Corporate law departments under pressure to cut costs may be the main driver behind a revolution in the provision of legal services, but when it comes to innovation they may be hamstrung by their own lack of budgets to pull it off themselves.
A recent white paper issued by legal technology company Mitratech Holdings Inc. called Embracing Disruption: Six Innovations Moving Legal Departments Up the Value Chain, cited six innovations the best-run legal departments are capitalizing on:
- Hiring non-lawyers to manage the business of the legal department;
- Creating efficiencies through robust knowledge management practices;
- Improving legal sourcing through data-driven decision-making;
- Funding litigation with outside investors;
- Purchasing goods and services through a consortium; and
- Applying cognitive computing to improve efficiency.
So are in-house departments in Canada driving the legal industry towards this change?
“I think this is absolutely happening today right now even in Canada,” says Monica Goyal, a Toronto lawyer and founder of legal software company Aluvion Law. “Businesses are looking to technology to improve and quantify their processes. Legal departments as I understand it are under the same pressures as other business units.”
But are in-house departments really driving the change?
“I think it’s a qualified yes,” says Helen Fotinos, partner in the business law group at McCarthy Tétrault LLP and former general counsel in both the automotive and food, beverage, and hospitality industries. “Yes, insofar as they are the ones pushing the economics, and applying the pressure to do more for less and forcing their service providers to deliver on that objective.” But, having been in-house and knowing how lean a lot of those departments are, and perceptions of legal as a cost center, Fotinos adds there is often “zero budget” allocated to technology spends to improve process.
“There also isn’t a clear roadmap of how you do these things,” she says. “Both in-house and having come back to private practice—the legal community is on board but there’s a little trial and error involved.” She says the opportunity exists for in-house to continue to push the envelope and capitalize on what their external law firms are doing in terms of investing in technology to survive in a changing market. “It’s a dual partnership and if managed properly will serve us well.”
When it comes to implementing successful knowledge management, she explains it needs to be driven by a combination of technology and people. “The most common and first step is precedent directories [and] document automation and that’s something I did as in-house counsel to generate efficiency for myself but to control liability with the business units,” she says. “You create a template and lock it and it’s used automatically.”
On the human piece, there is growth in multiple areas of expertise, moving away from generalists to a “super bench of experts.”
When it comes to data-driven decision-making, this involves a risk management approach. So if there is due diligence required to be done as part of a transaction, traditionally associates would toil over it at a firm, but now an in-house team can hire a legal process outsourcer to do it for C$45 an hour. “I build LPOs directly into my retainers for different segments of the work,” says Fotinos.
The challenge, she notes, with funding litigation with outside investors is aligning the interest of the investor and the plaintiff. “I haven’t seen that yet, I think the safer and more common application is the older contingency model. On a transaction basis, lawyers are doing a version of that through success fees and risk collars.
“I did a file recently where I did a low fixed fee on a collection matter and built in a graduated contingency based on our success,” she says. “We’re sort of funding it in that we’re investing in our process and delivery. If we’re successful in delivering we’ll be compensated, if not, we’re not and that makes it a little more palatable for the client.”
Some of the other points are less prevalent in the Canadian market such as purchasing goods through a consortium and applying cognitive computing to improve efficiency.
Fotinos says McCarthy Tétrault is pitching clients on the idea that if they bring their full portfolio of work or a designated percentage they can negotiate a more competitive pricing model. The firm has a “virtual GC” model Fotinos introduced last year. The basic premise of her model is to offer clients the same unlimited access to dedicated counsel as they would enjoy if they had their own in-house lawyer, with the support of a full-service firm. “It’s all premised on a volume proposition,” she says. “Is it a legal service consortium? No, not quite. I think actually think there might be a problem with conflicts with that.”
The challenge for law firms and legal departments will be to pick the technologies that will allow them to sustain their practice by taking a closer look not just at billings but what they are doing internally, says Fotinos. “It’s not the technology that’s disruptive, it’s the business model that needs to change. Law is kind of losing its mystique. We’re realizing not all of our work is artisanal,” she says. “The challenge is in the execution.”
[This blog was originally posted on the Canadian Lawyer website. Canadian Lawyer is a publication of Thomson Reuters Canada Ltd.]