Wolters Kluwer has partnered with the Association of Corporate Counsel to conduct a survey and issue a report on the legal ops maturity of corporate legal departments (CLDs). I wrote about some of the main takeaways here, but there is much more to say about the rich dataset this survey provides. In particular, I have some thoughts to share on the survey results in light of the COVID-19 pandemic. The economic downturn caused by the current situation puts additional pressure on corporate legal departments to solve problems faster and more affordably. Legal operations is positioned to be a significant part of meeting that challenge.
How does legal ops help?
The survey shows a wide range in the maturity of the legal ops function in corporate legal departments. While larger departments generally tend to have a higher legal ops maturity rating, 16% of large CLDs still do not have even one dedicated legal ops staff member, reducing their maturity. This limitation could make it more difficult for these departments to meet aggressive new savings and efficiency goals, while law departments on the more mature end of the spectrum will have an easier time dealing with this aspect of the crisis.
The traditional approach to getting more done has been to simply hire more lawyers. But implementing or expanding legal ops is a more appropriate solution for several reasons. Hiring lawyers is expensive and isn’t scalable. One additional lawyer only can solve a very limited number of legal problems. Legal ops benefits, on the other hand, can scale across the entire legal department and even into the larger organization, making every member of the team more efficient and multiplying the value of individual workers. This is especially true in areas like financial management, external resources management, and strategic planning, where the survey shows legal ops adds a lot of value. Corporate law departments that add their first legal operations resource should experience tremendous gains while adding yet another attorney will likely not add as much value because of diminishing returns.
Support from data and analytics
In order to meet more stringent spend and efficiency goals, many law departments will need to renegotiate some of their law firm relationships. However, the survey shows that some law departments are more prepared than others to do this. Legal ops can help by supporting and adding value to processes such as budgeting, managing outside counsel, and departmental strategic planning.
Legal ops teams and tools capture data and look at analytics that provide clear information on law firm performance and departmental spend, which are core elements that need to be considered in any outside counsel negotiations. It’s important to be able to show a law firm, for example, if they have been overbilling in certain areas by assigning lawyers to work that could be done by paralegals or the areas where your spending with them has been trending upward too quickly. This allows legal project management on both sides to find ways to help the firm deliver more value. Law departments that have the right people, processes, and technology to do this will succeed, but those that do not will struggle.
The abrupt changes to business caused by COVID-19 are creating a lot of contracts-related issues for corporations. Law departments that have made appropriate investments in contract lifecycle management (CLM) technology and training are better prepared to deal with these issues. For other organizations, the crisis could expose major deficiencies in their CLM approach and create momentum for more investment going forward.
The ACC survey showed that most organizations consider themselves to be in the early or intermediate stages of CLM maturity. Large companies – those with over $3 billion in annual revenue – generally have higher rates of maturity, but CLM is an exception. The average maturity rate for this area is very similar across all revenue categories. Companies of any size on the less mature side may find that they are challenged to locate important contracts, analyze them, and diminish their level of risk going forward.
COVID-19 is the latest crisis to have a serious impact on global business, but in a volatile world where economies are dependent on performance across borders, there is always a risk of major disruption that arrives without much warning. Law departments with strong legal ops teams, processes, and tools are always in a better position to respond to these challenges than those with a less mature approach.
For more information on the survey, take a look at our summary infographic about the survey findings and download the full report. And if you’d like to explore more about making the business case for contract lifecycle management, download our whitepaper here.