As one of North America’s legal operations (legal ops) veterans, Richard Brzakala has seen big changes in the structure of corporate legal functions.
I was almost a unicorn when I first started working in legal operations 20 years ago. The concept of operations, though well-defined in other business functions, was not well understood among legal counsel. Only the largest and most sophisticated legal departments were using e-billing products or matter management, and only the most far-sighted GCs thought of their function as a set of systems and processes that could be improved by careful design.
Today, there are armies of people working in legal ops, supporting GCs in their attempts to improve the efficiency and effectiveness of the legal function. A big reason for that shift is that legal teams have come under increasing pressure to constrain costs and avoid unnecessary expenditure. Improving efficiency has become a second mandate of the GC role, one that sits alongside managing purely legal matters on the list of priorities for business. And so, inevitably, legal ops professionals have entered North American corporate legal functions, tasked with finding the latest and greatest things in the marketplace that can help improve processes.
The rise of legal ops has been accompanied by a rise in legal technology. The increasing sophistication of legal technology means that data is now starting to speak to us and reveal patterns that were previously hidden. For example, by leveraging data and information from billing systems, legal teams are better able to understand the inefficiencies in a process.
The marketplace for legal tech has matured and evolved so rapidly that it is becoming all but impossible for busy general counsel to keep up with developments. Covid has been a huge catalyst, increasing the speed with which we are moving into a virtual workplace, but the wind was already in the sails of the innovators, driving greater choice and competition in the space. What all of this means for corporate legal departments is far less clear, but there are some clear trends we can identify.
The changing relationship between clients and law firms has been spoken about at length, but the significance of this change is still not widely understood. It feels as if there is a revolution taking place in the legal services industry, but the evidence for this is not appearing where many expected to find it.
While there has been a general tendency among businesses to shrink their pool of external firms, the impact of this has played to the advantage of many of the market’s most dominant players. In a typical panel only a small number of firms are ever likely to be deemed key strategic partners. While it is true that corporate legal departments are paring down their panels and moving more of their strategic work to a smaller constituency of firms, the firms that survive are the ones that have historically handled big class actions or M&A deals on behalf of a client.
These firms have reached that almost utopian state where price is rarely an issue. Clients are not going to nickel and dime them on invoices because they are deemed to be delivering true value. When it comes to appointing these firms, particularly on bet-the-company matters, the board of directors is standing behind their GC. In short, there is absolutely no evidence that the traditional elite will be disrupted anytime soon.
The mid-tier law firm space is perhaps more interesting. Clearly, these firms have been hit hard by disruption to the market: competitive pricing has become extremely challenging in a market where transactional work has either abated or moved to alternative providers. Meeting growing client expectations around information security is also much more challenging for smaller firms, particularly as concerns over cyber risk and handling of information have come into the limelight recently. This alone could lead to a firm being delisted from a panel.
At the same time, these smaller firms have the potential to be more agile. They can be more receptive to new ways of working, which is an advantage in a world where clients want to collaborate with and learn from their providers. It can be easier to form that sort of chemistry with a smaller firm.
There is a greater awareness, certainly among legal ops, that a firm is more than its partners. We want to know who works on project management. All people bring value to the organisation, and as much as we like and respect managing partners, we also now want to know the wider firm. It’s a very much a symbiotic relationship, which is exactly how it should be. Like any relationship, both sides need to put in the effort to make it work, but the rewards can be hugely beneficial for both sides.