Legal operating model
Legal operating model: the operational structure that allows an organization to achieve its objectives
Starting with technology is not the answer
In the current environment and given the amount of technology focused on the legal sector, it is not surprising that many GCs and their teams default to the belief that by adopting artificial intelligence, robotic process automation or data analytics they will be able to cope with the speed of change and increased demands that are placed on the in-house Legal function by other parts of the organization, their owners and regulators, and the general public. However, technology is only one component of the legal operating model, as illustrated here:
Technology is just one of six “enablers” that allow Legal to deliver the legal services and tasks that the organization demands, and it cannot be considered in isolation from the people who will use the technology – whether in-house or externally – the processes they perform, the matters they manage, the information that’s reported to management on Legal’s performance and the risks that are mitigated through the department’s work. A team that decides to implement new technology without considering these adjacent functions and dependencies may achieve efficiencies, but they also run the risk of taking the department in the wrong direction, albeit more quickly!
Strategy trumps all
Although it is tempting – and more straightforward – to focus on one or more of the enablers, it is putting the cart before the horse. In order to evaluate where resources should be targeted, the GC first needs to conclude on an operating strategy for the department which is aligned with the strategy of the organization as a whole. This allows the GC to put in place a governance framework to support the strategic objectives and determine roles and responsibilities. This encompasses the role of the Legal function in relation to the rest of the organization, and the responsibilities of the individuals within the department.
Creating a legal operating strategy
The process of creating an operating strategy for the legal department is not something to rush; stepping back requires both time and head space from those involved.
What does it look like?
The right answer to what strategy to adopt is dependent on the overall strategy and risk appetite of the organisation with which the transformed legal function’s strategy and risk appetite need to be aligned. It will also be a tactical response to the expectations of many stakeholders beyond those employed within the department. These include the board to which the GC reports, other functions within the organisation who rely on Legal for the fulfilment of tasks and the delivery of services, and can potentially include the organisation’s own customers and strategic partners. For example, if there is an underlying imperative to achieve efficiency gains or focus on risks and controls this will have a significant impact on the direction the strategy takes as it is developed. If the role or mandate of the GC is changing this too may impact the strategy. Some organizations decide to have no legal team and outsource the fulfilment of their legal service needs entirely which is in itself one type of legal operating model, albeit entirely outsourced.
Who does what and where do they do it?
The operating strategy will also depend on the extent to which the legal tasks that the company has to deliver sit within Legal or within other departments such as Finance and HR, and whether or not these other departments report directly to, have a dotted line into, or are independent from the legal function. It is obviously possible that in evaluating the operating strategy of the department, some tasks currently delivered by legal will be reassigned to other departments (especially if they don’t have a legal component) or tasks which sit elsewhere will be brought within the remit of the legal team.
The right people in the right place: people and sourcing
Depending on the new operating strategy, the department’s people may need to be re-deployed, re-tasked or re-skilled. There might be a possibility of moving away from specialisms to a more fungible legal resource pool. This could also involve adopting alternative resourcing strategies such as a group of skilled contractors to draw upon at times of increased activity such as an acquisition. Some law firms have already adopted this approach and it suits those lawyers who prefer a degree of flexibility beyond what is possible from a traditional career path. Workforce-on-demand organizations have sprung up to meet this need for additional short term resources.
Where the people performing the legal tasks and services sit will depend on the strategy, which is in turn determined by the needs and shape of the organization as a whole. This could be one head office team for a highly centralized group operating in one sector or a hub and spoke model if the company is dispersed and diversified. Although offshoring through SSCs is well-established in the finance domain, Legal has proved slow in adopting the model. This may be a function of concerns over control and security of data, or arise from the belief that in order to perform legal work in country A, you need to be qualified in that country’s legal system. However, a combination of technology and carefully developed scripts may allow for more routine tasks to be moved to a SSC, freeing up lawyers’ time to focus on the technically complex or nuanced advisory work such as litigation tactics. Over time, as the level of sophistication in the SSC increases they may become centres of excellence for particular activities.
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Chris de Jong
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