July 2020 |
Chase D’Agostino, AVP of Corporate Solutions & Strategic Growth, QuisLex
Andy Banquer, Vice President, Corporate Solutions, QuisLex
What is the right strategic approach for a legal department to optimize its return on investment for the resources it deploys to render legal services? Of course, there are many ways to get good results, but after helping many corporations navigate their way to a more effective model, here are some lessons learned along the way.
Step 1: Conduct an Assessment
Start by analyzing the work currently performed by the legal department. This assessment would include volumes, strategic importance and complexity level of the work, while also looking at the level of skill and effort required to complete it. Track the level of effort spent by different resources (in-house lawyers, contract specialists, legal service providers, external counsel) and the cost of providing support. Though in-house counsel shudder at the prospect of tracking time, even a few weeks of time tracking can provide meaningful data. Outside counsel and legal service providers should already be tracking and categorizing time by task or project.
Map out the processes currently used to complete legal work, starting from requests for new work, where and how technology is used, what resources are involved in the process and what tasks they are undertaking. Look at the current state of content (templates, playbooks, policies, processes and governance), as well as the data produced and how that data is used.
Complete this exercise by practice area, working with an internal subject matter expert that knows the ins and outs of that group. For commercial work, consider a list of tasks like this:
- Transactional support
- Contract interpretations, terminations, dispute resolution
- Review of marketing and customer-facing materials
- Advise and train on relevant legal landscape and its impact on business
- Development/maintenance of contracting templates, guides, tools
- Risk counseling/strategic guidance
- Administrative and miscellaneous activities
It’s also important to understand the priorities of the legal department and the problems it seeks to solve. If a legal department must cut costs by X% within the next few years, a deeper dive might show that there are other challenges besides costs that need to be solved. These typically include:
- Senior resources spending too much time on routine, repetitive work
- Internal teams being unable to keep up with spikes in volume, particularly at end of quarter or end of year
- Lack of knowledge management, resulting in failure to locate relevant content or precedent and recreation of work
- Internal legal resources stepping in to do the work of other company functions
- Lack of consistency across groups or geographies, creating poor risk and account management
Step 2: Determine In-house vs. Outsource
With a deeper understanding of the department’s current practices, challenges and costs, envision a new sourcing model that is right-scoped, right-staffed and optimally facilitated by technology, processes and infrastructure. But also consider company culture, tolerance for change and budget realties.
First, determine what should and should not be in scope (e.g., is legal performing services that should be handled by other departments or functions?). Start by looking for easier wins with the following characteristics:
- Larger volumes and repeatable tasks, which are performed or managed by higher-cost resources and could benefit from more efficient global processes
- Opportunity to drive value with technology
- Opportunity to right-source work if there were more robust playbooks and templates
Examine where the legal department is currently under- or overstaffed, more specifically:
- For areas underserved, what type of resources should fill the gaps?
- For areas overserved, can current resources be redeployed elsewhere?
- Are there tools that enable automated solutions? If not, what tools are needed?
- What are the right experience levels required to provide a particular service (e.g., what needs to stay in-house; what needs specific expertise; what can be easily outsourced or automated)? See Table 1 below for an example of right-sourcing transactional work.
TABLE 1: SAMPLE RESOURCE ALLOCATION MATRIX FOR TRANSACTIONAL WORK
Category 1: Automation and self-help. Escalations handled by ALSPs or lower-cost resources.
Category 2: A combination of automation, AI and ALSPs or lower-cost internal resources.
Category 3: Mostly ALSPs with AI to for preliminary tasks and escalations to in-house counsel.
Category 4: Mostly in-house resources with supplemental assistance from AI and ALSPs for preliminary tasks.
Category 5: Senior in-house counsel or outside counsel if specialty expertise is required.
- Determine if the underlying infrastructure adequately supports the work. Is there a need to improve processes, templates, playbooks or governance?
- Determine if technology tools adequately meet needs. What are the gaps and pain points? Investigate costs and timelines needed to bring tools to a desired level of functionality, including replacement costs.
- Then map out an implementation plan that will:
- Properly scope services and move out-of-scope services back to the responsible function
- Right-staff in-scope work
- Enhance the infrastructure
- Add technology capabilities
Step 3: Analyze Costs and Timing
While you can find great results, and quickly, with easy wins, if the desire is for more holistic change across the department, don’t expect to get there right away. It can take at least six months to reach a steady state with improved efficiency and decreasing annual cost.
When mapping a desired future state, gather relevant cost information associated with implementation. Determine how those costs can be allocated over time given budget constraints, change tolerance and competing priorities. Map out those costs with a horizon of 3-5 years. See the sample implementation plans in Table 2 below, which show representative cost and cost savings based on the pace and scope of implementation. If the department can allocate more budget upfront, change can happen more quickly and savings will be larger. If the budget allows for only a gradual or partial implementation, savings will be smaller.
In this very simplistic example, we’ve assumed current annual department costs are $10M, including staffing, external providers and technology tools. New model implementation costs are $2M, including staffing transitions, infrastructure and content improvement and tech upgrades. Full implementation will achieve a 30% reduction in costs within a year. In the Aggressive example, this $2M spend happens in year 1, whereas in the Gradual example, $500K is allocated over four years.
TABLE 2: SAMPLE IMPLEMENTATION COST SAVINGS
Step 4: Develop Metrics
Measures of success should flow from the department’s strategic objectives. Starting from those objectives, examine the following:
- What does success look like? What are key performance indicators?
- What specific initiatives must be undertaken?
- How will teams measure the impact of those initiatives – what metrics are relevant?
- What data is needed to measure progress? Are there baselines to compare against?
- How will teams capture and analyze relevant data and report on progress?
- How will gaps in metrics be addressed?
Step 5: Prioritize Change Management
Change management is vital to success. Good change management requires planning, leadership and continuous attention, although it is often overlooked or undervalued. Don’t let change management be the last part of a desired future state; make it one of the first areas addressed.
- Create a dedicated transition team.
- Develop transition and communication plans, FAQs and other training.
- Bring key stakeholders into transition and communication planning.
- Create a clear governance model that establishes roles and responsibilities.
- Assure commitment at senior leadership level.
- Host town halls or communication sessions to bring everyone impacted into the fold.
- Be honest and transparent – explain why the changes are being made, what success looks like and the expected impact on personnel.
- Enlist internal champions who can advocate at the operational level.
- Continuous Attention
- Continue to communicate during transition and implementation.
- Check in with managers to identify hurdles and reinforce expectations.
- Be responsive to concerns, feedback, questions.
For more information about outsourcing, schedule a free consultation and get any of your questions answered: https://calendly.com/chase-dagostino.