In Michael Lewis’s book, Moneyball, he discusses Oakland Athletics’ General Manager Billy Beane’s use of rigorous statistical analysis to find baseball players who added the most value to their team’s success for the least amount of acquisition cost. Lewis says this is a part of the “ruthless drive for efficiency that capitalism demands.” Using this strategy, Beane’s team was competitive with larger market teams like the Yankees on a budget three times smaller.
The release of the Ninth Annual Law Department Operations Survey highlights one of the legal world’s own metrics masters, who just so happens to have the same initials as Billy Beane. Brad Blickstein, principal at the Blickstein Group and publisher of the Annual Law Department Operations Survey, states that, “As law departments are expected to act more like other business units, they are expecting more from their LDO professionals. It is evident from our results that the role is becoming more mature: LDO professionals are gaining new responsibilities, their budgets are covering new areas and more companies have built effective legal project management programs.”
Here are some significant highlights from the report:
LEGAL PROJECT MANAGEMENT
According to the results of the of the study, LDO professionals now handle almost everything but the practice of law. They spend between 4% and 13% of their time in nine different roles, ranging from financial reporting to outside counsel management, and to do this successfully, law departments now must focus on process optimization and project management. The survey supports this, with 57% of respondents saying they have legal project management processes in place, compared with 50% two years ago; and, of those who do have legal project management programs, 82% report that they are effective, compared with 74% last year.
This focus on legal project management is why a dedicated LDO is needed in the legal department. Elizabeth Jaworski, director, legal operations at Motorola Mobility elaborates: “The LDO professional is a very strategic role. Because of the scope of work the LDO professional touches, they need to be at the right hand of the general counsel.”
REPORTING AND METRICS
In regards to reporting and metrics, Sailaja Meesaraganda, associate vice president, client solutions of QuisLex, sums it up best: “In order to understand and control their legal spend, organizations need to develop the right reporting and metrics programs. Getting the right metrics are critical: Tracking the wrong metrics can prove unhelpful or even misleading, while burdening resources. With the right information about their spend, law department operations professionals can help their organizations control costs and improve the predictability of their budgets.”
For years, the benefits of moving discovery in-house have been talked about, but action has been generally limited to processes on the “left” side of the EDRM, with preservation and collection. Now, according to the survey results, more and more right side EDRM processes are moving in-house as well: hosting has jumped from 12% to 23%; document review from 13% to almost 19%; and production has climbed from more than 14% to almost 23%.
But even with this growth, 62% of respondents said they currently have no plans for new initiatives; this may be the result of tightening budgets (77% reported that their budgets are flat or decreasing, compared with 72% in 2015).
It’s this need to do more for less that drives innovative approaches. According to Jeffrey D. Paquin, who was until recently chief counsel, legal operations for General Motors LLC, “There is increasing use of alternative service providers by legal departments to get work done, such as Legal Process Outsourcing, non-law-firm vendors, and other staffing solutions.” In fact, 21% of this year’s respondents currently use LPOs (compared with 17% last year), and 39% would consider using LPOs (up from 22 % last year). Other areas where alternative staffing/non-law firm vendors are used include e-discovery processing (31 %), e-discovery hosting (29 %) and document review (27 %).
“As a result,” Paquin continues, “alternative service providers that take the initiative to disrupt the legal industry, without sitting back and relying on legal departments to initiate such change, will continue to receive more and higher-quality work from legal departments.”
Couple these approaches to the very large majority of respondents (87%) who use some form of alternative fee arrangements, and you can see the trend of legal teams working to do more work at a lower cost. “As more companies rely on business-savvy LDO professionals to improve their processes, we are seeing much more interest in alternative delivery and billing models,” said Blickstein. “But the traditional law firm hourly bill is still king.”
Legal Departments can no longer see themselves as exempt from normal company scrutiny, but instead must view their role as being a part of the larger mission of the organization, which includes looking for ways to be more efficient while cutting costs. As with any endeavor, those who adapt to changing trends early and effectively can continue to be competitive, while those who continue with the status quo, may find themselves falling far behind quicker than they had ever imagined.