Digital disruption and the challenge of building tomorrow’s legal function

As legal environments get ever more complex, law departments are coming under relentless pressure to reduce costs. However, right now, with many just trying to keep the lights on, most are focussed on meeting day-to-day demand without the time to think about operating more effectively.

Most law departments have found it challenging to tackle costs strategically, instead choosing a tactical approach to meet savings targets quickly. Often, cuts have been made where it has been ‘easiest’, rather than where they were most needed and many have failed to look more deeply at the underlying issues with the delivery model.

Solving this problem requires a laser focus on the right business and strategic priorities, underpinned by a high-performing, scalable and cost-effective delivery model.

Transformation requires a holistic approach

There’s no "one size fits all" approach to legal department transformation but, working alongside their CEOs and CFOs, today’s GCs are looking towards cost-based transformation of their function by harnessing enterprise change programmes and focussing on the right level of business partnering, improving how the function operates, introducing legal technology and leveraging managed legal services, in addition to targeted use of outside counsel. Deployment of specific solutions for key costs areas, such as contract review, preparation and execution, and legal automation, remains vital in delivering this transformation.

“As legal teams focus on supporting the growth and protection of the business in the most efficient and cost-effective way, there’s a lot that needs to happen in order to successfully transform and maximise the value that legal can bring: from designing and implementing new, efficient and cost-effective legal processes to putting in place the right technologies and alternative delivery models.”

Juan Crosby, Partner, PwC UK, and Global NewLaw Leader

Regardless of the transformation project, the goal remains the same: drive down costs or make best use of the available budget, while maintaining quality and improving delivery.

Long-term transformation is also about changing mindsets. Mike Stevens, Senior Manager, PwC UK, says:

“Legal functions have historically grown organically rather than by deliberate design - but GCs now know that this approach is not going to help them be the partner that the business needs and that a more fundamental rethink is required.’”

Rolling out transformation requires careful consideration

Transformation isn’t just implementing new technologies; it involves major changes in how the function operates and how people work together and embrace this change. Because of this, the sequencing needs careful consideration and a reimagining of the entire journey, which can be hard after years of incremental improvements.

Only once the vision and direction are agreed can organisations build the processes and technology to support it and this is where legal functions should look to harness transformation initiatives that are taking place across the broader enterprise. Leveraging these programmes can help align with board ambitions, new business objectives and wider organisational investments to help the legal department put in place a more effective operating model and improved capabilities.

Managed legal service and contract review solutions

As legal teams revisit operating models, and focus on business advisory rather than documenting simple transactions or other execution-level tasks, new service models are being explored to deliver these activities more effectively.

Managed legal services (MLS) enable in-house teams to quickly and cost-effectively extend and enhance capability and capacity in relation to execution type tasks by leveraging the optimised resourcing model of a mature provider. Internal resources can then concentrate on higher-value, strategic matters where they can provide the greatest value to their organisation.

Alongside MLS, in-house teams can employ outsourced contract review and remediation solutions for cost-effective, large-scale, technology-enabled contract digitisation, review and remediation support programmes.

Taking London Interbank Offered Rate (LIBOR) cessation as an example - financial institutions and large corporates are under pressure to identify contracts requiring transition, determine how they are impacted and remediate agreements. Technology solutions that can automatically identify and extract LIBOR transition-relevant terms and conditions will play a key role in enabling the process and avoiding litigation.

Approaching these types of regulatory and market-driven challenges strategically, with the partner, can provide not only a cost-effective solution for the immediate programme requirements, but also a solid foundation for longer-term legal operating model transformation.

“The right combination of a mature managed service provider together with their deep technology capability and understanding of your wider business can be extremely powerful: getting this partnership right can provide support as a seamless extension of your in-house team and the capability to establish a longer-term legal operating model to deal with regulatory or market-driven events and services”

Alan Angell, Director, PwC UK

Incorporating LegalTech efficiently

Technology continues to be one of the biggest disruptors in the legal sector - and one that COVID-19 has accelerated. While it’s clear the most successful legal teams of the future will leverage technology, selecting the right tools in a market that’s crowded by a huge range of vendors and solutions is difficult.

And digital transformation is much more than platforms, AI, and data. The key isn’t just introducing and using technology, but developing new skills, capturing legal insights, leveraging the efficiencies and changing mindsets to maximise return on investment.

“It’s key to work out what your requirements are and identify the problem you’re trying to solve. Some of the most successful projects we’ve seen are those that have been process-mapped as an end-to-end solution into the business leveraging wider enterprise technology and legal-specific tools. The best legal functions think creatively about what, where and how legal services get delivered, and then put the right people, processes and systems in place to ensure that work is done efficiently. They also actively challenge themselves as to what work they should be doing”

Andrew Giverin, Partner, PwC

Act now to overcome current disruption and drive future change

The legal industry has long faced pressure to modernise. To best help their organisations adapt to change, legal teams need to evolve.

Those that do it successfully will reap the rewards of better-managed capacity, increased efficiency and, ultimately, more significant cost savings. They’ll also be best positioned to add value to the business as a strategic partner and advisor, enabling and contributing to the future growth and success of the organisation.

To discuss any of the themes raised in this article, please get in touch.

Juan Crosby

Partner and NewLaw Leader, Global Tax & Legal Services, PwC United Kingdom

Email

Andrew Giverin

Partner, NewLaw Services, PwC United Kingdom

+44 (0)7990 575 269

Email

Alan Angell

Director, PwC United Kingdom

+44 (0)7483 434402

Email

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Ed Stacey

Ed Stacey

Partner, PwC United Kingdom

Tel: +44 (0)7725 445168

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