Like many professions, lawyers have the long held the belief that clients receive the most value when they can see the ‘whites of your eyes’. This belief might not be a problem if the world we operate in wasn’t changing so rapidly.
As the velocity of the competitive threats increases, CEOs recognise the key is to have an organizational design that is more nimble, flexible and efficient. To achieve this, they are increasingly devolving decision making from the central executive to the dispersed middle management, whist increasing scrutiny on the cost base of shared service functions.
This would be concerning enough. However, when combined with ever more complex organisations, and ever-greater regulatory expectations (that extend throughout the supply chain) the trend line becomes frightening.
It presents multiple problems for the legal function. Firstly, middle management is far more numerous than a small central executive and their dispersion across the organization makes them difficult and costly to serve in a traditional mode. Secondly, they are less likely to be sophisticated consumers of legal support and more likely to have a lower level of legal competency.
In other words this ‘diffusion’ of decision making creates Legal’s greatest risk: someone in your organization, who historically would never have been on Legal’s radar, is about to make a decision that will cause a catastrophic risk.
Recent research suggests only 31 percent of corporate middle managers who had a legal problem went to the legal department with the problem.
Some legal functions have been tempted to combat this by ‘clinging on harder’. Forcing all decisions through legal sign-off and, in the process, becoming a resented, overworked, chokepoint for the business.
Leading functions are pursuing a number of concurrent strategies to move with the times.
- 74% of UK General Counsel suggest they will increase investment in legal automation across the next two years. In doing this they are changing the way they deliver their services from one to one, to one to many. These technology enabled self service tools not only improve the responsiveness and efficiency of advice; research consistently demonstrates they increase client satisfaction. Supporting this, Plexus’ most popular automation tool has an Net Promoter Score that is 60% higher than the legal industry average.
- They are improving the design of their function from a largely unstructured central pool of lawyers to one that better mimics the locus of activity and disproportionally allocates resources to the areas in the business that pose the greatest risk to the organisational strategy.
- They are being more structured and disciplined about where they inject themselves into the decision making cycle. While some General Counsel still cling to the belief that in-house lawyers should be at the front end of strategy, and attend all stakeholder meetings, most recognise this is a luxury they can no longer afford. Instead they are identifying the key points in the decision making cycle and injecting themselves there.
- The time they are saving from the above strategies is being reinvested to ‘work on the business, not in the business’ – in the form of preventative lawyering. General Counsel rate preventative lawyering as the second greatest competency gap for their teams. It is seen by many as the high watermark of a shift from ‘reactive problem solver to a proactive business partner’.
The ultimate aim of these strategies is to move the focus of the function from ‘providing legal advice’ or ‘solving legal problems’ to what research group CEB calls increasing the organisations ‘Legal IQ’.
Legal IQ is defined as: managers’ propensity to understand and engage in legal issues; organizational visibility allowing the legal function to find relevant issues; and mechanisms that make it easy for clients to resolve them.
The macro trends that we mention in this article, are just like the lifestyle causes of heart disease and cancer. They don’t appear on our radar because the changes feel so incremental it is only with hindsight that we see them.
As Jack Welsh said, ‘the time to change is before you have to’.