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  Closing the Gap

Author: Richard Stock - Lexpert, April 2016, Vol 17, No. 6 at pg 66

Internal Counsel have a new ally to help drive innovation : external counsel

LAW DEPARTMENTS with 10 lawyers are far from the biggest in the country. A non-government law department of 10 lawyers is a going concern in Canada. However, I would consider few of them to be innovative in service delivery, in their use of resources, and in their relationships with external counsel.

Despite the introduction of five different innovation awards for law department management in recent years, there is little pressure and even less appetite to change what matters when it comes to competence, coverage and costs of legal services. A satisfactory rating from internal clients, living within the approved budget and securing the usual 10-per-cent discount from external counsel is usually enough to coast on, although it only amounts to Version 1.0 of law department management.

I recently asked 20 law departments whether they had documented business plans for their departments — something that was different than budget plans. Only three reported that they had such a plan in place. Only three had key performance indicators (KPIs) for their law department. And only two had issued a request for proposals from external counsel in the past three years.

The majority of law departments remain paper-intensive and rely fairly heavily on the support of legal assistants. Too few departments have the right number of paralegal staff. Almost no corporate law departments have legal operations specialists to run the department. And many of the lawyers are overqualified for the work they are doing three days out of five. Some respond that they have no “juniors” to delegate relatively straightforward work. I too often see a 10-year lawyer spending 50 per cent of the year on matters that require less than 90 minutes each to complete. There were very few instances of trying to make clients more self-sufficient for daily operational support for legal services.

But enough “tilting at windmills.” General counsel are largely aware that they are not managing legal services delivery to its full potential — what I would call the Version 4.0 law department. They attend the conferences, read the studies and consult the resources available from their associations. Many also participate in informal networking with other general counsel, often arranged by their primary law firm. So GCs know what needs to be done.

But there is the “Knowing-Doing Gap” to worry about (see Pffeifer and Sutton for the book by the same title for the five pitfalls and how to close the gap). Most law departments could do much better on at least 12 counts: crafting a robust business plan; forecasting demand for legal services; changing work intake and allocation protocols; using strong quality-assurance practices; investing in LEAN and other process-improvement measures; implementing KPIs and data analytics; buying into collaborative technologies both internally and with external counsel; legal project budgeting for complex matters; formalizing knowledge transfer; advanced sourcing for external counsel and other providers; and making use of performance-based pricing.

The list could go on. Many of the challenges and solutions are interdependent, but a piecemeal approach is hardly worth the effort. Few departments find the resources to address these opportunities in a comprehensive fashion over just a few months. The past five years have seen a remarkable expansion in the capabilities of Canada’s 20 largest law firms, and in some of the most progressive boutiques, when it comes to helping their law department clients take on the full inventory of challenges. Firms have hired process-improvement specialists, expanded their IT offerings, fine-tuned project-management budget templates, upped their research capabilities, and hired experienced pricing specialists.

Experienced firms are now enthusiastic to add these resources to the service-delivery mix with select clients in exchange for a significant share of the legal work over time. Such arrangements work best with non-hourly fee arrangements, usually incorporating a performance feature to balance risk and reward for the client and the firm.

Partnering with a primary law firm for the full range of initiatives over a three-year period will save the GC years of watching the “knowing-doing gap” widen in the company. Law departments should not hesitate to ask their law firms for help to improve their service-delivery capabilities. It makes business sense to pay a law firm for help that is specific, measureable, achievable, results-focused and time-bound as long as the action plan is solid.

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