A Smarter Legal Model
Author: Richard Stock - Lexpert (March 2013 at p. 70)
OVER THE CHRISTMAS holidays, I took the time to carefully read Trevor Faure’s The Smarter Legal Model: More fr om Less. Faure is Global General Counsel and a partner at Ernst & Young. He has presented his work on a couple of occasions in Canada, and I had a chance to meet with him in his UK office last fall.
His second idea is that legal departments must get a lot better at defining their economic imperatives. The chapter on quantifying value is of particular interest, arguing that “it is the lawyer’s imperative to demonstrate the complete equation for their clients by measuring, managing and improving the full, multi-dimensional value of their legal services.”
In the 15 years that I have spent advising legal departments, I have seldom seen this policy well executed. Legal departments have survived by focusing on building relationships and being responsive. But there is now significant evidence of success from legal departments that measure and manage demand and resources. The most progressive ones have adopted an array of key performance indicators to communicate their efficiency and effectiveness. Still, these departments are a minority and we are nowhere near a tipping point. Most legal departments could benefit from a body of case studies and best practices to fast-track the quantification of their value.
Two of the three triangle points in Faure’s model are easy enough to quantify. The first is internal head count and the second is total cost, including the cost of internal head count, external legal fees and the direct and indirect costs of failure. It was refreshing to see that Faure’s articulation of net cost extends beyond a series of numbers to include real anecdotes of successes and contributions in all forms: deals done, losses and fines avoided, and employee time saved because of the effective and efficient delivery of legal services.
It is Faure’s third point in the triangle that requires the most innovation to measure. He suggests that coverage, compliance and client satisfaction are a constellation of deliverables to be customized by each legal department. Much of the book is centred on the element of coverage, with chapters on defining and measuring it, on its relationship to head count, and on ways to achieve it with less net cost.
Faure starts by conducting a stakeholder analysis for legal services. There are lists of needs and challenges or obstacles for the business unit and for the legal department. Business needs are universal: contracts and deals, the resolution of disputes, responsiveness and flexibility, and help in making the business unit successful. For its part, the legal department aims for 100-per-cent legal and geographic coverage and compliance, teamwork and effective communications. The model goes on to propose a list of needs and challenges for the individual lawyer as a stakeholder. That is a useful exercise and one that I have rarely seen a general counsel take the time to prepare formally.
From there, Faure applies a reality check to the three lists of needs and challenges as a way to eliminate those that are not within reach and those that are already achieved, leaving what he calls “core legal essentials.”
This residue should lend itself to measurement and improvement, categorized into a list of what the legal department does and how it does so. All of this is important for the general counsel to undertake every year because it requires a focused conversation with business units, detailed knowledge of the department’s activities, and awareness of the contribution of each of its members. While useful, this effort is still a collection of general descriptions and statements that is not yet actionable.
Faure’s book then calls for the preparation of deliverables and best practices in legal services that need to be measured, analyzed and improved. I have often seen annual objectives for legal departments that are specific, measurable, achievable, results-oriented and time-bound. Some of these are tied to key performance indicators. But they typically have two faults. First, they are not grounded in a systematic stakeholder analysis. Second, they are not visibly aligned with the company’s strategic priorities and business unit targets.
Faure’s Smarter Legal Model provides a very useful starter kit for general counsel wanting to move beyond version 1 of managing a legal department.