This is the third of my four-part series on what constitutes “value” in the eyes of the sophisticated buyer of legal services, specifically, in-house legal departments. The first post identified four key factors in the value equation: i) alignment; ii) operational excellence; iii) communication; and iv) collaboration.
The second post made the case that alignment between a client and a law firm requires that the firm understands how that specific client defines value and then delivers it. And it’s in how value is delivered by law firms where operational excellence takes center stage.
What Is Operational Excellence?
Operational excellence is the disciplined approach to getting work done so it’s done faster, smarter and more efficiently. In the context of providing legal services, operational excellence transforms the fluid practice of law approach to a nuts-and-bolts business of law model. How? By instituting a way of operating that deploys people, process and technology to produce high-quality legal work at lower and more predictable costs to the client.
The ability of a law firm to “lower and predict” the cost of doing client work is essential to its ability to move from an hourly billing model to alternative fee arrangements that fulfill the economic interests of both sides. In an environment where clients are demanding high-quality outcomes at a well-managed and predictable cost, operational excellence becomes the linchpin of the “value” equation. The growing number of in-house legal departments who have taken up the mantle of operational excellence is compelling evidence of its importance.
Clarion Call for Operational Excellence
General Counsel at the top of their game have put a premium on running their legal departments in an effective and efficient way. To achieve both they have placed operational excellence as a top priority, hiring professionals — many of whom are not lawyers — who have extensive operational experience and placed them as direct reports. Their titles vary (Chief of Staff, Head of Legal Operations, etc.) but a central part of their mission is to achieve cost savings across their department’s legal ecosystem.
These operations experts are the architects of the legal department. They are redesigning how work gets done in a number of significant ways. They’ve introduced process and technology (e.g., Project Management, Knowledge Management) to improve how in-house lawyers manage, capture and reuse their work. Some have introduced new skill sets by hiring project managers, process specialists, and other smart professionals who can perform work that doesn’t require a JD degree. They also hire talent on a flexible basis by partnering with a contract staffing firm, a managed service provider or both. Data and metrics are then used to evaluate the efficacy of these approaches.
This disciplined approach to staffing, process and technology is similarly employed in the selection and management of outside counsel. Increasingly, for example, client RFPs include questions on law firms’ use of Knowledge Management (KM) and Project Management (PM). The questions are phrased in a way that assumes that both are in place, a clear indication that both are a threshold requirement to the firm’s ability to compete. This is worth repeating! Law firms’ ability to compete increasingly hinges on their ability to demonstrate operational excellence. It has become table stakes! And, as more legal departments place operational excellence front and center in their own value proposition, the more urgent becomes the need for law firms to get on the same page.
And the pace that legal departments are adopting operational excellence has quickened from a crawl to a gallop. In 2016, the American Corporate Counsel (ACC) survey of chief legal officers highlighted the “drastic growth in legal operations.”
I spoke to Connie Brenton, the President and CEO of the Corporate Legal Operations Consortium (CLOC), the organization at the center of furthering the education and influence of legal operations professionals, about the future of legal operations.
“Legal operations has been a growing field for no less than 10 years and now we’ve reached the tipping point,” Brenton explained. “We’ve proven our ability to drive measurable value to the legal department’s goal to be a company asset.” And Brenton is one of the few who have been there since the beginning of the transformation. In 2010, she was tapped by Matt Fawcett shortly after he joined NetApp, Inc. as General Counsel to be the legal department’s first Chief of Staff and Head of Legal Operations. Today, the department is widely recognized as a leader in operational excellence and Brenton it’s leading evangelist.
Her statement that legal operations has reached a tipping point is founded in the fact the individual efforts of company’s like NetApp, and professionals like her, have coalesced into a movement joined by a broad range of companies, including such corporate heavyweights as General Electric, Cisco, Google, Facebook, Oracle, Bank of America, Prudential, Adobe, Amazon, Motorola, Qualcomm, Yahoo, Microsoft, Honeywell, Citibank, Starbucks, Fidelity and PayPal.
Now it’s time for law firms to join the movement and add operational excellence to their value equation. A few law firms got the message long ago — others have grudgingly joined the ranks. But the race is on and the winners, as Darwin taught us about survival, will be those who adapt.