9
Do you believe that trained lawyers aren’t necessarily required as part of any legal process outsourcing operation?
If you time and motion study a legal matter, it’s startling what percentage of hours of work does not require a trained lawyer. The fi rst phase is clearly legal advisory and legal strategy, requiring experienced legal minds. The oft overlooked project management is not a legal discipline. The assembly of a legal document or fi rst pass review does not generally need to be performed by lawyers, though of course, the output requires review by experienced lawyers. You keep going through the process and there are simply many non-value added elements that don’t need to be performed by a lawyer. A substantial percentage of the work of the multi-billion dollar legal market actually has nothing to do with being a lawyer. It has simply been historically performed by lawyers because it’s been swept up amongst all the things that need to get done during a legal matter.
Are legal process tasks such as discovery, IP and documents just the tip of the iceberg for the LPO industry: is there potential for LPOs to expand into other areas of legal work?
That’s a really big question! I think the smart LPOs aren’t going to do anything that would be truly perceived as competition on the home turf of law fi rms. However, I do believe that alternative legal service providers such as Axiom, are competing directly with law fi rms and will try to do so more and more.
In my view LPO should restrict itself to ‘legal effi ciency’ work like document review, contract management and patent management. Some LPOs have said things like ‘we’ll start low on the legal value curve and then move higher’. Leah Cooper, former
General Counsel (GC) of Rio Tinto, often discussed publicly how her company rightly identifi ed legal work that didn’t need to be performed by a lawyer, but then a number of LPOs misinterpreted that to mean ‘let’s go and hire a lot lawyers and start with that work— let’s lift it, move it to a low cost location and then we’ll move up the value chain and have our lawyers do more complex legal work in the future.’ They incorrectly positioned themselves, quite unfortunately for the whole legal system in my view, as a competing alternative to law fi rms. And then when they struggled to deliver consistent quality at the higher value level (because they relied on a few key people and hadn’t systematsed the work), we started to hear about the dissatisfaction with LPO from some clients.
I think the right thing to do is to look at the overall legal system of work and disaggregate it into its components: separating advisory work from non-advisory or process driven work. The non-advisory work should then be produced by non-lawyers and it needs to be as systematised and automated as possible. And then the work that is advisory, project management or client relationship management needs to be the core of law fi rms and corporate legal departments. If you look back 20 years, that’s actually what used to happen: law fi rms used to perform those core functions. What has happened over the last 20 years is a kind of leverage where, basically, many junior lawyers are doing work they shouldn’t be doing—more often process or system oriented.
What are the benefi ts to law fi rms in using LPOs? Is it purely about cutting costs or are there other benefi ts to be gained?
It’s been fashionable to suggest a zero sum game is being played out between corporate legal
departments on one side of the table and law fi rms on the other, e.g. GCs force their law fi rms to use LPOs to reduce costs, while law fi rm partners resist the LPO-driven reduction in their billing. I don’t believe there’s such a systemic divide, but rather the legal sector is an ecosystem, with players who intend to do the right thing; but for a moment in time, law fi rms are anchored by their old operating and economic models, while the fi nancial pressures on the legal department demands that GCs immediately fi nd ways to do the same or more, with less. Until the new ways of working settle in, this will be a painful mismatch between them. I believe law fi rms have no option, but to embrace the reality that their clients’ economic pressures aren’t going away, and they must work diff erently to help them aff ord to meet their increasing legal workload—and that includes embracing LPO.
In corporate legal departments, GCs are focusing on the value balance between risk and cost. Alongside managing risk, they’re now really starting to think about the total cost of ownership of legal. They are starting to measure and benchmark a balanced scorecard of metrics against their industry peers, such as what is their total legal spend per billion dollars of revenue? And they are now asking themselves whether they would rather spend $3 million on outside legal counsel to review email in a discovery process or spend only $1 million by using an LPO, and invest some of that $2 million saving into helping their business through a compliance center of excellence or technology for contract management to help the business better manage their obligations.
At law fi rms, the best practice use of LPO is not only doing the work more effi ciently for their clients, but also doing the work more profi tably for the fi rm.
MAR–MAY 2012
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