Event

Legadex round table on Legal Operations

On June 7, 2018 Legadex hosted a Round Table meeting in Eye Film Museum in Amsterdam about the topic legal operations. Please find below a summary of the discussions held. If you’d like to know more about Legal Operations and how to incorporate this new discipline into your organisation, please send an email to legaloperations@legadex.com and learn about articles and events on the subject. On 5 and 11 October 2018, Legadex will be holding a more in-depth workshop on Legal Operations for General Counsels, in conjunction with Hans Albers (Juniper Networks) and Klaas Evelein (Unilever). You can register to take part using the email address above, marking your application ‘Legal Operations Workshop’ and stating your preferred attendance date.

The Legal Operations Officer: the new anchor for Legal Legal Operations Officers, who make legal departments more efficient and streamlined, and concentrate on non-legal matters such as budgets, data, technology and HR, are becoming increasingly indispensable. Not so long ago you generally came across ‘legal ops’ only in very large corporate legal departments. These days smaller companies also seem to be recognising the value of legal operations in helping them to professionalise their activities, either with or without a designated CLOO or Chief Legal Operations Officer. This is the logical consequence of a trend in which Legal is being asked to take on ever more responsibilities. But how do you structure such a role, and what can you achieve with it? This was the topic discussed by 18 legal counsels at a round table organised by Legadex. They all agreed that one of the clearest gains was cost efficiency, with large companies in particular still not doing enough to curb legal expenditure.

The days when corporate lawyers focused solely on legal work are now far behind us. Communication, training, selection of software and tools, processing data and managing external service providers: these are all jobs Legal is often asked to do and that are gradually squeezing out the legal work, especially for the heads of legal teams. CLOOs can ensure that all these non-legal jobs are done efficiently and can improve internal processes so that the department as a whole becomes more productive and efficient.

The fact that this works very well was shown by the examples put forward by Hans Albers of Juniper Networks and Klaas Evelein of Unilever, both of whom spoke from experience. As Legal Operations Officers, they are responsible for the full supervision of the legal departments to which they belong, and work continuously to improve internal processes, starting (not altogether surprisingly) with expenditure. Albers: “Approximately half our budget is spent on external advisers, chiefly lawyers, and it will be no different for many other companies. What’s more, we found that our senior lawyers spent at least 20% of their time managing outside counsel directing, negotiating, providing input – which is too much. The last thing you want your senior lawyers to be doing is negotiating fee structures and scrutinising invoices.”

There’s a wealth of data available with which you can do very useful things. But rather than asking what tools you can buy to make life easier for lawyers, you should start by analysing and improving your processes.

This can be done perfectly well by a Legal Operations Officer. The Corporate Legal Operations Consortium, a network organisation of Legal Operations Officers, has defined four core competences for CLOOs: strategic planning, financial management, management of outside counsel and other service providers, and technology. More experienced CLOOs also take on communication, growth and development, litigation support and the coordination of different functions. And in organisations with highly mature Legal Operations departments, some CLOOs may even deal with knowledge management and structural data analytics. Albers: “There’s a wealth of data available with which you can do very useful things. But rather than asking what tools you can buy to make life easier for lawyers, you should start by analysing and improving your processes.”

According to Klaas Evelein, there are various reasons why organisations should seriously consider creating a legal operations role. For Unilever the focal areas included efficiency, outside counsel management, mapping legal tech, knowledge management and data intelligence. “But controlling spend management is the most clearly quantifiable aspect you can start with,” adds Evelein. “After all, you’ve generally got reliable insights into your outgoings, cost control produces directly measurable results and there are some useful tools and solutions on the market to assist you.

And if you’re thinking about bringing in law firms or other external service providers, my advice is: keep it simple and reduce the number of firms on your shortlist. Ideally, an initial selection of external advisers should be carried out in conjunction with Procurement, not by the legal department alone, simply because Procurement has more experience of negotiating fees and so on. More important still: set very clear guidelines for invoicing and RfPs.”

Hans Albers adds: “I’m truly amazed that the fees quoted by different legal firms for relatively straightforward projects can sometimes differ by up to a million dollars. And then, in the follow-up process, it still remains to be seen whether billings are correct. Legal Operations would be ideal for coordinating this verification process, with or without the help of available tools. We’ve been using an external service provider ourselves for the past six months now, and have saved at least 5% on invoices, simply because they’re now being critically reviewed. Verifying whether billed hours were actually put in remains difficult, but a simple test based on what was agreed should really be made standard practice.” Despite this, unclear invoicing was what most concerned the General Counsels who attended the round table, such as law firm partners who charge higher hourly fees than agreed for time spent ‘considering’ a case. So what’s the solution? E-billing, says Albers. “Invoices are received in a fully digitally and automated way, and agreements such as hourly fees charged are all recorded in the system.”

Despite this, the company lawyers who were present said that organisations appeared to take their foot off the brake as soon as major litigation cases or M&A deals were involved, and simply gave free rein to outside counsel spend. In such cases, it’s often the CEO, CFO and/or General Counsel who are so keen for a deal to succeed that they’re prepared to spend any amount of money (that is, pay for external counsel hours). “Excessive amounts, really,” observed one company lawyer. “You then get the crazy situation where you’re endlessly haggling over 5% for standard work but letting the bigger cost items slide.”

Apart from spend management, there are many other areas where the CLOO can support the legal department. Rogier Roelen, Legal Director at Akzo Nobel, thinks the most important aspect is project management. “Without real project managers, there’s a high risk of projects failing, and although we lawyers undertake a lot of projects, we’re not natural project managers,” he says. “This is just the kind of thing Legal Operations could do very well, in my view.”

Evelein: “Some law firms already employ process managers, and I think corporate legal departments would gain a lot by doing the same. Despite this, we’re still mainly looking for ‘T-shaped’ lawyers, i.e. lawyers with multidisciplinary skills.”

When asked whether they now divided their external work into different types of activity, and to what extent they were using alternative legal service providers as well as law firms, the delegates gave mixed replies. Albers said he was using a combination. “To me, it’s only logical to segment legal work. Standard work such as contracts can be very easily checked externally using a playbook which you’ve compiled. This includes the standard clauses applied by the company. What you then see is a contract that highlights the potential conflicts. Doing this saves a huge amount of work, especially if you have to process hundreds of NDAs a month.” Hans-Martijn Roos of Legadex: “Many companies ask us if we think they could improve particular processes by automating them. But they should always start by conducting a sanity check of the process itself, which needs to be accurately mapped. It’s a positive gain for many companies if this can be done using local resources, since it makes communication easier and gets adjustments to the work process completed sooner.

Roos: “The CLOO’s responsibilities sometimes also include knowledge management. How far have your organisations come with this?” Evelein: “Sound knowledge management is vital for relatively large, dynamic organisations. The advantage is that when your successor takes over, he or she can see straightaway what you’ve been working on in recent years. Then, knowledge management is not an unnecessary luxury to my mind. The question is: are you going to gather knowledge yourself or will you insource it from external service providers?” Rogier Roelen: “We gain the knowledge we need through our panel firms, who deliver it in customised form.” Albers: “Even so, most companies will probably prefer to have it in their own system. After all, not every law firm gathers the news and relevant knowledge and sends it on to your own system in an equally professional way. As to the newsletters, you’ll have seen all you want after the first couple.” Dirk Meerburg of Ahold Delhaize: “The knowledge management system is perfect for adding in templates for contracts, which can make life much easier for the legal team. We’ve now converted nearly all contracts for our Not for Resale (NfR) department into templates. As a result, anyone who uses them will no longer have to obtain legal approval. Both the department and the company as a whole are now reaping the benefits.”

Keeping time records, often seen as a necessary evil, can be used by Legal Operations as a way of streamlining and improving the department. Jan Roelofs, NS Dutch Railways: “We ask our lawyers to keep a record of their hours, not to call them to account but to get an idea of which activities take up the most time – and hence capacity – of Legal. Legal will then also know how many hours are spent on certain activities, and discuss this with the business if necessary. And if you feel you need extra FTEs in a particular area, it helps to present the relevant data in support of your request.” Albers: “The fact that more and more corporate lawyers are having to keep time records seems to me to tie in with the trend of Legal becoming an ‘ordinary’ business line where everyone is measured against in the same yardstick.”

The final topic discussed at the round table was training. Luc van Daele of Legadex wondered whether the growing legislative burden, such as the recent GDPR deadline, had compromised the efficiency of departments and reduced scope for training. “Many companies are now only recruiting seniors, but who’s going to train them? Ten years ago when you joined a law firm, you could spend a couple of years learning, but now you’ve got to be billable from the outset. So how do young lawyers acquire their knowledge these days?” Albers: “It’s true that corporate legal departments aren’t generally taking on any juniors; the Legal Operations Team, on the other hand, is an excellent incubator for young lawyers. Take companies such as Cisco and IBM; they all have centres of excellence in countries like Ireland where young lawyers are trained before moving on to locations all over the globe. The legal profession itself is now gradually realising that trainees are primarily a cost item during the first few years. That’s because it’s no longer acceptable to charge high hourly fees for their work.” Roos: “We handle the training for various companies. This works well for both the juniors and the companies themselves since the former can use their on-the-job training straightaway and hence make a valuable contribution to their legal team. Added to that, it’s often the Legal Operations Officers – with project management and technical skills -- who are keen to make the difference in this critical area.”

The round table cautiously concluded that most large and medium-sized companies had enough work to justify a legal operations role, but in organisations with compact legal teams the legal ops role was initially most likely to form part of the duties of the General Counsel or a senior counsel.

What are the essential requirements for getting started with legal ops? Make sure your processes are clear and have been streamlined, and that the department is properly structured. It would be extremely useful if the organisation’s knowledge management, and any tools that could make day-to-day work more efficient, were also in order. Another key requirement is for your existing legal spend to be transparent, so as to give you a basis, a baseline measurement, which Legal Operations can use to measure its progress. Finally, Albers ended with a warning: “Don’t get taken in by nice and shiny tools that promise the earth. Start with a good process instead. After all, if you automate an inadequate process, it will still be inadequate.”