Bain founded two technology consulting practice groups, bainlab and BainNet, in 1999 and 2000.  bainlab was originally founded as Bain New Venture Group.  It assisted start-ups that would otherwise not be able to pay Bain`s fees and accepted a partial equity payment.  It is hard to escape the fact that the legal environment is becoming increasingly complex – and often more punitive. A sign of this trend is the sharp increase in law enforcement: at least two-thirds of companies in the insurance, energy, financial services and healthcare sectors were subject to a regulatory investigation in 2013, and 52% reported spending more time on regulatory investigations or enforcement proceedings, up from 43 percent last year, according to a recent survey of in-house legal experts. Across all industries, new business practices such as electronic data storage and mobile computing are driving new work for the legal department, as more than 40% of companies had privacy or data protection issues in 2013. Not only is the volume of work increasing, but the stakes are also increasing. One-third of businesses face at least one lawsuit of $20 million or more. Only 18% report no complaints. In some support functions, such as IT, the trend is towards greater centralization, regardless of the organizational structure and culture of the company. There is no single right answer for legal services.
Typically, the organizational structure and culture of legal departments often follows the structure and culture of the company. Each of the three organizational models can still enable legal departments to achieve the desired business outcomes while achieving a high level of efficiency and effectiveness of the department. Most of today`s businesses have gone far beyond the traditional model, where legal work has only been outsourced to blue-chip law firms, with no lower-level or non-legal alternatives considered (see Figure 3). Today, leaders are focusing more on dissecting and disaggregating legal processes with an increased degree of granularity and finding new layers of sub-processes that can be outsourced to suppliers at a lower cost. So how do the best companies ensure that their legal services combine legal expertise and business acumen at an effective cost? For many, it starts with the fact that the legal department invests time to better understand the company`s strategy and business goals. From there, CLOs can determine where and how they can add the most value and which delivery model makes the most sense. The next step with a blank sheet of paper is to develop a roadmap to reach the desired state and create the right milestones and metrics (see Figure 1). Business results and therefore supporting KPIs will vary by industry and company.
Therefore, it is important that legal services do not take a one-size-fits-all approach to measures. Just as no two companies have the same strategy, there is no cookie-cutter approach to transforming a legal department to support that strategy. But the companies that are making the most progress in realigning their legal departments and realizing the resulting efficiencies are taking a number of similar steps toward legal transformation. This starts with a vision shared by the CEO and the CLO, which includes both an understanding of the evolving role of CLOs and what CLOs can do to more closely align their departments with the company. The next step is to assess the gaps and potential opportunities around each element of the framework and then set priorities for change. Organization and culture. There are many different models for structuring corporate legal services. Some departments are highly centralized, with legal specialists at the center and working in all departments.
Others are more decentralized, integrating a legal team in each business unit. Still others have a more mixed model, with both legal specialists at the center of certain departments and dedicated legal teams integrated throughout the company. Our research and experience show that the best – and most effective – support functions are relentlessly focused on achieving the company`s core mission while leveraging a powerful and scalable delivery model to flexibly address new challenges. For example, the role of finance is shifting from a role that merely reports historical facts and transactions to one that examines the broader landscape, with a greater focus on decision support. Similarly, the role of law is not only compliance or contract management. It is about supporting the company`s strategy and growth in order to reconcile opportunities and risks. However, how legal services achieve the desired outcomes will vary depending on the organization chosen. A decentralized model with legal teams integrated throughout the organization means that the CLO must lead to a higher level of standardization and management involvement, as it is too expensive and risky to build large legal teams in every corner of the company that perform highly personalized work.
Conversely, a highly centralized model with legal specialists at the centre means that OCOL must ensure that there is sufficient expertise and customization of services to meet the unique needs of business units. On the resource side, the right mix of technology, policies and processes can also increase the efficiency of the department. New eDiscovery tools, for example, can significantly reduce the cost of discovery, and new records retention policies can significantly reduce costs by significantly reducing the volume of documents that lawyers need to investigate. Overall, automating and minimizing some basic legal tasks will give lawyers more time to focus on higher-value activities and promote the goal of a business partnership. Help us make legal wages more transparent. Get exclusive access to anonymized legal salary data. An important measure of the success of any legal department should be its influence on the most important components of the business. The best legal services are valued consultants.
While leaders don`t follow all instructions, top-notch legal departments work hard to improve and improve their ability to influence behavior. The most reliable legal departments do three things particularly well: structural change is, of course, difficult – it`s about making decisions about risk, organization and culture, and then taking the right steps to make sure the resulting changes last. But aligning with the company`s strategy and needs, as well as increasing the business efficiency of the legal department, can be extremely helpful in the transition – they provide support to business units and help ensure that efficiency gains are not reversed later because they interfere with important support functions. The result: a fundamental change in the way the legal department operates, both internally and within the entire company. Aligning legal work with business outcomes is an important first step, but the strategy will not succeed if employees do not have the skills and resources to implement it. On the skills side, corporate legal departments typically strive to ensure they have the right mix of legal professionals in key areas such as litigation, intellectual property, and mergers and acquisitions. For many corporate legal departments, the answer is too often no. Jason Heinrich is a partner in Bain & Company`s Chicago office and a leader in the company`s performance improvement practice. Michael Heric is a Bain Partner based in New York and leads G&A`s optimization and organizational design practice for the Americas.
Neal Goldman is counsel at Bain & Company. Paul Cichocki is a partner in Bain`s Boston office and leads the firm`s performance improvement practice in the Americas. To set the stage, CLOs must articulate the acceptable risk profile for the entire organization, set service level expectations, and educate legal departments and executives on areas to make potential service trade-offs. For example, should the company strive to win a lawsuit at all costs? Filing patent applications as often as possible? Maintain granular and detailed policies for employees? Or would the company be better served if it held back outside the courts, reduced the patent portfolio, and created user-friendly policies that promote better employee relationships? These are questions that can only be answered in the context of each company`s broader corporate goals, but the explicit approval of the board and management team gives CLOs the appropriate framework to make the inevitable trade-offs between cost and quality that the legal department will face (see Figure 2).