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Explaining Enterprise Legal Management and Why It Matters

September 30, 2020

elm

Enterprise legal management is the strategic administration of operations within a corporate legal department.

And although it’s a discipline that was first formalized nearly 30 years ago, its definition is still evolving.

What remains constant, however, are the conditions driving the development of enterprise legal management. With company boards and regulatory bodies continuously calling for greater transparency, efficiency, and predictability, in-house legal teams have had to take a hard look at how they do business. When they do, the conversation typically revolves around three core functions.

Key elements of enterprise legal management

In-house legal teams are expected to advise and support their business colleagues on a wide array of topics. Regardless of the subject area, however, all corporate legal services depend on a few common functions to ensure their effective delivery.

Matter management

Matters are to legal teams what accounts are to sales teams: the individual work units into which many related assets and activities are bundled. Given the increased sensitivity of the work, companies have a responsibility to govern their legal matters with extensive protections and protocols. In fact, matter management begins well before any legal services are performed.

The first task is safe, efficient matter intake. Business colleagues need clear direction on how to initiate requests for legal assistance and what context to include. From there, the in-house legal team will review the request, rate its relative urgency, and evaluate available resources. Once the priority of the matter and the capacity of the team are in alignment, the legal department will assign resources and authorize work to begin.

As the in-house legal team and any outside counsel continue to progress with the matter, there are a litany of details that need to be documented along the way. Business stakeholders, legal contributors, budgets, deadlines, and invoices are just the tip of the iceberg when it comes to what companies must track. Then finally, once the matter is resolved, the team must communicate its outcome through the appropriate channels and consider lessons which could be applied to future projects.

If that sounds like a lot of information to track, store, retrieve, and revise, it’s because it is. And that burden is only multiplied by the fact that most companies will undertake hundreds of matters over the course of a year. So it’s no surprise to see more recognizing the futility of managing legal matters via email and spreadsheet and opting for a more specialized solution.

Similar to what customer relationship management (CRM) tools do for sales teams, matter management software helps legal teams easily establish a central digital record of all relevant activities.

Legal spend management

Most of the spend management responsibilities held by in-house legal teams would be easily recognizable to any other business department. Each must forecast expenses, track budgets, and strive to limit spending wherever possible. But there are several subtle factors that make cost control uniquely difficult for legal departments.

First, demand for corporate legal services is inherently unpredictable and largely driven by factors beyond the department. Defending against litigation or pursuing an acquisition, for example, are not matters that can be easily anticipated or accurately modeled months in advance.

Second, external legal counsel is a business service that has historically defied objective analysis. Clients naturally defer to the expertise of the vendor and implicitly trust them to maintain efficient work habits. The hourly billing model favored by the legal industry also has a tendency to obscure the exact nature and value of tasks performed. When a law firm bills for three hours of research, for example, can a client ever truly know whether each minute was spent on value-adding activities?

The narrative descriptions that accompany each legal invoice line item can offer insightful context. But considering the hundreds (or thousands) of invoice pages received by corporate legal teams each month, manually reviewing every word is practically impossible. As a result, in-house legal teams have had to explore additional strategic and technical measures.

From a strategic perspective, corporate clients are now adopting more proactive stances in their outside counsel relationships. They’re documenting detailed legal billing guidelines to clearly articulate their definition of what is – and is not – a valid billable service. They are proposing alternative fee arrangements, such as monthly retainers or volume discounts, which offer superior predictability over hourly billing. And they’re analyzing billing data for more objective clues about what certain activities should cost.

The emergence of specialized legal spend management software is helping teams accelerate each of those strategic ambitions. Digitizing and standardizing invoice management has significantly reduced the administrative effort required to maintain awareness of legal costs.

Automating elements of the invoice review workflow has enabled teams to consistently enforce billing guidelines and quickly reject unauthorized expenses. And the analytical capabilities of modern software have now given tech-savvy teams entirely new data sets to consider when weighing budgeting and resourcing decisions.

Reporting and analytics

In addition to managing matters and controlling costs on a day-to-day basis, legal departments also have a duty to transparently report their progress and analyze the strategic implications. These quantitative exercises haven’t always come easily to in-house legal teams, however.

The most stubborn hurdle has actually been basic visibility. Corporate legal departments have been comparatively late to digitize their operations. As a result, their reporting has suffered from the same accuracy and scalability issues that plague many manual processes. Missing metadata and unexamined invoices can combine to leave significant blind spots in the bigger picture of legal operations.

Even when legal departments are working with a complete data set, though, efficient analysis poses a separate challenge. Piecing together reports from an endless chain of spreadsheets is hardly conducive to quick turnarounds. And by the time busy legal staffers do finalize their reports, the value of such late-arriving insights is often diminished.

Two key developments are providing hope, however. The first is the emergence of legal operations as a specialized profession. Legal operators tend to come from more traditional business administration backgrounds and bring a more analytical mindset to the department. In short, they understand which metrics to monitor and which moves to make to get those numbers trending in the correct directions.

The second, related development has been the technical empowerment of legal operations professionals. More departments are realizing the significant returns that can come from investing in software that suits their increasingly analytical ambitions. From simple refinements like visual reporting dashboards to sophisticated innovations like AI-assisted invoice review, in-house legal teams are gradually gaining the technical horsepower required to quickly transform raw data into practical insights.

tool and activity breakdown

Complementary functions to be familiar with

The three dimensions of enterprise legal management outlined above will continue to attract the most attention and investment from corporate legal teams. Even still, it’s important to also acknowledge some of the overlapping functions that remain fixtures of legal operations.Key topics and technical categories include:

  • Contract lifecycle management. Corporate legal departments assist with the creation, negotiation, signature, storage, enforcement, and renewal of complex contracts between the business and its partners.
  • Legal hold. When a business faces pending or anticipated litigation proceedings, the in-house legal team ensures and facilitates preservation of potentially relevant information.
  • E-discovery. In preparation for legal proceedings, counsel for both parties will seek, identify, and secure any electronic records that may be used as evidence.

So as you evaluate your legal operations in sum, be sure to consider what you can do to reduce friction between components.

3 immediate benefits of enterprise legal management software

Enterprise legal management is a continuous process rather than a finite project. It’s an ongoing analysis of how a legal department operates and how it can improve. As a result, teams will often have to ask candid questions and abandon ingrained habits along the way. But on the other side of these minor discomforts lie major rewards.

1. Accountable operations

Accountability is one of those traits you can only really recognize by its absence. When all operational questions are met with quick answers and complete records, it’s easy to assume responsibility and compliance just come naturally to a team. But when those inquiries are more commonly met with quizzical looks, we’re reminded that accountability is the product of intentional effort.

Enterprise legal management software helps departments develop this trait by first getting work out of individual inboxes and spreadsheets and into a more controlled environment. Managing matters through a central digital hub suddenly makes every legal service visible and trackable by default. This attitude of accountability is then reinforced by the adoption of reliable reporting tools. The knowledge that performance will be consistently and objectively measured naturally raises expectations within a team.

This cultural shift benefits the wider organization as well by helping reduce compliance and security risks by several degrees. And the availability of quantitative reports makes it easier for business colleagues to understand and relate to the work being done within the legal department. But most important of all, it establishes the foundation for all future progress. After all, how can teams improve what they can’t see?

2. Efficient processes

Doing more with less is a familiar mandate for in-house legal teams. Considering companies tend to frame their legal function as a cost center, the question of what can be removed tends to be asked more frequently than what must be added. Thoughtful investments in enterprise legal management, however, can help departments deliver massive results from modest resources.

The transition from manual, paper-based processes to automated, digital workflows dramatically reduces the administrative burden behind legal operations. The effort required to gather law firm invoices and route them to the appropriate reviewers, for example, is effectively eliminated by the proper software. The same can be said of tasks ranging from matter intake to budget tracking. And all these incremental improvements add up to work week fundamentally refocused around higher-value activities.

The strategic reduction of waste within legal operations also benefits business stakeholders. Corporate finance teams, for example, will have less reason to worry about the submission of non-compliant invoices or the delayed arrival of requested reports. Meanwhile, outside counsel can take heart from faster payment cycles and fewer administrative headaches.

3. Cost savings

In truth, some business stakeholders will continue to see the ratio of legal expenses to company revenue as the sole indicator of legal department performance. Instilling accountability and increasing efficiency may be welcome improvements, but it’s often the financial implications which are most widely felt.

Investing in smarter enterprise legal management systems can draw valuable cost savings from several sources. Extending financial oversight to cover the full width and depth of a legal service portfolio often brings a few surprising expenses to light for the very first time. Automating elements of the invoice review process ensures fewer of those unauthorized activities reach accounts payable in the first place. But, in the end, analytics will be what hands in-house legal teams their longest and strongest cost control levers.

Translating legal services into practical data paves the way for performance benchmarking. Legal departments can quickly conduct an exhaustive review of their employment-related matters, for example, to develop an objective pricing standard for similar projects going forward. That informational advantage could facilitate negotiation of more favorable hourly rates or implementation of fixed fee structures. In either case, the total cost is made more predictable and less substantial from the start.

legal services

The larger value of enterprise legal management

Progress made within any one of the dimensions outlined above will be impressive and valuable in its own right. But the collective impact of these incremental achievements is something altogether grander – a new perception of what corporate legal departments can be.

Instead of regarding law as a strictly subjective business function, in-house legal teams are beginning to see their services as objective, quantifiable activities. And that data-informed perspective is elevating them into more powerful positions. Instead of reacting to the developments of others, they’re more frequently making proactive declarations and confident predictions about what will (and should) happen.

At the same time, their decreasing administrative burdens are enabling them to trade tactical obligations for strategic opportunities. That means more time engaged in the work that not only inspires them professionally, but also contributes more directly to their company’s overall success.

And as these internal changes continue to accumulate, their impact inevitably begins to echo beyond the department. Business colleagues start to recognize and respect their in-house legal team’s commitment to continuous innovation. Then, before long, the dynamic fully shifts. The corporate legal department, a team too-often dismissed as an impediment to progress, finally becomes an equally valued strategic partner.

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