Guest post by David Boyd, partner at Konexo, and Stephen Cooke, general counsel services consultant at Konexo and former managing director, deputy general counsel and legal chief operating officer at HSBC
As the role of in-house legal teams shifts towards the centre of business decision making the support needed from its law firms and alternative legal services providers (ALSPs) is changing. To meet this need, law firms and ALSPs have to adapt to recognise this.
This doesn’t just mean helping in-house teams run and evolve smoothly, but also prove they are doing so in an efficient and modern way.
Outside of the US, in-house legal teams are still a relatively recent phenomenon when compared with finance and other functions. It is because of this, their relative size and the nature of the legal specialism, that they have often been treated as special or different from other functions. As a consequence, the legal team is not often subject to organisational design reviews or process mapping.
Many in-house legal teams evolved in size and influence through necessity as risks arose or business changes occurred. In the UK and EU particularly, the fast flow of regulation only accelerated this process.
However, and somewhat inevitably, in recent years the way that a legal function is viewed has changed.
As the whole legal team becomes more integrated and influential within a business, it is receiving the same attention as other, often more mature and larger departments.
The challenge then for today’s general counsel or chief legal officer is to ensure focus on the key strategic risks to the business while at the same time giving appropriate focus to the efficient operation of the function, with costs and operations coming under a new level of scrutiny.
Evolving legal teams without increasing cost
As their role modernises, legal teams have to demonstrate the total cost of the function. This includes the costs of the in-house team and third-party cost.
Demonstrating cost against the value of enabling efficient business and protecting against material risks is not just an in-house team role. Law firms and ALSPs have to contribute.
Having people with experience of being in-house to understand what that looks like is essential. This experience helps anticipate the request to do more with less or at the very least to finance new cost requirements from within the budget of the legal function.
These demands are obviously not new within the corporate world as a whole and other functions may benefit from an industry-recognised organisational design to enable better understanding of the operation and justification of their costs
and in some cases is leading to the rise of the dedicated legal chief operating officer.
The pace of change, predominantly driven by technology and now generative AI, has been felt across businesses. And while there was some delay, legal is now experiencing the growing strength of technology.
To reduce the risk of technology-driven change being pushed on it or shaped from outside the team, legal has to choose its own approach, albeit often this will be informed by enterprise-wide technology constraints and opportunities.
In regulated businesses, previously regulators would accept a sample of 5-10% contracts to understand the impact of a scenario on a large body of contracts, but technology has increased speed and efficiency.
With contract review technology 100% of contracts are expected to be tested – a great pressure for these businesses.
Growing with the in-house team, law firms and ALSPs can help to shape the expectations placed on AI-assisted law to something realistic, but also compliant and safe in terms of intellectual property, data privacy and other legal considerations.
As the evolution of in-house teams continues, law firms and ALSPs have to support clients as they take up new responsibilities by modifying their approach and shaping their own teams differently.
This means it isn’t always about the law, but how legal services are provided to the business as a whole. And to do this, the success of law firms and ALSPs will be driven by how well they understand the challenges general counsel are facing with their fast-evolving in-house teams.