As the upward pressure on legal teams’ workloads mounts, the downward pressure on budgets also grows, forcing General Counsel to find ways to transform legal operations and enable highly customizable end-to-end services for internal and external clients.
A survey with surprising results: in-house Legal Departments are clearly in favor of leveraging technology—but struggle to obtain budgets from C-Level decision makers. Carried out jointly by EY Law and the Harvard Law School Center on the Legal Profession, the survey interviewed over 2,000 CEOs in 22 countries in January 2021, providing a rich source of insights into the needs of General Counsel amid shifting priorities in the post-pandemic business environment. This was a good reason to discuss the key findings with some of the leading voices in the industry.
Our CEO, Michael Grupp, joined an expert panel hosted by the Digital Legal Exchange with Isabel Parker, Executive Director at Digital Legal Exchange, alongside Mark A. Cohen, CEO, Legal Mosaic and Executive Chairman of the Digital Legal Exchange and Cornelius Grossmann, EY Global Law Leader and co-initiator of the report.
During the event, we heard the panel discuss the key challenges that General Counsel face today and the findings of the 2021 EY Law Survey.
To reconcile diverging pressures, the panel agreed that the legal team needs to step up and take ownership of the process, building tangible cases to reduce the friction between the promises of legal technology and its actual benefits, procuring budget to improve the processes and take part in digital transformation on par with other business departments.
Understanding the landscape: four key priorities for CEOs
In order to provide a better context within which to unpack the survey findings and expected trends, Cornelius Grossmann presented the survey results at the start of the panel, outlining four key priorities of CEOs in the coming years. These are:
- Risk management;
- Cost reduction;
- Digitizing processes; and
- All units supporting revenue growth.
Interestingly, when this data is stacked against General Counsel’s take on the future of legal operations, there are a few discrepancies that need addressing.
As Grossmann stated, “on the one side, there are very aggressive cost reduction goals, as 88% of General Counsel are planning to reduce costs over the next three years, but 75% of General Counsel believe growth in workloads will outpace budget growth.”
Customer-centricity as the main driver of change
Reflecting on the survey findings, Mark Cohen took the view that “much of the legal change is not being driven by lawyers.”
In his view, the change is “driven by business, more specifically the C-Suite, because of the tremendous pressure on business to conduct things differently.” And this pressure comes from the customer being at the center of business strategic activities.
“The companies that are really excelling today are those companies that are truly customer-centric. That is, they are not just tech-for-tech’s-sake companies. These are companies that are really tapping into all the tools, all the resources and all the changes in human behavior that are required to really service customers in a different kind of way, and in order to provide them with an end-to-end experience that makes the consumption of this service or product more accessible.”
While zooming in on the corporate legal industry, Cohen said that there is a shift in how legal teams work within the business. Traditionally, it was the legal professionals who determined priorities, but over the last decade, there is a growing divergence between how legal teams perceive themselves and how the end-user of legal services perceives them.
“The change is now an imperative just as digital transformation has become an existential business imperative. So too must the legal function view [legal change] as both an existential mandate, as well as an imperative, because, make no mistake about it, the legal function has and must begin to use the same tools, to operate at the same speed, to utilize the same data as the rest of the business. It can no longer operate in the vacuum and in the silo that it has so long operated in.”
Difficulties of wielding legal budget
Reflecting on the changing legal profession, our CEO, Michael Grupp, drew on BRYTER experience, having worked with legal teams on implementing digitization across industries, and highlighted digital transformation efforts in other industries as well.
“The change we see now is triggered by digital transformation in the big enterprise. I think the same panel that we’re having here, in the legal area, are happening, as we speak, in the financial service departments, risk and procurement teams, HR and admin.”
“Companies everywhere have begun to go from building intake tools to building digital infrastructure, for the company to then plug into the verticals, in order to allow the expertise in the departments to be a part of the company. And this is a great moment for legal and compliance to participate.”
But as the study showed, securing the budget for legal tech is not an easy feat. Grupp’s experience confirms the findings, adding another challenge to the topic – demonstrating tangible benefits of legal tech before the C-suite.
“Legal departments have an overall challenge to procure budget. Typically, legal departments are not experienced in buying and procuring software, compared with other departments. So, receiving budget, and then also leveraging budget, is in line with the fact that this shift is happening for the first time.”
Automating legal operations and demonstrating business value for legal technology requires not just the budget, but also empowering legal teams to procure and lead legal digitization. But as Grupp puts it, “the lack of budget leads to a lack of experience in leveraging it and procuring legal technology”, which in turn creates a ‘vicious circle’”.
“To have a limited budget and limited experience means that you cannot get started with the big solution. And everybody’s waiting for that. And as businesses, we want end-to-end. We want holistic. We want the one platform.”
Breaking the vicious circle of legal tech procurement
Breaking the vicious circle takes three steps according to Grupp.
“The first is, what we call, the ‘seeing is believing’ step, where you need to have something tangible that proves ROI, is functional, that you can showcase, and that helps you procure budget. It will not help make a huge difference at the onset, but it is the first step.
“Then comes the proactive stage, where you have a bit of tension between the legal team and the IT team, but where it’s very clear that change management and the ultimate knowledge transfer into the digital needs to come from domain experts. And this is something where digital transformation has faced a big challenge over the last decades. Whenever domain expertise needed to become part of a process, things slowed down. We know that 70% of IT projects fail because of the difficulties in collaboration between domain experts and those with the skill to build the infrastructure and the processes. The projects then run out of budget and people, and teams dissolve.”
As Grupp sees it, while IT teams need to handle technical aspects in this collaboration, such as integrations, it is the domain experts who need to set the rules on how to generate NDAs, or rules for compliance checks or how to automate legal requests. And this leads to the third step.
“The third step is the core one. It’s where legal has ownership over these processes. The legal department needs to have ownership of the digital expertise. And this journey is something that legal departments are currently working on, and they are at all stages.”
From bottleneck to business enablers
Despite the need for alignment between legal operations and business strategies, the EY survey found that only 52% of General Counsel believe the work of their legal departments to be aligned with the broad business strategy.
Commenting on these stats and the role of the GC and legal teams as business partners, Cohen believes that the legal function must be about persuasion, using the language and tools of business.
“To become better empowered, I think General Counsel, and the legal function more broadly, must start presenting the case as a business would, because the legal function is a business function.”
“Lawyers just have to get over the inherent conflict between what the enterprise wants and what they want. I’ve been a managing partner and the greatest conflicts I have ever seen are not between the profession and the client, but rather the internal-facing teams, among partners in terms of compensation.”
“So, I think, it has to be about making the business case just as any other business function would, [answering questions such as] ‘what it is going to cost’, ‘what is the anticipated ROI’, ‘how are you going to implement it’, ‘how long is it going to take’, ‘what is the risk’, and then go forward.”
Legal tech implementation: GC and tech vendors’ views
Discussing legal tech and difficulties getting started, Grossmann, having led 3,000 lawyers, offered a GC perspective on what it takes to convert the technology and genuinely implement it to deliver value.
“There’s a natural hesitation among General Counsel in [adopting legal tech solution]. Before I implement something, which is transformative and will change the lives of all my lawyers, I really need to understand what it means. The riskiest part is of course with the implementers. And so, in terms of a strategy, I would say you cannot invest enough in conveying the right implementation teams, the right advice on training and change management when you sell software otherwise you come to a frustration [among legal teams].”
“There’s at least a 50% share in responsibility on the technology side to explain and help General Counsel make informed discussions by giving them the data and the know-how in terms of what’s on the market and what are the strengths and what are the potential pitfalls.”
Commenting on the technology implementation and meaningfulness from a vendor’s perspective, Grupp said that “ultimately, technology is about the use case. It is something tangible that comes out of the service spectrum of the legal department that needs to be faster, easier, cheaper, more accessible, and easier to use. It needs to be something that makes one problem easier.”
Legal at a crossroads
What stays as the key takeaway of the panel is that the legal function is bound to transform. Found between the increasing workload pressure and stagnant budgets, looking for legal tech solutions to help automate day-to-day operations and enable businesses at large to free up expert capacity for more strategic work, General Counsel and legal teams need to build business cases to demonstrate the business value and take the front seat in driving digital transformation forward.
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