

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In conversation: Robert Jett, Chief Privacy Officer, Crawford & Company

I have been working on data privacy since before it was a recognised area of law. When I started out, what is now understood as privacy was part of a company’s compliance programme and fell to its compliance officers. Of course, privacy still falls under compliance, but it has become a unique feature of the compliance programme.

To oversimplify things for the sake of making a point, privacy is just compliance with an IT flavour, and it is something I have been giving presentations on to boards of directors and executive management for over a decade.

It’s funny, because I still have a compliance-based approach. I come to the meetings with only four slides. At first, everybody looks at me like I am out of my mind, but they soon understand that we don’t need many more to understand what privacy is all about.

Essentially, privacy in an organisation can be reduced to four fundamental questions: Which data are we collecting? Why are we collecting it? What are we doing with it? And finally, where does it go to die?

In reality, privacy and compliance programmes have to be a lot more detailed, of course, but at the end of the day, if a company can effectively answer these four “Ws”, I would argue that it has a very robust programme.

While the fundamentals of privacy have stayed the same, the environment businesses operate in has not. In particular, the general public is becoming more aware of privacy issues, and the last of the four “Ws” has taken on a new importance. Companies cannot keep data forever and they must find ways to get rid of the data they do not need in a secure manner. Businesses must also remember that security is always key when it comes to privacy. If you’re storing data in the cloud then to a large extent you are relying on a third-party. The quality of its controls and server management may be exceptional, but it is a potential gap in your security.

As chief privacy officer, I work with the chief information security officer daily. Together, we have built an incident response plan for privacy and another for security, but the two are intertwined. My management agreed to it because we demonstrated that cybersecurity breaches are, almost invariably, a threat to privacy. That’s why I would advise counsel to always take the two threats together. You rarely discover one without the other.

Technically speaking, security has improved a lot in the last twenty years. We have created automated tools that can support anyone’s privacy policies. So much that nowadays, most ransomware attacks are due to human failure or insiders. The old approach of making a brute force attack on a server typically does not work anymore. Consequently, the bad people have gone back to tried-and-true technics, like spear phishing, which lead to attacks that take advantage of social behaviours.

I have seen an 80% increase in phishing attacks in the past few years and it has gotten even worse since the beginning of the pandemic. These are often very targeted and very well thought-out from a social engineering perspective. Hackers know that we work and live on our computers and smartphones, and it just takes one careless mistake form an employee for them to download IDs and then access all or part of your system. It is a little scary, and board members are generally very worried about phishing, but privacy professionals are here to help.

I have been tracking what may happen, during and after the pandemic, as regards to medical records. Form a privacy point of view, they have always been sacrosanct, and I think that we are going to start seeing that peel back a bit.

In the US, there has been a lot of hue and cry over vaccinations because there is this tension between the Occupational Safety and Health Administration’s requirements and the level of security that is reasonable to expect from companies. Employers have an obligation to maintain a safe workplace.
This includes protecting people from airborne diseases. Therefore, for them to carry out their duty, they should be allowed to inquire if their employees have been vaccinated against Covid.

These things have never really been allowed in our modern societies, so the ways in which this will play out should be of interest to every privacy professional and general counsel.

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Tech Tactics: The case for rethinking the legal function

This time, finally, it might be happening.

For at least a decade now lawyers have talked up the impending transformation of their industry, with technology set to play the lead role in a new and better way of doing things. Why would anyone think otherwise? The legal profession, as every GC will point out, is riddled with inefficiency. Clients are being asked to pay for things they do not need, and very expensive labour is routinely assigned to basic tasks.

But recognising the problem and identifying the solution are two very different things. While almost all GCs can give a long list of reasons why the profession should change and what it should look like, far fewer had a roadmap for how to get there. Until now.

‘There’s a movement afloat’, says Chris Young, general counsel of Ironclad. ‘For the first time ever in the history of the legal profession there is cutting-edge technology that allows us to do our jobs more effectively as lawyers. The whole profession is now waking up to what it can do differently, and it is in-house legal teams driving this change.’

But technology is only part of the picture. When it comes to understanding the changes taking place across corporate legal teams, the rise of legal operations (legal ops) is just as important. ‘For years every department at a major company has had its own ops function’, notes Young. ‘Marketing, engineering, sales – all of these departments have relied on operations professionals to keep them moving. Now we are seeing that in legal teams, and it is having a transformational impact on the way systems, processes, people and tech work together.’

Ashley Herring, global legal programme manager at BCG, is among the new breed of ops professionals working to improve legal teams. Identifying the purpose of the legal function, she says, is key to unlocking its potential.

‘The temptation for a lot of in-house teams is to set things up in a very transactional way that looks to a large extent like the model of an internal law firm. That is not really the best structure, and it doesn’t give the best results. Legal should not let itself become a dumping ground – it overburdens the lawyers and takes away from what the function can deliver to the business.

Setting up things in a way that lets you extract data and make data-driven decisions is essential to this. Technology can play a big part here but technology itself should not be the goal. The goal is being able to structure decisions and processes in a way that is based on data and numbers.’

In other words, technology is a tactic, not a strategy. While it can be a useful way of improving the legal function, it will only work if the function knows what it wants to accomplish. This, for many GCs, can be a difficult question to answer. But, for those that have given it thought, the possibilities are endless.

‘I want to be a data-driven lawyer and not just a lawyer who talks about data’, concludes Young. ‘With the tech that now exists I can look at our sales contracts historically and generate data that is of real predictive value. Finally, legal is beginning to function like any other department and use its data to accurately forecast what the quarter is going to look like.’

Identifying the ‘why’

To judge from the results of our survey, legal teams in North America are enthusiastic supporters of technology. Over half (51%) of those surveyed felt new technology would significantly enhance outcomes within the legal team, while 84% felt it would enhance outcomes to at least some extent.

The appetite for technology was just as apparent, with 58% of respondents saying they wanted to increase the use of technology within their legal team.

As ever, finding the budget for new tech was the biggest obstacle they faced, with 62% of teams citing this as a barrier to change. Over a quarter of legal teams (26%) said they wanted to introduce new technology but lacked the time to research available tools, while just 11% said they were unable to find a solution that met their needs.

However, a sizable number of corporate counsel (14%) felt they already used too much technology. As one respondent, general counsel at a Canadian energy company, noted, ‘Finding technology is not a problem. Making sure that technology is being used properly by everyone in the team is the issue. You can’t execute a tech transformation in a large team without having some form of discipline and training. You either all do it together or it doesn’t work. I am quite willing to admit I do not have the time or expertise to effectively oversee that sort of project.’

Even the most popular and successful forms of legal technology, such as contract management systems, found their critics. ‘Lawyers love contract management systems, but do they really test how they’re being used?’, asked one respondent. ‘Of course, if you’re a lawyer then you intuitively understand why a contract platform would be useful. Go speak to the sales team that has to use it and you will hear a different story. I have found that these things are not actually all that intuitive when they’re out in the wild.’

Still, when it comes to a show of hands the consensus is that corporate legal functions will change for good: 91% of those surveyed said they expected AI to be a disruptor in the legal industry, with nearly half (47%) saying they expect this disruption to be significant.

Inevitably, there will be push back. Any legal team over a certain size recognises that it needs a contract management system, but a solution that can flag risks or identify and extract terms is a different matter. For some, the unspoken message when advanced technology is introduced is ‘a machine can do your job, and it will be more reliable’. But, says Michael Shour of Banyan Software, the results lawyers can achieve with advanced tools mean widespread adoption is all but inevitable.

‘Recently, I trained an AI solution to help review a certain type of regularly occurring contract that was key to our business. It improved our response times and, I think, ultimately helped us win deals. It didn’t get rid of the lawyers; it gave us better and more accurate information and allowed us to handle the matter more effectively.

The use of this technology will continue to evolve and become more pervasive. Already, service-level agreements and the general sophistication of providers have improved considerably. It is incumbent on GCs and legal tech providers to at least try to keep up with these developments, even if doing so is not always easy.’

As ever, there will also be strong resistance from State Bars when it comes to innovative ways of delivering legal services. But as the legal profession reaches critical mass in its use of technology, regulation will have to follow suit. 

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The tip of the iceberg: Data protection and cyber risk

Bob Jett, chief privacy officer at Crawford & Company notes ‘People used to joke that when a GC hears of a cyber attack or data breach they breathe a sigh of relief and say, “Thank God, that one falls to the IT team”. Today that joke wouldn’t make sense. No serious corporate legal professional thinks cyber and data risks are off their radar.’

Britton Guerrina, deputy global general counsel for technology and shared services with Deloitte Touche Tohmatsu Limited, echoes this view. ‘Cyber and data protection are increasingly important and should be top of mind for any legal team. The legal and regulatory risks in these areas have increased and continue to do so, with countries introducing increasing regulatory requirements, many of which are contradictory.’

Corporate counsel may be increasingly aware of the dangers posed to their organisations from cyber attacks, but the results to our survey of over 200 senior counsel across the US and Canada suggest their organisations take a very different view.

While 91% of legal teams were aware of their organisations’ cybersecurity efforts, only 18% said they were heavily involved in these efforts. In fact, an alarmingly high number of teams (39%) were not involved at all, while nearly two thirds (63%) were either not involved or only involved to a small extent.

Even legal teams that are involved in their organisations’ cybersecurity strategy are typically confined to a fairly narrow role. By far the most likely task falling to legal teams is ensuring the security of their own communications, data and files (84%) or providing strictly legal opinions on regulatory compliance (47%). Just under a fifth of teams (19%) reported being involved in their organisation’s wider cyber response planning, while only 7% were monitoring cyber threats across the organisation as a whole.

Businesses not involving legal teams in their cybersecurity efforts should take note: over half (53%) of the senior counsel surveyed rated their organisations’ cybersecurity defences as either poor or average. Just 13% said their organisations had excellent protection against cyber threats.

The limited involvement of legal teams when it comes to cyber security efforts is particularly puzzling given the obvious advantages lawyers would bring to the process. As Britton Guerrina notes:

‘Legal involvement is critical for various reasons, and lawyers are able to guide efforts in a wide range of areas, from helping to design the security programme to comply with privacy, employment and other local laws to advising the cybersecurity team on cyber regulatory requirements.

Legal teams can also assist with the roll out of security tools while addressing any legal impediments. They can advise which legal and regulatory requirements apply to a breach based on the facts and circumstances presented, determine whether breach notification requirements (regulatory or contractual) have been triggered, and craft notifications, interact with regulators, law enforcement, and so on. In my view, legal and cyber need to partner together, along with risk, in order to protect the organisation effectively.’

However, as Michael Shour, general counsel and secretary for Banyan Software, observes, this is likely to change as the regulatory and reputational stakes increase.

‘Legal is actually very well positioned to spearhead this area, but it is often not an area where management wants legal to focus, due to the limited resources. As class actions and cyber-related litigation increase over time, I suspect that this will continue to require an increasing amount of legal involvement.’

Plugging the leaks

Monitoring cyber risks may still be deemed a low priority for legal counsel, but the related issue of data privacy is fast becoming a key part of the legal team’s role. As one respondent, senior counsel for data and privacy at a global media and telecoms business, puts it:

‘Data protection is a growing issue, and not just because of the rise of serious and very damaging incidents which we all read about in the news. From a compliance perspective, it is the increase in country-wide and global regulations. Business has to operate as smoothly as possible, and it is our job as legal to help it do so within these regulatory boundaries.’

When asked to identify the most pressing cyber threats their organisations faced, nearly half (49%) of corporate counsel pointed to the risk of customer data being compromised. Theft of confidential business information was seen as the next most pressing risk, reported by 28% of those surveyed. As Naseem Bawa, general counsel for InteraXon, a leading maker of brainwave-controlled computing technology and applications, points out, in the digital economy data is a chief driver of value. ‘Data is part of a company’s IP and without stringent safeguards to protect and enhance its value you are leaving your doors unlocked.’

For comparison, just 2% said that direct monetary loss through theft was their organisation’s most pressing concern. While theft can be costly, it is often nowhere near as expensive as dealing with the regulators. For businesses that have yet to experience a significant data breach, comments one senior legal and compliance counsel at a large retailer, the uncertainty over consequences can be troubling.

‘The big unknown here is the way a regulators will respond. The marquee cases have been in the financial services industry, and there is some evidence that regulators will look at what a retailer is doing around data and compare it with the systems and controls that have been put in place by financial institutions. Obviously, these financial institutions have far more robust data-security arrangements in place, which is potentially something that could damage our position in any litigation.’

These risks are especially pressing, continues the respondent, in a world where customer interaction is increasingly digital.

‘Mobile payment apps and e-commerce are becoming the principal vector through which fraudsters are able to infiltrate business systems. It’s a data security issue but it’s also a cybersecurity issue that goes right to the heart of our business. That means the legal team needs to know how our IT systems work, with at least some degree of accuracy, and how those systems can sink us.’

For those unfortunate enough to suffer a breach affecting customer data, knowing how to respond is key. The advice from one general counsel at a large US medical insurer is to bare all. ‘If customer data has been compromised then you need to tell them, and you need to help them take whatever steps are needed to mitigate the risk they now face. In the first day or so after an incident everyone is scrambling around to collect as much information as possible before the company needs to report the incident, but often it will be too late for the customer if you wait a day. Bite the bullet and tell them what has taken place. And, of course, have a plan ready so you aren’t worrying about drafting the message during a firestorm. If you are facing a situation where you need to email potentially millions of customers, you will really be thankful that you planned ahead of time.’

This planning, many agreed, is among the most important steps that GCs can take. As Richard Brzakala, director of external legal services at Bank of Canada, comments, ‘The old maxim “Trust but verify” applies here. You may have best-in-class cybersecurity in place, but it needs to be tested continuously. It’s not a question of if things go wrong. They will go wrong. You will experience a cybersecurity incident or data breach eventually, so be prepared.’

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In conversation: Cameron Forbes Kerry, Ann R. and Andrew H. Tisch Distinguished Visiting Fellow – Governance Studies, Center for Technology Innovation, Brookings Institution

Cameron Forbes Kerry

Privacy law is a subject that has interested me for a long time. Even as a college student – although I was the paragon of a classic liberal arts major who avoided hard sciences – my best paper was on comparative law issues between French and American rights to privacy. However, it was not until I began working as a lawyer that I started engaging with cybersecurity and data protection as anything other than abstract concepts.

In my early career I was a communications lawyer and a litigator in the cable television and telecommunications industries. These are sectors that have had privacy protections for customer data for some time – in the case of cable television these protections date back to 1984. Working in that field gave me a lot of exposure to communications technologies and helped me to understand how various systems operate, the type of data flowing over them and what sort of information is captured by providers.

When I joined the Department of Commerce as general counsel in 2009, I was aware that privacy and cybersecurity were becoming increasingly important issues. Even before I was confirmed by the Senate, we spent time working on these topics, thinking about what we should be doing. Very early in the Obama administration, after I had deepened my familiarity with the matter, I advocated for action to deal with privacy issues.

The government seemed interested, and the White House empowered me to lead an Inter-Agency Committee to look at this more closely, which led to the development of what ultimately became the Consumer Privacy Bill of Rights Act in 2015. This was a compelling leap forward.

I resigned as Acting Secretary of Commerce in late 2013, since which time I have been a visiting scholar at the Massachusetts Institute of Technology Media Lab and at the Brookings Institution, where I am a member of the Center for Technology Innovation. My work at these institutions follows the ways in which public policy and the law is adapting to the evolution of technology, but also to design better governance for advanced and transformational technologies such as artificial intelligence.

Over the past decade or so, I have been involved in high-level exchanges on artificial intelligence policies among several countries – the US, the UK, Canada, Singapore, Australia, Japan, and also with the EU. Along with other experts, I have been looking at opportunities for stronger international cooperation on this front. The appreciation that such cooperation is necessary has certainly grown over this time, and the channels allowing for inter-governmental cooperation have become much more sophisticated.

My experience in politics and familiarity with legislative processes has undoubtedly helped me in this work – it is impossible to design good governance without appreciating how things get done at a governmental level, how to gauge what is possible, and how to frame issues in ways that speak to members of Congress or to the public.

This is especially important when it comes to topics such as analytics and big data. Because of their ability to discern unique patterns in a data set, or to link one data set with others, these technologies are turning things that have traditionally not been regarded as personal information into powerful and exploitable data sets.

In such an environment, defining limits and setting legal requirements can be more complicated than ever before. There is so much value in data now that society and enterprises have increasingly important interests in how it is used. That is why, even after a life spent in the field, I still consider the legal implications of technology to be among the most important questions we face today.

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In conversation: Paul Slattery, General Counsel, Eleusis

Paul Slattery

At Eleusis, we are developing psychedelics for potential therapeutic applications, as well as a care delivery platform that aims to increase the safety, tolerability, and accessibility of any ultimately-approved psychedelic drug therapies. It is a complex path from drug discovery, to preclinical work, to trial design and regulatory submissions, involving selection of potential patient populations, invention of patient monitoring systems, and optimisation of treatment regimes.

As general counsel, I support our team facing these challenges in preclinical and clinical development of psychedelics for psychiatry, therapies beyond psychiatry, and care delivery. Compliance with controlled substances, FDA, EMA, and other healthcare law is a big part of the role.

Technology enables our legal department to deliver for the business. Calendaring programmes track our patent portfolio, regulatory planning, and submissions, as well as entity management. Task management software allocates diverse work in an efficient and auditable way. Our board portal se-cures and organises our communications and governance documents. Independent data rooms protect trial and observational study data compliant with privacy laws. In short, digital management of our department helps coordinate our remote team to empower Eleusis’ scientists and clinicians.

We also make extensive use of DocuSign, a popular eSignature platform. Neither our contracting velocity nor its global reach would be possible without it. Collaboration in an IP-driven space requires near-constant execution of non-disclosure agreements (NDAs), as well as ready access to their terms and expiration dates. Absent technology, we could not manage that without a much larger team. The next phase for eSignatures is their acceptance by regulators and other authorities on documents like informed consents and filings, and I am glad to see that trend already underway.

For a GC working in the tech sector, particularly remotely, connecting with other in-house counsel is essential. Among others, I joined an invite-only network called TechGC. This community of general counsels from emerging growth companies shares best practices, sample documents, and a listserv. It is invaluable for a lean team practicing outside a law firm’s institutional knowledge and bench of subject matter experts. While the companies TechGC members represent range across industries, there is nearly always a GC who has faced an issue similar to the one in front of me.

Technology has also enabled a shift – accelerated by the pandemic – in the relationship between practicing law and lawyers’ lives.  For in-house legal teams, [working from home] removes geographic recruiting constraints, lowers many folks’ cost of living, and enables around-the-clock availability of a team member without sleepless nights. I am in Venice Beach; my deputy is in New York; and our paralegal is in Florida. That would be unthinkable two decades ago, but technology has made that possible and effective.

On a more human level, technology is just a tool, and it has downsides for my team too. I keep a photo album of working on my laptop in beautiful places – Switzerland, Honduras, Alaska, and Baja. That is either freedom or a little dark depending on how you look at it. Technology means you can work from anywhere, and also could be working wherever you are. Lawyers are susceptible to boundaryless grind, and we are now solely responsible for building divisions between work and the rest of our lives. It is incumbent on a modern GC to set the tone and support team members in building those personalised boundaries.

The advantages of legal tech are clear. It helps lawyers deliver better and faster for the company, and there is headroom for it to do more with natural language processing and similar technologies. If you review hundreds of entities’ bespoke NDAs, you find there is immense arbitrary variation to get to the same six terms. There will be ethical obligations to sort out in handing that to software, in the same way there have been with technology-assisted document review in litigation, but the gains from legal technology make it feel inevitable that we will get there.

Today, when people refer to a ‘technology company’, they are often referring to the application of tech to a traditional sector. Take Lime, the phone-based electric scooter rental service. Is that a tech company or a transportation company with an app? Nearly every industry has been upended by what tech makes possible. Law will be characteristically slow on this front, but it is now law’s turn.

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Schrödinger’s Tech: Opening the box on law firms’ use of technology

Chris Young, general counsel for digital contracting platform Ironclad notes that ‘In-house teams used to ask their law firms about technology. Now it’s the reverse. GCs are encouraging their firms to adopt technology, and firms are hearing about the most useful software and tools from their customers.’

For many firms, this will come as unpleasant news. But there is an upside. As Young points out, ‘In-house lawyers will always need law firms, and the industry won’t be transformed by one side alone. The more forward-thinking law firms should see this moment of change as an opportunity to gain a competitive advantage and become a true strategic partner to their clients.’

Judging by the results of our survey, it is an opportunity many have failed to grasp. Under half (45%) of the more than 200 senior counsel we polled for this report said their firms were using technology to deliver legal services and solutions, while a similar number (41%) were unsure how their external firms were resourcing matters.

As one respondent noted, ‘Knowing what goes on at a lot of firms is a game of Schrödinger’s Cat. They may be using some pretty sophisticated software to bulk process our matters, but they are unlikely to tell us about it unless we push them.’

This lack of transparency was widely cited as a source of frustration. Indeed, nearly three quarters (74%) of those we spoke to said they were not satisfied with their firms when it came to technology.

Law firms should take note: 88% of legal teams said it was important that their law firms kept up with developments in technology, with 32% saying it was crucial for them to do so.

We should not place the blame entirely on law firms here. In-house lawyers may complain that their firms behind the curve, but fewer than half (44%) are asking about their external advisers’ use of technology when undertaking
panel reviews.

With so many GCs either unsure of or dissatisfied with their firms’ use of technology, it is no surprise to see that few are looking to them as a source of inspiration. Just over a third of respondents (38%) said they now looked to their firms for guidance when it came to finding or implementing legal technologies, while under a quarter (23%) reported having been advised by their firms on the use of specialist legal technology. Only 21% of respondents said their firms had offered to share technology with them.

This, for some GCs, has been a dealbreaker. ‘One of the factors that motivated me to change firms was the lack of use of technology by my old external firm’, comments the general counsel of a large commodities business.

Of course, the technology used by law firms is often very different to the technology needed by corporate legal teams. Firms tend to operate in scales and volumes that are far beyond the requirements of their clients, making tech transfer a far from simple matter.

Even so, it may trouble those in private practice to know that legal teams are beginning to look for solutions elsewhere. Almost half (47%) of those surveyed said use of technology within the legal team had already impacted their relationships with external firms.

The good news? Law firms that take a proactive approach are winning clients. As Michael Shour, general counsel and secretary of Banyan Software, concludes:

‘If a firm is wise to the implementation of appropriate technology solutions, it can allow them to complete tasks more efficiently and cost-effectively. When I see a firm doing things like this, I can’t help but appreciate that they are driving efficiently for their clients and am impressed that they are on top of things – and that can only be a good thing for business.’

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Risk, Litigation and GC Evolution Report 2021

Following on from our highly informative Risk and Litigation Report 2019, GC has partnered with Freeths once more to gather the opinions of over 100 general and senior counsel across the UK and Europe, to see how their approach to risk and litigation management has changed over a period that has tested even the most accomplished legal leaders. While undoubtedly a challenge, the Covid-19 pandemic also gave in-house counsel the chance to show their businesses just how useful they can be in a crisis; we also took the opportunity to examine how true this was, and how far the general counsel role has grown over recent months in response. Finally, our survey asked how legal teams felt they dealt with the lockdowns and subsequent shift to remote working.

Download and read the report offline.

James Hartley

This partnership project with GC magazine is a valuable opportunity for Freeths to engage with senior in-house legal colleagues and to pool the latest thinking on how best to create value, in the face of ever increasing litigation and regulatory risks.

We’re fascinated to see this survey data, which aligns with what we’re seeing through our risk advisory work. We see more businesses focusing on preparing for unforeseen, high impact, strategic risks, which have the potential to materially disrupt the business. On the positive side, this data also highlights an increasing awareness that the more sophisticated approaches to legal risk management are starting to emerge as factors which have the potential to enhance business value and give a competitive edge. Undoubtedly, the pandemic and Brexit have played their part in this heightened risk awareness.

There are plenty of theories on how GCs can convert risk into opportunity and create value for the business – but how are GCs actually achieving these things in the real, commercial world?

This survey data, webinar, and the roundtable discussions that will follow, should give us all a fascinating insight into how successful GCs are in achieving results, despite the risks and pressures.

Working with GCs to convert that insight into proactive risk management strategies is something we excel at here at Freeths.

James Hartley, Partner and National Head of Dispute Resolution

(Hartley is recognised as a leading individual by The Legal 500 in the fields of commercial litigation and dispute resolution. He uses his litigation experience to help clients undertake and implement complex risk management strategies, most notably in the recent successful claim against the Post Office.)

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Risk & Litigation Management

Risk and litigation management has become an essential skill for GCs. Boards are increasingly focused on preempting and minimising disputes and, as one respondent put it, ‘the responsible management of regulatory and compliance risks is a genuine competitive advantage that our management is acutely aware of’. Given the fact that the business landscape has changed so radically since the previous report, and that management varies across firms in different jurisdictions, GC took a fresh look at how general counsel now tend to deal with risk and litigation.

Our survey demonstrates just how important risk and litigation management strategies have become to corporate legal teams; all respondents said litigation risks and transactional risks, including contracts and projects, were part of their overall responsibilities. But the legal support they provide does not extend into other business areas, and GCs are not always aligned with their boards when it comes to the definition of risk. While only a third of respondents said that environment, social and governance (ESG) and corporate social responsibility (CSR) were part of their main responsibilities, all agreed that these areas are increasingly important business value metrics with an associated risk profile that in-house counsel are well-placed to manage.

Have the remarkable circumstances of the past 18 months given the impetus needed for a radical shake-up of how GCs are approaching their risk and litigation management, or is it business as usual? Based on the results of our survey, the latter is a more accurate statement; 60% of respondents stated that the events of the pandemic have not changed the order in which they prioritise the risks to the business. Of the remaining 40%, quite a number said their risk and litigation management has led to rigorous cost/benefit analysis in order to keep costs low; for example, one GC stated that the ‘challenging economic period requires us to now analyse, in detail, every single opportunity to save money’. Others pointed to changes such as placing greater emphasis on risks related to the pandemic, for instance prioritising the well-being of customers and colleagues.

While in-house legal departments are happy to manage risk internally, and in the main feel competent to do so, almost half of the respondents said they would benefit from external law firms providing more sophisticated and bespoke litigation risk advisory services as well as, if it was offered, dedicated financial cost/benefit analysis. For legal services providers who take pride in their risk advisory services, this may indicate an opportunity.

It also suggests that respondents are aware that improvements can be made in their corporate risk management, and the survey offers some insight into where these improvements can be made. 28% of respondents stated that they are reactive rather than proactive in terms of their risk management, while others were concerned that the many moving parts of their organisations are not working as one; 16% reported their risk management response to be wholly un-holistic in its approach.

Freeths Comment

‘We’re certainly seeing within our Dispute Advisory practice a growing awareness among corporates that decisions around litigation and regulatory situations need to be viewed as investment decisions – requiring cost/benefit analysis, and outcome scenario planning, that can be presented clearly and decisively to boards’. – James Hartley, Head of Dispute Resolution, Freeths

Creating Value

General counsel are now more likely than ever before to view their risk and litigation work in business terms and are expert at explaining this to other stakeholders within the business. As one GC eloquently put it, ‘Taking a sensible approach to risk, and having a mitigation strategy, enables the business to also take on appropriate risk, which can generate returns. All businesses take on a degree of risk and the key is finding the right balance to optimise these opportunities in order to not lose out to competitors’.

Other GCs agreed, with many focusing on how the ability to assess the merits and demerits of a case in its early stages allows for a cheaper resolution. As another GC stated, ‘from a cost perspective, gaining an early view of potential risks allows commercial decisions to be made well before expenses are incurred’. Others mentioned that being able to predict – somewhat – the cost that a case might incur as being a major boon to business-legal team relations, as the corporate side often appreciate being given a ball-park figure to be able to base their strategy around. Others still mentioned the importance of being able to avoid adverse consequences like claims and fines, and how effective mitigation efforts can also improve their company’s knowledge of the legal landscape and contribute to the good reputation of the company.

We asked respondents to score four metrics out of ten for how far they allowed them to demonstrate positive contribution to the growth and value of their business: enhancing the legal and regulatory risk profile of the business; horizon-scanning to predict and neutralise legal and regulatory risks to growth and profitability; quantifiable financial savings achieved through proactive, decisive and strategic resolution of issues and obstacles; and generating cash through the monetisation of meritorious claims or litigation by deploying external litigation funding solutions. This, also, demonstrates that general counsel still see their main contribution to the business’ bottom line to be as cost-avoiders rather than revenue-makers themselves. ‘Generating cash through the monetisation of meritorious claims or litigation by deploying external litigation funding solutions’ achieved far and away the lowest average score out of ten: 3.3. The other options, ‘legal and regulatory risk profile enhancement’, ‘horizon-scanning’ and ‘proactive, decisive and strategic resolution of issues’ received generally high average scores; 7.9, 7.3 and 7.1 respectively.

So much for the theoretical side, but how have in-house counsel actually been performing when it comes to avoiding risks before they develop? On the evidence of GC’s survey, one positive conclusion that can be made is that the in-house teams that have managed risk in a conscientious and responsible way over the last 18 months have been noticed and supported by their companies; more than half of respondents said that the pandemic has not impacted how adequately resourced their teams are. In a similar vein, 62% of respondents have not considered financing options to improve their litigation and regulatory risk management.

From Risk to Opportunity

Sixteen months after the order to work from home where possible, many of us have forgotten just how profound a shift in working practices it has been. But it is worth considering whether the changing approach to risk management within legal teams is part of a broader ‘post-pandemic’ shift in the way businesses are looking to safeguard long term stability. Intuitively, it seems that general counsel, given their risk management expertise and the analytical skills given to them by their legal training, could have been seen as ideal personnel to lean on for companies under the circumstances. The data appears to bear this out; almost half of respondents stated their greatest challenge of the past 12 months was increased responsibility, while only 15% answered that their role has not appreciably changed. This trend remained approximately the same across legal teams of vastly different sizes, indicating that general counsel at companies of all sizes have been relied on to fight fires for their companies in their hours of need. That they have been fighting fires is evidenced in the report as well; roughly four fifths of respondents reported they have been involved in litigation or regulatory activity over the past year.

But how exactly have in-house counsel seen their risk management and prevention responsibilities grow over the past year? A shade under half of those surveyed noted the greatest change in their responsibilities as an increased emphasis on unforeseeable or unpredictable risks; undoubtedly the Covid pandemic has shaken the business world into taking such threats more seriously. Interestingly ‘increased time with the board or taking on a board position’ was the second most popular way in which respondents have seen their responsibilities increase. Clearly, a significant minority of in-house counsel have raised their profile within their companies who have trusted them to safeguard them in a difficult business environment.

Those that weren’t afforded this increased level of face-to-face time with the board probably feel as though they should have been. An overwhelming majority of respondents, 93%, believe they work best as a combination businessperson and lawyer rather than as a lawyer first and foremost. With that said, most benefit from something of a separation of power with the board; 57% believe they work better as an independent advisor at arms-length rather than a fully-fledged member of the board.

Freeths Comment

‘In my experience, lawyers who are seen by boards as those who “grasp the nettle” in difficult litigation and regulatory situations, and who shape a strategy so as to gain some control, are the ones who are seen as highly valuable in the business – this applies to both internal and external legal teams’. – James Hartley, Head of Dispute Resolution, Freeths

Lessons Learned

The Covid-19 pandemic was an unprecedented business challenge that came at a time when uncertainty already gripped a UK business scene which was trying to get its head around the ramifications of leaving the European Union. That these should have changed the way in-house counsel operate seems elementary, but what have they meant in terms of how much legal work is outsourced vs kept in-house? Legal providers can take heart from the fact that results were even; half of respondents to GC said they would send a greater proportion of their legal work externally while the remainder said they would grow their in-house team in response. There is an interesting caveat to this, though; larger companies are far more likely to be relying on their in-house teams going forward. Of respondents with the largest in-house legal teams comprising over 25 members, two thirds reported they will be growing their in-house legal team as opposed to sending more work to firms. The thinking behind this tends to be based on cost. As one respondent put it, ‘While decisions will always be taken depending on work type, carrying out more work in-house generally tends to be more cost effective’.

Away from the nuts and bolts of specifically legal concerns, the day-to-day life of the average general counsel has changed markedly over the course of the pandemic and subsequent lockdowns. For most, the greatest change of all has been the need to work remotely for long periods. While there are perks to working from home, for example a decrease in commuting, greater flexibility and a better work and life balance, it does come with issues. The lack of face-to-face conversations and the drop in productivity some feel comes with not being supervised are perhaps chief among these. How do in-house lawyers feel the move to remote working has been, then? As it turns out, only roughly one in ten respondents reported a decrease in productivity when working away from the office. While this tenth of respondents may be facing obstacles in home working, such as an increase in distractions or lacking a good working environment, this does seem to be a resounding endorsement for remote working. Working from home does not appear to be hindering productivity noticeably, which more than explains why some employers are looking at making this a permanent change in the future.

The Covid pandemic and subsequent lockdowns were – hopefully – a once-in-a-lifetime business challenge that caught the vast majority of general counsel off-guard. How does the average general counsel feel they met the challenge? To find out, GC’s survey also asked the million-dollar question: would they have done anything differently about their strategy during the lockdown period if they were able to have the time over? Several responses focused on measures such as moving earlier, acting more proactively and being more conscious of how the pandemic would impact the demands of work. For example, as one GC put it, ‘[we would have] sped up getting the technology in place to permit home working at the beginning of the crisis’. Likewise, another stated ‘Planning for negotiating agreements with landlords on rent levels and review of office use’. In the main, though, respondents were pleased with how they handled the situation, and proud of how their teams rose to the challenge. ‘We identified the seriousness of the problem early’, recalls one GC, ‘and sent our employees into home working before companies were asked to do so by government. We even saw a boost in productivity soon after home working, and, now, we’re ready for the return to the office’.

Freeths Comment

‘Recalibrating resilience plans in light of the events over the last two years is now high on the corporate agenda, with more focus now on identifying and evaluating major shocks – including litigation and regulation – which might disrupt strategic objectives.’ – James Hartley, Head of Dispute Resolution, Freeths

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LExOpensource: practical solutions for GCs by GCs

It is no secret, this year has been particularly challenging for general counsel the world round. Economic instability coupled with lockdowns and movement restrictions have hampered businesses, slowed trade, impacted production, and disrupted supply chains.

The Legal 500 in partnership with LEx360, is proud to announce “LExOpensource: practical solutions for GCs by GCs”, a series of interactive workshops that will equip general counsel and the teams they manage with the skills to confidently take on challenges within a post-pandemic world.

During times of uncertainty, corporate boards and management teams rely on their legal departments for guidance. GCs are expected to not only be legal advisors but also strategic business partners to the companies they guide. Over six sessions we will focus on the business of law from a thought leadership perspective.

We will evaluate key topics such as:

  • strategic planning
  • financial management
  • vendor management
  • data analysis
  • technology procurement and implementation

No subject is out of bounds as all in attendance will adhere to Chatham House rules. Our first session will cover ‘The right people, doing the right work.’ GCs today bring more to the table than just their legal expertise and knowing how to delegate and manage a team is pivotal to meeting business goals.

If you are a GC or part of a corporate in-house team, you cannot afford not to be part of the discussion. “LExOpensource: practical solutions for GCs by GCs” provides the exclusive opportunity for you to connect with other leading in-house professionals in a safe and interactive environment.

Become part of the discussion, by registering to our workshop here.

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Moving the needle on progress

In no uncertain terms, 2020 has truly been a year of reckoning for the US: Donald Trump is vying for a second term in the White House. Tragic killings of black civilians at the hands of white law enforcement provoke widespread outrage and demands to ‘defund the police’. A deadly global pandemic is ruining lives and upending the economy, and the President suggests intravenous disinfectant may be the cure.

As the year’s events exceed even the sharpest satire, and with the country at its most divided in living memory, to the average onlooker it may appear impossible to envision anyone making inroads to promote tolerance, mutual respect, diversity or inclusion. On the contrary, such widespread discontent has compelled individuals and companies alike to double down on their commitment to equality, take pause to examine their attitudes to race, to gender, and to any traditionally ‘othered’ group in society, and ultimately to take bold and meaningful actions to combat injustice.

The legal industry has been no exception to this call for action, as diversity and inclusion has shifted from a mere extra-curricular endeavour to an unquestionable expectation from colleagues, business leaders, and clients alike. As the last few years have seen the juncture of corporate strategy and social justice go mainstream, is corporate America entering a new era of social consciousness that is meaningful beyond profit and loss? And, if so, how are legal departments playing their part and taking action?

In a series of exclusive interviews, the legal thought-leaders spearheading D&I in the US speak to GC about the new initiatives shaking up the industry, the value of a diverse team, and how minority GCs who’ve paved the way are inspiring the diverse talent of today.

“If everyone is moving forward together, then success takes care of itself.” The timeless words of Henry Ford ring as true today as they did a century ago, a timely reminder that progress is a necessarily collective endeavour.
Indeed, collaboration is the modus operandi of Diversity Lab, the undisputed stalwart and main facilitator of D&I initiatives in the US legal field. As its name suggests, Diversity Lab takes a science-based approach to monitoring and enhancing D&I through the use of metrics, behavioural data, and design-thinking. New initiatives are formulated in ‘hackathons’, with the best ideas then piloted in law firms and legal departments across the country. In the US, D&I has not been approached in such an analytic fashion before; it is this cutting-edge strategy, coupled with a culture of teamwork and collective success, that has law firms and in-house departments flocking to work with the group.

Through a roster of joint initiatives and partnerships, Diversity Lab’s programmes cut across conventional competitive boundaries, ensuring that no matter what path aspiring lawyers take, they will be supported, encouraged, and accepted throughout. Drawing on the success of programmes like the Mansfield Rule (now available to in-house departments from last Summer) and the On-Ramp Fellowship, Move The Needle is Diversity Lab’s latest project.

“It’s our pull-all-the levers, let’s-see-if-we-can-really-make-a-change programme,” says Leila Hock, Diversity Lab’s director of legal department partnerships. “The idea for Move The Needle came about when we were all talking about every struggle that a diverse lawyer has, starting from law school up until maybe they’re managing partner – what are all the struggles and feelings they’re going through? We can’t solve this problem by focusing on one part of the career path or pipeline; they really all work together.”
Hoping to drive progress across the career spectrum, five of the country’s top law firms have invested $5 million to fund experimental approaches to D&I over the next five years. MTN’s 28 founding general counsel will also work with these firms, while also piloting these new initiatives within their own legal departments and with external counsel.

“We found five brave, trailblazing firms that were willing to work with us to pull all the levers across different areas, look at their practice groups individually, and see what, from a talent perspective, each group needed to retain and attract diverse lawyers,” explains Hock. “We’re working very closely with them to implement all of our pilots. They’re our ‘lab’ right now to test a lot of our new initiatives, report back and see how they work and make adjustments. Our strong hope is that much of what we implement with them will work and help them achieve their goals, and we’ll then be able to disseminate them more broadly into the legal market.”

Many hands make D&I work

For many of MTN’s founding GCs, the biggest draw is its uniquely experimental nature which fosters innovation in a way that many firms or in-house departments couldn’t – or wouldn’t – do alone, especially when it comes to financing. “One of the things that attracted me to Move The Needle is that it focuses on the relationship between the client – being me, the in-house lawyer – and the law firm. I think that’s a tremendous area of opportunity,” says Laura Quatela, Senior VP and CLO at Lenovo and MTN founding GC. “I’m sure some ideas will work, others will be utter failures, but the law firms, to their everlasting credit, have committed big bucks to fund this experimentation over the next several years. That’s really what was needed, because we have tight budgets, law firms have profitability targets, so I think the funding was necessary and will hopefully help us, in fact, move the needle.”

Hock agrees: “My guess is the talent leads or D&I leads within Move The Needle firms feel like they have a lot more leeway to do their job. Not only do they have the money that they’ve committed, they also have us at Diversity Lab and the entire team helping them achieve their goals, but they also have each other. One of the big pillars of the Move The Needle fund is collaboration in a way that collaboration in the legal industry hasn’t happened before, which is across firms. They’re talking and brainstorming with, technically, their competitors, and I think we’re seeing a lot of growth and learning from that, for sure.”

So, with the knowledgeable support of Diversity Lab, the backing of legal leaders at firms and in-house, and a much-needed cash injection, what has MTN been able to achieve so far? “We’re at the point now where we’re whittling down the ideas to some initiatives that we all want to line up behind,” explains Quatela. “One of the things we’ve talked about doing is a combined law firm/in-house summer programme, where interns or clerks have the opportunity to experience both early in their training. They can start to make the important decisions, like, where do I really want to end up? Which of these backdrops will cater to my own personal objectives?

“Through MTN, I’m personally trying to focus on the ‘off-ramp’. Both law firms and in-house experience this off-ramp of particularly women and underrepresented minorities who, when they get to year five or six, when they could really start to be positioned for leadership, and they leave. Why is that? It happens with such regularity in the legal profession. What are we not doing for these folks? Part of it, I think, is belonging, creating an inclusive culture, but what else is there? How can we incentivise people to stay off the exit ramp? For me, Move The Needle will give us an opportunity to try some things in that regard, that will hopefully make a difference.”

Another way MTN has sought to enhance progression opportunities for diverse attorneys is through piloting a mentoring programme between high-potential associates and GCs. “We’re mentoring them to understand what works well in a pitch, what doesn’t work well, how can we get more engaged on certain matters, inviting them to meet with my direct reports so we can talk about the issues that we face, and whether or not there are opportunities for that person’s firm to get engaged,” explains Rishi Varma, founding GC from HP Enterprise. “It starts creating a connection that results in an engagement, and results in origination credit. That diverse attorney at that law firm is then viewed as somebody who will carry that client forward, and hopefully as they become a partner, a senior partner, a managing partner, they carry that forward. We think about metrics from a diversity perspective, but it’s important to recognise the different obstacles beneath those metrics.”

He who pays the piper calls the tune

As figures from the ACC show that corporate legal departments spent an average of $9.7 million on outside counsel in 2018, the purchasing power that US in-house departments can wield in the name of D&I is significant. Diversity Lab and the Move The Needle GCs have been quick to realise this fact, which is particularly salient when contracting external counsel.

For fellow founding GCs, U.S Bancorp’s Jim Chosy and Hannah Gordon of the San Francisco 49ers, Move The Needle has provided opportunities to open dialogue on D&I with external counsel, ensuring that diversity metrics are front and centre when deciding which firms to contract. “In-house legal departments have big role to play in positively influencing diversity with outside counsel,” says Chosy. “Given our purchasing power, we’re able to drive change and I feel an obligation to do this with our law firms, which we consider an extension of our own in-house function. We do this in several ways, including as I’ve mentioned with the Mansfield Rule, the Move the Needle Fund, and our Spotlight on Talent program. We also request and measure diversity data from our law firms to help drive hiring decisions, and last year presented our first U.S. Bank “Invested in Diversity” award, in recognition of firms’ efforts and success with diversity.”

“Move The Needle is a helpful tool for all of us who would like to ensure that we are acting really responsibly in the way that we seek and select outside counsel,” says Gordon. “We’ve had conversations with existing counsel about the importance of diversity to us, and I think the positive we’re seeing out of that is that outside counsel does listen, and does pay attention to how they staff your cases. I think there’s two things that all of us are looking at when it comes to this issue. One is, what are the overall demographics and statistics of a firm? Then secondly, who is actually the staff on your particular matter? Both of those are important.”

Varma is also acutely aware of GCs’ pivotal role in reading deeper into diversity statistics. “One of the reasons I became a founding member of Move The Needle as a general counsel was, it’s my problem. I’m the one who’s hiring outside counsel, so it’s important to recognise that there are many obstacles to improving that diversity, starting with how people get credit and how people move through the ranks of those law firms. You cannot just look at the numbers at the firm, or the numbers on my matter – you have to look at the quality of the representation you get. If I had a firm working on a matter, and I saw consistently that they had about 10 to 15% of the representation that was diverse, that could be good, or they could have somebody who is diverse at the very top level, but the people doing a significant majority of the work are not as diverse.”

Far from a trite marketing exercise, research from Deloitte confirms that companies who can unlock the collective potential of diverse teams can expect to see innovation increase by around 20%, with risk falling by 30%. Simply hiring a diverse array of people, however, is not enough to achieve these results: while diversity is the bricks that build a team, inclusion is the mortar that bonds teams and ensures members feel a sense of authentic belonging.