Law Department Transformation: Embracing Change to Deliver New Value to the Business

Joanne Schehl, VP & Deputy General Counsel, Fannie Mae
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Globalization and technology are forcing unprecedented change in the legal profes­sion. These forces, catalyzed by the reduced demand for legal services following the 2008 recession, have triggered a cascading set of changes through the legal industry. Competent legal services are available offshore at a fraction of the cost of home grown talent. Electronic discovery has replaced the legions of associates who once poured painstakingly over scores of documents as part of a litigation team. Sophisticated software tools can create basic contracts. Other tools analyze contracts, locate relevant content, convert contract terms into data and subject that data to sophisticated analytics to help drive business decisions. Work that was once unquestionably the province of highly-educated and highly-paid attorneys is now being delivered by lower-cost providers who approach the work differently, more cost-effectively and often better.

What does this mean for general counsel and those of us who work in corporate legal departments? It is tempting to look outward, to ask what additional value we can demand from our outside counsel–whether in alternate or fixed fee structures, less expensive staffing models, or the use of technology solutions. And, indeed, these are questions we must be asking. But we must turn the same lens on ourselves as we are turning on our outside counsel. The disruption of the legal industry will inevitably force fundamental changes within law departments just as it has to the traditional law firm model. We must look at ourselves and question the way we have traditionally delivered legal services.

“There is now widespread recognition that legal services can be “unbundled” or “disaggregated” into discrete components along a value continuum”

As one of the most expensive support functions in a corporation, law departments are under increasing pressure to reduce costs without sacrificing their quality or output. As risk managers, we are also sometimes viewed as a function that slows or impedes the business. At the same time, there is now widespread recognition that legal services can be “unbundled” or “disaggregated” into discrete components along a value continuum and that, across that continuum, legal work is more or less susceptible to the use of a rapidly expand­ing array of alternative legal service providers and technology solutions.

At the top of the value continuum is the highly complex, high risk or strategic work that lawyers will continue to perform, and where general counsel will continue to consult high-priced outside counsel. But moving down the value continuum from that point, it makes less and less sense to use the highest-priced talent–in-house or outside–to perform aspects of legal work that can be done more cost-effectively by others. Alternative delivery models often can provide cheaper, faster and more consistent outcomes for this lower value work.

Law departments interested in beginning the transformation journey should consider the following foundational steps:

Knowing what information is available and where to find it

Lawyers are in the business of knowledge, expertise and infor­mation, and our work product resides in the realm of documents and other knowledge or information assets. No transformation initiative can begin without effective control of these assets. Whether it’s knowledge management, document management or content management–every law department should have a technology solution and a process in place to capture, maintain, search and share information.

At the most fundamental level, such a system increases ef­ficiency, consistency and reuse capability across the law depart­ment. Beyond that, control of knowledge assets is the founda­tion of any transformational effort because moving work to lower cost providers, consistent with quality and risk management, de­pends on the use of tools that are centrally managed and readily available.

And the value-add of transformation for legal departments– the ability to access and manipulate the information contained in legal documents–is entirely a function of technology systems. When such information is extracted, “datafied” and analyzed, it constitutes a new form of value that the law department can provide the corporation to help drive and inform business decisions.

Unbundling corporate legal services

Law departments can benefit from reduced costs and increased efficiencies if they are willing to look hard at the services they provide and consider what aspects of that work could be done more cheaply, more quickly or more consistently by a non- lawyer. Look for the work, or aspects of work, that does not require a unique solution but is routine, limited in scope and susceptible to process and work flow efficiencies or to a technology solution. E-discovery is an obvious example but routine drafting can also be automated, and even negotiation can be pushed down to a lower cost provider if supported by playbooks, templates, clause banks and similar tools.

Rethink your staffing model to include a different mix of skills and expertise

One of the clearest implications of the value chain analysis is that law departments need to rethink the professional “demographics” of the legal team. We must be willing to look beyond lawyers and legal assistants, to recognize the value that other professionals bring to the table, be they information specialists, technologists, process analysts or project managers. As we move from one-to-one, bespoke legal solutions for all legal work to systematized and commoditized approaches to routine work, we need new expertise and skills to build and maintain our systems, to manage information and knowledge assets, to design processes and workflows and to work in tandem with lawyers to develop the sophisticated algorithms that support effective automation.

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