Janet Taylor-Hall, CEO, Cognia
The New Year has started and I am conscious that 2022 was oftentimes challenging with shockwaves that impacted all of us – both personally and professionally. Having come through the years of the Covid pandemic it seemed especially hard to be faced with the seemingly perfect storm of economic, geo-political, social and environmental challenges that faced businesses in 2022.
This is very much on my mind as I reflect on the resilience and optimism in the business world and the innovation and commitment that the legal services industry brings to business challenges. When I write about the legal services market I am talking about the entire eco-system: in-house legal teams, law firms, legal service providers and legal technology providers. I am also thinking of the diversity of talent and skills in the eco-system, the multi-disciplinary approach that is often taken, and very much needed, to address delivery challenges and create future-fit legal services.
My optimism for the future of the legal services industry has been reinforced by discussions with clients, colleagues in the industry and participants in conferences and roundtable events. I have learnt so much from these interactions and am offering my key takeaways in the spirit of sharing and communicating that characterizes our industry.
01 Meaningful GC led partnership with the business is a must
Business leaders are calling on GCs and their legal teams to lean into challenges and to pro-actively partner in both protecting and growing the business. However, there continues to be a debate on the role of legal. In particular, the role of the GC. The value of independence and “moral custodian” often comes up with some at opposite end of the spectrum. At Cognia we believe that both independence and moral custodian are powerful concepts – we don’t advocate giving them up but we do advocate taking these mindsets and skills proactively into your partnership with the business.
What is Partnership? It’s much more than a transactional relationship where you only engage with the business to predict demand and have some visibility over the pipeline of work. It’s about integrated legal services that enable business goals, but it goes beyond integrating processes and technologies (although this is critical). It is pro-actively bringing unique institutional legal expertise into critical business decision making. Effective business partnering can improve the speed and quality of decisions that impact the organisation’s bottom line and ultimately drive business value. It is also critical to influencing the way the business complies with policies and standards and how it manages increasingly complex challenges like ESG. Early constructive intervention is highly valued by the business leaders we engage with. Achieving true business partnership takes time, commitment, and innovative ways of growing capability within the legal team. At The Lawyer Conference in May 2022 panel speakers described their journey to GC which often included being seconded to functional roles in the business. They were able to learn first-hand what the role entails – the challenges and the opportunities. Bringing this functional expertise back into the legal function became a huge part of making legal a perceptive and relevant business partner. This is what the C-Suite are asking for and increasingly this seems to be the differentiator in legal leaders having a pro-active role at Board level.
02 Run Legal Like a Business – data-driven decision making and reporting
The pressure on GCs to formulate an operational response to business challenges is intensifying. In-house functions need a long-term strategy and an effective legal operating model. It is great to see the growth in professional, multi-disciplinary legal careers in response to this challenge. However, a Harvard EY Law survey found that GCs anticipate a 25% increase in workload, with 75% not confident that they will have sufficient resource to address it. This problem hasn’t gone away and it needs to be tackled systemically and can only be fixed by careful use of the legal eco-system. The legal operating model needs to ensure senior legal resources are ring-fenced to spend time on business partnership and on managing complex matters where deep institutional knowledge is a differentiator. To do this the operating model should drive simplification and self-service where that is viable and provide carefully constructed options that leverage different delivery models to deal with routine low-risk and high-volume work. To achieve this, it is essential to run legal like a business and to be able to take evidence-based and data-driven decisions on how work should be managed so that it is neither under nor over serviced. In addition, part of the push to expand the GC role is to think differently about business risk and how legal can help manage it. GCs know how to uncover legal risks and liabilities. Now boards want them to address commercial risk from a legal perspective, considering areas like corruption and fraud, regulatory compliance, with standard metrics and reporting evidencing that risks are known and under management.
Tackling data sources and data quality is a critical first step in producing meaningful reporting. It’s challenging but it’s transformational for GCs who need to evidence that legal risks are under management, work is being directed to the right level of capability and cost and that legal’s role in business initiatives is agile and enabling. This is not a “nice to have” – it’s at the heart of credibility and essential to a legal function that really partners with the business.
03 Strategic market partnerships are key to driving value and accelerating change for In-House Functions
The last 10 years has seen a significant period of disruption and change in the Legal Services market. The growth of Alternative Legal Service Providers (ALSPs) – or Legal Service Providers as they are increasingly being referred to – has transformed the market. They offer complimentary and/or alternative services to traditional Law Firms. The innovation in the sector has been stimulated by the growth of the legal technology market – with ALSPs being early adopters of technology enabled services. Whilst this has resulted in positive options for General Counsels and Heads of Legal Operations, the market is now diverse and complex. Routine panel reviews of traditional Law Firms are no longer the best or the only option for engaging the market and a more strategic approach is needed. Moving work around the market based on tactical pricing decisions or due to stakeholder preferences and relationships is unlikely to deliver a long-term sustainable benefit. The legal sector and their clients are increasingly motivated by partnerships where mutual investment and time commitment result in long-term cost reduction through delivery innovation. Increased reliance on technology enabled delivery, process simplification and playbook driven decision making is not something that can be easily swapped across providers. Taking a strategic decision to partner with a legal service provider to tackle systemic issues needs an understanding of the market and a forensic approach to evidencing that your preferred choice really understands the objectives of the partnership and has a proven track record of delivering value over time. Just as real partnership with the business is a critical differentiator so is real partnership with your provider. It needs a commitment to open and transparent communication, realistic timelines to drive costs down and shared understanding of the real potential of using a provider’s technology enabled delivery methods.
04 Demonstrating value is more important to business leaders than cutting the legal budget
In the current climate, there probably isn’t a business leader who is not under pressure to reduce budget and/or headcount. This is certainly a theme with GCs and Heads of Legal Operations. However, discussion and insight from business leaders indicates that the need for legal to demonstrate value is a far more overriding concern than budget. The in-house legal budget is probably not the first place businesses look to achieve meaningful cost savings. Being able to evidence value through reporting (see section 2 above on data-driven decisions) will equip a GC well as they protect their budget. This is particularly important where they can show how investments have paid off over the years and even more applicable to investment in technology – however this a real challenge and I explore this further below.
05 Delivering value from legal tech investment is challenging
It’s hard to think of a discussion I’ve had with a GC or Head of Legal Ops that doesn’t include a painful discussion on a failed or failing technology led initiative. Why? Often this is thought to be down to a poor selection of product and partner. Providers over promising and underdelivering is often cited as a root cause of failed initiatives but the root cause is more complex. Busy legal teams are eager to believe that software will fix the problem and don’t invest enough time (or sometimes no time at all) in simplifying processes and aligning data models with those processes. There is no point in automating a process that was never really efficient in the first place. This type of transformation needs a multi-disciplinary approach with legal teams and legal operations teams working together. The investment in the software is only one cost component. Be realistic about the work needed to deliver on the whole initiative – process simplification, data modelling, data cleansing, data migration, change management, communication – the list goes on. It’s tempting to cut corners and minimize the budget needed – but it will cost at least double if you need costly workarounds, re-work and extended implementation timelines. Don’t go it alone – spend time and money on client-side advisors who really understand the pitfalls and will help you succeed. Network in your own business to understand how Finance and IT are tacking technology enabled change, reach out to your external networks.
06 Your CLO may come from outside the club
Probably the most unexpected thing I’ve encountered recently is the number of times people have told me that their CLO isn’t a lawyer. It may be too soon to call this a trend, but the idea is intriguing. Does any CLO get closely involved in day-to-day legal matters? If the most senior corporate legal roles are becoming more business-centric, it makes sense that a CLO with an MBA could do the job (with enough practical support from the in-house legal team).
07 A new talent model is emerging
Changing the culture will require training, but longer term the skill sets we look for in new joiners will be different too. Education, qualifications, and experience will always be vital considerations, but demonstrating skills like creative thinking and emotional intelligence are becoming more important. Comfort with technology platforms and data analytics will also be vital. Teams will need those skills in abundance if they’re going to carve out a space for legal in the broader business ecosystem.
A study by Accenture found that organisations see biggest improvements in performance when humans and machines work in tandem. Where legal operations take on a hybrid form, with a core team working side-by-side with an extended team of suppliers, comfort working with data and collaborating over digital platforms will have to be second nature.
HOW SHOULD GCs RESPOND?
The thread connecting all these trends is the need for a smart legal operation that supports GCs as they adapt and cope.
What makes a smart legal department? At a recent FT Accelerating Business event, legal think tank RSGI articulated eight key attributes which I find a useful point of reference:
01 There’s a new division of labour, where tasks are separated into complex, similar and standardised. The latter are handled by an operations team and often outsourced to a third party, while in-house lawyers focus on strategically important work.
02 Tighter integration of legal and business processes makes it easier for different departments and business units to use legal services. Increasingly this takes the form of a self-service portal, where processes are automated — particularly around contracts.
03 Data-driven legal departments provide business insights to the senior executive team. For example, by collecting, structuring and linking legal data to company data. This can support commercial risk management by making it easier to uncover fraud or compliance risks.
04 Greater reliance on commercial metrics to demonstrate legal’s value to the business. These can include legal’s contribution to improving time to market for new products and services, or the money saved by identifying risks and avoiding problems before they happen.
05 Clarity and control over internal workloads and external legal expenditure has been established, often using digital solutions like dashboards or resource allocation and outsourcing platforms.
06 Greater alignment between legal services and broader business objectives. That means legal works more frequently with product, procurement, and supply chain partners, while legal and compliance may operate as a single team using the same data.
07 Commerical risk management is a core legal responsibility, where all lawyers and contract professionals understand how the business defines and grades different risks. Legal teams then operate with the organisation’s risk appetite in mind.
08 The talent model has been updated to reflect all the changes listed above. Lawyers are encouraged to experiment with new approaches. Coaching, training, and mentoring are offered on a systematic basis. Recruitment places stronger emphasis on data and technology skills, as well as soft skills like collaboration and emotional intelligence.
In our vision we see in-house legal teams operating at the top of their licence and focusing on the right types of work. The operating model ensures the GC does not need to rely on good faith that the most important work is being done in the right place. There is a balance between protecting the business (managing risk and compliance) and driving the business. This is determined by predictive analysis and predicative risk control. And all of it is evidenced through insightful reporting.
So, l leave you with a thought from a quote at a conference attended in New York last year. “Legal is always invited to the Hangover and not the Party.” If we can collectively achieve our vision of a smart legal function we will be key to transforming the overall results of the business.
However, it will take all of us across the legal ecosystem, to be leaders to effect this change – sometimes that is very hard to achieve over the long term.