The rise of in-house teams. What does the future hold?
Over recent years, we have seen substantial growth in the in-house legal sector. Current estimates show that there were over 25,000 solicitors working as part of an in-house team in 2014 and according to the Law Society Report – Future of Law 2016, growth is set to continue, with an estimated 32% of solicitors working in-house by 2020. What does this mean for the future of in-house legal teams?
I recently met a GC who said that she needs to reduce legal spend and the only way she can do that is by reducing her external spend, i.e. outsourcing less to firms and growing her in-house team. However, cost cannot be the only or even the main driving force for change or for legal transformation. Most business leaders and GCs, especially those of large in-house teams, are fully aware that continuing to insource is not sustainable, and even if that is the position now, maintaining that status quo is not effective.
So what comes next? What changes should in-house teams be considering and in what order? My co-founder at Halebury usually starts most thought processes with “what does good look like?”. It is a good starting point and I have found myself using it a great deal. What does good like for an in-house legal team for your business? There is a lot to consider, but in determining “what good looks like”, I would suggest starting with the following three points:
Aligning legal with business strategy
It is imperative that a legal function and the skill set of the team within it should be closely aligned to the business’ requirements and vision. I have seen in-house legal teams reduce their legal costs by LPO’ing a legal function that is crucial to business growth, and that move had a significant detriment to the growth plans of the business. Managing the cost of legal spend is of course important, but understanding where the business is going is essential, not only to ensure that legal has the right skills and capacity to support the business, but also to ensure that legal is an enabler for business growth.
Addressing the issue of ‘more for less’
When we at Halebury are out and about in the GC community talking to clients about their challenges, the phrase “more for less” consistently comes up. In-house teams are going to come under even further pressure with compliance and regulatory matters, general commercial issues and now Brexit. Indeed, the HBR Consulting survey 2016 reported that 79% of it’s respondents believe that their legal requirements are likely to increase.
To address the question of how to do “more for less” the first step would be to address what “more” entails, and what is the weighting between the various areas of growth, risk, compliance and Brexit. Once there is a good understanding of “more”, an analysis how “more” can be done efficiently and effectively and of course for less cost can be carried out and conveyed to the team and business.
Some GCs believe insourcing is the answer to “more for less”, but it is not sustainable to increase in-house teams exponentially, reactively. There has to be a more consistent, thought out process and structure and to fully understand what legal will be required to undertake and how it will continue to deliver more value to the business.
The role of in-house – doers or influencers?
What is the plan for your in-house team? A 2016 report by Nabarro’s (General Counsel: reaching new heights?), states that for 49% of respondents working on deals and contracts is an essential part of their work. This is a report about GCs and I find it fascinating. Would you, for example, have a CFO undertaking bookkeeping, invoicing, credit control or preparing the company accounts? Is the carrying out of this day-to-day work a good use of a senior lawyer’s time?
The same report states that 43% of GCs believe that their influence has grown over time but that in 2015 only 27% felt that their influence was very strong. For business leaders managing in-house legal teams, it is important to consider what you expect from GCs and actually the wider question of what do you expect from the in-house legal team? Should the in-house legal team be a team of ‘doers’ or do you expect them to be strategic? If it is the latter, how does the team go up the value chain within the business? If it is the former, is the team essentially an insourced law firm? What role the in-house team should play within the business is a key part of determining what the operating model will be.
The three questions above are a possible starting point for you to determine “what good looks like” for an in-house legal team and what operating model you are seeking to create.
There is no doubt that we now find ourselves in a new era of legal services. For the first time in my legal and business career, I genuinely feel that the buyers of legal services have a variety of options. We can choose from a range of legal providers on every level, from LPO to senior end; we can choose who we engage and manage these providers; how to resource in-house legal teams; which technologies we might implement, from content management systems to project management tools. We can choose what KPIs we implement to measure the effectiveness of all of this.
In the coming months, the team at Halebury will be writing a series of pieces which aim to help understand and navigate the many options. They will also be drawing on their own experiences as senior lawyers who have undertaken legal transformation processes within leading businesses to highlight some valuable lessons learned and practical tips to help others considering embarking upon similar for their teams and businesses. We hope you will tune in for this series.
To many starting on the analysis journey and to many GCs who are struggling with day to day issues, dealing with the above questions and the follow on steps can seem overwhelming. However, this is an exciting time to be in the legal profession, especially the in-house legal market. You are have genuine buying power and options to go with it.
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