Analysis

Precision instruments

What do a legal department and a Swiss watch have in common? They both run like clockwork – as long as operations staff are involved… We report on the rise and rise of the legal chief operating officer

watchmaker

Analysis |

With increasing scrutiny of outside spend, general counsel are under mounting pressure to deliver a smooth-running and more efficient machine, as well as effective legal advice. GCs must therefore fine-tune their teams with a discerning eye for quality and economy.

watchmakerAs GCs and chief legal officers embrace corporate leadership, they are increasingly delegating a significant chunk of their department’s day-to-day running to a new band of professionals: legal operations. Jeff Franke, former chief of staff to the GC at Yahoo!, describes the role as one that ‘ultimately leads the legal department from lacking operational discipline, to running with efficiency and effectiveness’.

‘It’s about making sure that you’re getting value for the dollar that you’re spending, both inside on systems and human resources, but also externally,’ adds Mary Shen O’Carroll, head of legal operations at Google. ‘The legal ops role is one that can be the right hand to the GC – the person who manages all the functions that are separate from the true substantive delivery of legal advice.’

A broad remit

Economic pressures stemming from the global financial crisis, the march of advanced legal tech and the expansion of alternative service providers have all handed in-house departments more options beyond traditional law firms or insourcing.

Rather than one overloaded GC managing an increasingly-complex series of work streams, many legal chiefs have sought to bring in experienced non-lawyer professionals to expand their capabilities and push for fresh approaches. Unsurprisingly then, the legal operations role is multifaceted, covering areas as broad as technology, knowledge management, analytics and change management.

Comments Reese Arrowsmith, head of legal operations at Campbell Soup Company: ‘My main responsibilities are strategic planning, financial management (both operating budget and outside counsel budget), vendor management, internal resource management, technology management, process improvement, knowledge management, and metrics and analytics. At times, I focus on compliance, discovery, contract management and anything that comes up daily.’

Eye on the CLOC

Rather than being daunted, an increasing number of professionals within legal services are opting to enter this burgeoning profession.

The clearest indication of the rise of legal operations as a field in its own right is the launch of its own industry body, the Corporate Legal Operations Consortium (CLOC). The group began seven years ago as a group of around 40 meeting informally, growing to a global legal association with nearly 1,200 members, which it expects to expand into an attendance of 2,500 at its annual conference in the US later this year. Although such professionals largely first emerged in the financial services and technology sectors, they can now be found across all industries.

‘There was obviously a gap in this space,’ says Connie Brenton, CLOC president and chief executive, and also chief of staff and senior director of legal operations at NetApp. ‘It’s a relatively new industry and it has hit the tipping point.

It’s a new industry and it has hit the tipping point. We used to see one or two job postings in this role a year; now we see ten a month.
Connie Brenton, CLOC/NetApp

‘We used to see one or two job postings in this role a year; now we see ten a month. It used to be the really large companies – Fortune 50-type companies with legal departments of at least 50 people – that would be large enough to consider having a legal operations person,’ adds O’Carroll.

‘What we are now finding is that even start-up companies – maybe the GC’s first hire will be a legal operations person rather than another lawyer. We are seeing a sea change in the industry.’

CLOC has taken a leading role in creating an industry definition and relevant standards, with the intention of guiding and training its members, devising 12 ‘core competencies’ that map out the role and provide the gold standard for professionals entering this field.

‘In many cases, when legal departments grow the role, early on there’s a lawyer taking the informal lead, addressing operations matters ad hoc. That person – certainly in my case – ultimately slots into that operations/chief of staff role,’ says Franke.

Those with legal training are often a natural fit for the role. However, both Brenton and Franke agree that legal qualifications are not a prerequisite, with finance, technology, business and leadership backgrounds also providing a strong grounding. ‘It’s quite odd for a guy with a bachelor in environmental science and biology to be the head of operations for a Fortune 500 legal department,’ jokes Arrowsmith, in recognition of the sometimes circuitous route into the role. But, with stop-offs as a litigation manager, a legal management software consultant and then a strategic management consultant focused on the legal department, Arrowsmith’s pathway to legal operations ticks many of Franke’s suggested boxes.

Managing change

Although the number of legal ops roles on the market is growing, they can be difficult to fill. The mixture of a diverse skillset and strong communication and project management skills is hard to find.

‘It’s all unprecedented. You have to look around and figure out what’s broken to try and fix it on your own, and there is no playbook, there is no standard,’ says O’Carroll.

The change management aspects are often the most testing given the conservatism of legal colleagues. This is a role that requires alignment between the legal operations professional and the GC. Even then, driving through change often causes friction between team members.

‘The lawyers at Campbell are top talent and some of the most supportive people I have worked with regarding the types of projects and initiatives I bring to the table. Operations professionals at other companies aren’t always in the same situation. I regularly get questions on how to gain rapport with lawyers or the GC,’ says Arrowsmith.

‘In some companies, the issue is related to being a “non-lawyer”. I am not a lawyer. I recently spoke on a panel at a conference and I made reference to being such. My good friend and fellow panellist (a lawyer) suggested I never say “non-lawyer” again. This issue is tied to change management. No-one likes change or being told what to do and lawyers are no exception.’

Only the full support of the GC can extend staff the credibility to realise the transformational scope of the role. By consensus, an effective legal operations professional should be informed and fully involved in strategic decisions involving the department.

‘Many of my peers at companies with empowered operations professionals already own service delivery. Freeing the GC to focus on mitigating current risks and foreseeing future risks, while also helping to make the company as profitable as possible, should be every legal professional’s goal. Centralising operations and service delivery into the ops team frees up the GC to be more strategic,’ says Arrowsmith.

And there are little ways that the GC can help, too, he adds: ‘Think about everything from the placement of their office to the way you introduce them the first time.’ Even if winning lawyer colleagues around takes time, most recalcitrant team members eventually appreciate the benefits of slicker systems and delegating the challenges of managing external procurement.

As legal ops and chiefs of strategy closely scrutinise the range of available offerings in the newly-competitive marketplace, law firms are, to some extent, under the microscope. But that does not mean law firms are out. ‘We’re providing them with our thoughts on what they’re doing well and they are doing lots of things well. Law firms are still exceptional at delivering legal services; they’re the best of all the players in the field in a lot of areas,’ says Franke.

‘It does mean that they have to look very carefully at their role in the marketplace, their mission and purpose, and how they deliver – just like all the other players. But if we don’t have all of the participants from the legal ecosystem in the room together, collaborating, growing and innovating together, the solutions don’t work,’ adds Brenton.

CLOC has identified six fundamental players in that ecosystem: corporations; law firms; legal service outsourcers; technology companies; law schools; and regulators. It already opens its annual conferences to non-legal ops attendees, with plans to add a CLOC membership category for law firms in the near term.

The US-bred CLOC has been moving to expand its operations into Europe in the last 18 months, in February 2017 launching its European chapter at a meeting at BT’s offices, with an event including representatives from Vodafone, Shell, Lloyds Banking Group and Cisco. Aside from a string of regional chapters in the US, there are also plans to launch a branch to cover professionals in the Middle East.

The expansion is rapid at home and abroad. A 2016 survey by the US’s Association of Corporate Counsel, found that 48% of legal teams now have dedicated legal operations staff, roughly double the figure in 2015.

‘We are going to, over time, evolve the membership profile and the way we engage from one that is currently focused on legal ops professionals, to one that allows input, feedback and contributions from all of these players and also looks to engage them to push for change,’ says Franke.

CLOC’s ambitions extend beyond legal efficiency, to a full sectoral evolution. Its 12 core competencies are a starting point for further refinement, working towards both forging and spreading best practice models. CLOC expects that its content will become core to the legal profession as it plans to work with law schools and other training providers to develop a formalised curriculum for legal operations, and for delivering legal services in a corporate environment.

‘As companies experiment, and share the knowledge learned through successes and failures, we will all learn faster. Companies are going to need more ops professionals evaluating these technologies, training legal staff on how best to use the systems and tweaking input to get better output,’ says Arrowsmith.

At present, legal ops is still behind the scenes, keeping the legal team ticking over. But there are increasingly expectations that the emergence of these new professionals will soon start driving more radical change than has been evident under lawyer-dominated in-house teams.

As the legal services sector re-tools and equips itself for both the challenges and opportunities presented by technological and structural changes of the 21st century, the rapid evolution of legal service professionals promises to be one of the most significant forces shaping the industry for years to come.

catherine.wycherley@legalease.co.uk

Case study: Reese Arrowsmith, head of legal operations, Campbell Soup Company

Arrowsmith,-ReeceI always suggest the head of operations starts with the internal operating budget and outside counsel budget. Implement a vendor management programme. Negotiate rates with firms. Look at which firms are doing what kind of work and at what cost. Evaluate settlements and total case cost. Understand the drivers at a macro and micro level. Look at how the internal team is staffed. Then, look to reorganise the department, make sure you have experienced attorneys driving strategy with outside counsel, implement retainer agreements, implement billing guidelines. Assess whether you should consider alternative fee arrangements. If you do these things, the company will almost always see a reduction in spend.

Companies should have an approval policy before outside counsel are engaged. The process should assess whether the right lawyer is engaged on every matter. At a prior company, I looked at minimum, maximum and average outside counsel spend, minimum, maximum and average settlement cost, and minimum, maximum and average total case cost, per firm and per jurisdiction for similar type and size matters. The differences were significant. The company set out on a path to engage firms with lower average total case cost.

Once the right attorney is engaged, the in-house team should be working with the business and outside counsel to set and drive strategy, budgets and manage to the agreed scope. At a prior company, I assisted in reorganising the department, implemented an outside counsel management programme, implemented technology, better leveraged matter management, e-billing and metrics. The results were a reduction of outside counsel spend by over 60% in two years.

Another non-financial example is related to compliance. A company I worked with was inundated with changing regulations. They couldn’t keep up with compliance and had no metrics to show what had or had not been done. We engaged a vendor to help evaluate regulations faster, which resulted in becoming compliant faster, and gave us the ability to provide reports on our status. The vendor provided three elements: relevance questions (to understand whether each rule applied to the company), action items (as a map to achieve compliance) and tools (for example, forms that would need to be filed). Finally, the content/information was supplied through a software application, which allowed the compliance team to collaborate with the business and track metrics in real time. The company caught up on past regulations quickly and remained compliant going forward. The services and tools supplied by these vendors are going to become mainstream and table stakes in the coming years.’