Управление юридической службой организации (версия на английском)

Алексей Никифоров «Управление юридической функцией организации» — версия на английском

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This book is dedicated to my wife Tatiana

and my daughters Vera, Anna and Nina,

who support me in all my endeavors.

Even in this.

As a rule, the legal profession is associated with laws and legal practice. It is assumed that anyone in the “legal universe” should have a law degree and be an expert in one or more branches of law. However, for many legal professionals, specific legal knowledge and skill is not enough – sooner or later, they become heads of legal departments, general counsels, and chief legal officers, and start to do an absolutely new job.

I came across this in 2014, when I was appointed as head of the legal department in a large corporation. Overnight, I became responsible for managing more than a hundred lawyers working in the holding company. To obtain basic skills in managing the legal department, I enrolled in an MBA program at Warwick Business School in England. The knowledge I gained during this training, as well as my experience in managing a legal department, enabled me to systematize some ideas on how to effectively manage the work of in-house lawyers.

In this book, I focus on issues that heads of legal departments may have in their day-to-day practiсe. It covers issues on operational management for lawyers, describes client-centricity and legal operations, a new role in legal departments.

The practice of managing legal departments does not stand still, and any management situation is unique in its own way. Therefore, if you have any questions, ideas, or suggestions regarding this study, you can write to me on Linkedin. Also visit my website, where I post materials on the theory and practice of management in legal departments.

Happy reading!
This book is dedicated to my wife Tatiana

and my daughters Vera, Anna and Nina,

who support me in all my endeavors.

Even in this.

As a rule, the legal profession is associated with laws and legal practice. It is assumed that anyone in the “legal universe” should have a law degree and be an expert in one or more branches of law. However, for many legal professionals, specific legal knowledge and skill is not enough – sooner or later, they become heads of legal departments, general counsels, and chief legal officers, and start to do an absolutely new job.

I came across this in 2014, when I was appointed as head of the legal department in a large corporation. Overnight, I became responsible for managing more than a hundred lawyers working in the holding company. To obtain basic skills in managing the legal department, I enrolled in an MBA program at Warwick Business School in England. The knowledge I gained during this training, as well as my experience in managing a legal department, enabled me to systematize some ideas on how to effectively manage the work of in-house lawyers.

In this book, I focus on issues that heads of legal departments may have in their day-to-day practiсe. It covers issues on operational management for lawyers, describes client-centricity and legal operations, a new role in legal departments.

The practice of managing legal departments does not stand still, and any management situation is unique in its own way. Therefore, if you have any questions, ideas, or suggestions regarding this study, you can write to me on Linkedin. Also visit my website, where I post materials on the theory and practice of management in legal departments.

Happy reading!
1.1. What does IKEA have in common with a legal department?

You may have been to an IKEA store. What can you observe about this store? Firstly, there are organized shopping aisles, through which, like a river, a stream of buyers floats without intersecting with one another, seeing the entire range of products. Secondly, there are standard-sized goods that are easy to pack without taking up much space. The third observation is in regard to the location of shops. If it is a large Ikea store, then it is usually located on the outskirts of the city, and if it is a design studio, then it is likely to be located in some popular place in the city center. In addition to such obvious aspects, there are also hidden, but critical elements of the business process that make IKEA the way we know it. This is a reliable supply of stores with goods (supply chain management), a built-in system for monitoring the availability of products on shelves and in warehouses (capacity management and inventory management), quality control of service (quality control), and, finally, a system of staff motivation for continuous improvement (job design and operations improvement).

Most likely, you have already thought about the similarities the management of a business unit and a legal department. Let us analyze what the company's legal department would look like if you looked at it like an IKEA store.

First, the lawyers of the company (or chief legal officer) daily receive series of questions from employees of other departments and from the company executives (internal clients). Although they do not queue at the checkout and do not “shop around” the legal department, choosing “which legal advice they are most interested in today,” they are no different from buyers in a store. They have a request for a particular legal service, and they expect it to be satisfied by the legal department.

Secondly, by consulting with an internal client, negotiating with a partner's representative under a contract, and even appearing in court, a lawyer creates a product (in the form of a consultation, contract, or resolved conflict) that is “purchased” by his company. And if you look at the entire line of such legal products, you can see that a significant part of these artifacts can be standardized. The process of their "production" can be organized to ensure their efficiency, stability, and predictability (after all, we all love when we get what we expect to buy).

Thirdly, if we are talking about a big legal department that provides support for the business of a large holding, then we will most likely see the organization of geographically distributed legal support centers. If it is a head office of a large company with numerous departments, including HR, finance, procurement, sales, then, as a rule, it will have more lawyers than a single plant. In the first case, we are likely to see a large department with lawyers who practice various areas of law. In the second case, we will see “generalists” who are able to solve most of the legal issues that arise within the plant. At the same time, if a lawyer attached to a plant faces some specific legal issue, it will turn to the head office for additional support. There is a clear analogy here with large shopping centers (legal departments of head offices), where you can buy everything (get support on any legal issue), and small corner stores (lawyer or legal department of a plant) where you can quickly buy only the essentials. Such similarities between legal departments and shopping centers are the result of the same business processes in these seemingly different organizations.

First, like shops, legal departments depend on their suppliers (supply chain management), although suppliers for legal services are not wholesale companies, farmers, or factories, but external law firms, IT companies (developing technological solutions that increase the efficiency of legal services), training and education providers (training legal staff), recruitment agencies and universities (providing high quality staff).

Secondly, legal departments have (at least they should have) control over the headcount. There should not be “too many” or “too few” lawyers to provide legal services to internal clients (capacity management and inventory management).

Thirdly, ensuring a reliable quality of legal advice and expertise of contracts, litigation work is a duty of the general counsel. Although quality control over legal services may look completely different from checking the quality of products laid out on the supermarket shelves, the goals of these controls are the same.

Finally, no professional manager of a legal department neglects such processes as employee engagement and continuous improvements. For a legal department – with lawyers being a main asset and smart advice as a basic product – this process (job design and operations improvement) is a key one.
1.2. Key operational goals of the chief legal officer (CLO)

As noted above, while he manages the legal department, the CLO creates an operating system. This is the main task of the leader of the legal department, and no one can do it except him. But what exactly is this task? If we apply an analogy from the general theory of management, by creating an operating system for a legal department, its leader strives to achieve operational excellence, which can be represented in a diagram (Figure 1). Let us consder each of the indicated operational priorities of the legal department.

Elements of operational excellence

Figure 1

When lawyers work as fast as a Ferrari

As all business processes are being accelerated, highly responsive legal teams are becoming more and more desirable. Speed is paramount both for standard legal services, including contract expertise or claim management, and for complex legal products, such as M&A transactions or Eurobond’s issuance. The mandatory duration of legal services may be prescribed by an SLA (service level agreement), which is more applicable to standard legal services, or by a client's expectations, if a lawyer’s work is associated with a non-standard legal request. For instance, the typical contract examination cycle can vary from several hours (as in the case of sales contracts that generate the main revenue of the company) to several days. In turn, the expected timing of a major transaction can be extremely aggressive (as a rule, it is). In order to meet the deadline, lawyers can spend the last days in round-the-clock negotiations and drafting sessions. Speed is of the essence in such cases. Perhaps we can say that there is no legal service that is “too fast” and, as a rule, a quick response from the lawyer is valued more highly than one that needs to be waited for. At the same time, in general, the lawyer's work is just one of several different links within the chain of business processes. Therefore, a smoothly agreed-upon contract may not result in a quick purchase of raw materials if other departments involved in the approval process are not as prompt. In such a case, the legal service, although being rendered quickly, will not lead to the main business goal. To reduce such risks, the manager of the business process (in this case, the process of purchasing raw materials) must ensure that all departments involved, including lawyers, work efficiently. The manager can do it either through SLA or applying KPI (key performance indicators) tools to motivate all participants in the process move quickly.

When can clients rely on lawyers?

Let's imagine a situation when a police investigative team comes to the company's office early in the morning. The officers pass through security unhindered, go up to the floor where the company's management is located, and hand the CEO a search warrant. First of all, the CEO will likely contact the CLO. And here it is critically important for the chief lawyer to answer the call to give the first recommendations to the CEO on how to respond to the investigator's requirements, take over the interaction with law enforcement officers, and involve leading specialists in working with criminal cases, if needed. The head of the company must be sure that he and the company can get necessary legal support at any time. Reliability and availability are the key features of legal support. An urgent request from the construction department regarding an important contract for building a new plant, a negative publication in a federal newspaper that needs to be urgently refuted, an unexpected meeting of the CEO with the partner's shareholders scheduled for tomorrow morning, which lawyers have to take part in and prepare a list of key issues for discussion — all these cases demonstrate that internal clients need to be able to rely on legal department.

“Quality means doing it right when no one is looking.” – Henry Ford

Let’s discuss the quality of legal services in more detail. Unfortunately, the quality is a less obvious feature than timing and reliability. The classical theory of operational management postulates that the high quality of service is based primarily on its conformance to the expectations of the client. Let's consider a situation when an in-house lawyer turns to an external law firm. As a rule, in-house lawyers turn to external lawyers (1) when the legal department lacks required resources, (2) when specialized legal competencies are required that are not available in the legal unit (for example, antitrust law, custom law, tax law, foreign law issues), or (3) when they need an authoritative opinion to back up a position already taken by the legal department itself.

The first case occurs when the headcount of a legal department is limited. In such a case, the in-house lawyer is seeking “good enough” legal services, which will protect him from failure and ensure that the work requested by an internal business client is done – not such a high standard.

In the second situation, when the client lacks competence in a particular area of law, his expectations from the law firm are the least clear, since he does not know the specifics of the issue and can only make general requests for the law firm’s service. Likely, he will be satisfied if the services are simply rendered at the right time, in a form familiar to the client and cheaply.

It is most difficult to assess the quality of legal services in the third situation, when the client – the in-house lawyer – requests verification of his point of view by an independent law firm. In this case, an external consultant is usually expected to solve a legal problem in a way the client prefers, even if it contradicts prevailing practice and even law. If the external law firm can do this, it is very likely to satisfy the client. In such a situation, there is a great temptation for the lawyer not to disappoint the client with “bad news” about existing legal risks or with a conservative view on the client's position in court. Will such a service provided by an external lawyer be of high quality? In practice, in-house lawyers prefer to work with law firms that they can rely on to uphold their opinions.

The problem of quality control is also relevant for legal services provided by in-house lawyers, whose clients are employees of a business unit and the company's managers. Unlike the situation in which the client is an in-house lawyer (for a law firm), the client from a business unit, as a rule, has no idea how to qualify or legally formalize his idea, business agreement, or business operation. But he has a clear idea of how this arrangement or operation should look and work in practice. He just needs the implementation to be free of legal risks. To tackle this problem, the internal client goes to the legal department, from whom he only expects "legal clearance" of his plan. At the same time, the business client, as a rule, does not have legal qualifications and must rely on the expertise of the in-house lawyer. Therefore, if the lawyer's position coincides with the expectations of the internal client, i.e. does not create obstacles to the implementation of his business idea, he will be satisfied with the legal service. If the position expressed by the lawyer does not coincide with the client's expectations and significantly complicates the implementation of his plan, he will probably not be happy with the legal service.

If a business client is not satisfied with the recommendations received from the in-house lawyer, he can double-check the position by getting an alternative opinion from another lawyer of the company (although, the CLO should prevent such an opportunity), by asking someone in a position above this lawyer to look at the question again (up to the CLO), by insisting that an independent law firm's opinion be requested, or (if it is allowed by the company's processes) or by ordering a legal opinion from a law firm himself. If, because of such re-examination, a solution that suits the client is not found, the in-house lawyer should do his best to explain all reasons that the internal client’s idea cannot be realized (at least legally) and demonstrate high level of empathy, trying to put himself in the client’s shoes and proposing some alternative ways to approach the problem.

At the same time, it is worth bearing in mind the balance that must be maintained between the actual expectations of a client and the efforts that an in-house lawyer invests in serving the client. We will talk about this in detail in the section about client-centricity, but here I would like to emphasize the following important idea: The chief legal officer, like any other manager who sets product development process, must distinguish between such qualities of greater and lesser importance to the client; qualities of lesser importance to the client may be considered more important by the lawyer (the area of "Excessive product quality", shown in the diagram below in Fig. 2). These qualities relate to the external form of a legal opinion, the detailed references to regulations and applicable laws (usually not important for clients), training materials that are not requested by customers, etc. As soon as a lawyer satisfies his client’s minimum requirements, further investments in improving the qualities of the legal product usually do not lead to increase in its demand from customers or their evaluation by clients.

At times, qualities associated with a legal product may be of the essence for the client, but the lawyer underestimates their actual importance. For instance, it may be a term within which legal services have been provided, clarity of recommendations and positions proposed by lawyers (usually complicated by legalese), sometimes it's just doing additional legal work not requested by customer, but necessary for the case. If the head of the legal department (law firm) knows how to distinguish these qualities, his services will be highly appreciated.

Figure 3

An interesting view on the balance between quality and a client’s expectations is described by Felix Oberholzer in the Harvard Business Review[1]. Bearing in mind that corporations can be too focused on financial performance, the author proposes that they pay more attention to the actual interests of their stakeholders by taking the following steps:

1. Identify all stakeholders of the business, including clients, suppliers, employees, and communities.

2. Find their actual needs, preferences, and interests, which drive them to buy the company’s products and services, supply it with necessary materials, work for it, support its initiatives and ideas.

3. Focus on areas and actions which are most important for all groups of the stakeholders.
Like the companies, lawyers can confuse the priorities of their clients. For instance, usually clients prefer speed and clarity of legal opinions over their completeness, referring to the highly professional language of lawyers as “legalese.” The CLO must pay specific attention to the balance between resources which in-house lawyers spend on such tasks and the importance of this work for the internal client and for the company as whole.

Worth the money

A company’s legal support budget covers services from external law firms and alternative legal service providers (ALSP) as well as in-house lawyers (including salaries, administrative expenses). As per data presented by Corporate Legal Operations Consortium (“CLOC”) in 2019[2], 22% of legal departments increased their budgets on law firms and ALSP, while more than 30% shifted more tasks to in-house lawyers.

[1] Oberholzer-Gee F. Eliminate Strategic Overload. HBR. May–June, 2021.
[2] State of the industry survey 2019. URL: https://cloc.org/wp-content/uploads/2019/07/2019-State-of-the-Industry-FINAL.pdf (accessed: 23.10.2021).

According to a 2018 study, the legal expenses of European and American companies were as follows (Figure 4):

Figure 4

According to a Thomson Reuters report[3], in 2019 external law firms and in-house lawyers worked on legal tasks in the following proportions: (Table 1).

[3] Legal Department Operations (LDO) Index Fifth Edition: 2020. URL: https://legal.thomsonreuters.com/en/insights/reports/legal-department-operations-index-fifth-edition-2020 (accessed: 23.10.2021).

Share of legal tasks assigned to law firms

As we can see, most legal departments assigns from 1/3 to 2/3 of their tasks to external law firms. In contrast to foreign legal divisions, Russian companies commonly spend more on in-house lawyers. As per a PricewaterhouseCoopers report, only 30% of companies’ legal budgets in Russia is spent on the services of law firms[4].
This difference can be explained by some obvious factors. First, Russian companies have a higher average headcount within their legal departments than their European and American counterparts. In particular, according to data presented by CLOC, the in-house lawyers of European and U.S. corporations account for around 0.3% of all their staff, which equals to one lawyer for 300-350 employees. At the same time, PWC shows that in an average Russian company, there is one in-house lawyer for every 287 employees (Figure 5).

[4] Viktoria Arutunan, Companies start working without law firms // Vedomosti. March, 10, 2019. URL: https://www.vedomosti.ru/economics/blogs/2019/03/10/795995-korporatsii-bez-konsultantov (accessed: 23.10.2021).

Average number of in-house lawyers for employees in Russian companies

Figure 5

Secondly, Russian in-house lawyers earn, on average, less than their European and U.S. colleagues. The available salary reports state that the average compensation of an in-house lawyer with 4-9 years of Post-Qualified Experience (PQE) is equivalent to 100,000-120,000 USD[5]. In Russia the average in-house lawyer’s salary is around 35,000 USD[6], which is remarkably less than fees paid to external law firms (which charge almost the same rates as their foreign colleagues). As a result, corporate clients shift legal support to internal in-house lawyers, only assigning their legal tasks to external consultants when necessary.

Even lawyers can be flexible

Last, but not least, the CLO must ensure flexibility of legal support. In this case flexibility means adaptability of the legal services to external environments and clients’ expectations[7]. In particular, lawyers have to adjust how their services are rendered. They may consult their clients in person, by telephone, through messaging services on Telegram, WhatsApp, social media, or an intranet portal. By diversifying the channels of legal support, lawyers delight their clients by being adaptable to their needs; they provide their clients with an instrument that ensures that all their requests are assigned to the appropriate experts who will be the best for a particular issue.

The next aspect of flexibility relates to the ability to consult clients on specific and nonstandard issues. Whenever they lack appropriate experience and skills, lawyers must demonstrate their flexibility and readiness to handle new requests and become experts in new area in a short period of time. If they are unable to do so, their company will have to incur additional costs on external law firms to cope with the issues in-house lawyers cannot manage. For example, the introduction of different forms of sanctions in 2022 put dramatic pressure on Russia and led to the development of an entirely new area of law practice. Not having the relevant legal background or education, Russian lawyers had to study tons of sanction regulations and laws issued by the E.U., the U.S., and other countries to acquire new expertise. It was the only solution when many foreign law firms left Russia and refused to assist Russian clients on sanctions issues.

As we can see from some studies of the legal market, when pressed by external challenges and budget constraints, Russian lawyers try to find new niches and expand their services to internal clients. Sixteen percent of them consider it as one of the main priorities in their tasks[8].

1.4. How operation goals determine legal department strategy

The head of the legal department must ensure that all operation goals are balanced. It is obvious that better legal support is more expensive. And when it is provided quickly, the legal issue is less deeply analyzed. As procurement experts say, of the three metrics – price, delivery time, and quality – one always is compromised. Therefore, one of the important tasks of the leader of the legal function is to find the best balance between each of the five specified aspects of the legal service (terms, quality, reliability, flexibility, cost). Let's first look at what a law firm's (as opposed to a legal department’s) operational goals balance might look like.

In the first case, we see law firms providing quick legal solutions. As a rule, they are simple services with a high level of standardization provided by lawyers with average qualifications or by recent graduates of law schools (since they mostly act according to a template or checklists). The list of services provided by these firms is quite limited, and they are reluctant to be flexible and adapt to a specific request from the client. But this type of law firm, of course, is better in terms of price and timing. This is a model of standard legal services (Fig. 6).

[5] Lawyer Salary Guide. URL: https://corporatefinanceinstitute.com/resources/careers/compensation/lawyer-salary-guide/ (дата обращения: 23.10.2021); Lawyer Salary Guide. URL: https://money.usnews.com/careers/best-jobs/lawyer/salary (accessed: 23.10.2021).
[6] Russian corporate lawyers salary report, 2019. URL: https://nortoncaine.com/files/Associates_salary_review_2019.pdf (accessed: 23.10.2021).
[7] Slack N., Brandon-Jones A., Johnston R. Operations Management. 7th Edition. June 2013. P. 52–53.
[8] Viktoria Arutunan, Companies start working without law firms // Vedomosti. March, 10, 2019. URL: https://www.vedomosti.ru/economics/blogs/2019/03/10/795995-korporatsii-bez-konsultantov (accessed: 23.10.2021)

Figure 6

In this case, we are talking about law firms that provide various kinds of registration services, prepare documents related to setting up, reorganization and winding up of legal entities, or simple claim and litigation services. Such a ratio of operational goals in these cases (modest quality, low price, high speed) is fully justified. If the partners or managers of such a firm decide to expand the range of services they provide, then this would certainly affect both cost and quality. After all, they would need to retrain lawyers engaged in standard functionality or hire new employees, which would generate losses associated with setting up the company's work in a new way, errors, alterations, and low ratings from clients.

The second model of legal service can be called "boutique." Quality is of upmost importance to these firms: perfectly drafted memo that reflects the legal assessment of the situation in detail, multi-page contracts that regulate all aspects of parties’ relations, claims and lawsuits thoroughly formulated and supported by numerous arguments and evidence. Of course, it is impossible to prepare such a high-quality product very quickly. These legal products take more time. As "boutique" law firms are not ready to compromise and provide a service at a level below their standards, they may be reluctant to be flexible and responsive to client requests if they conflict with the firm’s standards (in the same way that a Ferrari manufacturer will never make small cars or trucks, even if there is a high demand for them). Since highly qualified lawyers work on such products, these services cannot be cheap (Fig. 7).

Figure 7

Such legal services are provided by international law firms, as well as local law firms specializing in certain practices, such as antitrust law, international arbitration disputes, capital market transactions, maritime law, etc.

Finally, there are law firms that provide a wide range of legal services. They have a variety of practices, including niche areas of legal work, such as financial derivatives, project financing or criminal law practice. As a rule, these firms are big. They employ highly qualified lawyers, the cost of their work is quite high, and the terms of service are not the shortest, but they are sufficient to create a high-quality legal product. The main advantage of such law firms is that they work as “one-stop-shop.” A client faced with a multi-dimensional legal task involving different practices can contact such a firm and receive a full range of necessary legal services. Of course, in some respects the quality of legal services provided by such “universal” law firms is inferior to “boutique” ones; but “universal” law firms make up for this with a “turn-key” approach and lack of interface risks associated with loss of information, such as unclosed areas of responsibility or contradiction of positions issued by different law firms hired for one project (Fig. 8).

Figure 8

These models of law firms with different balances of operational priorities are also applicable to in-house legal departments. Let's look at the “Standard legal services” model and talk about the legal department of a small organization engaged in the sale of agricultural products. The number of lawyers in such organizations is minimal; often it is a sole lawyer. As a rule, his main tasks include the drafting of standard contracts for the sale of products and purchase of raw materials or equipment, providing legal support in liaison with government bodies, and routine litigation cases. In this model of work, the operational priorities of the legal department include timing, availability of legal services and their cost. Since the organization operates in a highly competitive environment, the timing of legal service provided by such lawyers is crucial, as any delay may cause the loss of a client. Thus, the lawyers need to be available around the clock. Of course, such companies cannot afford to spend a lot on legal services. If such an organization is faced with a new legal issue, then it hires external lawyers (if the company has a budget for this) or the in-house lawyer tries to solve this issue by himself, gaining new competence and, at best, becoming a more universal expert.

Now let’s take a look at how the "boutique" legal model works within a company. We can consider a development company engaged in the real estate market. The lawyers of this organization are involved in working with large construction contracts, providing judicial protection in disputes for quite large sums of money; the branch of construction law is so complicated that serious specialization is required for its understanding. The high value of the legal issues which such lawyers resolve fully justifies their high cost. And the significant risks associated with major litigation or regulatory actions that could put a developer on the verge of bankruptcy justify the highest quality standards of legal work. At the same time, because of their high-quality legal expertise in construction law, the lawyers of a development company can rarely decide other material legal issues that occasionally arise in business. They “sacrifice” their flexibility to provide high-quality expertise in construction law.

Finally, let’s consider the model of a universal law firm within the context of a large holding company that includes numerous production assets. The lawyers of such a company face a wide range of legal issues, starting from M&A transactions ending with legal support in criminal cases related to environmental protection, or government relations work with bills of laws. There are also financing issues (shares and bonds issuance, project financing, bank loans), product sales, equipment purchases, and a huge array of issues related to logistics cooperation, competition law, compliance, IP, sanctions, etc. It is quite difficult to find a branch of law that lawyers of a large holding company do not encounter. This creates the need for the development of a wide variety of competencies in such a legal department. Therefore, in this case, flexibility is the top operational priority. At the same time, the high materiality of the issues such in-house departments resolve does not let them compromise with the quality of the legal product they create. Therefore, the contracts, legal memos, and court documents issued by lawyers of a large legal function are not so inferior in quality to products created by "boutique" law firms. This, of course, is reflected in the costs associated with the legal department. It is quite high. What is less important for large companies is timing. Highly material issues are usually not resolved very quickly. Therefore, a three-day deadline for answering a simple legal question or months of negotiations on a joint venture project is normal for a large organization.

The trade-off between quality, speed and cost is the reality of legal services. It is almost impossible to reach the highest level simultaneously in each operational goal. At the same time, there are two main tools which could improve the balances: automation of processes and effective leadership in the legal team. Let's see how they can influence the operational model of a legal department.

The automation of legal support can have a noticeable impact on the balance of operational priorities. Let's assume that a company implements Contract Management Software, which ensures that non-legal business units can independently create contracts based on forms originally drafted by lawyers and embedded in the software product. In this case, the internal customer can receive the contract faster than if he waits to receive it from in-house lawyer, an expensive resource of lawyers will not be involved, not to mention the fact that this service is available 24/7. On the downside, flexibility is compromised here: in order to obtain any new type of contract, the lawyer has to enter it into the IT system (the client will not be able do it himself). The same is true for quality, since constructor of contracts includes just common solutions and is unable to adapt standard contract forms to a particular request of the client. As a result, it creates a different ratio of operational priorities than we have with “bespoke” contracts hand-made by in-house lawyers (Figure 9).

Figure 9

At the same time, the effects of automation can differ depending on the process of legal work. If we talk about standard contracts – which each company has in large supply as part of the normal business – then the Contract Management System can increase the efficiency of legal department. If we are talking about contracts of M&A or large construction projects, then this IT solution will be practically useless.

Another instrument that improves the balance of operational goals is the effective management of the legal team. By improving the quality of documents, reducing the time required to complete legal tasks, and optimizing the costs of the legal department by reducing both internal and external expenses, the Chief Legal Officer can make the legal department better in all aspects. For example, a General Counsel leading a legal department with an operating model similar to that of a "universal law firm" can reduce the time of legal support services implementing SLA (service level agreement, which will be discussed in more detail below). In order to reduce the cost of the function for the company, the Head of the legal department can divide the legal staff into different groups depending on their experience, and delegate tasks received from clients to different experts in accordance with their complexity. If, for example, an M&A transaction contains both complex legal elements (like a shareholders agreement under English law) and standard ones (such as a share transfer agreement in the charter of an LLC, certified by a notary), then more experienced (and expensive) lawyers can be assigned to the first type of tasks, while less seasoned experts can be assigned to the second type. As a result, the balance of operational priorities of the legal department becomes healthier (Figure 10).

Figure 10

1.5. Legal operations as a new role in the legal department

In most business schools with MBA programs, operational management is one of the basic modules. However, the role of the legal operations manager (LOM) in the legal department is relatively new. At the same time, if you look at recruiting resources in the United States, you can see that the demand for specialists in this category already exists and continues to grow. According to a report prepared by Thomson Reuters, in 2019, 81% of legal departments included the operational management function (in contrast to 51% in 2017), and 16% of the legal units increased the number dedicated legal operations staff, while in general the staff of lawyers remained at the same level or even shrunk. In the next year, 2020, the growth in demand for LOMs become even more obvious: 87% of legal departments had already hired employees for this role. In turn, according to a study by BusyLamp portal, only 2% of the surveyed organizations had not considered the possibility of implementing operational management of legal services. The remaining legal departments either had at least one LOM, or performed this function by distributing operational tasks among lawyers and managers. Let's consider the main functions of LOMs.

What functions are carried out by legal operation managers?
One of the most complete descriptions of the functions of the LOM is presented on the CLOC website (https://cloc.org/), with supporting material from Gartner studies (https://www.gartner.com/en). We can look at the standard functions of the LOM.

Managing data needed for decision-making

Lawyers usually do not make decisions based on a scrupulously analyzed and extensive collection of data. Figures, facts, details - all this is often overlooked in legal risk assessment. To a typical lawyer’s mind, his professional duty is to find and report legal risks; it is much more difficult to assess how significant they are. Arranging data required to make sound decisions about risks is one of the aims of legal operations.

What would data management look like in a legal department? Let’s consider one scenario: If a head of a legal department counts the working time spent by lawyers on certain tasks, he can use this set of data to see where the lawyers overspend or underinvest their time. This, in turn, will create an opportunity to identify legal issues that require additional management attention (for example, if the issues are related to challenging employee discrimination), or can be standardized in templates without the regular involvement of lawyers. The billing information could even make it obvious that there is a need to increase the headcount of in-house lawyers or the budget for external advisers. Without such data about working hours spent by in-house lawyers on their tasks, such decisions will lack justification.

Another example of how LOMs can use data relates to the time lawyers spend on certain legal disputes. Every court case takes certain resources from its participants – costs of business trips, working hours of in-house lawyers, time billed by external lawyers – and all of this should correspond to the complexity and materiality of the court case. The ability to combine information about all these resources and to use this information for future cases could remarkably optimize costs of a company.

In practice, large legal departments are already collecting and using such data to improve their efficiency. For example, Coca-Cola lawyers collect data on the causes of litigation and violations of regulatory requirements to reduce the risks of such excesses by making appropriate adjustments to the company's business processes.
Without consolidation of this data, the head of the legal department misses the potential for business process optimization. As Peter Drucker said, "What cannot be counted cannot be controlled."

Financial management
The legal department, like any other division in the company, has its own financial dimension. Financial competence, as a rule, is not well developed among lawyers since financial management is not included in law school programs. Accordingly, lawyers usually rely on the expertise of financial departments. The LOM acts as a bridge between the legal and financial departments by managing the budget, optimizing costs, and working with the billing of both in-house lawyers and law firms.

Procurement of legal services
According to a Thomson Reuters study, in 2020, legal fees optimization was the highest priority for 89% of legal service managers. The LOM controls legal expenses though RFPs (requests for proposals, i.e. requests for legal services), fixing optimal fees proposals for each legal task (including conditions alternative to the traditional hourly payment system), and gathering feedback on legal advisers. According to the research of Gartner, legal departments with a dedicated legal operations manager or team spend less on external consultants than those in which this role is not formalized (Fig. 11).

Figure 11

Learning and development in the legal department
In most companies, learning and development (L&D) is a separate function related to HR. However, any business or service units of an organization, including the legal department, needs to invest significant resources in the development of the hard and soft skills of their staff. If they just rely on L&D or HR, it could negatively affect the skills development process. After all, no general corporate L&D program can ensure the development of special skills needed for unique professionals working in the company. This is a task of their department management – in our case, legal operations management. The LOM provides training and development for in-house lawyers, arranges the induction of newcomers, implements trainings to develop special hard and soft skills, engages external trainers and consultants and provides professional assessment through different certification programs. In addition, the LOM organizes legal knowledge management and shares it with non-legal personnel. HR trainings on the latest trends in labor disputes, seminars for the tax compliance function in such topics as "what points are important to pay attention to in JV creation" or "how to reduce antitrust risks in company's sales strategy” – all these items are covered by L&D programs for a company’s staff.

Technologies in legal processes
A separate book can be written about digitalization of the legal profession. Here we can just note how Legal Tech correlates with the LOM to complete tasks. Firstly, the LOM creates the so-called roadmap for the digitalization of the legal department, choosing appropriate IT solutions for legal processes. Secondly, he connects the legal IT departments of a company. The LOM is a key player in implementing the Legal Tech agenda in a company. He combines very different activities for the digitalization of the legal department. If the LOM is not engaged in using technology, the legal department will not keep pace with digital developments that would otherwise benefit the department.

Creating a strategy of legal department
Often legal departments do not have a long-term strategy, being limited to a short-term vision and working "on demand". At the same time, many companies have development plans and strategies for five or ten years or even longer. It is obvious that the plans for legal department development should be in tune with the movement of their company. Ensuring such tuning is one of the LOM’s goals. Having helicopter view – is an important competency of the operations manager of the legal service. By helping the head of the legal department, he ensures that the "broad picture" of the company's development is brought to each employee, helping them to integrate their individual and group tasks into the key goals of the organization.

Finding a balance between in-house lawyers’ and external law firms’ involvement
Let’s talk now about the allocation of different legal tasks between in-house lawyers and external law firms. As Richard Susskind, a well-known futurist of the legal profession writes: "I call for the decomposition of legal work into separate components, highlighting routine and standard ones that should be performed by more cost-effective tools... This will lead us to a wide practice of offshoring, outsourcing, subcontracting, digitalization, since customers will prefer this to the high fees they pay today to ‘expensive’ lawyers working in expensive offices." Deciding which types of legal tasks should be assigned to external lawyers, and which should be left to the in-house ones, but entrusted to young specialists, as well as those which should be automated or stopped altogether – all of this is in the area of responsibility of legal operations. Not assigning the tasks himself, the LOM creates a business process of such distribution, and evaluates how this system works.

Project management
Any business is very dynamic. Organizational structure, processes, and technologies are ever changing in any company. In some cases, these changes have no effect on the legal department and relate to other divisions of a corporation. In other cases, lawyers take part in these movements, providing legal support, or even lead changes in a business with an impact on the entire company. For example, in-house lawyers transform claim management procedures or build compliance systems, making an impact on other business processes. In such cases, lawyers need to be proficient in project management. The legal operations function can play an important role in the development of these skills.
How can it work? If an employee of a legal department has an idea to change something in the company, then he can contact the LOM with a request to support his initiative. The LOM can train the lawyer and provide him with the necessary set of techniques that will help him to implement changes. In addition, being familiar with the company and its key leaders, the LOM can help the lawyer to take into account some unwritten principles of change management in the organization. If there is no existing legal operations unit in the company, then all these tasks fall on the General Counsel (GC), who, due to his workload, cannot devote much time to support even the most promising ideas of his employees. The legal operations function provides greater opportunities for these changes to be made.

Working with personnel
People are the main asset in legal services; this is true for both to law firms and in-house lawyers. As such, hiring, onboarding, appraisal, and other aspects of working with personnel are of paramount importance for any GC. The LOM assists the GC in these tasks by setting up a system for selecting the most effective and motivated employees, developing career tracks for high-potential lawyers, monitoring the work-life balance of in-house lawyers, and implementing mentoring programs for the staff.
What could work with personnel look like? For example, when a company hires a new lawyer, the LOM can provide him with a so-called “buddy” – an experienced employee in the legal department who knows the organization well – for induction of the newcomer into the corporate environment. The buddy can introduce him to key employees in the department and to some internal customers, help him navigate complicated IT systems, etc. If the LOM is not assigned this important task, the head of the legal department will have to deal with it personally. Without proper guidance, the new employee will dive into the company much more slowly, thus wasting time, struggling with motivation, and failing to create value for the organization that he could have otherwise provided.

Knowledge management
Information is both an instrument and the main product of lawyers’ work. When information that has been created is not stored in the company, the legal department loses the money its company invested in it. Now knowledge management is at the earliest stage in most legal departments. Data is not systematized, employees of legal departments have neither the habit nor the motivation to share the information they receive with colleagues and other departments, and information created (like memos or drafts of documents) is not reused, since it usually languishes in people's private messages or folders. Therefore, a knowledge management system is of the essence for almost any legal department. As authors of SimpleLegal define it, legal knowledge management is the way corporate legal departments create, share, and find information within their team and organization[9]. And legal operations can play an important role in its development and support. As noted in the CLOC review, the legal operations manager can facilitate knowledge hubs and centers of influence across an organization, ensure a consistent response on topics and issues, design an intranet experience that makes sharing and finding best practices much easier, encourage team members to document and share their work in standard templates and formats, and guard against loss of valuable knowledge caused by staff departures and role changes[10].

How could the legal operations function look?
Legal operations could be realized in different forms. First, the head of the legal department could be in charge of legal operations. Another option is to distribute legal operations tasks among some lawyers and paralegals. Finally, legal operations could relate to the responsibility of one special person – the LOM – or even a legal operations division. Each of these options has its pros and cons, which are explained in greater detail in Table 2.

[9] https://www.simplelegal.com/blog/knowledge-management-for-corporate-legal-departments
[10] https://cloc.org/what-is-legal-operations/

Table 2

Let’s take a look at how legal operations structures typically function in Western companies: (Figure 12)[11]:

[11] См.: Legal Operations Trends: Benchmarking Report. URL: https://www.busylamp.com/legal-operations-benchmarking-report-2019 (accessed: 23.10.2021).

Figure 12

Only a small percentage of legal departments does not perform operational management functions. Their share does not exceed 4%. In most cases, the legal operations tasks are distributed among lawyers who also perform other, pure legal tasks. As we can see, in Germany, the UK, and the USA, the legal operations function has such a structure in 40-50% of cases. The next most common option of LO organization is the allocation of one LOM (in Germany, 30% of the surveyed legal departments work this way, in the UK – 43%, and in the USA – 22%). In some cases, there are two LOMs. And in what are probably the largest companies – primarily in the USA– the number is equal to three or more.
According to another study conducted by CLOC, in the United States, the share of companies in which the legal operations function is distributed among lawyers is about 25%. In turn, large corporations have, on average, 14 operational managers in the legal function, while small organizations have only 2. Companies from the pharmaceutical industry and from the biotechnology sector are the leaders in the number of legal operations staff, while the lowest headcount of LOMs can be found in companies from manufacturing industries.

Who can become a Legal Operations Manager?
Operational management is not yet part of the educational programs of law schools. Therefore, to become a LOM, a professional must develop the appropriate skills in practice, by studying relevant literature, and by sharing experience with colleagues from other companies. At the same time, an individual seeking to fill the role of LOM may not have a specialized legal education. As practice shows, people from business functions can bring a fresh view to the operational management of a legal department, which is difficult to expect from lawyers. In turn, for legal experts who want to gain new experience and update their professional profile, legal operations management can be an attractive career track. A consulting company specializing in the management of legal teams, BusyLamp, provides the following analysis of the pros and cons of candidates for positions in legal operations with a legal and business background (Table 3).

Table 3

Pros and cons of candidates for positions in legal operations

As can be seen from this comparison, in most of the competencies important for the legal operations function, people from business units outperform lawyers. At the same time, LOMs who are legal experts may be most motivated due to their desire to gain this new experience, while leveraging their legal expertise.

Let’s take a look at the statistics. The LawGeex platform in its report “Anatomy of a Director of Legal Operations” cited the results of a study of 235 profiles of LOMs on LinkedIn. Based on the results of the analysis, they have detected the following patterns:

✓ 71% of operational managers have a law degree. As a rule, these are former lawyers.
✓ 25% of them have an MBA degree.
✓ In 59% of cases, the role of LOM is performed by a woman.
✓ On average, before being appointed to the position of operations manager, an employee worked in the company for 6-7 years.
✓ The salary level of the chief operating officer of the legal function of a large company is typically in the range between 200,000 and 300,000 US dollars per year.

Why do many lawyers want to switch to the role of LOM? According to legal recruiter Julia Brush, “There are a lot of lawyers out there who want something different, they don’t want to practice law anymore and so those who want to stay tethered with the law, it’s a great option for them. And frankly, it puts them in a position of power, which a lot of lawyers have never been in[12].

[12] См.: Anatomy of A Director of Legal Operations Revealed. URL: https://blog.lawgeex.com/anatomy-of-a-director-of-legal-operations (дата обращения: 23.10.2021).
2.1. What products does the legal department create?

In the first part of the book, we drew an analogy between a legal department and an IKEA store. We talked about the fact that both IKEA and lawyers have a business process that are aimed at satisfying customers’ requests. Satisfaction in this case means providing a client with a certain product. Usually, a product is something a client buys at the store. But we can also say that what a client gets from a lawyer is a "product." While it is obvious to IKEA employees that they sell products (goods) to customers, lawyers usually do not look at their work in such a fashion. As a rule, they focus on the process of providing legal services, and not on their final result. This is manifested, among other things, in the fact that usually they charge clients for their time (counting billable hours), but not for results. Only in rare cases do lawyers agree to be responsible for the outcome of their work, making their remuneration dependent on the client’s expectations (so-called success fee). Even so, in these rare cases lawyers often still retain a minimum monetary compensation irrespective of the results of their work.

But what is the product of a legal department? Let's turn to the general theory of marketing. Initially, a product was defined as an item created for sale, usually produced as part of a manufacturing process or in agriculture. However, some time ago, such a conservative approach began to change, and the product category began to be associated with the general value proposition provided to the client. The value proposition includes not only a material object or service ("product" in the narrow sense of the word), but also the overall impression of interaction with the seller that the client gets.

In relation to legal services, we can also consider the product in two of these aspects: 1) as the physical result of the legal work itself (narrow meaning), or 2) as the client's overall impression of the services received (broad meaning).

A legal product in a narrow meaning is a traditional and easily understandable category for all lawyers. From the first year in university, and then in practice and in countless professional development programs, lawyers are trained to prepare high-quality documents, to make a deep and comprehensive analysis of legal cases, and to speak in court. The Internet is overflowing with resources that can teach lawyers to create legal products in this narrow sense of the word.

At the same time, today we see the evolution of customers' expectations of the legal service they purchase. Clients want to acquire not just a legal product in the narrow meaning of the word, but also a quality of communication with the lawyer. This is, so to speak, the second meaning of the legal product. If yesterday the customer was quite satisfied with a memo, contract, power of attorney or court work, today, in order to satisfy the request of a client who has a choice among a large number of competing legal service providers, it is necessary to show more than just knowledge of the law or judicial practice.

In Jack Newton's book The Client Centered Law Firm – dedicated to the modernization of law firms' patterns of work with clients – the author states an important observation: when purchasing a product, we usually get satisfaction not only from the product itself, but also from corresponding services. We may not have any complaints about the new iPhone bought in the store, but if we were poorly served during the sale, we will probably never go back there. In turn, companies such as Netflix, Airbnb and Uber have not only changed their industries, but have generally influenced what service consumers expect from other service providers. And the effortless experience we have while booking a hotel, watching a new movie, or calling a taxi is now expected when we take advantage of other services, including legal ones. In one of the research studies conducted by PwC, the following trends demonstrate the evolution of the customer experience influence on markets:

- customers are willing to pay 16% more for positive impressions received when purchasing a product;
- approximately 33% of clients are not ready to return to the company they have had a negative experience working with, even if they were loyal to it before;
- the speed, convenience and friendliness of the service, as well as the willingness of the staff to help the client are fundamentally important for 70% of customers. For customers belonging to generation Z (born in the period from 1997 to 2012), these service quality data are even more important;
- regardless of technologies, up to 80% of customers want to continue to interact with a person, and not just with automatic systems;
- approximately 55% of the clients noted that the level of customer experience provided in most companies should be higher. This indicates a so-called client experience gap, i.e. the potential to increase the demand for services, including legal ones, by increasing the level of customer service.

The Clio, a company specializing in the development of the service of law firms, conducted study of client-centricity among law firms. They have sent more than 1,000 e-mail requests and made more than 500 phone calls to legal practitioners asking questions that are usually asked by first-time clients (Table 4). Here are some results of the study:

Table 4

Results of client-centricity study of the Clio

As we can see, just slightly more than 5% of law firms operating in the American market have demonstrated the ability to meet clients’ expectations, including providing complete information about services, making a prompt response, and having a transparent approach to costs. This observation is relevant to most other legal markets. Not many of them provide the customer with an estimation of their costs for services (unless the client asks the law firm in advance to specify the upper limit of remuneration, which, as a rule, is limited to many assumptions). And it is rare that after the completion of work on a legal project law firms request detailed feedback from the client.

What is the reason for such a low willingness of lawyers to make a legal product not only useful, but also convenient and accessible to the client? One of the reasons for this is the low focus on client-centricity among legal experts. Focusing on so-called “hard skills” – which includes knowledge of law and legal practice as well as the ability to draft a contract, legal opinion or position in a court – classical law schools, as a rule, limit their attention to the legal training of a professional lawyer. In turn, “soft skills”, including empathy and the ability to communicate, which are key for the customer service, are practically not taught in law schools. Often young lawyers begin to develop these skills after they have already started their professional route, sometimes on their own, sometimes through taking corporate courses (if they are lucky enough to find a job in a company with a well-developed learning culture).

There is also a third aspect of a legal product. It can be called “result orientation”. The contract can be prepared diligently, regulate a variety of aspects of the relationship between the parties, be sent to the client on time with detailed comments, and the bill for these services can be completely acceptable to the customer. But if during the negotiations with the client the lawyer did not demonstrate a proactive approach and leadership attitude, then the services rendered by the lawyer will not be well appreciated by the customer.

Thus, we can say that a legal product has three aspects. Firstly, it is a product in the narrow sense of the word (e.g. the text of a contract, legal advice, petition to court or antitrust body). Secondly, it is a "service shell" that creates the client's impression of the legal product; it includes answering the client's question within an acceptable timeframe, providing a detailed explanation of the legal qualification of the situation in understandable language (not legalese), and making the service’s pricing transparent. Finally, thirdly, it is a proactive attitude of the lawyer toward solving the client's issues, which includes clarifying his needs and performing additional actions even if they are not expected by the client.

2.2. What does client-centricity mean for a legal department?

The researcher of the Lean concept, Michael George, noted that the quality and value of a service can only be determined by the client. But who is the client of a legal department? Some time ago I conducted a survey in which I tried to find out from my colleagues whom they consider to be their client. The results are shown below (Table 5).

Table 5

As we can see, a significant percentage of employees considers the company they work for to be their client. But how can we, as lawyers, satisfy the company's request for legal support? Client requests may be wide ranging, and clients assume that a lawyer has a correspondingly wide range of skills — from contract drafting to negotiation and litigation. Obviously, in real life, we are dealing with a lot of clients who work for the company we work for. Therefore, the client of the in-house lawyer is a specific employee who requests legal support. At the same time, this employee works in a certain department, which has its own goals, powers and restrictions. In making a legal request, this employee represents interests of this business unit. In order to work on this task, a lawyer needs to understand how this department operates and what priorities it has. In this book we will base our analysis on this definition of the client of the legal department.

Many of us are familiar with the adage "the customer is always right." We tend to use it when we are clients; however, as lawyers, we are playing on the other side and have to satisfy the requests of our customers. How to arrange a job in a way that the client is happy? Are there any boundaries to a lawyer's client-centricity and where do they lie?

Ipsos Research (https://www.ipsos.com) identifies six key aspects of the customer's perception of services. Let's apply each of them services provided by legal department.

Fair treatment. Every customer wants their needs to be considered of paramount importance. It is enough to remember what emotions we feel when we are standing in line to check in for a flight, while a business class passenger desk is empty nearby. In the same way, a business class passenger (who has paid several times more for his ticket than an economy class traveler) may experience negative feelings when he goes to a crowded screening area before boarding his flight. The client of a legal department is subject to the same negative feelings when he sees that his issue is taking longer to resolve than that of a client from a different business unit or of a higher-ranking employee. It may also seem unfair from the client’s perspective when the lawyer with whom he’s working (and is satisfied) is shifted to another more "important" project, and the client is assigned a new (and probably less experienced) expert who is unfamiliar with his case.

According to Ipsos, to minimize the risk of the client perceiving unfairness, the service provider needs to make sure that customers feel they’re involved in an honest exchange. If the value proposition or service is fundamentally unfair, customers will not support the company in the future. Thus, it is possible to create a sense of justice regarding legal services by increasing the transparency of the service process, including setting up an open queue of intakes to the legal department with tracking of their status. In this case, each client will be able to see that the response to his problem is “in progress” and will be made within a clearly defined time frame not exceeding appropriate deadlines. We will talk in more detail about the operational transparency of the legal department below. In turn, in the second example, related to "unfair" replacement of a more experienced lawyer with a new one, a dialogue between the head of the legal department and the internal customer is very important. It is necessary for the legal department head to explain the reasons for this replacement, and to pay special attention to the client's concerns.

Status. The criterion of fairness in the relationship between the client and the one who provides the service borders on another factor affecting the customer's perception of the service — status. Each client wants the value proposition he acquires to match the level of his loyalty to the seller and the importance of his business. A large client always expects to be prioritized, and if he does receive priority, he will notice it; if not, the client is more likely to reduce the volume of services purchased, or to leave altogether. That is why many sellers of services and goods use loyalty programs, giving their regular customers additional benefits and advantages.

In relation to the service provided by the legal department, this may manifest itself in the form of prioritizing attention to intakes made by higher-level managers or business units requiring legal support in connection with an urgent task important to the company as a whole. At the same time, it is important to distinguish between intakes from managers in connection with their business decisions and personal requests from the managers. The latter should not be prioritized in relation to other business tasks coming from business units. In turn, if the organization has "always burning" units that abuse their right to priority service in some way, this issue should be brought to the level of the heads of the legal department and these business units to resolve the issue of how to provide the most optimal support for such requests. If they are urgent for objective reasons, then the number of lawyers working on these items can be increased (of course, at the expense of the function dealing with "burning" requests, or at the expense of the company's budget). If the urgency of the requests is a result of poor organization of the business unit, then it can help to make all "urgent" intakes subject to the approval of the head of the legal department as well as the business unit to “filter” incoming appeals.

Reliability. The client prefers to work with those who can be relied upon. Work done on time, transparent fee compensation, availability at any time — we take all of this for granted when we buy something for ourselves or our family. The confidence of the client acquiring legal service is somewhat similar to the confidence of the buyer of goods.

One day, when I was moving to a new, but not yet equipped apartment, I bought a sofa. The delivery of the sofa was scheduled exactly on the day when my family and I moved to the apartment. And if the sofa had not been delivered on time, then we would not have had a place to sleep. And the day before the expected delivery date, a manager from the store contacts me and asks me to postpone the delivery for 1-2 days. I was very disappointed.
A client who expects a draft contract from the company's lawyers, which this client has promised to send to an external partner, may feel the same when, a few days after contacting the legal department, he receives a completely different form of contract from that which he expected. Unfortunately, such cases have happened in my practice.

Reliability creates confidence within the client and increases his satisfaction with in-house lawyers’ work. But how to ensure this reliability? There are a lot of tools available to the head of legal department. Such reliability of the legal service can be ensured by regular evaluation of the function by internal customers (either in an advanced IT system or in Excel format on Share Point). The general counsel may also directly contact other business leaders in the company and ask their opinion about the effectiveness of the legal department. With the reliable work of lawyers, clients' confidence in the legal service – as well as its score – increases.

Control. An important aspect of legal department management is the transparency of the service process, which gives a client a sense of control over how his request is handled. In his article "Operational Transparency," published in the Harvard Business Review in March 2019, Harvard Business School professor Ryan Buell notes that without seeing the inner kitchen of a restaurant, a client does not realize and appreciate all the efforts the personnel make. As with other services, the process of legal services should also be transparent to the client. How can this be organized? Let's imagine the openness of the legal department at different stages of the client's journey (Table 6).

Table 6

Effortless experience.
Imagine an employee of a company who needs to receive a draft contract from lawyer. He turns to one of the company's legal counsels with a hope to resolve his seemingly simple issue. In response to this request, he got a link to Share Point, where he finds a hundred forms of different contracts (from a loan to the sale of an enterprise) without any prompts to find the one that he really needs. How does the client feel at this moment? Even though the legal service seemed to be provided, it did not make the life of the customer easier and did not solve his issue.

Now imagine that a client needs to send a claim to a counterparty of the company. In response to his request, the legal department suggests that he himself collect the entire package of documents that should be enough to win the lawsuit and asks him to prepare the text of the claim by himself choosing one from several dozen templates collected in the server folder (since the claim is “only” on USD 100 and lawyers do not deal with such “small” tasks themselves). Will the client be satisfied with such a service?

To make the client happy, lawyer needs to free him from additional efforts to get the service. According to a Gartner study, among the main factors of low customer satisfaction (along with the need to repeat their contacts when applying for a service, switching a call to another specialist), complexity of service procedure is one of the strongest. By dealing with an internal client in a formal manner, not being proactive, lawyers harm the client’s satisfaction with the legal service.

In his book on improving customer experience, Matt Dixon highlights the following approaches to improving customer satisfaction:

1. Apply self-service tools with a friendly interface and easy-to-follow instructions.
Clients increasingly prefer to resolve their issues without the mediation of people, through chat bots, client portals, FAQ sections.

2. Solve client’s requests immediately.
In worst case scenario, client contacts the legal department several times. And every time his happiness from the work with lawyers becomes lower. If we focus on the best practices of client service, then after the first call / email / application, the lawyer must respond on all details of the legal request, provide the client with comprehensive explanations about his further actions, send him an email (or a message) with a step-by-step description of the legal services process. The client should not need to contact the legal department repeatedly to resolve the same issue.

3. Dive into the real, not just the voiced problem of the client to provide him with the best appropriate solution.
Going beyond the initial task, plunging into the situation in which the client actually is, a lawyer can do more than just provide him with a legal service. Legal counsel can solve the real customer's problem. Perhaps the client does not need to go to court to resolve his issue. Or instead of a huge fine that the client is trying to recover from a faulty counterparty, he could achieve his real aim by reporting the violations the government bodies. As a rule, a lawyer can offer more than just one additional solution that will remove or mitigate client's problem. Even if the client comes with a specific task and translates it to a lawyer.

4. The manager should give lawyers more power and freedom to solve the client's problem.
Remember how you evaluate the work of the seller of faulty equipment, who says that he cannot help you in solving this problem, sending you to the service department (which cannot be reached by phone)? Or when you are late for a plane, and an airport employee at the check-in desk stops you due to exceeding the allowed baggage allowance, refusing to accept payment for the excess and sending you to the next line of the same “lucky ones”? "It's not in my power" is just as disappointing to customers as "We don't have this item" or "Your product isn't ready yet".

Few things make a client happier than the lawyer’s ability to solve complex legal issue on his own, providing the customer with a “turnkey” solution. What the lawyer’s manager can do to ensure such a client-centric approach of legal work?

First of all, the manager has to support cooperative culture in a law firm or legal department. It is necessary for any lawyer to create a high quality and comprehensive legal product, which will help client in all aspects of his problem. Even if one particular lawyer does not have an appropriate knowledge or skills, he needs to be able to get it from his colleagues.

Secondly, the manager shall entrust the lawyer to communicate with the client independently, as one-stop-shop. The client prefers to work with a single expert and don’t switch from one legal expert to another just because each of the lawyers responds to him in strict scope of their competence.

Thirdly, the manager shall keep a minimum of control related to the lawyers. It is difficult to build a high-quality customer-oriented service on directive instructions. Just as a polite waiter in a restaurant serves you well not because he is being watched by a video camera, so a client-oriented lawyer works to solve a customer’s legal problem because he is a master, but not because he follows the commands of his manager.

Sense of belonging. As experts from Ipsos point out, sense of belonging helps customers to feel that they are more than just buyers but relates to a center of interests of a particular business. How does this apply to legal services? Many of us have been to client events held by law firms. Being free for customers, they aim to increase their loyalty to the brand of a particular law firm. Another form of creating a community around a law firm is the organization of various kinds of training seminars. As practice shows, these marketing approaches allow a client to associate a law firm with some special legal practice. And if he has a question related to this practice, he is more likely to turn to this law firm.
Is it possible to talk about some kind of affiliation related to legal department of a company? Undoubtedly, some instruments applied by law firms can be useful for in-house lawyers. For example, in-house lawyers can include some of their internal clients (including those who most often apply to the legal service) as a permanent evaluator of the legal department’s work. If such clients regularly receive requests for feedback from the legal department, or if the head of the department contacts them personally to get an opinion on the work of in-house lawyers, it can increase the value of the legal function for client, as they begin to feel that they have an impact on development of the legal service. At the same time, what you influence gradually begins to be perceived as your own, to some extent belonging to the one who has an impact on the object.

Another way to create such sense of belonging is to reward the best clients with certificates of honor or intangible prizes. The award can be given to employees who contact lawyers most often or to those clients who gave the largest number of comments or suggestions for improving the legal service.

Only a client-oriented legal service can be called as highly professional. Gone are the days when lawyers were only expected to qualify "legitimately" or "illegitimately". Unfortunately, current level of the soft-skills development, including client-centricity culture among lawyers, is not so high. Nurturing the culture of work with internal customers should become one of the priorities in the modern legal education.

2.3. How Legal-partners can increase client-centricity of the legal departments?

A few years ago, so-called Legal partners began to appear in the practice of Russian companies. As a rule, they were the most experienced lawyers with high communication skills, whose main or only function was to create and support functional communication between the legal department and its internal clients. Even though the functionality of Legal partners in different companies sometimes differs markedly, we can highlight the following main tasks that Legal partners can solve, making the legal department more client centric.

Firstly, the tasks of a Legal partner may include identifying cases in business divisions that need to be supported by lawyers. The Legal partner must find the problem before the client ask for legal advice. Like in case of preventive medical checkup, where a doctor detects the disease at its early stage, the Legal partner can identify a legal issue long before it because legal problem. To be able to find such cases, the Legal partner navigate in the information space of the client, participate in its key meetings, regularly interact with its employees.
Secondly, the Legal partner arrange direct communication between the clients’ employees and the relevant lawyers of the legal department. A Legal partner, as a rule, does not handle absolutely all legal issues arising in a particular client’s business unit. This would not be optimal, and in some cases impossible. But it helps to build reliable communication between the employees of the client and the legal unit by identifying the lawyer with the best competence to resolve a specific legal issue. As soon as this functional communication is built, the Legal partner can disconnect from this issue, leaving its decision to a special lawyer.
Finally, a Legal partner can act as a representative of legal department in front of managers of the relevant business units. Providing them with reports on the status of the most important legal tasks, informing them about the main changes in the legal service, discussing the most optimal formats of events held by the legal department with its business unit, the Legal partner performs an important part that the head of the legal department should have performed by himself in the absence of the partner.

The Legal Partner role can create the following advantages for the legal department:

  • For clients of the legal department, the legal partner acts as a single person representing the company's lawyers, to whom they can always contact to get legal support. In my experience, business units almost always glad to have such a direct channel for work with Legal department. At one of the appraisal sessions, some heads of business units even jokingly wondered whether it was “discrimination” that some business customers had their own legal partner, and some did not.
  • Acting as the face of the legal unit, the Legal partner largely relieves the head of the function from a bulk of communications, which let him concentrate just on key issues.
  • Finally, for the lawyer himself, the role of a Legal partner can be a step in his career ladder, since it involves the manifestation of not only legal qualifications, but rather even managerial skills. The ability to find a common language with a business customer to identify a real legal problem at an early stage, the ability to bring to a client a legal position developed by lawyers, the ability to organize the work of legal experts on a task that is set by a business unit, not being their line manager. Many Legal partners gain valuable experience that can contribute to their further career development.

2.4. The NPS, CSAT, CES, and other tools for assessing the client centricity of the legal department.

Surveys and customer satisfaction studies are an important tool for assessing the client centricity of in-house lawyers. In practice, such assessments take a variety of forms, but here we will consider just three of them.

The most popular way of evaluating customer satisfaction is the NPS (net promoter score) index. As part of the NPS study, the client is invited to do only one thing: “Evaluate your willingness to recommend us to your family, friends, and colleagues on a scale from 1 to 10.” If the client gives a rating from 1 to 6, then he is considered to be a critic. If from 7 to 8, then he is “neutral”. Lastly, those customers who rate the service at a score of 9 or 10 are viewed as supporters. The NPS index is calculated as the difference between the share of supporters and the share of critics. For example, if 20% of customers have rated the service as 9 or 10, and 10% from 0-6, then the NPS is 10%. Which is not so small, considering that the index can be in a range from 100% to -100%.

Customer Gugu regularly calculates the NPS for well-known brands and produces the NPS benchmark, which highlights NPS indexes of such brands as Apple, Netflix, Google etc. Some sources provide an assessment of the NPS of the US and UK legal industries. For example, the Clearlyrated service[13] provides the following estimates of the NPS level of American law firms in recent years:

[13] https://www.clearlyrated.com/solutions/2022-legal-nps-benchmarks/

Figure 13

Approximately the same assessment is made by Jack Newton in his book The Client-Centered Law Firm, in which he compares the NPS of law firms (25%) with the NPS of Netflix (77%).
Despite its popularity, the NPS can be used to evaluate in-house lawyers only to some extent. After all, the question addressed to clients as part of this assessment (“Evaluate your willingness to recommend us to your family, friends, and colleagues on a scale from 1 to 10”) suggests the possibility of not recommending the company's lawyers to colleagues from other departments of the organization. But in most cases, business units do not have the opportunity to choose another legal service to work with, or to hire an external law firm on their own. Therefore, the NPS assessment, originally created to evaluate services sold on the open market, is not the best way to evaluate a service provided within an organization.
Another method of assessing customer satisfaction level is based on the CSAT index (abbreviated from Customer Satisfaction). Unlike the NPS, this index does not imply the presence of an alternative service provider (in our case, another legal department), and poses a fairly simple question to the client: "How would you assess your overall satisfaction with the service received?". The client is invited to give a rating of 1 (extremely dissatisfied) up to 5 (above expectations); then the ratings are summed up, divided by the total number of clients interviewed (the total number of ratings) and multiplied by 100. For instance, the score around 300 is relatively modest, in contrast to 400 or 450, but better than 250.

Despite the fact that the CSAT method does not seem particularly complicated, it can give very ambiguous results. Satisfaction is a rather vague category and its assessment is mostly subjective. If a legal department is evaluated not by a professional lawyer, but by a customer who does not have a legal education, his criteria for evaluating a legal service can be very different, and the feedback of "extremely dissatisfied" can indicate that the client felt he received either ambiguous legal advice or an unexpected response from lawyer. Therefore, it would be better to request that customers leave a comment alongside their a CSAT assessment score; this comment can be either structured (for example, responses given about to questions about what the client liked and what should have been done differently), or open (that is, to allow the evaluator to write any comment). This can provide an opportunity to better understand the basis upon which the client makes an assessment –his expectations, his request, and the current situation in which he works.

Finally, the third method of gauging customer satisfaction is based on the so-called CES index (Customer Effort Score). It gained its popularity after the publication of the article "Stop Trying to Delight Your Customers" in the Harvard Business Review[14]. Its authors have revealed that the provision of services that exceed the expectations of the client does not ensure his loyalty to the company. However, failure to meet a client’s minimum requirements is highly likely to result in the loss of that client. According to the authors of the article, the key factor determining customer satisfaction is the ease and simplicity with which he receives the service. The question addressed to the client in this case is as follows: “In general, how easy it for you was to get this service?” The client is invited to evaluate this ease on a 7-point scale, from "extremely difficult" (1 point) to "extremely easy" (7 points). The CES index is calculated by dividing the sum of the points received by the number of ratings (that is, the clients interviewed). Accordingly, the higher the index and closer to 7 on average – the higher the level of customer service.

How can this be expressed in relation to the services provided by the corporate legal department? For example, if a client cannot get an answer to his question within a few days, then he will most likely evaluate the service he received as “difficult” or “extremely difficult”. If the answers arrive quickly in unambiguous legal language, then the client is highly likely to indicate that it was “easy” or “extremely easy” to get the service.

Even though the CES index does not reflect all aspects of the customer's perception of the service, it is more relevant for evaluating the service provided by the legal department of an organization than the NPS. In modern realities, the speed of producing a legal product, whether it is a contract, consultation, dispute resolution, is very important. Being unable to spend more than one minute on reading a document, clients prefer "a one-page summary" to detailed legal opinions. Businesses expect legal support to be available as soon as possible, by email, WhatsApp, or phone call. The CES index can help the legal industry to catch up and not miss the lead in the race for a client in need of quick legal information.

Some corporations apply their own metrics of legal department efficiency. For example, the legal function of Coca-Cola has the following dimensions of client-centricity:

  • Staff involvement
  • Ability to work with customers
  • Processing speed and standardization level of contracts for the purchase and sale of products
  • Compliance level
  • The level of expenses of the function relative to sales company

[14] https://hbr.org/2010/07/stop-trying-to-delight-your-customers

2.5. Client journey map

The client journey map is one of the most effective instruments for client experience design. Roughly speaking, it is a sequence of steps that the customer must go through on the way to receiving service, as well as immediately after. How does it relate to legal services?

Let's consider a typical situation of a client contacting a law firm to resolve a legal issue. He goes through a number of stages, including (1) searching for a law firm on various websites or through references and recommendations, (2) familiarizing himself with the services the law firm provides, as well as its team of lawyers, (3) making the first contact with the law firm's lawyers, (4) making the decision to buy (or not to buy) their legal services, (5) interacting with the lawyer and the law firm when legal support is being provided, (6) paying the bill, (7) providing feedback (if the law firm requests it), and, theoretically, (8) returning to the firm when he needs its services. Each of these stages affects the customer's overall impression of the legal product. And the text of the contract itself or the legal memorandum are only one of the elements that affect the client's impression of the legal product. For example, if the lawyers win the court for the client (stage 5) but issue an illogical bill for the services (stage 6), the client's overall experience with the law firm will not be great. At the same time, if all the stages on the client's path to legal services go off without a hitch, but after the completion of the project the law firm does not ask for the client’s feedback, then he may have the impression that the law firm does not pay so much attention to improving its services.
Similarly, the client of an in-house legal department also goes through his own customer journey. Consider the path of a customer seeking legal advice. As a rule, this path will include the following steps:

  • Finding a way to contact the legal department
  • Asking for legal support
  • Identifying a lawyer who will work on the issue
  • Interacting with this lawyer as part of the legal support process
  • Following up interaction with the lawyer in connection with legal services provided
At each of these stages the client can receive positive, neutral, or even negative experiences. This, inevitably, will influence his overall impression of the legal department.

Let's consider the first three stages of the client's path related to legal services provided by an in-house department. Imagine a situation in which an HR employee who has recently got a job in a company understands that he needs legal advice on labor law. In practice, he may have several options for contacting the legal department:

(1) He can ask his colleagues in the HR department whom they usually go to for such support. This option is common, but it completely depends on the opportunity to discuss the issue with colleagues, and their awareness of the legal department lawyers. This option is really old-fashioned today.

(2) He can send an email to the head of the legal department in the expectation that he will delegate this issue to a particular lawyer. In this case, the client makes himself dependent on the promptness of the response / instruction of the head of the legal department (which may not be the highest due to the workload of managers).

(3) After finding the contact information for a particular lawyer or the head of the relevant legal department by searching in the corporate portal, he can direct his question to the appropriate party. This option is already better. The client can find a lawyer specializing in the issue he needs help with, and send him a direct request, bypassing the head of the department. If the department card is easily available (through the corporate portal, a social network, or some other well-known and public resource), if it is relevant and all the necessary contacts are reflected on it, and if the lawyer who can help this customer will promptly respond to a call or an email, it will create a good impression of the first stage of the client’s journey. However, it is not so easy to achieve it. The legal department map should be kept up to date, both in terms of contacts and in terms of the lawyers’ list. It should be accessible and easily found by any client, even a newcomer who has recently joined the company. Finally, if the department card contains all the necessary information, if it is fully up to date, posted on a well-known resource, but the lawyer does not respond as soon as possible and does not confirm that the task has been accepted for work, then the customer will most likely switch to communication with a head of department (paragraph 2 above) and will not get the most pleasant customer experience.

(4) He can send a request to a single client mailing address, then receive the application number and instantly (or after a certain time) the name and contacts of the lawyer who will work on the issue. This option is better for the client than the previous ones. It relieves him of the headache of finding a lawyer for his task and moves this burden to the department staff. But it takes additional resources from the legal department, which now is responsible for handling the client’s request. Any delay in responding to it can hurt the client's impression of the legal department. This is the rule of working with a client: the higher his expectations, the higher the risk of a negative assessment.

(5) Lastly, the client may use one of the most advanced ways to organize communication with a lawyer today – through the legal support portal or a chat bot.
Some legal departments create legal support portals, and to contact lawyers, the customer must submit his legal requests here. The service interface allows the customer to see all his requests and their current statuses, and to upload large-volume documents, thus avoiding sending them through corporate e-mails. The client no longer needs to look through long chains of emails to find the necessary information. After the application has been worked out, the internal customer can evaluate a lawyer he worked with. This way of working with lawyers is obviously convenient. According to market research, about 63% of customers prefer to interact with a client portal or chat bots, rather than with a person. In turn, 81% of customers who apply for service first try to solve their problem independently. This creates a high potential for optimizing the labor costs of corporate lawyers by freeing them from routine work with standard appeals that can be solved using the client portal. However, the building of such a portal takes time and financial resources. At the same time, its popularization among the company's employees becomes a separate task that lawyers do not often face in their standard work. The client’s portal must be user friendly. This implies constant work on its development and dialogue with customers. As soon as the client portal is built, information about it should be disseminated among internal clients. The positive client experience provided by the portal will require even greater efforts on the part of the legal department and will form even higher expectations among clients. In turn, the risk of "failure" and negative feedback from customers in this case will increase, as is the case with more complex systems (e.g., portals), which will always have more possible failures than an elementary one (e.g., a single email box).

In practice, the question often arises whether it is worth disabling less modern channels of communication between a client and a lawyer when introducing more technological and advanced ones. For instance, it would seem that if a company has invested significant resources in creating a client portal, equipping it with extensive functionality, working on its interface, then why leave phone contacts for calls, or receive e-mail addresses that are neither systematized nor combined into a knowledge base, and require significant labor resources? The fact is that all clients differ from one another in some way. Sometimes even the most modern interface of the client portal is not able to replace a direct phone call or a personal meeting with a lawyer.