What is Legal Operations?
Legal operations is a recent addition to the business of law. It encompasses a range of responsibilities, all of which are geared towards the effective and efficient management of the operational aspects of delivering legal services. The scope of legal operations can include managing costs, overseeing outside counsel, invoicing and payments, billing rate management, department budgeting, billing guidelines development and enforcement, matter and case management, workflow and process improvement, resource allocation, data management and analytics, enterprise project management, legal planning and forecasting, vendor management, technology procurement, request for proposal (RFP) preparation and response evaluation, e-billing, contract management, knowledge management, project management, litigation and discovery support, and litigation hold management. Some identify the legal operations function as the realm responsible for innovation , and their work extends to defining the current business of law so that we can develop models for the future. This extends to processes, products, pricing, pricing models, solutions delivery, and design thinking methodology. They are often seen as change agents for the direct delivery of legal services through streamlining operations, enhancing the use of technology, and obtaining results by creating value for money. Not only do they manage the evolution of the practice of law of the firm or the corporate department, but they also help their firm or department understand the changes going on in the legal market and the impact on the delivery of legal services. They are at the forefront of research and benchmarking activities across the industry, including client satisfaction, value perception, complexity (band 1-5) of relationships of firms with companies, maturity (band 1-5) of corporate departments as buyers of legal services, and improvement recommendations of corporate departments.
The Role of a Legal Operations Director
The primary duty and responsibility of a director of legal operations is to help the business save money by controlling costs via process redesign, technology and vendor management. Some associated tasks include assessing legal department processes, managing outside counsel, overseeing e-billing, determining the right types of software and technology for the legal department, etc. The details of these duties may change from organization to organization, but the bottom line is that the role of a director of legal operations is very much that of a mini-CFO.
As organizations grow and evolve and the business of law becomes more sophisticated, the company should have a clear plan as to where they want their legal department to be positioned in the future with regards to processes and the use of technology. The director of legal operations can contribute to the development of this plan via his/her knowledge and understanding of the industry and the various processes and technologies available in the market.
The result of this work is a law department that is almost fully optimized. With this optimization comes the ability for the legal department to focus on adding value to the business, as opposed to getting bogged down in the minutiae of the business of law.
Competencies of a Legal Operations Director
For a successful transition into a director-level position, there are several skills and qualifications that are essential to posses.
Hard Skills
Typically, the director of legal operations should have a strong background in IT (computers and/or systems), math and/or finance, accounting, process management and/or law.
Soft Skills
The most successful director of legal operations will also possess strong leadership, project management, communication and team-building skills. This role is very hands-on and requires the ability to effectively train, coach and build an effective team: Law firms and other legal service providers will also be looking for these candidates to have significant experience with business controls, compliance and audit experience. Which is another reason why a consultant with 20+ years in-house experience is highly qualified to train professionals on how to shift from a strong focus on legal work to a stronger focus on business expertise and operational efficiencies.
The Effects of Legal Operations on Efficiency
The efficiency of a legal department is central to its ability to function and deliver value to the organization. A director of legal operations can have a significant impact on departmental efficiency by introducing improved processes, better tracking of work product, streamlined workflows and enhanced controls on the use of resources. Two examples of how a legal operations director can drive efficiency have been addressed in prior posts and will be added here.
The first area is process improvement, which has been covered in the prior post entitled Seven Common Process Improvement Steps. As previously explained, a good example of what might be a candidate for a process improvement would be the document review process. Document reviews, such as privilege review or review of a large production, can be tedious both from a process standpoint and the consumption of outside counsel resources. Adopting technology tools such as e-discovery mining software can vastly improve the efficiency of these processes allowing attorneys to focus on higher value work tasks.
The second area is dealing with the management of outside counsel. This topic has also been covered in two prior posts entitled Legal Department Outside Counsel Management Processes, Policies, and Guidelines and Legal Department Outside Counsel Management Control Parameters. CFO Magazine printed a good article regarding the topic here.
It is critical that an organization have a clear set of policies and procedures regarding the management and outside firms. Without a solid set of outside counsel management billing guidelines and policies in place, there may not be an historical record of why certain types of billing are permitted. Outside counsel management is as much about risk management as it is about cost control, it is proven that having an effective outside counsel management program in place reduces litigation risk.
Some of these elements are simple in concept. Similar to Sarbanes-Oxley (SOX) and "soft controls", for example, each of the above steps can be thought of as "hard controls." Many of the "soft controls", such as getting buy-in from stakeholders, can be more complicated to implement. Nevertheless, a legal operations director, working in partnership with outside counsel, can have a substantial impact on the efficiency of an organization’s legal department.
Innovation and Technology in Legal Operations
A Director of Legal Operations must identify, deploy, and leverage the appropriate technology tools to create efficiencies and automate processes. For example, corporate legal departments might require consistent, real-time reporting from outside counsel about the progress and hours billed on open matters. A Director of Legal Operations could individually request weekly reports each from the 20 – 50 different law firms used by the company in any given year, but that would require a substantial allocation of time and resources for little return. Instead, he or she might consider the use of third-party data analysis tools that aggregates and synthesizes the information from law firm billing systems into a dashboard that paints a complete picture of the current status of outside counsel costs and provides metrics from which to measure practice trends. The use of such technology allows for more timely reporting, reduces unnecessary disruption of the billing and accounting processes for outside counsel, and provides for the development of a single point of view about spending across the entire company that can be used to inform decisions about fee negotiations , budgeting, and even which matters should be closed out or farmed out.
Technology will continue to transform the delivery of legal services and outside counsel management in (very) positive ways. However, it also requires a Director of Legal Operations to manage the risks of the adoption and use of technology. Third-party data collections and aggregation can raise data security and data privacy risks. In addition, while many law firms — and law firm clients — remain focused on the legal implications of work, they are beginning to recognize that the operational aspects of legally mandated work can be as important and have significant business impacts that require the attention of Chief Operating Officers. As more legal work is being farmed out to operations centers and other cost-sensitive locations overseas, managing the risk of outsourcing legal services and the introduction of technology into ‘back office’ functions presents a more difficult challenge for a Director of Legal Operations and his or her outside counsel.
Progression and Training
Aspiring legal operations directors are often educated with an eye to the future with degrees in business administration, engineering, accounting, and finance. Law degrees are helpful, but a legal background is not required. The bottom line is that the candidate should have experience with such meta-practices of an organization that includes budgeting, reporting, strategic planning, legal compliance, technology assessment and implementation, resource allocation, and cash flow modeling.
Beyond an educational foundation, most individuals do not "become" a director of legal operations. They start in more junior positions, primarily because the law department has not yet established a position that requires multiple years of specific experience. Candidates, therefore, tend to move around prior to becoming a director.
The most common career progression is (1) a position as a staff attorney in a law department before moving to (2) a role in outside counsel expense & matter management, or business operations. Then, they move towards such positions as (3) head of a business unit (4) paralegal manager, (5) division operational manager, (6) practice group leader, and (7) business unit controller.
In addition to movement within a law department, there are a number of legal operations consulting firms, legal service providers, and legal project management organizations that provide individuals the opportunity to gain the requisite experience to become a director. At one of these firms, a person could advance from (1) a "big law" Associate or in-house Counsel to (2) a Project Manager to (3) Director of Operations for the consulting or service team. There might then be a (4) transition to Director of a Division or Similar Service Area.
There are very few formal professional development opportunities related to the position of director of operations. The Corporate Legal Operations Consortium provides a conference and professional certifications. The American Corporate Counsel Association offers periodic webinars and programs that keep these professionals informed of changes in the law and technology.
The Legal Operations Director’s Challenges
The rapidly shifting landscape of legal technology poses a significant challenge to Directors of Legal Operations as they strive to remain ahead of the curve while also leveraging their current software investment. For example, the recent entry of generative artificial intelligence (AI) into the software market has the potential to increase efficiency (and profitability) for all market participants. At the same time, it can create competitive threats to legal departments and law firms that move slowly to embrace the trend. So how does a Director of Legal Operations balance risk and reward in this time of unprecedented technological change?
On the one hand, the Director of Legal Operations must balance the need for robust cybersecurity without stifling innovation. For example, most large law firms and vendors have multiple levels of engineers, IT professionals, and security practitioners, and associated travel, expenses, and training requirements . Purchasing a larger litigation tool from an established vendor might make a lot of sense if the firm has 12 lawyers and 80 staff members. Directors of Legal Operations faced with similar decisions spend a lot of their time on vendor assessment, vendor relationship management, and vendor oversight. Building an efficient technical foundation is critical to managing costs and improving operational efficiency and maximizing budgets.
On the other hand and on the vendor side of the fence, directors of Legal Operations also face pressure to remain at their jobs. Many Directors of Legal Operations are pulled away from their core duties to help vendors navigate complex relationships and resolve tier-one issues. For example, vendors faced with a structure process to vet a supplier and move a deal along a review process often call their lawyer to help them navigate a frustrating review process. Although these vendors pay for this service, it takes time away from their core mission, which is to build and sell great things.