Reimagining legal operations: The business infrastructure of legal services

Topics: Client Relations, CLOC, Corporate Legal, Data Analytics, Efficiency, Law Firms, Legal Innovation, Legal Managed Services, Legal Operations, Midsize Law Firms Blog Posts, Penn Law, Process Management, Thomson Reuters

legal operations

It’s strongly evident now that legal operations are taking a more important role in how the delivery of legal services are conceptualized and executed. Indeed, the recent Legal Department Operations (LDO) Index 2020 report, published by Thomson Reuters, showed that the portion of legal departments with dedicated legal operations staff now represents 81% of all legal departments surveyed, a jump of 24 percentage points compared to the 2019 report.

Understanding the trends that has brought about this shift can give insight into what the future may hold for legal operations, the delivery of legal services, and the ever-evolving skillsets required of modern-day lawyers.

These topics were the focus of Reimagining Legal Operations, the second of a three-part series of panel discussions hosted by Penn Law’s Future of the Profession Initiative and Thomson Reuters. (The discussion from the first panel in the series can be found here.)

In the latest discussion, panelists included Connie Brenton, Chief of Staff and Senior Director of Legal Operations at NetApp and the former CEO and Chairman of the Corporate Legal Operations Consortium (CLOC); and Aaron Katzel (L’97), Chief Operating Officer of Legal & Compliance for SoftBank. Susan Lambreth (L’83), Principal at LawVision, moderated the panel.

The panel’s discussion focused on answering three primary questions: What are legal operations? Why are legal operations expanding in companies? And what is the expected evolution of legal operations in the next five to ten years?

What are legal operations?

During the panel discussion, Brenton described the legal corporate services ecosystem in which legal operations sit. At the center of the ecosystem are corporations, and within them lie the general counsel along with their in-house counsel and legal operations team. Corporations and certain facets of its legal team interface with law firms on a case-by-case basis; however, historically, that dynamic was not always the case.

Before 1990, most companies simply used their general counsel to handle most legal issues, with a heavy reliance on outside counsel and little sensitivity to the legal fees they charged. As the international economy evolved after 1990, the legal issues became more complex and corporations began to rely more on outside law firms to handle these complex legal issues. Also, corporate legal departments did grow some sensitivity to legal fees during this time.

After 2000, and especially after the Great Recession in the mid-2000s, legal issues increased in complexity with many legal problems lying at the intersection of public policy and macroeconomics. As a result, large corporations increased the size of their own legal departments, using reliance on outside counsel more strategically and displaying a strong sensitivity to law firm fees and rates.

As corporations increased the size of their legal departments, legal operations were born, the panel described. Broadly speaking, legal operations manage the legal affairs of a company by using various tools and focusing strongly on what is most economical for their corporation. Indeed, today, aspects of legal operations include strategy & financial management, which oversees the fee arrangements between the corporation and outside counsel. This component of legal operations impacts decisions on whether outside counsel even need to be hired for a certain matter at all.

Another component of legal operations is analytics, which collects and analyzes data that can show the efficiency in how the legal department is addressing certain legal tasks. For example, this data could show how quickly certain documents are drafted, or how well processes for delivering documents and obtaining appropriate signatures are working. Data analysis such as this allows corporations to compare the effectiveness of both in-house and outside counsel to achieve the best outcomes at optimal cost.

Why are legal operations teams expanding in companies?

After surveying the history of the corporate legal departments and the growing role of legal operations, the panelists described in more detail the types of legal issues that companies face today that they did not face 20 years ago. Due to the changing economy, for example, companies today see greater value in expanding their own legal departments, and they are using legal operations teams and the data they collect to assess risk in the face of uncertainty, Katzel pointed out.

The issues that companies face today involve cybersecurity, domestic and international regulations, corporate competition, trademarking, licensing, consumer and client privacy, intellectual property, federal, state, and local scrutiny of a company’s business model — just to name a few. Indeed, many of these issues were not as prevalent in the past as they are today, and companies need to be much more responsive to these current challenges and assess these multiple risks accordingly.

During the panel discussion, a member of the audience raised the possibility that this focus on assessing risk could negatively impact the types of decisions lawyers make. For example, an attorney may become risk-averse in order to influence the data that is being collected.

Katzel countered that corporations are entrepreneurial in nature and are generally not receptive to counsel that only says No. Rather, companies are looking for its in-house counsel to take informed, calculated, and reasonable risks while helping the business side achieve the company’s goals.

What is the future of legal operations?

The changes to the business infrastructure of legal services have changed the type of skills needed by the modern lawyer, panelists argued. In the past, panelists explained, the I-shaped lawyer was in vogue, one that showed deep legal knowledge and legal skills. But today, the modern lawyer has evolved to become T-shaped — one that still has deep legal expertise but also has the ability to collaborate across many disciplines. These lawyers add to the fundamental training, knowledge, and expertise they get from law school by engaging skills and filling roles related to technology, data analysis, project management, business knowledge, risk management, and design thinking throughout their careers.

The growth of legal operations is also automating workflows so that lawyers can focus on higher-level thinking. This means that as the more mundane tasks of drafting and delivering certain legal matters become more automated, modern lawyers focus on the language and legal questions that a project may entail, using their expertise to deliver more value to the corporation.

In the future, as the legal issues become even more complex because of an ever-shifting regulatory, technological, and macroeconomic landscape, corporations will lean on their legal operations team even more to assess risk, streamline processes, and strike the proper balance between in-house and outside counsel, the panel said.