Although digital transformation of the legal function had already begun, the coronavirus pandemic has highlighted the need for agility–forcing general counsel (GC) to accelerate the pace of change.
Furthermore, the pandemic has also created huge cost pressure on companies with disrupted supply chains and rafts of new temporary and permanent legislation to adhere to. Inevitably, this has spilled over to the GC. A new way of working is emerging, based on a sophisticated approach to sourcing.
The rationale for alternative sourcing models can be for a multitude of reasons. These will vary by industry and also by stage of the economic cycle–industries growing fast often have different rationale from those in contraction. Common reasons include:
Traditionally, the GC built the in-house team and individual lawyers decided when to outsource work to outside counsel, often choosing the provider themselves and building relationships in the process. In many jurisdictions, the procurement function started playing a larger role in panel selections and other sourcing options, after the 2008 financial crisis. Outsourcing is now happening on two levels–not just to outside counsel for specialist work, but to alternative managed services providers who are playing a significant role in fulfilling the more routine legal needs of the GC.
In-house lawyers are focused on the most strategic items, as managed services providers deliver the day-to-day services that would be too expensive or time-consuming to do in-house. Many legal managed services providers have wider business expertise, and are able to bring project management skills, deploy technology, and provide advice on a broad range of business and legal issues.
As legal departments refine the sourcing approaches, we see the following models used most commonly:
Providers of outsourced and managed services often use technology to manage the transactions and work between the client and the lawyer. They may staff engagements with a combination of their own employees and external lawyers, or just rely on a database of freelancers (or mix of freelancers and employees or external lawyers). Effective technology deployment is critical to support alternative sourcing arrangements.
Outsourcing or managed services arrangements can often be a way of accessing technology solutions that might not make investment sense internally. As ad-hoc requests such as e-discovery, contract and litigation reviews, and GDPR issues don’t conform to any pattern or frequency, few companies invest in the technology which is increasingly deployed to accelerate the task by reducing the volume of manual work.
With any transformation, it is essential to manage performance and measure the value being derived from the new arrangements. By measuring the effectiveness and efficiency of sourcing decisions, analytics-driven insights can be used to help refine the sourcing model.
The benefit brought by whichever sourcing model the general counsel chooses, should be measurable and specific in terms of improved business outcomes, cost saving, and service delivery improvements. Measures that we have seen adopted include:
In a managed services relationship, much of this should be contractual, and even captive shared services centers will typically have measurement of improvement as a critical success factor.
While the business world has been predicting a ‘robotic takeover’ for years, the reality has proven for technology to be an aid to work, rather than a replacement. In the legal profession, it is largely because the human traits of professional judgment, intuition and advisory skills, cannot be automated, or replicated by machines.
The legal profession is notoriously complex, which has given rise to the need for the general counsel of the future to be prepared to develop technical skills, and collaborate across work streams, with advisers and in-house professionals. Overall, one of the most important traits is resilience throughout change. Embrace change, and respond with agility. Building the right sourcing model is critical to that goal.
The general counsel in a resilient world
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An effective legal operating model strategy can pave the way to a digitally-transformed legal department. A strategic plan will drive sustainable change, allowing you to focus on more efficient matter management, derive smart insights from data, and facilitate more effective legal risk management.