How to build a resilient, value-adding legal function

General counsel clients are facing unprecedented levels of change in every aspect of their work. This is borne out by our newly published global survey, which finds that legal functions worldwide are under intensifying pressure from boards, CEOs and CFOs to operate differently. In response, law department leaders are striving to reinvent their operating models and align more closely with C-suite priorities. 

These complex challenges for today’s GCs may feel daunting, but they also present significant opportunities to reimagine the legal function and play a more strategic, value-adding role. Our conversations with clients, together with our survey findings, show that legal transformation is a priority in most organisations. There is compelling evidence that the ability to lead change will be a defining quality of the successful GC in the 2020s. 

The leadership agenda

The UK findings from our worldwide survey of over 1,000 law department leaders are consistent not only with the global picture, but also with the C-suite views highlighted in our global CEO Imperative Survey 2021. As we emerge from the pandemic into a likely K-shaped recovery, where some will thrive and others will fight for survival, CEOs and boards are having to map out radically different strategies and invest in transformation. Yet, only 44% of UK law department leaders say their day-to-day work is aligned with the corporate strategy, and only half believe their function is effective at adding value to the business. When it comes to transformation, 86% of UK companies report that they are making changes to legal operations, but 98% cite difficulties with securing budget for necessary technology investments. 

Legal functions are clearly struggling to get the support they need for investment. There could be many reasons for this – competing investment demands, lower level of understanding of the function and its role or, in some cases, just a historic perception issue – but whatever the reason, more investment needs to be secured in order to deliver the transformation needed. This does not need to be the in-house counsel’s future. In many organisations, the combined disruptions from Brexit and COVID-19 have thrust GCs into the executive spotlight, providing them with a much more influential role and an opportunity to demonstrate the legal function’s value. 

Looking ahead, the legal department clearly has a continuing role, not only in protecting the business from future crises, but also in realising the strategic agenda. The pandemic has prompted a general reimagining of what happens in businesses and a more nuanced sense of where value is derived, raising existential questions about corporate purpose and values, accelerating the environmental, social and corporate governance (ESG) agenda, and sharpening the focus on employee wellbeing, diversity and inclusion. These are all areas where the legal function can contribute significantly to long-term value. 

To cement their place among the top decision-makers, GCs now need to demonstrate they are adding value in new ways closely aligned with the business’s strategy and purpose. They must maintain the rigour, objectivity and independence that come with their profession, but at the same time adopt a commercial mindset, understand the drivers for change and argue a compelling business case for investment in the legal function.

Key areas for change 

All of these findings call for transformation – a term we don’t use lightly. This is not just about improving operating efficiencies and effectiveness. The times we live in call for fundamental changes to the role the legal function plays in the business, its nature and ways of working. 

The impact on individuals in the legal team will be huge – and we believe that a key area of focus should be on people, culture and the talent proposition. Our survey shows that in-sourcing continues to be seen by many as an opportunity to reduce costs, but with 53% of GCs reporting that employee morale has suffered due to increasing volumes of low-value work, we question whether this is sustainable. To attract and retain talent, the legal function must provide interesting, high-value work; a cohesive, engaged team, and the satisfaction gained from delivering on the company’s purpose and strategy.

Another focus area should be the use of – and relationship with – external counsel. Our survey finds that more than half of legal departments want to reduce their spend on law firms, and that around three-quarters are now using ALSPs in areas, such as contract management and employment law. Almost a quarter are using ALSPs extensively – and it’s noteworthy that these departments are eight times more likely to say they want to expand their use. As well as an enhanced ability to manage risk, the use of ALSPs brings significant cost benefits. In contrast, the potential for cost savings on traditional legal advisory services is relatively low: only 11% of law department leaders believe that negotiating better rates presents significant cost-saving opportunities.

The transformation journey

Against this background, what do GCs need to do?

• As in any journey, they need to be clear about where they want to get to. They must paint a picture of the destination, then persuade their people and stakeholders to go there with them. Defining what good looks like will be critical: a legal function that understands and protects value, operates as a strategic partner and business enabler, and is a resilient, flexible and efficient operation. Also, setting out ‘how we will know when we have got there’ – what are the goals, the key performance indicators, the benefits? These must be woven into a compelling business case and used to secure vital investment, resource, and buy-in from key stakeholders. 
• Develop a practical roadmap: this is not a quick fix or a six-month project but an ongoing, potentially complex, multi-year programme of change.
• Finally, they need to find a travelling partner who has the knowledge and experience to support them at every stage of the journey. 

A clear vision of the law department of the future is taking shape: value-adding, responsive, technology-enabled, and closely aligned with strategy and purpose. Creating such an organisation should be the direction of travel for every GC. The time to embark is today.