Introduction
Law firms and legal departments are reevaluating their operational support to prioritize corporate client-facing activities. They hire legal operations leaders to drive efficiency and strategic initiatives, allowing general counsel to focus on core competencies.
By providing centers of excellence, organizations can focus on client needs and strategic opportunities.
Operational efficiency is a top priority
Several forces are driving long-term changes in the legal industry:
- Cost pressures: Legal departments are reducing reliance on outside counsel, shifting work in-house, and seeking more efficient fee arrangements.
- Emerging competitors: New law firms, technology vendors, and the Big Four accounting firms are challenging traditional law firms.
- Talent: Increased competition for legal talent requires organizations to reconsider recruitment, development, and retention strategies.
All law firms and legal departments must adapt to market changes to avoid losing market share.
Leaders — even those at organizations that have been insulated from the impact of market change — acknowledge that if they do not pursue operational efficiencies now, they run the risk of losing market share in the future.
Opportunities in centralizing, offshoring + outsourcing
Law firms and departments are adopting back-office centralization to streamline operations and reduce costs. They can either offshore or establish low-cost domestic hubs.
Global firms like Baker McKenzie, Latham & Watkins, and Linklaters have embraced offshoring. For example, Hogan Lovells established a global business center in Kentucky, integrating it with another center in South Africa for round-the-clock service coverage. Many firms, including WilmerHale, Littler, and White & Case, have followed similar paths, saving up to 30% on labor and 40% on real estate expenses.
HBR’s 2018 Law Department Survey indicates a shrinking portion of work going to law firms and an increasing amount being brought in-house or to non-law firm providers. Between 2015 and 2018, law firms’ share of law departments’ spend went from 55% to 49%, while the in-house share increased from 43% to 44% and the non-law firm share from 2% to 6% in the same period.
Summary
Change is constant. Organizations should prepare by empowering leaders to streamline or outsource administrative functions, benefiting from efficiency and agility. Reducing service providers and using technology optimize buying power and reduce risk. Aligning strategies and resources achieves a competitive advantage.
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- Business operations
- Content & collaboration
- Enterprise legal management
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