Modern legal entity management has finally transcended its traditional confines in the general counsel’s office, and not a moment too soon. In fact, we see this happening more frequently, with legal departments increasingly involving compliance (48%), governance (38%), finance (35%) and tax (25%) business units in entity management activities.

By no longer limiting itself to a small team of legal colleagues, the corporate record can finally be used for strategic decision-making. However, even with more business units participating in entity management, is there room to make this an even more powerful partnership? The answer lies with your colleagues in Finance & Tax.

Finance: Follow the money

Formally engaging the finance department can help more senior executives beyond the general counsel’s office understand entity management as an important business priority. Finance departments are often profit centers (as opposed to the legal department, which is often viewed as a cost center).

And for finance teams, entity data is increasingly important to their strategic planning processes. This year, the volatile markets and increased financing costs have pushed companies and funds to act more cautiously than in years past, with a higher priority on entity restructuring (and spinoffs), smaller M&A deals, and looking at past opportunities with fresh eyes. However, these short-term activities are only setting up for a bigger potential play in 2023; with high rates of undeployed capital — or dry powder — in the capital markets, 80% of Deloitte’s survey respondents believed that may be an opportunity to catch the wave and invest their cash as targets rise in value.

These opportunities, both short and long term, require a comprehensive understanding of entity data and a strong compliance track record to be competitive. Yet, 49% of companies still report using Excel to manage their entity data and a quarter reported at least one entity out of good standing in the last 24 months.

It is in the finance department’s best interest to find and invest in solutions that ensure the meticulous execution of entity management processes and empowers them to stay competitive for whatever opportunity arises.

Tax: Fighting complexity with collaboration

The Head of Tax seeks out opportunities that minimize costs and drive efficiency. Yet global complexity has hampered their agility in a trend that only seems to increase: in 2023, 45% of TMF Group’s accounting and tax experts anticipated compliance to grow over the next five years, which demonstrates the operational strain these business units are increasingly facing.

However, there’s acute awareness that with access to the right data at the right time, these heads of tax can ward off complexity. Focusing on global tax provisioning and integrating tax data company-wide are the top two priority for tax professionals in 2023, of which entity data is interlinked. By using technology to create a holistic view of the organization’s tax burden, this alignment with the legal team breeds efficiency, reduces redundancies and maximizes the potential for growth.

Entity technology: The path to partnership

In a world where collaboration reigns supreme, technology’s importance in connecting disparate business units cannot be underestimated. By creating a single source of truth for your entity data stored in a self-service database, tax, finance and legal teams can finally strategize from a collective playbook. This playbook can unlock the potential for growth, risk mitigation, and efficient decision-making. The era of entity management as a cross-functional responsibility has arrived, transforming it from an individual effort into the team sport it was always meant to be.

Diligent

Diligent Entities is the world’s leading purpose-driven entity management technology solution.  With solutions across governance, risk, compliance, audit and ESG, Diligent empowers more than 1 million users and 700,000 board members and leaders to make better decisions, faster. No matter the challenge.

Now that you know the value of partnering with tax and finance teams, take a closer look at how entity management technology can help you solidify that partnership and practice more efficient entity management.

“How do I know I’m getting a good price from my law firms?”

Traditionally, that type of data simply hasn’t been available to in-house teams or firms — a fact that causes widespread discrepancies in cost across the legal industry.

In this article, we’ll show you a process PERSUIT uses to find what we call the “true market price” for a legal matter.

It may seem counterintuitive, but finding a true market price makes the price less important when you select your firm for a matter. By doing so, you can empower your team to better manage risk by choosing the best firm — not just the one with the best rate.

What is a True Market Price?

A “true market price” is the average transaction price that buyers and sellers can commonly be expected to agree upon for a particular good or service. But without transparency and competition within a market — like in legal services — it’s difficult to discover what a true market price actually is.

In legal, that’s starting to change.

In-house teams are under pressure to demonstrate their value to the business more than ever before — and to justify and document their decisions around external spend.

For all these reasons, legal teams are increasingly adopting a new process for engaging outside counsel — one that introduces transparency and competition so a true market price can emerge.

A Four-Step Process to Find the True Market Price for Legal Services

At PERSUIT, we teach in-house teams a process they can use to determine a fair market price for legal services.

Here’s how it works:

Step 1: Segment the matter by milestones and deliverables

Most legal work falls into repeatable patterns. You may not know exactly how a matter will go, but you know the types of activities that often happen.

For example, in litigation, you know there will be depositions, even if you don’t know exactly how many you’ll need. Nearly any matter can be broken down into predictable phases and activities to arrive at the “deliverable” or outcome.

In our litigation example, those milestones and deliverables would include depositions, discovery, pre-trial, trial, appeals, etc. The same concept can be applied to advice or transactional matters as well.

The same holds true even for complex matters such as IP litigation. Certain phases and types of work, like claim construction and the Markman hearing, can be scoped and outlined. It will take some up-front investment, but the process will yield a better environment for competition and transparency with your firms.

Having a library of pre-built templates for many types of matters also helps make the scoping process significantly easier.

Step 2: Invite preferred firms to submit proposals

After you’ve scoped your matter by phase, invite three to four of your preferred firms to submit proposals detailing how they’ll approach the work.

Ask them to submit their price estimate, a summary of how they’ll approach the matter, and any other information you’ll consider when awarding the work (DEI, relevant experience, etc.)

If you’re doing this manually, you can send emails inviting the proposals. Or use a firm relationship platform to simplify the process.

When appropriate, some companies invite bidding firms to ask questions and further scope the matter, helping you ensure a true “apples to apples” comparison when you receive proposals.

Step 3: Use a competitive process

Sometimes, the proposals you receive will have similar price quotes.

In those cases, the competitive RFP process — on its own — has revealed a “true market price.” This gives you confidence that you’re not overpaying for the matter.

There are other cases where you’ll receive proposals with price estimates that are wildly different. In that case, you can’t know if the prices you’re looking at are a true “market price.” It may be that the firms simply don’t know what other firms are charging for similar types of services.

In this scenario, the process we recommend is a “reverse auction” — a competitive process where you set a time window, show the price quotes (or their rankings) you received from firms, then give those firms a chance to revise their price quote.

This is usually done as a live event with a time limit between 30 minutes to an hour.

Here’s an illustration of a real reverse auction taken from the PERSUIT platform.

At the start of the auction, there was a $1.275 million spread between the highest-priced quote and the lowest.

One hour and six minutes later, the price spread had narrowed dramatically, with all four firms having price quotes within $270,000.

In this case, the “true market price” is about $1 million — the price the firms are grouping around at the end of the auction.

Step 4: Choose the firm you think has the best chance of giving you the result you need

At the end of this competitive process, you and your team can evaluate the proposals and make a choice about who to work with for the matter.

It may be counterintuitive, but a competitive process actually makes price less of a factor when choosing a firm.

At the beginning of the auction illustrated above, there was little chance that an in-house team could justify paying an extra $1.275 million to engage with the highest-priced firm competing for the work — unless it was a “bet-the-company” type matter.

By the end of the auction, however, the bid spread had been reduced to only $270,000 between all four firms; even less between the top three.

With the emergence of a true market price for the matter, the decision becomes less about price and more about who is the best team to manage the relative risk and drive the right outcomes.

The Payoff: Make Price Matter Less When Selecting Outside Counsel

Our internal data — which includes over $8 billion in proposals and $1 billion in legal work awarded through the platform — show that time and again the competitive process detailed above takes large price differences out of the equation.

By driving firms closer to a consensus price, or true market value, cost becomes less of a deciding factor than in a traditional RFP process. This price convergence empowers in-house teams to move beyond price in deciding which firm is the best fit based on the things that really matter — experience, strategic insights, diversity and ESG metrics, and more.

You can read more about the benefits of competitive sourcing in our recent report, 5 Myths About Reverse Auctions in Legal. You can also hear about how competitive sourcing strengthens the relationship between in-house teams and their firms in our webinar featuring Gopal Burgher, partner at BurgherGrey, and Kimberly Williams, head of Legal Operations at SMBC.

Ready to uncover the true market price for your matters? Sign up for a demo today.

PERSUIT is used by the world’s leading in-house legal teams to engage outside counsel in a way that’s more fair, more objective, more diverse, more equitable, and more effective for everyone involved. Learn more about PERSUIT.

The role of legal operations is having its well-deserved moment in the spotlight. There are wide-ranging benefits of adding this team of professional efficiency drivers to your legal team. Publishing firm Legal 500 also pushes General Counsels (GCs) to “unbundle internally” – and establish a legal operations department to improve planning, technology, communication, and financial management – everything beyond giving legal advice.

The advantages are clear, but it’s challenging to go from creating a legal ops team to building one that runs like a well-oiled machine. In this blog, we’ll cover principles that will transform your legal ops team. Let’s dive in!

Build bridges within your business with legal ops.

Communication gaps erode performance. Enterprises often experience these in two areas: financial reporting and sales cycles. But a well-tuned legal ops function bridges these divides.

Financial Reporting

The Corporate Legal Operations Consortium (CLOC) guides legal operations professionals to pursue activities that maximize resources through sound financial management. Often, companies need more visibility and predictability in their budgeting and forecasting. This leads to material cash impacts, including shortfalls and a lack of economic context when making investment decisions.

Given its proximity to deals and contracts, legal ops can share critical reporting that boosts finance team effectiveness. Opportunity areas include: 

• Streamlining invoice review
• Allocating legal costs to business areas
• Deriving spend insights from vendor contracts
• Supporting budget development with centralized reporting

Legal ops teams have become an indispensable part of budgeting and financial planning by supporting activities like these.  

Sales Cycle

When legal and sales fall out of sync, the deal pace slows. To avoid this, legal ops must pinpoint problem areas. This often means eliminating communication gaps by centralizing and integrating both teams’ data and systems.

Practically, this should include creating processes that move contract drafting and management workflows out of the inbox. LinkSquares, for example, built a Salesforce CRM integration within its contract lifecycle management (CLM) platform. This becomes a low-hanging fruit opportunity for many to reduce the email clutter that’s compounding poor communication. Reps benefit from automated contract status updates, and managers sharpen their ability to forecast, assess time-to-close, and predict revenues.

To support sales (or any critical business function), legal ops must also understand what their colleagues need and expect. This doesn’t mean becoming an order taker. Spend time defining common sales cycle disruptors and identifying process risks. Talk to key stakeholders; come up with step-by-step procedures and workflows to improve ownership, clarity, and accountability.

When teams don’t discuss these, sales process confusion turns to frustration. As one legal leader told us, “Communication missteps are rare when everyone knows who is doing what by when.” Once exposed, legal ops must rebuild the processes that once slowed down deals. Consider deploying tools to speed up contract creation by allowing sales to draft or request agreements directly from their CRM. Additionally, consider pre-approved terms or contract language that sales or customer success teams can use without interacting with legal.

Explore self-service reporting as well. Legal ops may streamline communications by adopting software to give business users access to custom contract reporting. For example: Does the revenue ops team need to pull reports on how many contracts renew this quarter or understand how many clients are headquartered in London?

Automate it  – eliminate back-and-forth emails that paint the picture of other teams waiting on legal to comb through contracts. Ready now? Download this guide today.

Minimizing the cost of change—such that we derive value from the technology we invest in at low costs of adoption is an essential goal for just about every department in every organization. It’s also a substantial challenge. And in no department is this more true than legal—and, more specifically,Legal Operations.

Here, unique challenges exist. For a good reason, lawyers focus on risk: reducing it, safeguarding their organizations against it, and combating it when it manifests into a real threat. As a result, lawyers can be wary of process-level innovations, such as those requiring change because innovation introduces new risk variables.

This wariness makes sense and is ultimately a good thing. The legal department serves as a crucial business partner within their organizations, connecting to and impacting every part of the business. Systems for completing NDAs, for example, impact how quickly business conversations can start. Ensuring contracts are quickly signed affects sales velocity. Employee agreements can influence hiring processes.

Keeping the above in mind, legal’s comparatively conservative ethos for the tech sector serves as an essential counterbalance to predominantly innovation-focused mindsets. But as the rest of the business world moves forward, embracing increasingly powerful means of innovation that differentiate companies competitively, this same counterbalance can be an obstacle to embracing innovation and adapting to the change innovation requires, threatening to hold companies back.

For Legal Operations teams to be highly strategic partners within their organizations, they should push the organization forward. But how do you overcome the pushback? And once you do that, how do you ensure the new systems create real, tangible, appreciable value without requiring change?

Here are a few strategies.

Strategy #1: Reduce app-dependency.

A primary impediment to implementing more innovative and efficient processes and technological solutions in Legal Operations is the thinking that attempting to do so requires forcing employees to learn how to use yet another app.

Or, at least we think it does.

In truth, what innovative processes do is reduce the number of applications and software tools employees use. That new processes succeed in doing this is particularly crucial in the legal ops context, seeing how the employees we serve are uniquely allergic to new tech. Our goal should be to enable our people to focus purposefully on the right work. The more the legal department relies on disparate, static, siloed apps, the harder it is for our people to do that.

At the risk of oversimplifying things, the functional limitations of the applications we employ today — Asana, Onit, TeamConnect, Slack, Jira, and email — constrict us. Worse – the more applications we introduce into a process, the more those apps lose their power. Rather than enabling us, they burden us and limit our productivity because of what they can’t do, necessitating manual workarounds and fostering bottlenecks.

To create operations that truly increase our people’s power and capacity—without annoying them—we need to make our internal processes dependent on as few apps as possible, so that these manual workarounds and bottlenecks are removed.

Strategy #2: Reduce developer & IT dependency.

Just as depending on another app to address every process challenge is impractical, it’s similarly impractical to rely on your developers and IT department to minimize the pain of change.

Look, developers are influential, but relying on them to build custom solutions all the time inevitably delays your ability to problem-solve or adapt quickly—customization in this context bogs down your developers, IT, and your Legal Ops teams.

Custom-built solutions for the legal department increase your Legal Ops team’s workload. Custom-building solutions require legal ops teams to play a product manager’s role, working directly with developers to define the department’s business requirements. As the solution moves through development, developers look to the Legal Ops team to quality engineer the app. Once the app is ready to be launched, the Legal Ops team will be responsible for training everyone to use it.

This strategy is directly counterproductive to reducing developer and design dependency. We are introducing a custom-built solution that frustrates impacted employees just as much as introducing another “off-the-shelf” app—and relying on IT to get it done.

Remember, one goal here is to empower Legal Operations to react and function as needed, without a heavy reliance on your IT department. Introducing custom-built apps won’t accomplish that.

Strategy #3: Minimize user interfaces.

Perhaps the chief problem with attempting to innovate for efficiency in the legal ops context by buying or building new apps is that both strategies require employees to learn new interfaces. That this is inherently challenging is something Legal Operations teams have to understand. And this is true not only for complicated pieces of tech but for seemingly simple applications, too.

It’s crucial that instead of continuously increasing the number of interfaces, employees learn to use and derive value from those that currently exist.

Our organizations are at an inflection point. We have a decision to make regarding how we want to work in the future. In one direction: the end is adopting new apps (and in the process, increasing risk and exposure), or remaining stagnant and falling behind as an organization.

In the other direction is a kinder, happier, more empathetic future that lends credence to people’s needs, preferences, and unique abilities. The processes and systems with which they power organizations prove flexible, dynamic, and adaptive.

We must choose the latter path, especially in the context of Legal Operations. To do so is both prudent and moral. Legal Operations can be a practical and strategic business partner, capable of introducing new processes and optimizing existing ones without pushback. In this sense, it can also be a catalyst for adopting systems that improve employees’ lives.

If you’re interested in learning more about either Tonkean or Adaptive Business Operations, visit Tonkean.com. And check out our Legal Operations ebook here!

June 2020 | Debora Motyka Jones, Senior Advisor, Market Engagement and Operations, Lighthouse

One of the most common complaints I hear from General Counsels and Chief Legal Officers is that they are not able to sit at a table full of their executive peers and provide metrics on how legal is impacting the core business. Sure, they are able to show their own department’s spending, tasks, and resource allocation. But wouldn’t it be nice to tell the business when revenue will hit? Or insights about what organizational behaviors are leading to inefficiency and, if changed, will impact spending. More specifically, as the legal operations team member responsible for metrics, wouldn’t it be great to share these key insights with your GC as well as your finance, sales, IT, and other department counterparts? Good news! Legal has this type of information, it is just a matter of identifying and mining it!

Keeping metrics has become table stakes in today’s legal department and it often falls on the shoulders of legal operations to track and share those metrics. In fact, CLOC highlights business intelligence as a core competency for the legal operations function. Identifying metrics, cleansing those metrics, and putting them forth can be quite a lift, but once you have the right metrics in place, you are able to make data-driven decisions about how to staff your team, what external resources you need, and drive efficiencies. If you are still at the early stages of figuring out which metrics you should track for your department, there are many good resources out there including a checklist of potential metrics by Thompson Reuters, and a blog by CLOC on where to start. HBR also conducts a survey so you can see what other departments are seeing – this can be helpful for setting targets and/or seeing how you compare. When you analyze these and other resources, you will notice that many of the metrics are legal department centric. Though they are helpful for the department, they are not very meaningful when they are sitting around the table with executives doing strategic business planning for the business as a whole. So what types of metrics can legal provide in those settings and how do you capture them? There are many ways to go about this, but I have highlighted a few that can provide a robust discussion at the executive table.

Leading Indicators of Revenue

Most companies are reviewing the top line with some frequency and in many industries it is a challenge to predict the timing of that revenue. Given its position at the end of the sales cycle, in the contracting phase, legal has excellent access to information about revenue and the timing thereof. Here are the most common statistics your legal department can provide in that area:

1. New Customer Acquisition: Number of Customer Contracts Signed this Month – Signing up paying customers is a direct tie to revenue and the legal department holds the keys to one of the last steps pre-revenue: contract signing. By identifying the type of contract that leads to revenue, the legal department is able to share with the business how many new customers are coming online. The metric is typically a raw number and can be compared against the number of contracts in a prior period. If not all customers who sign this contract lead to revenue, you will want to report (or at least know) the ratio of contracts to paying customers in order to give an accurate picture.
   
   Once you have been tracking this metric, you may want to take it a step further and identify and contracts that come earlier in the process. For example, in some companies, prospective clients sign NDAs earlier in the sales cycle. By reporting on the number of NDAs signed, you will start to see a ratio of the number of NDA to the number of MSAs and can give even earlier visibility into the customer acquisition pipeline.
   
   
2. Expected New Customers: Contracts in Negotiation and Contract Negotiation Length – If your company has negotiated contracts then reporting on the number of contracts in negotiation can also help with revenue planning. Knowing the typical length of that negotiation will give an indication as to the timing of that revenue.
   
   
3. Expected Revenue: Timing – The final piece of the revenue puzzle is when the above revenue will hit. You can work with the finance team to get the typical time between contract signing and revenue. This will often vary by contract size so layering in the contract size is helpful. If contract size if not available in the contract itself, that is likely information that sales keep so they can report that metrics if legal cannot.

The two departments most interested in all three the above metrics are likely to be sales and finance but depending on the detail reported at the executive level, these may be executive-level metrics. If the above seems like a lot, know that many contract management tools and/or contract artificial intelligence tools can mine your contracts for the above information.

Efficiency in Business Operations

Legal operations also has a unique ability to look back and reflect on the efficiency in some areas of business operations. More specifically, in the course of litigation and investigations, cross sections of the business are examined with hindsight and as we all know, hindsight is 20/20. Providing that look back information to the business can help in overall business efficiency. In addition, legal has access to payment clauses, in contracts, that can ensure efficiency in cash management. Here are some helpful statistics your legal department can provide on the state of legal operations.

1. Early Payment Discount Usage: Number of Contracts with Early Payment and Percentage of Early Payment Discounts Used – When signing vendor contracts, there are often provisions allowing for discounts if certain terms – e.g. payment within a short timeframe, are met. Although this may be fresh on everyone’s mind at the time of negotiation, this often gets lost over time. Using current technologies, the legal operations team can identify these contracts and provide the number of contracts in which such provisions exist. You can then work with finance to determine how many of these provisions are being leveraged – e.g. is the business actually paying early and taking the percentage reduction. The savings for the business can be material by just providing visibility into this area.
   
   
2. Data Storage: How Much Data to Keep – A common IT pain point is storage management and having to add servers in order to keep up with the business needs. With cloud technologies, IT often knows how much space they have allocated to each user’s mail or individual drives but what is unknown is how much data users are keeping on their machines or in collaborations tools and shared drives. With data collections for litigation or regulatory matters, the legal team has access to this information. This information can help IT understand its storage needs and put in place technologies to minimize storage per person thereby saving on storage costs.
   
   
3. Business Intelligence from Active Matters – This one isn’t a specific metric. Instead, this is more focused on the business intelligence that comes out of the legal department’s unique position as a reviewer of sets of documents. In litigation or investigations, the legal department has access to a cross section of data that the business doesn’t pull together in the regular course of business. Technology is now advanced enough to be able to provide business insights from this data that can be shared with the business as a whole.
   
   
   • Example #1: Artificial intelligence can be used to create compliance models that show correlations between expense reports, trade journals, and sales behavior to identify bad behaviors. Sharing these types of learnings from matters can open up discussions among executives as to which learnings deserve a deeper dive. As an aside, you could also imagine a scenario where this same logic can also be used inversely – when combined with revenue it could identify effective sales behaviors – although this is something that would be a bigger lift and I would expect the sales department to drive this type of work.
     
     
   • Example #2: The amount of duplicative data is a common metric reported in litigations or investigations. Sharing this with your IT team can highlight an easy storage win and legal can help craft a plan of how to attack duplicative data thereby leading to lower storage costs.

I would be remiss if I didn’t mention that there are opportunities for the legal department in these metrics as well. By using these metrics, as well as the artificial intelligence mentioned above, legal operations can resource plan and drive savings within the legal department. For example, the number of NDAs and sales contracts can inform staffing. Technology can identify contracts or other documents that are repetitive and automate the handling of those documents. Within litigation and investigations, technology can identify objectively non-responsive data so that it does not need to be collected as well as identify sources that are lower risk which don’t require outside counsel review and previously collected data that can be re-used.

I hope that with the above metrics, you’re able to participate in some great business discussions and show how your legal department is not only effective in its own right but how integral a unit it is to driving the core business.

To discuss this topic more, please feel free to reach out to me at DJones@lighthouseglobal.com.

I recently had the privilege of moderating a panel with four legal operations superstars from leading organizations. On the panel were Mark Smolik (GC of DHL Americas), Preston McGowan (Chief Transformation Officer at Goldberg Segalla), Kevin Iredell (Chief Marketing Officer at Lowenstein Sandler) and Chris Ende (Chief Value Officer at Goulston and Storrs).

The central question examined by the panel was whether selection and management of outside counsel should be more relationship-based or more based on “hard” legal ops criteria where success is defined more by hitting objective performance metrics rather than the strength of personal relationships.

The panelists agreed that “pure” relationship-based management is no longer enough. Relationships will always have a place, but there are stakeholders in client organizations (think CFO’s) that are not party to those personal relationships. Those stakeholders want to see objective data that proves that what they are getting is not nepotism, but good quality at a good price. Law firms that think they can ignore the legal ops movement and get by on the strength of personal relationships will lose those relationships. By the same token, GC’s and other top corporate law department folks who do not want to undergo the temporary pain of fixing broken or nonexistent processes will be replaced by people who are on board with legal ops and open to change.

Analytics set firms apart

The above points were underscored by the example one of our panelists gave of an RFP for an important piece of litigation. The company’s tried and true law firms responded with more or less boilerplate responses about how experienced they were, their sterling reputations, etc. However, there was one firm that, rather than bragging about how awesome it was, proved it. Their RFP response was a detailed analysis of the present litigation together with a nationwide analysis of all similar litigation against the company, the judges and plaintiff’s attorneys involved, the status of those cases, and a recommendation of how to proceed with the present case based on that information. When the GC read the response, he instantly knew this was the firm he was going to use.

In the new legal ops-based world, that is the kind of demonstrated operational competence that is going to win work. The panelists, some of the most distinguished names in legal operations from both the law firm and corporate sides, underscored this idea repeatedly by making remarks like the following:

• I am going to hire you because you’ve proven to me using data that you are the best organization to solve my problem, not because you bought me Super Bowl tickets.
• Do not think you are going to get work from my organization because of your legal expertise. Legal expertise is table stakes. I want to hear about things like how you manage to budget, how you use technology, and how you realize diversity.
• Even though I value the personal relationship between us as inside and outside counsel, the reality of today’s marketplace is in five years I may be working somewhere else and so might you. So part of my job is to build a relationship between our two companies so they can continue benefitting each other without a hiccup if either or both of us move on.

Augmenting, not replacing, relationships

From the above, one might conclude, as some legal procurement professionals prematurely did a couple years ago, that “relationships are dead.” But our panelists made it clear that that way of thinking was dead on arrival. Trust matters, just like it always did. History matters. Liking another human being matters. Legal ops hasn’t changed any of that and isn’t really trying to.

In fact, our panelists described the concept of legal ops “vs.” relationship-based management as a false dichotomy. Legal ops discipline, rather than taking away from relationships, is transforming them by putting them into a structure where third parties can see that they are actual businesslike relationships and not just cronyism. Just as law firms who don’t get legal ops will lose client relationships, legal ops folks who take a hardcore “procurement”-type approach will lose law firm relationships when those law firms come to feel they are not being treated as trusted advisors but as commodities. They will take their talents elsewhere.

In conclusion, it’s not relationships VS. structure. It’s relationships AND structure. Human warmth AND process/technology. That is what modern law practice looks like.

We’ve met with more than 50 clients in the past 12 months and have enjoyed a front seat to the transformation happening across legal departments. Our meetings have reinforced that CLOC’s 12 core competencies are not stagnant and continue to evolve in their application and impact. Here is a taste of what we are seeing you all accomplish. You can use these to plan your next project, benchmark with your colleagues, and to continue to show the value that you bring to your legal departments and companies.

Financial Management: This has evolved into so much more than simply reporting on spend or managing to the budget. Legal departments are overlaying spend against key objectives of the company to ensure that the allocation of legal resources aligns with the strategic priorities of the company.

Vendor Management: We started with preferred vendors and negotiating favorable pricing. Legal departments are working with vendors to solve common challenges in technology, ediscovery, and more. They are also asking vendors for data dashboarding to spot trends and inform future action.

Cross-Functional Alignment: Legal operations roles are often filled with business professionals from within the company, including finance, products and IT. These hires bring with them relationships and institutional know-how, and allow companies to repurpose people, process, and technology used in the business for use in the legal department.

Technology & Process Support: Legal operations is changing the culture of legal departments by driving the adoption of technology and incorporating process-driven workflows into serving the business.

Service Delivery & Alternative Support Models: This is not just about insourcing versus outsourcing. It is about right sourcing the work to ensure that tasks are assigned to the right resource. This allows everyone on the team to focus on the high-impact and high-value work. Legal operations professionals are shining a light on churn and helping legal departments to stop doing tasks that don’t bring value.

Organizational Design, Support & Management: Legal operations departments are no longer behind the scenes. The groups are front and center within legal departments and the business. Legal operations professionals are increasingly leading pitch meetings, panel selection, fee negotiations, and outside counsel evaluations, and have more optics into organizational changes impacting their legal departments.

Communications: Together with their GCs, legal operations departments are helping accelerate change and are creating innovation fluency about the company’s business and legal industry. At legal department meetings, they are highlighting how technology is transforming their business, mapping legal goals to innovation objectives of the business, and are training on skills core to legal operations. At legal department retreats, they are changing the curriculum to include design thinking sessions, technology updates, and data metrics discussions. They are also bringing together outside counsel to share innovation success stories so that they may be replicated across all firms supporting the company.

Data Analytics: Using data, legal operations is changing the conversation about value. What is the business goal for the matter? How will success be measured? Are legal resources aligned to the business’s strategies? Legal operations departments are driving the creation of dashboards to spot trends, inform future action, and identify missed opportunities. They are also capturing knowledge about the performance and use of their outside counsel. This includes tracking who at what firms have done work in particular areas for the company, working toward a future where legal operations can provide predictive analytics on who is best suited to solve a specific problem for the business.

Litigation Support & IP Management: Legal departments are partnering with IT to bring even more of the ediscovery lifecycle in-house. Teams from information security, IT, internal investigations, and legal operations are working together to show how particular license offerings can reduce spend exponentially. They are using advanced features to identify risk before litigation and are reducing their digital footprint with their vendors by 50 to 90%.

Knowledge Management: In response to the needs of the business, especially during periods of rapid growth, legal operations departments are creating on-demand, self-service legal solutions for their internal customers. To do so, they scope what the business needs, how much of the need requires interaction with a lawyer, and what portion can be solved with automation and standardization. These solutions are driven by playbooks, AI and legal bots.

Information Governance & Records Management: Legal operations departments are creating programs that provide the business better access to information so that it can harness data for a strategic advantage and, in some cases, monetize that data. They are driving the creation of policy and procedure that is practical and enhances service to the business. They are also complying with emerging data privacy laws and protecting against data breach and the associated reputational damage.

Strategic Planning: Legal operations leaders are reporting directly to their general counsel and are helping set the strategy and goals for the legal department. They increasingly have a seat at the table and are measuring their achievement and performance against the established goals for the legal department.

The Vital Role Of Reporting For Legal Operations

Easy to use, clear and comprehensive reporting functionality has evolved from an added bonus to a must-have requirement for corporate legal teams when evaluating legal technology. The pressure on legal operations to demonstrate improvements and return has led to reporting features being almost as important as the fundamental benefits of the software tool in use.

Where legal operations is missing a trick is when data analysis from a particular tool is used in isolation. To use legal spend management software as an example, out-of-the-box spend reports and user-friendly analytics wizards allow legal departments to monitor work in progress, measure actual spend, and forecast budgets accurately.

That’s not to say legal spend data isn’t useful on its own. On the contrary, legal operations teams use spend data to make better matter resourcing decisions, negotiate discounts, get more value from firms, and hire more internal staff.

Combining Legal Data To Better Manage Risk

Where the in-house legal function is working closely and in partnership with the business units across the company, the range of information and data it holds will often put it in a unique position within the organisation. This data not only supports an awareness of what the business is doing but also forms part of the historic corporate knowledge that is built up over the years; such as previous contracts, decisions and outcomes. Historically, this information was not held in a structured electronic format, which meant any form of data and trend analysis, as well as knowledge management, was extremely manual and time consuming.

With the increase in legal matter management and legal spend management solutions as well as better document search and retrieval there is a growing need and clamour for data processing, data analysis and knowledge management. Capturing basic contract terms and/or details of legal opinions in a matter management system provides a very simple knowledge management tool and a rich source of data. Other tools that will help provide data are any solutions used to create standard contracts, access to benchmark reports, as well as internal resources (finance reports etc.).

Those legal operations teams that are seeing the most value are those that combine data from various technology tools to take their strategic input to the next level. One such area is management and mitigation of risk.

A legal operations team that is carrying out data analysis on all the data at its disposal will be in a position to identify trends that will lead to a range of questions that should spark further debate, such as;

• How much work is done “in-house” versus being sent externally?
• Are the correct processes being followed?
• Are we getting the right level of technical support for the type of transaction?
• Is there a growth in the types of transactions either at a business unit or country level?
• Is one firm being used more than others for similar types of transaction from a particular part of the business / legal team?
• How does the firm perform against others for similar types of transaction both on price and performance?
• How does the business differ to market peers?
• What is required to manage a specific regulatory change?
• Is the in-house legal function and its staff compliant with the relevant regulatory authority guidelines, such as the Solicitor Regulation Authority (SRA) etc.?

Below are some examples of how the answers to these questions could demonstrate a change in the risk profile and risk appetite.

By monitoring the volumes of work, what type of work is being done, who is doing it (in-house lawyers, external lawyers or a combination of both), the time taken, the costs etc. the legal operations teams will be better placed to advise on the organisational design, support and management of the legal function as well as the risk profile and the risk appetite of the legal function and in certain cases, the supported businesses.

A better understanding of what is being done and by whom, will help ensure that the legal function is properly resourced, is not taking on activities that are better placed in other parts of the organisation, and that the appropriate processes and procedures are in place and controls are being administered. For the legal function and its in-house staff, this might include ensuring that they are complying with the rules of the governing bodies such as the SRA, NALP, the Federal Bar Association in Germany etc.

Spotting an uplift in a particular type of work (such as litigation) or activity (such as drafting) could indicate a lack of understanding of the contract terms within the business front line areas who are requesting contract changes, bad working practices, poor standard documentation, or changes in the markets and/or economic climate (each of which also presents opportunities). Legal operations teams can help to mitigate these by highlighting trends and ensuring that the legal function;

• Delivers better training and communication to the business and legal function
• Carries out regular reviews of standard documentation,
• Supports reviews of policies, practices and procedures, and
• Develops a better understanding of the market.

Consistent use of one firm over others should provoke questions as to why that firm is being used. It may be that they are very competitive on price or they have the appropriate skill sets. Fixed fee arrangements are increasingly popular, but if the firm is not providing any supporting timekeeper activity data, it becomes difficult to know whether the firm is providing the right level of technical support and whether the fee structure is still fair and balanced. As part of the legal operations team’s vendor management programme, they should ensure that that firms are maintaining the right level of skill sets for the work they are being asked to undertake, as this will help mitigate legal risk caused by a lack of technical knowledge and support. For the more complex deals it would be normal to see more senior lawyers engaged with the matter.

With the increase in cyber security and greater scrutiny by regulators who are starting to require more rapid, robust, evidence-based reporting, the need for greater use of these solutions is becoming more prevalent to avoid data being compromised and fines being levied. Understanding what data has been passed to which supplier helps ensure that those suppliers have appropriate controls in place to manage that information in line with Information Governance and Records Management policies and procedures and that any breaches promptly reported.

It is also worth noting that a lack of data in the legal systems is equally as insightful as it will show where parts of the business and/or legal function are not following agreed practices and procedures. Furthermore, using “gap” reports in the legal systems helps identify problems within the data that will distort any data analysis.

For legal operations teams to deliver process improvements and efficiencies, ensure compliance with policies and regulatory requirements, optimise their spend and manage risk, they should analyse the data that is available to them from all the data sources at their disposal. As they start to analyse all their data, instead of analysing point solution data in isolation, they will start to discover new trends and insights not previously seen or understood.

About BusyLamp

Founded by a team of lawyers and powered by frustrated users of endless spreadsheets and clunky legacy legal tech systems, BusyLamp is the leading SaaS alternative for efficient legal operations. We help legal departments save time, significantly reduce costs, and collaborate more effectively with in-house and outside counsel by simplifying and improving their legal processes. Legal departments leverage our end-to-end solution to improve visibility and efficiency from pitch to completion. Become a member of the BusyLamp user family and take advantage of our sophisticated sourcing, fee tracking, e-billing, matter management and vendor management features, all with powerful reporting and analytics.

www.BusyLamp.com

You can have any color you want, as long as it’s black. Ford’s Model T was a classic example of a market-creating blue ocean strategy that allows companies to unlock new demand. For centuries, people were content with horse and buggy until Ford showed people what they were missing.

Currently, some in-house lawyers fear the idea of having the outside counsel engagement process wrapped up into the auspices of their enterprise’s competitive bidding policies. However, they desire all the benefits that competitive bidding provides. Namely, driving for more competitive rates, obtaining cost predictability, and gathering qualitative insights into how the firms plan to strategically approach the engagement. So, why the disconnect?

“I think that it is a good concept and could work well for simple, repeatable cases, but all my cases are really complex commercial litigation matters so I don’t think an RFP really makes sense for me,” If only I had a dollar for each time I heard that excuse….

Today, the role of legal operations has been more frequently tasked with finding opportunities to run RFPs and this task can be challenged by push-back from managing attorneys. While there are many use cases for RFPs that include establishing a panel of firms company-wide or by practice area to properly align the selection of firms with their greatest area of expertise, among other considerations, bidding to select firms for a specific case is less common. There are many common misconceptions amongst managing attorneys about competitive bidding aka RFPs aka Sourcing on a matter-by-matter basis. The most frequently cited misunderstanding is that RFPs and competitive sourcing only work for commoditized work and that the greater the risk or complexity within the case or project, the less workable the case is for an RFP. However, RFPs are a great means for selecting firms in complex litigation matters for 3 key reasons:

1. More Competition and Firms’ Desire to Work Big Cases

The first reason complex litigation matters are ideal candidates for RFPs is that they are big and sexy… No, seriously. The complex nature of the work necessarily means that there is likely to be a greater amount of work involved. With more revenue potential for the firms, there is a greater incentive for firms to provide added discounts in order to earn the selection. Also, firms want the assignment so they can tout high-profile case outcomes to other clients. Therefore, a competitive selection process is more likely to be fruitful in these cases than in simple projects because firms want the business more and are more willing to lower their fees to win the assignment. This can lead to multi-million-dollar savings for the client in a single RFP. Clients completely lose out on these savings by sticking to the status quo – simply selecting their panel firms at preexisting, “discounted” rates.

2. RFPs can account for ambiguity and define price in case of change

Projects don’t have to be simplistic in their scopes of work to be candidates for an RFP. RFPs can be set up in a way where you account for the ambiguity that comes with complex litigation matters. One of the reasons that hourly billing is so pervasive in the legal industry is because of the ever-changing nature of litigation matters, whose timelines are heavily dependent on external variables – such as the whims of the judge. For this reason, the industry has (despite all its proclamations to the contrary) resisted AFAs. It’s just easier to get the firm started and have them bill you at what you’re told is ‘competitive’ hourly rates (but do not really know for sure?). However, the rate is only half the equation. And negotiating an hourly rate can be like squeezing the center of a tube of toothpaste – as the rate decreases, the firm can easily make up the difference on the backend by billing more hours.

Selecting a firm immediately without requiring the firm to submit a fixed fee proposal amongst competing firms causes the client to lose all leverage. Once the firm is engaged and the longer they are engaged, the less leverage the client has to negotiate a lower rate or to implement an AFA later on. That’s because firms know that the learning curve to bring in a new firm would be costly to the client. For this reason, its critical to run an RFP at the start of a new matter or project so that you can obtain a fixed fee proposal that provides price predictability for the duration of the case. In contrast, hourly budgets are horribly inaccurate and provide zero price predictability. With a fixed fee proposal obtained in an RFP, clients can get the total price while defining the types of changes that would trigger a “material deviation” (for example – a 30% increase or decrease in the number of these 5 key activities). After defining these triggers, the parties can also agree on how much it will cost to add additional activities into the scope (i.e. $100,000 for each additional motion to dismiss) and how much the total will be reduced if they are removed from scope. In this way, you can use the RFP process to obtain overall price predictability whilst also ensuring that you have an easy mechanism for making adjustments.

3. RFPs allow clients to set expectations for staffing and strategy upfront

A third reason RFPs are great for selecting firms in complex litigation matters is that they help the client set expectations early on. Expectations can be defined in the RFP in several areas such as a client’s preferred staffing mix, definition of a successful outcome, and preferred vendors and billing guidelines. Further, clients can define the level of seniority that it prefers to handle various tasks (for example – no first- or second-year associates on expert depositions). This allows the firms to provide pricing based on common assumptions so that the client can truly compare apples-to-apples total fee proposals. Also, it ensures that the client has set the right expectations before the work begins, which allows them to avoid time-consuming and difficult conversations that might occur during hourly invoice review.

You can have any AFA you want, as long as it’s competitively bid

Although the terminology, “Request for Proposal,” comes from procurement, where the purchase of commodities used to be the department’s only charter, the process is something that greatly benefits corporate law departments. An RFP doesn’t have to be a 60-page, lengthy exercise that is designed to evaluate whether a company “qualifies.” It can be a short 5-10 question template with pricing obtained at the phase and/or activity level that is sent only to panel law firms that the client has already ‘pre-qualified’. This streamlined process can then be replicated on a matter-by-matter basis such that panel law firms get into a rhythm of bidding for each case and can provide their best price during periods when they have their greatest capacity – creating a win-win scenario for both the firm and the client. By dispelling the misconceptions about the proper use of RFPs, the legal industry can move away from the misery-induced billable hour and towards a fair, transparent selection process. Clients can let the market dictate the true price of the work. This would allow them to spend less time worrying over hourly rate hikes and invoice review while achieving the budget predictability that CFOs have been asking of their GCs for decades.

About PERSUIT

PERSUIT™ is a Software as a Service (“SaaS”) company specializing in legal services sourcing technology. Founded in early 2016 by Jim Delkousis (a former BigLaw partner), PERSUIT was designed to be easy enough for in-house attorneys and law firms to use with little to no training. The tool is self-service enabled and is an out-of-the box, cloud-based software application, providing corporate law department attorneys the ability to launch Requests for Proposals (RFPs), Requests for Information (RFIs), Hourly Rate Information Requests, Panel Counsel Inquiries, and Alternative Fee Arrangements (AFAs). Each request type can be set up to drive price competition amongst participating law firms such that true market price is achieved. PERSUIT is reinventing the way companies engage with outside counsel with a mission to Kill the Bill(able) hour in favor of outcome and value-based fixed and certain pricing models. Have questions? Reach out to David@persuit.com or visit our website at https://persuit.com.