I cannot remember a time when General Counsel were not being urged to do more with less. Even in the best of times they rarely got to the front of the queue for more people or greater investment in their IT. I doubt that has changed over the last year as the pandemic put a hold on all sorts of expenditure and created urgent pressures across most businesses.
Underpinning these pressures has been the changing expectation in corporations of their chief lawyer. They must know the law and have connections to subject matter experts where necessary, but that is a given. Boards and CEOs are unlikely to be testing candidates legal knowledge when choosing their GC. Rather lawyers are under pressure to deliver excellence beyond the legal: they have to demonstrate skills, values and behaviours that resonate across the senior team and Board.
We know that senior executives, including lawyers, must lead across the business rather than simply head their function. The GC’s focus on creating a responsive legal function is only a start – the next step is to collaborate in order to create value for clients. That doesn’t mean that GCs are no longer lawyers, but it is not enough to answer the legal questions of the rest of the business or act as the Board’s conscience and risk manager. They have to be at the coalface, alongside operational functions and close to clients because that is where the business lives or dies.
What is driving this change? I will leave others* to cover the full range of drivers, but one aspect is digitisation. ‘Digital’ is bandied around but what does it really mean? For me it is the manifestation of big data and powerful computing harnessed through people, process, technology and culture to create new insights that drive the business forwards.
This is more than implementing new IT that allows the legal function to automate its workflows. It is more than creating a portal so that the business can self-service on routine legal activity, get quick and responsive support online for less routine work. It is more than working with law firms and alternative providers to bring better systems thinking to bear on delivery of legal services. All of these are important – and they can free up expert resource to think about strategic issues and better manage the non-routine risks and tasks – but they are not enough.
GCs already think about efficiency as well as the quantity and quality of what they produce. That is behind the changes in the legal function over the last ten or twenty years – growth of in-house teams to reduce spend on external law firms and then the partnering with various enterprise models such as flexible lawyer platforms and managed legal services.
Axiom,
LoD,
Factor,
Elevate,
United Lex
and of course
KPMG
and the rest of the Big Four may specialise in one area of enterprise legal services but they are all moving across and up the value chain to offer a more complete set of solutions to their clients. As GCs have partnered with enterprise services, that has increased the pressure on law firms to deliver differently. Through all of this GCs have shifted their horizons and are starting to see the opportunities that come with digitisation.
In my view however, that of itself is not enough to transform the legal function. GCs rarely get the budget to make the investments that help them make transformational change in how they operate. I remember the GC of a global business telling me that everyone agreed his team’s IT needed replacing but in reality, through the annual budgeting and prioritisation process, the agreed investment shuffled annually between the ‘current year reserve list’ and ‘next year’s priorities’, always being overtaken by more pressing issues. They had expected tomorrow to come but it never did. For real change to happen the CEO and the rest of the senior team need to see the legal function’s transformation as inextricably linked to better outcomes for the firm’s clients.
I understand why so many GCs see their employer as their client. It allows them to think like a private law firm. But replicating the private law firm is unlikely to be a good solution – they are, after all, set up to maximise income from multiple clients. The GCs role is to spend the minimum consistent with the legal risks the business faces. But seeing the business as the GC’s client increases lawyers’ distance from the business. GCs are part of the business and the reason the business exists is to meet the needs of clients. Rather than asking what legal advice other silos or the Board needs, it is surely better to ask what role the legal function plays in meeting the needs of the businesses’ clients? The legal function has to be part of how products and services are designed and offered to clients rather than separate and remote. None of that negates the role of the GC to provide independent advice to the Board – most legal function work is simply not at that level.
GCs need to understand the real client as much as the sales force, service developers or the product designers do. They need to go back to the front line in the same way as CEOs do – to remember why they exist. One inspirational CEO I came across reminds all his head office staff that they exist to serve the needs of the front line staff – those who sell to clients. ‘Head Office people’ are not it turns out the most important.
Making sure that the legal processes that support the rest of the business are the right quality and are efficiently produced is of course a solid foundation for this. Similarly, identifying and managing the breadth of legal risks has to be a given. But real value comes from insight rather than just doing these things well. And it is insight that will drive CEOs to want to invest in the legal function. If the CEO and senior team sees the legal function as part of a digital future rather than as a corporate service that slows them down then its seat at the table is secured.
The insight must come via collaborating across silos – that allows more than just reporting on performance of the function. It facilitates, for example, identifying relationships between the substance of contracts, how they are put in place (and by whom), and how they subsequently perform. Analysis of business data by the legal function can help spot new risks early, or even provide insight on how to take bigger risks in a more informed way. All of this requires data and analysis. It is a shift for people and their objectives as miuch as their relationship to IT. That is why culture matters so much. That is what digitisation really is.
A digitised legal function will be part of the digitalised business, not separate, but sharing data. Functional ownership of data is a barrier to useful insights: collaboration underpins new insights that support the data revolution that is driving many businesses to offer customers compelling new products and services in ways that are safe and profitable.
What is in the way of this sort of transformation? Digitalisation is more than IT. Culture and the exceptionalism of lawyers are high on my list. So long as lawyers keep telling themselves that they are different, that their client is the rest of the business rather than the businesses’ clients, that they are special and separate from the rest of the workforce, then they will not be fully integrated and collaborating with all their colleagues. Without getting the digital culture right we are left with data and miss out on new insights.
So where next? GCs need to stop worrying about being
T-shaped,
O-shaped
or some other geometric form. They need to be three dimensional. They need to fit in their organisation so that they are part of it, not separate to it. And they need to digitise because that is the only way that they can provide insights based on evidence that help the business understand how to be better.
Many law firms, the alternative providers and the Big Four offer consultancy services that will help businesses digitise. They might bring particular expertise in different sectors, in the legal function’s role or in aspects of people, process, culture and technology. But how does a GC start? Working with others that have been through this is one good way to get better informed. And a good place to do that is through the
Digital Legal Exchange⭐︎. This non-profit is bringing together a range of GCs, academics, digital experts and leaders of transformational change to explore how best to shift the legal function into the digital world. It offers real world experience and insights through workshops and can be GCs first step towards the digital future.
*Mark Cohen of Legal Mosaic
fame has blogged (several examples but I like here
and here) on some of these issues, linking to reports and surveys that record the change. I don’t need to repeat his excellent insights, but they are worth reading. Mari Sako
offers a deep analysis of how technology is changing the legal profession and her papers
also deserve attention.
