Managing Legal
The Point
- Corporate Legal should be aligned with the company’s strategy, and its success or failure in supporting that strategy should be judged by two outcomes:
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- Legal’s financial sustainability: By disciplined, continuous cuts in unproductive costs, free up dollars for reallocation to spiraling new demands.
- Prevention of legal problems: Guided by Legal but executed across the business, proactively head off liability, regulatory jeopardy, and reputational harm from avoidable catastrophes (e.g., Boeing’s 737 Max, GM’s ignition switch).
- Accountability for financial sustainability and prevention of legal problems requires a proven manager to run Legal. Not general counsels or others whose experience is limited to practicing law.
- Currently, Legal is isolated from company strategy as a siloed function, whose efforts and resources are deployed in reactions to events. And those reactions are dictated by the legal profession’s blind spots and idiosyncrasies, not guided by meaningful alignment with company strategy.
This Matters to Your Business
This approach to Legal requires new leadership with a different mindset.
Existing leadership — lawyers — are poorly situated to bring about Legal’s financial sustainability: committed to their profession’s billable hour business model, attorneys in-house and in firms are incentivized to avoid the tough decisions required to prioritize efficiency.
And they are unlikely to avoid legal problems from arising in the first place: with their fire-fighting M.O., attorneys have not developed the management disciplines needed to systematically prevent legal trouble before it’s a full-blown crisis.
Of course, no one other than licensed lawyers can document complex transactions, conduct litigation litigation defense, or give legal advice. But those licensed lawyers should be made meaningfully accountable to professional management; not answerable only to other attorneys (which is the case now).
Because …
In 2023, Legal function management, in service to the company’s strategy, has three kinds of resources available to it:
1. New tools and service providers
To scale corporate Legal’s capabilities for routine, recurring legal tasks at lower cost, with greater speed, and more accuracy:
- Legal operations specialists — A new profession, expert in skills that most lawyers lack: budgeting, business processes operations, automated systems design, finance, technology, and negotiation of terms with law firms and Legal’s other vendors.
- Alternative legal services providers (ALSPs) — Firms that provide the kinds of expertise offered by legal operations specialists.
- ALSPs that provide highly-qualified, veteran corporate attorneys on a temporary basis for a fixed fee, who come without the baggage of less experienced attorneys to “assist” them (e.g., Axiom).
- Use of selected technologies by legal operations specialists or ALSPs.
2. A changed negotiating context
To get fixed fees, minimize unneeded associate lawyers on teams, and obtain more reasonable rates generally:
- For the corporation — Most Legal functions, led by lawyers, are often intimidated from bargaining robustly with their fellow attorneys in law firms (see here, here, and here). With a business-minded, proven manager in charge, Legal can make full use of its purchasing power — just like other corporate functions and business units.
- For law firms — Legal can obtain partners / specialists for fixed fees, while minimizing junior lawyers forced onto teams, from (1) smaller, boutique law firms (e.g., Salazar Law), (2) “distributed” law firms (e.g., FisherBroyles), and (3) other firms willing to offer services of a partner / specialist, with minimal involvement of less experienced associate lawyers, at fixed fees.
3. Commitment at the top to systematic avoidance of catastrophic events
Boeing’s 737 Max failure, GM’s ignition switch tragedy, and almost all comparable liability disasters (the Wells Fargo fraud on customers, the Volkswagen emissions violations, Blue Bell’s listeria outbreak, etc.) took place in this setting: (1) senior management lacked early warning capability, (2) some frontline employees had a clear view of red flags, and (3) the lawyers were hermetically siloed off from both groups.
Legal can and should lead the way to early warning and prevention. And frontline employees will report red flags if provided with safe and reliable ways to do so. But, realistically, lawyers in Legal remain stuck in their ways. So the ball is in senior management’s court to drive these strategy changes from the top.