1.5. Legal operations as a new role in the legal department
In most business schools with MBA programs, operational management is one of the basic modules. However, the role of the legal operations manager (LOM) in the legal department is relatively new. At the same time, if you look at recruiting resources in the United States, you can see that the demand for specialists in this category already exists and continues to grow. According to a report prepared by Thomson Reuters, in 2019, 81% of legal departments included the operational management function (in contrast to 51% in 2017), and 16% of the legal units increased the number dedicated legal operations staff, while in general the staff of lawyers remained at the same level or even shrunk. In the next year, 2020, the growth in demand for LOMs become even more obvious: 87% of legal departments had already hired employees for this role. In turn, according to a study by BusyLamp portal, only 2% of the surveyed organizations had not considered the possibility of implementing operational management of legal services. The remaining legal departments either had at least one LOM, or performed this function by distributing operational tasks among lawyers and managers. Let's consider the main functions of LOMs.
What functions are carried out by legal operation managers?
One of the most complete descriptions of the functions of the LOM is presented on the CLOC website (https://cloc.org/), with supporting material from Gartner studies (https://www.gartner.com/en). We can look at the standard functions of the LOM.
Managing data needed for decision-making
Lawyers usually do not make decisions based on a scrupulously analyzed and extensive collection of data. Figures, facts, details - all this is often overlooked in legal risk assessment. To a typical lawyer’s mind, his professional duty is to find and report legal risks; it is much more difficult to assess how significant they are. Arranging data required to make sound decisions about risks is one of the aims of legal operations.
What would data management look like in a legal department? Let’s consider one scenario: If a head of a legal department counts the working time spent by lawyers on certain tasks, he can use this set of data to see where the lawyers overspend or underinvest their time. This, in turn, will create an opportunity to identify legal issues that require additional management attention (for example, if the issues are related to challenging employee discrimination), or can be standardized in templates without the regular involvement of lawyers. The billing information could even make it obvious that there is a need to increase the headcount of in-house lawyers or the budget for external advisers. Without such data about working hours spent by in-house lawyers on their tasks, such decisions will lack justification.
Another example of how LOMs can use data is with regard to the time that lawyers spend on certain legal disputes. Every court case takes certain resources from its participants – costs of business trips, working hours of in-house lawyers, time billed by external lawyers – and all of this should correspond to the complexity and materiality of the court case. The ability to combine information about all these resources and to use this information for future cases could remarkably optimize costs of a company.
In practice, large legal departments are already collecting and using such data to improve their efficiency. For example, Coca-Cola lawyers collect data on the causes of litigation and violations of regulatory requirements in order to reduce the risks of such excesses by making appropriate adjustments to the company's business processes.
Without consolidation of this data, the head of the legal department misses the potential for business process optimization. As Peter Drucker said, "What cannot be counted cannot be controlled."
Financial management
The legal department, like any other division in the company, has its own financial dimension. Financial competence, as a rule, is not well developed among lawyers since financial management is not included in law school programs. Accordingly, lawyers usually rely on the expertise of financial departments. The LOM acts as a bridge between the legal and financial departments by managing the budget, optimizing costs, and working with the billing of both in-house lawyers and law firms.
Procurement of legal services
According to a Thomson Reuters study, in 2020, legal fees optimization was the highest priority for 89% of legal service managers. The LOM controls legal expenses though RFPs (requests for proposals, i.e. requests for legal services), fixing optimal fees proposals for each legal task (including conditions alternative to the traditional hourly payment system), and gathering feedback on legal advisers. According to the research of Gartner, legal departments with a dedicated legal operations manager or team spend less on external consultants than those in which this role is not formalized (Fig. 11).
Learning and development in the legal department
In most companies, learning and development (L&D) is a separate function related to HR. However, any business or service units of an organization, including the legal department, needs to invest significant resources in the development of the hard and soft skills of their staff. If they just rely on L&D or HR, it could negatively affect the skills development process. After all, no general corporate L&D program can ensure the development of special skills needed for unique professionals working in the company. This is a task of their department management – in our case, legal operations management. The LOM provides training and development for in-house lawyers, arranges the induction of newcomers, implements trainings to develop special hard and soft skills, engages external trainers and consultants and provides professional assessment through different certification programs. In addition, the LOM organizes legal knowledge management and shares it with non-legal personnel. HR trainings on the latest trends in labor disputes, seminars for the tax compliance function in such topics as "what points are important to pay attention to in JV creation" or "how to reduce antitrust risks in company's sales strategy” – all these items are covered by L&D programs for a company’s staff.
Technologies in legal processes
A separate book can be written about digitalization of the legal profession. Here we can just note how Legal Tech correlates with the LOM to complete tasks. Firstly, the LOM creates the so-called roadmap for the digitalization of the legal department, choosing appropriate IT solutions for legal processes. Secondly, he connects the legal IT departments of a company. The LOM is a key player in implementing the Legal Tech agenda in a company. He combines very different activities for the digitalization of the legal department. If the LOM is not engaged in using technology, the legal department will not keep pace with digital developments that would otherwise benefit the department.
Creating a strategy of legal department
Often legal departments do not have a long-term strategy, being limited to a short-term vision and working "from the task". At the same time, many companies have development plans and strategies for five or ten years or even longer. It is obvious that the plans for legal department development should be in tune with the movement of their company. Ensuring such tuning is one of the LOM’s goals. Having a holistic view – or helicopter view, as it is now customary to call a large-scale view of the company's development – is an important competency of the operations manager of the legal service. By helping the head of the legal department, he ensures that the "broad picture" of the company's development is brought to each employee, helping them to integrate their individual and group tasks into the key goals of the organization.
Finding a balance between in-house lawyers’ and external law firms’ involvement
Let’s talk now about the allocation of different legal tasks between in-house lawyers and external law firms. As Richard Suskind, a well-known futurist of the legal profession writes: "I call for the decomposition of legal work into separate components, highlighting routine and standard ones that should be performed by more cost-effective tools... This will lead us to a wide practice of offshoring, outsourcing, subcontracting, digitalization, since customers will prefer this to the high fees they pay today to ‘expensive’ lawyers working in expensive offices." Deciding which types of legal tasks should be assigned to external lawyers, and which should be left to the in-house ones, but entrusted to young specialists, as well as those which should be automated or stopped altogether – all of this is in the area of responsibility of legal operations. Not assigning the tasks himself, the LOM creates a business process of such distribution, and evaluates how this system works.
Project management
There is no constant in the corporate life. Organizational structure, business processes, and technologies are ever changing in any company. In some cases, these changes have no effect on the legal department and relate to other divisions of a corporation. In other cases, lawyers take part in these movements, providing required legal support, or even lead changes in a business with an impact on the entire company. For example, in-house lawyers transform claim management procedures or build compliance systems, making an impact on other business processes. In such cases, lawyers need to be proficient in project management. The legal operations function can play an important role in the development of these skills.
How can it work? If an employee of a legal department has an idea to change something in the company, then he can contact the LOM with a request to support his initiative. The LOM can train the lawyer and provide him with the necessary set of techniques that will help him to implement changes. In addition, being familiar with the company and its key leaders, the LOM can help the lawyer to take into account some unwritten principles of change management in the organization. If there is no existing legal operations unit in the company, then all these tasks fall on the General Counsel (GC), who, due to his workload, cannot devote much time to support even the most promising ideas of his employees. The legal operations function provides greater opportunities for these changes to be made.
Working with personnel
People are the main asset in legal services; this is true for both to law firms and in-house lawyers. As such, hiring, onboarding, appraisal, and other aspects of working with personnel are of paramount importance for any GC. The LOM assists the GC in these tasks by setting up a system for selecting the most effective and motivated employees, developing career tracks for high-potential lawyers, monitoring the work-life balance of in-house lawyers, and implementing mentoring programs for the staff.
What might working with personnel look like? For example, when a company hires a new lawyer, the LOM can provide him with a so-called “buddy” – an experienced employee in the legal department who knows the organization well – for induction of the newcomer into the corporate environment. The buddy can introduce him to key employees in the department and to some internal customers, help him navigate complicated IT systems, etc. If the LOM is not assigned this important task, the head of the legal department will have to deal with it personally. Without proper guidance, the new employee will dive into the company much more slowly, thus wasting time, struggling with motivation, and failing to create value for the organization that he could have otherwise provided.
Knowledge management
Information is both an instrument and the main product of lawyers’ work. When information that has been created is not stored in the company, the legal department loses the money its company invested in it. Now knowledge management is at the earliest stage in most legal departments. Data is not systematized, employees of legal departments have neither the habit nor the motivation to share the information they receive with colleagues and other departments, and information created (like memos or drafts of documents) is not reused, since it usually languishes in people's private messages or folders. Therefore, a knowledge management system is of the essence for almost any legal department. As authors of SimpleLegal define it, legal knowledge management is the way corporate legal departments create, share, and find information within their team and organization[1]. And legal operations can play an important role in its development and support. As noted in the CLOC review, the legal operations manager can facilitate knowledge hubs and centers of influence across an organization, ensure a consistent response on topics and issues, design an intranet experience that makes sharing and finding best practices much easier, encourage team members to document and share their work in standard templates and formats, and guard against loss of valuable knowledge caused by staff departures and role changes[2].
How could the legal operations function look?
Legal operations could be realized in different forms. First, the head of the legal department could be in charge of legal operations. Another option is to distribute legal operations tasks among some lawyers and paralegals. Finally, legal operations could relate to the responsibility of one special person – the LOM – or even a legal operations division. Each of these options has its pros and cons, which are explained in greater detail in Table 2.
Table 2
How legal operations is organized
Picture 12
Only a small percentage of legal departments does not perform operational management functions. Their share does not exceed 4%. In most cases, the legal operations tasks are distributed among lawyers who also perform other, pure legal tasks. As we can see, in Germany, the UK, and the USA, the legal operations function has such a structure in 40-50% of cases. The next most common option of LO organization is the allocation of one LOM (in Germany, 30% of the surveyed legal departments work this way, in the UK – 43%, and in the USA – 22%). In some cases, there are two LOMs. And in what are probably the largest companies – primarily in the USA– the number is equal to three or more.
According to another study conducted by CLOC, in the United States, the share of companies in which the legal operations function is distributed among lawyers is about 25%. In turn, large corporations have, on average, 14 operational managers in the legal function, while small organizations have only 2. Companies from the pharmaceutical industry and from the biotechnology sector are the leaders in the number of legal operations staff, while the lowest headcount of LOMs can be found in companies from manufacturing industries.
Who can become a Legal Operations Manager?
Operational management is not yet part of the educational programs of law schools. At the moment, this is the case in both Russia and other countries. Therefore, to become an LOM, a professional must develop the appropriate skills in practice, by studying relevant literature (mainly in English), and by sharing experience with colleagues from other companies. At the same time, an individual seeking to fill the role of LOM may not have a specialized legal education. As practice shows, people from business functions can bring a fresh view to the operational management of a legal department, which is difficult to expect from lawyers. In turn, for legal experts who want to gain new experience and update their professional profile, legal operations management can be an attractive career track. A consulting company specializing in the management of legal teams, BusyLamp, provides the following analysis of the pros and cons of candidates for positions in legal operations with a legal and business background (Table 3).
Table 3
As can be seen from this comparison, in most of the competencies important for the legal operations function, people from business units outperform lawyers. At the same time, LOMs who are legal experts may be most motivated due to their desire to gain this new experience, while leveraging their legal expertise.
Let’s take a look at the statistics. The LawGeex platform in its report “Anatomy of a Director of Legal Operations” cited the results of a study of 235 profiles of LOMs on LinkedIn. Based on the results of the analysis, they have detected the following patterns:
- 71% of operational managers have a law degree. As a rule, these are former lawyers.
- 25% of them have an MBA degree.
- In 59% of cases, the role of LOM is performed by a woman.
- On average, before being appointed to the position of operations manager, an employee worked in the company for 6-7 years.
- The salary level of the chief operating officer of the legal function of a large company is typically in the range between 200,000 and 300,000 US dollars per year.
Why do many lawyers want to switch to the role of LOM? According to legal recruiter Julia Brush, “There are a lot of lawyers out there who want something different, they don’t want to practice law anymore and so those who want to stay tethered with the law, it’s a great option for them. And frankly, it puts them in a position of power, which a lot of lawyers have never been in”[4].
[1]https://www.simplelegal.com/blog/knowledge-management-for-corporate-legal-departments
[2]https://cloc.org/what-is-legal-operations/
[3] См.: Legal Operations Trends: Benchmarking Report. URL: https://www.busylamp.com/legal-operations-benchmarking-report-2019 (дата обращения: 23.10.2021).
[4] См.: Anatomy of A Director of Legal Operations Revealed. URL: https://blog.lawgeex.com/anatomy-of-a-director-of-legal-operations (дата обращения: 23.10.2021).