Technology and innovation in the in-house context
This was first published in the second issue of the Modern Legal Practice by Globe Law and Business in July 2017.
Bjarne P Tellmann, Chief Legal Officer and General Counsel at Pearson, considers the place of technological change in the evolving role of the GC
I have been giving some thought to how general counsel (GCs) can improve business output, drive efficiency and manage risk in their departments through a better use of technology and innovation.
There are three key questions that need to be tackled when considering this issue:
First, what has changed in the last few years that makes it so compelling and necessary to consider the role that technology and innovation should play within the legal profession itself? Is it just a byproduct of the spurt of technology innovation we are seeing in society more generally? Or are there other, deeper, factors at play that are driving the quest for new solutions?
Secondly, if there are in fact broader, underlying challenges that make the focus on technology particularly relevant for the legal profession at this point in time, what needs to change going forward? How should we solve those underlying challenges and what role does technology play as part of the solution?
Thirdly, as we consider the specific role that technology and innovation can play in solving our problems, are there any broader ‘rules of the road’ that we should keep in mind?
What has changed?
Let us start by considering the changing landscape within the legal profession and ferret out the underlying problem we are trying to address. What has changed? In sum, the answer is ‘a lot’.
At the heart of all the change, at least as far as it concerns the GC, lies complexity.
The GC’s role has become one of the most complex, intense and challenging in the corporate world. Today’s GC must perform at a much higher level than before. What was once considered worldclass is now the baseline.
Two forces are driving this increase in the complexity of the GC’s role. First, changes in the broader macro-economic landscape are pressuring GCs to ‘do more with less’. Secondly, an unprecedented level of disruption is underway within the profession itself that is providing legal departments with both opportunity and risk. Let us consider each in turn.
There are four macroeconomic forces in particular which will be familiar to most GCs.
- regulatory expansion;
- risk convergence; and
- cost pressures.
We have witnessed an explosion of sorts in government regulation in recent years. In the United States, federal regulations grew from 9,745 to more than 178,277 pages between 1950 and 2015.1 Other nations have followed similar, if less dramatic, trajectories. This growth has been accompanied by greater enforcement and ever-harsher penalties.
All of this has imposed a burden on in-house lawyers, who must ensure compliance with a bewildering array of rules that are often inconsistent across – and sometimes even within – markets. At the same time, in-house teams are under growing pressure to preempt regulatory enforcement through robust and comprehensive compliance programmes.
Globalisation has also increased the challenge. Organisationally, virtually every major legal matter now has cross-border effects. Whether a commercial arrangement, a regulatory investigation or a contract dispute, problems rarely stay put. Steps in one market must be considered for potential impact elsewhere.
The legal, economic, reputational and political dimensions of risk are converging. In-house counsel must carefully weigh the non-legal implications of legally appropriate courses of action. The speed and impact of reputational harm in an era of social media are enormous. News on Twitter now travels faster than any legal response.
All of this comes at a time when corporate profits are declining. McKinsey has reported that the global corporate-profit pool, currently valued at approximately 10% of global GDP, may shrink to less than 8% by 2025, undoing in the next decade nearly all of the corporate gains made relative to the world economy over the past 30 years.2
This means increased cost pressure on legal departments, which must do more with less at a time when the range of matters they are expected to be involved in is increasing. A recent study by best practice technology company CEB indicates that the growth in demand for in-house legal services is expected to outstrip capacity by between 10% and 30% by 2020.3
To meet this increased demand for in-house legal services and remain sustainable, cost-cutting efforts must be sophisticated and nuanced. GCs need to shelve the financial machete that they used in the outside counsel consolidation process and learn to work with a scalpel, leveraging sophisticated procurement techniques that previously were only used by purchasing experts.
GCs have also had to become much more refined in how they communicate legal costs, risks and benefits to their business partners. In the same way that their business partners most frequently think in numbers, charts, trends and projections, so too increasingly must their lawyers if they are to hope to persuade them to give the legal department sufficient resources. This requires financial acumen, a deep understanding of the business, communication and persuasion skills, and political talent.
"Good ideas come about when people with radically different skills interact in a connected manner."
Disruption within the legal profession
In addition to external forces, the legal profession is being convulsed from within by twin revolutions. These are the Innovation Revolution and the Professional Convergence Revolution.
The Innovation Revolution
The Innovation Revolution is happening as a result of globalisation and technology, which are enabling in-house lawyers to break down and disaggregate their work into ever-smaller pieces,
farming each part out to a competing array of increasingly efficient providers, who offer many kinds of new solutions.
There are numerous examples. Indeed, Professor Richard Susskind identified 15 back in 2013, and new ones are arising all the time.4 Some of the weightiest examples include:
- Offshoring, which has made deep inroads, particularly at the ‘commodity’ end of the spectrum. Lawyers in India, South Africa and similar countries are doing a significant amount of the work that historically went to law firms in the United States and Europe. While offshore work used mainly to involve more basic work, such as document reviews and processing, it is increasingly moving up the food chain to include contract negotiation and transaction support.
- Near-shoring provides another alternative, particularly for mid-level work where clients may prefer attorneys in their own jurisdiction and time zone. These attorneys work offsite, mainly through third-party law firms or agencies that run such business ventures in lower-cost locations.
- Staffing involves the retention of highly qualified lawyers for non-permanent engagements in the legal department, often on a project-by-project basis. These lawyers are typically employed through alternative legal service providers that do not have the same high brick-and-mortar overheads of traditional law firms. Often, such lawyers may have been trained at the best schools and firms but have chosen to work independently, and on a project-by-project basis to best balance their work and personal lives. This provides a viable and cost-effective solution for longish but non-permanent demand spikes. The days are over of having to choose between eye-watering hourly rates for full-time associate support or the fixed costs of additional headcount. You can now have an experienced, specialist attorney embedded in your operation for weeks or months at reasonable cost – and only for as long as you have need.
- Subcontracting, is yet another solution that is gaining ground. Pieces of a transaction, investigation or dispute that are being handled internally or by a law firm may either be subcontracted to multiple, smaller law firms ornon-law firm specialists, such as e-discover legal process outsourcing firms which are able to undertake discovery work at a lower cost point, and more efficiently and effectively.
At the same time, technological advances, increasingly including artificial intelligence and networked technologies, are providing ever-more powerful tools that are transforming how we work.
These include a number of categories:
- Communication and productivity-enhancing tools have reduced the need for people to be based in centralised locations. Instead, they can operate from wherever they are most cost-effective or needed. Telecommuting also empowers people who might not have otherwise been as mobile, including single parents and the disabled, thereby boosting diversity.
- Self-help tools, allow in-house attorneys to independently pull top-notch off-the-shelf documentation providing basic introductory information and legal templates, leverage best practice and insights from numerous other companies, and conduct sophisticated legal research, all without going through outside counsel.
- Efficiency tools such as contract management, e-discovery and matter management systems provide powerful, innovative tools to perform cheaper, faster and better. Many of these tools are cloud-based, eliminating the need for significant up-front investment costs and harnessing enormous power. And they are getting better by the day.
- Transparency tools, including e-billing software and online bidding platforms, are giving legal departments the analytics that enable them to ‘x-ray’ their invoices against billing policies, negotiate better rates, eliminate waste and secure the best deal among competing firms at any given moment.
- Artificial intelligence and machine learning technologies are undertaking increasingly highvalue work, including cross-disciplinary legal thinking, pattern spotting and legal analysis. Scalable machine-learning-based legal solutions is undoubtedly just around the corner.
The Innovation Revolution will have profound implications for how lawyers work, what they work on, and how legal departments source their needs. It will likely be a net positive for in-house lawyers; perhaps less so for outside counsel, as the one-stop shop law firm model is coming undone, leaving them to compete for smaller pieces of a shrinking pie.
To take advantage of these trends, legal departments must become more sophisticated in how they allocate internal workload, deliver services and procure from external partners.
The Professional Convergence Revolution
Good ideas come about when people with radically different skills interact in a connected manner. We are seeing this across a range of industries and professions. I recently had the opportunity to meet a ‘space archaeologist’, who is leveraging satellite technology to uncover new archaeological sites that are difficult to detect on the ground but easy to see from space. She mentioned to me that she had been inspired to go into the field by the actor Harrison Ford’s portrayal of the archaeologist Indiana Jones in the eponymous film series, and that the use of satellite technology was enabling her to crowd-source the discovery of new sites. So we have an archaeologist, inspired by an actor and working with a satellite technician to crowd source new finds.
This blending of the professions in the search for innovative thinking and efficiency is happening in corporations as well. That fact is creating demand for ‘T-shaped’ executives, who combine deep cognitive, analytical or technical skills with broad multidisciplinary and social ones.5
Given their deep legal expertise and role as connectors, in-house lawyers are natural-born T-shaped professionals, and are thus taking on a host of difficult new tasks in addition to legal adviser. Role-overload is an ever-present danger.
At the same time as in-house lawyers are given new roles, in-house lawyers must never forget their primary function as legal guardians. The company’s board, its shareholders, and society at large will hold them to account if they do.
What needs to change going forward?
The world that the GC inhabits has therefore become increasingly complex as a result of these forces. At the department level, demand is increasing while resources are tightening. At the individual level, role overload is an ever-present by-product of the Professional Convergence Revolution. Yet the Innovation Revolution presents the GC with many new opportunities to handle her work more effectively.
Given this reality, what should the GC do differently? I believe GCs need to meet these challenges head on by becoming mini-chief executives in their own right, tackling many of the same issues in their legal departments that the CEO must tackle for the corporation as a whole.
This requires an entire new set of skills to those learned in law school, including developing and executing a strategic plan, building teams, leading and inspiring people, managing complex global budgets, securing partnerships with an ever-growing list of external vendors, interfacing with government officials, the press and interest groups, and managing investments and technology transformations.
GCs cannot do this alone. It ultimately takes a team. The GC must be an outstanding leader and team-builder because, without a world-class legal team to support her, even the most distinguished legal counsel will eventually fail to deliver effective support for clients. Building an outstanding legal team is the GC’s acid test as a leader.
Unfortunately, crushed as they are with roleoverload, cost pressures, recurring litigation, major deals and periodic crises, and facing the many aforementioned challenges, most GCs have little
time to figure out how to build great teams.
A framework for building legal teams
Fortunately, there are plenty of opportunities amidst the threats that can help you build an excellent organisation. As noted, the innovation revolution is unbundling the traditional law firm model and disaggregating the one-stop shop approach to handling legal matters. Today, you can efficiently allocate your work to the best-suited provider, ranging from your own in-house team to law firms and alternative legal services partners. New technologies allow you to better communicate and be productive, provide self-service options and improve the overall efficiency and transparency of your operations.
There is a method and sequencing to the approach. You should start with what I call the ‘hardware’ (ie, the measurable, structural changes you can effect within your department). Assess your core risks and talent, and design an integrated team structure around that; unify your budget and optimise your spend; rationalise your service delivery model; select the right outside partners; and identify the technologies that will support your efforts.
By tackling these things first, you will gain the credibility you need to focus on the ‘software’, the less tangible but critical components of culture and talent. You will need to develop and reinforce your subculture; identify and tweak your unwritten cultural assumptions; manage the generational context; and recruit legal leaders who have the skills and qualities needed to run a high-performance 21st-century legal team.
In the real world, there will of course be interplay between the hardware and the software; steps will get mingled. But if you are in doubt, you should return to the basic sequencing.
Throughout your effort, you must also pay attention to change management and strategic direction. Failing to address these will scuttle your endeavours.
Technology rules of the road
A thorough discussion of each of these steps is clearly beyond the scope of the limited space of this article. But I raise it because it is within this broader context that the use of technology needs to be considered. Not alone, but as part of a holistic effort to build an outstanding legal team that can effectively tackle the challenges we face by adopting world-class processes, driven by innovative technology and powered by an outstanding culture.
Having placed technology in the broader context of the problem we are trying to solve and the solution we are trying to apply, there are a few ‘rules of the road’ that are specific to technology that might be worth underscoring. More specifically, there are three golden rules you should bear in mind. These are:
- ensure that you have a proper process before you leverage technology;
- do not overlook the boring by focusing on the sexy; and
- make sure you manage the change process.
Let us consider each of these rules.
Process before technology
To make intelligent technology decisions, you must first be clear about what the problem is. Too many GCs adopt the mantra “Ready, fire, aim!” when it comes to technology. Instead, first thoroughly consider, and understand, the problem you are grappling with and only then consider technology solutions. As I have noted earlier, technology is not the solution, it is merely a tool that can help you implement the solution.
To understand the underlying problem, you must focus first on understanding your processes and then create a plan to correct the deficiencies that you find. If you have a highly inefficient contract management process, for example, address the underlying process roadblocks before you roll out expensive new contract management software. If you do not, you will not solve your problem because the processes that are causing it will not have changed.
Technology solutions also require their own inherent process adaptations to yield true benefits. Contract analytics, for example, require you to first put in place a process to enter the data, and create decision trees and escalation clauses into the tool. If you fail to do this, your analytics will be useless – garbage in, garbage out.
Therefore, start any technology transformation with a process improvement project. You might consider using one of several systematic approaches or methodologies, such as benchmarking or lean manufacturing. The best approach will depend on your circumstances. You might, for instance, be experiencing problems with how incoming work is received, handled and allocated. Or you may need to better define what work gets prioritised, how assignments get delegated, or how work more generally gets done.
Different systems will be best-suited to different problems.
Legal operations specialists can and should play an important role in looking at how to optimise your processes. If you do not have, or cannot afford, your own legal ops team, consider renting one through an alternative legal services provider, or hire a consultant. There are plenty of alternatives out there if you are prepared to look more closely.
Boring before sexy
Once you have figured out what your problem actually is, you can begin to consider technology solutions. Unfortunately, this is where many GCs yield to the siren song of the sexy.
Artificial intelligence, the Internet of Things and the Blockchain are all tantalising. But sometimes the most impactful solutions are the mousy grey ones right under your nose.
Communications and productivity tools, including videoconferencing systems, email, mobile telephony and cloud-based servers, for example, are easily overlooked. But these will likely cost you nothing and empower your people to work from anywhere, having a profound effect on everything from the recruitment and retention to department cost.
Allowing people to work from home is overlooked by many GCs as a benefit. A permissive attitude towards working remotely will attract, in particular, top millennial talent. A 2015 survey from job
service company FlexJobs, for example, revealed that 85% of millennials want to telecommute 100% of the time.6
Of course, you must establish ground rules, including appropriate attire on video calls, and adequate office facilities and equipment at home locations. You also have to pay closer attention to productivity, and may need to ensure that lawyers can commute on a regular basis for meetings. There may of course be specific jobs that require people to be physically present in a location, and corporate culture may also discourage telecommuting. But if you are able to circumvent these limitations, remote working should be on your list of priorities.
The ability to deploy people from anywhere also presents an opportunity to re-deploy some work to lower cost parts of the country. The South and the Midwest, for example, are often vastly cheaper than the coasts.
Finally, collaboration tools can allow you to better manage teams remotely across the globe, enabling you to bring a global team together, organising them into networks that solve problems 24/7.
There are also plenty of other essential tools to consider, including know-how, self-help and best practice tools, as well as efficiency and transparency technologies, such as contract and matter management systems, e-billing solutions and e-signature tools.
There are of course also other, far sexier, emerging tools out there, including artificial intelligence enabled solutions that will play an increasingly important role in the modern legal department. But the point is not to forget the simple and the obvious. In sum, when it comes to legal technology, Leonardo da Vinci had it right: “simplicity is the ultimate sophistication”.
Manage the change process
Process optimisation and technology upgrades require changes in behaviour. Often, there is a gap between the theoretical value of technology and your team’s ability to leverage it.
That gap may exist because the people tasked with using the new tool will resist it. You need to focus on managing through that change, taking into account the emotions that come with changes in process, priorities and behaviour.
This is a vast subject, and one that there will be no time to consider in depth here. Suffice it to say, that we have come full circle – you cannot implement technology on its own without placing it in the broader context of building a team that has the cultural resilience to adapt to change and the procedural and organisational wherewithal to implement it.
With these broader thoughts in mind, you will be ready to tackle the specifics, looking at the specific role that technology and innovation can and should play in your department.
Bjarne P Tellmann is Chief Legal Officer and General Counsel of Pearson and a member of its Executive team. He is a frequent speaker and publishes regularly. His book, “Building an Outstanding Legal Team: Battle-Tested Strategies from a General Counsel”, was published by Globe Law and Business.
1. See http://financialservices.house.gov/dodd-frank (accessed 1 October 2016).
2 McKinsey Global Institute, “The New Global Competition for Corporate Profits”, September 2015, © 2017 McKinsey & Co (www.mckinsey.com).
3 CEB, The New Legal Operating Model (2016), pp11, 12 and 56.
4 Richard Susskind, Tomorrow’s Lawyers: An Introduction to Your Future (Oxford University Press, 2013), p616 in e-book edition.
5 See Irving Wladawsky-Berger, “The Rise of the T-Shaped Organization”, The Wall Street Journal CIO Journal, 18 December 2015 (available at http://blogs.wsj.com/cio/2015/12/18/the-rise-ofthe-
t-shaped-organisation/; accessed 21 October 2016).
6 Cited in “How and Why Millennials are Shaping the Future of Remote Working” by Sarah Sutton Fell, insight, 21 April 2016 (available at: http://workplaceinsight.net/millennials-shapingfuture-remote-working/; accessed 22 November 2016).