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From Reactive to Proactive: How Legal Operations is Transforming Business

, , , | March 6, 2023 | By | 3 min read
how legal operations helps manage risk and compliance for the entire organization

If the last few years have taught us anything, it's that change is inevitable.

With increasingly complex legal and regulatory requirements, rising legal costs, heavier workflows, and staffing changes, executives across all industries are questioning their next steps — and for legal teams, the uncertainty is ushering in a new era for legal operations. 

In this blog, we explore how legal operations came to be, its role in the organization, and why it’s critical for legal teams to stay ahead of evolving trends. 

What is Legal Operations?

Before the pandemic, legal was often siloed from other departments. Various legal functions were outdated, manual, and outsourced. During and after the pandemic, stakeholders turned to their legal teams for guidance on the influx of changes. And with this, the role of legal operations became clear: coordinating legal functions with other business areas to manage risks and ensure compliance.

Some of the functions of legal operations include:

  • Vendor management 
  • Technology (adoption and implementation) 
  • Strategic and financial planning 

Now, many businesses are turning to technology solutions and shifting to more in-house work to optimize their legal operations functions. In fact, insourcing legal work is a top trend of 2022, according to the Wolters Kluwer Future Ready Lawyer Survey; 86% of respondents state that more legal work is done in-house (up from 71% in 2020 ). 

These shifts are leading to significant organizational operation changes, where a more technology-powered, automated legal operations approach is crucial to boost efficiency and improve processes within the entire organization. By 2024, Gartner predicts that legal departments will have automated 50% of legal work related to major corporate transactions. 

With a designated legal operations team, legal professionals (and non-legal professionals alike) can now work hand-in-hand with business operations, resulting in a more proactive approach to navigating uncertainty and further aiding decision-making processes.

Origin of Legal Operations 

In the past, in-house lawyers were specialized employees that were subject matter experts in one area of law and outsourced legal operation functions. But now, with the shift to more in-house teams, general counsel and legal operations managers have expanded their roles to include decision-making and management responsibilities, as executives recognize the importance and value of compliance across the entire organization. 

The challenge, however, is that the pandemic increased workloads for already overwhelmed legal teams. The 2022 Wolters Kluwer Future Ready Lawyer Survey found that 79% of respondents stated that a top trend for lawyers is coping with the increased volume and complexity of information. Legal professionals in every industry are suddenly pulled into business areas that they typically wouldn't be involved in, increasing the demand for legal department staffing, legal-specific technology, and as a result, higher legal budgets. 

Legal Team Growth

The pandemic led to unforeseeable changes, many involving and requiring the assistance of the legal team. But there was one major issue: many legal teams were operating in the same capacity as they were 20 years ago, and thus left legal teams' weaknesses exposed. 

Legal suddenly became a large focus for many organizations as they recognized how crucial it is to navigate organizational changes, compliance, and security properly. For example, few organizations were prepared to operate remotely before the pandemic. Now, companies and their legal teams are asking questions such as:

  • How does working remotely affect security? 
  • What does this change in employee benefits, if anything?
  • How has the pandemic affected the language in our contracts?  

New contracts were written — and many had to be updated — to properly account for many of the changes that the pandemic required. Executives and in-house lawyers adapted and prioritized these once-segmented factors to efficiently make and implement these changes. They collaborated to form in-house legal operations teams and began improving legal workflows. According to the CLOC 2021 State of The Industry Survey, 66% of respondents find that their legal department is now integrated into the organization's strategy and objectives and is involved in all business functions and leadership. 

Evolving Legal Operations Roles 

The foundation of a successful legal operations team begins with a manager. Whether this is an in-house general counsel or a legal operations manager, this person will be crucial to the success and growth of any legal operations department. Many general counsel and legal operation managers may now find themselves on boards of directors and work alongside the leadership teams instead of reporting to them.

As organizations grow and legal involvement in all business operations continues, legal leaders will look to expand their teams with labor and tools — all while staying within their department budget. Gartner predicts that "by 2024, legal departments will replace 20% of generalist lawyers with non lawyer staff." 

As mentioned, many lawyers found their roles and responsibilities changing as the pandemic surfaced. Those who embraced and adapted to the change became the trusted leaders and managers who are now paving the way for the next legal era.In 2020 alone, 58% of legal departments in all industries filled a general legal operations role, according to Gartner

Broadening the Legal Budget

With the impacts of the pandemic, organizations began investing more time, money, and resources in their legal departments to solve pre-existing issues and be better equipped for future uncertainty. 

Like any department, in-house legal teams will always strive to reduce costs and boost efficiency — in addition to hiring cheaper labor, one of the best ways to do that is by investing in tools and pursuing automation. Gartner predicts legal teams will "increase their spending on legal technology threefold by 2025".

Technology 

Technology use in legal operations continues to increase and is crucial to stay competitive and efficient in the ever-changing business environment. According to Deloitte, "69% of general counsel surveyed felt their attorneys were taking on too much administrative work." 

This is one of the reasons why legal operations teams continue to invest in technology solutions, such as eSignature, e-discovery, and contract lifecycle management (CLM) tools so that they can focus on more impactful work and less busy work. 

Artificial intelligence (AI) is a crucial feature for legal operations teams that are looking to improve their CLM processes and take administrative burden off their plates. By automating the most painful, time-consuming, and costly tasks associated with contract management, AI helps teams operate more efficiently and effectively.The Wolters Kluwer Future Ready Lawyer Survey 2022  found that 80% of the legal departments they surveyed expect AI to have an impact over the next three years

Today

Today, organizations see cross-organizational benefits as more businesses prioritize legal operations. The shift to more in-house teams expedites processes, takes a more proactive approach to change, and saves the organization money in the long run when handling legal functions. 

In response to the constantly changing legal landscape, many organizations have established dedicated legal operations roles and teams. These teams are instrumental in performing various functions, and as the industry continues to evolve, we can expect to see further transformations in the contracting process. With new roles and tools constantly emerging to meet industry needs, the legal operations field is experiencing an exciting period of growth and innovation. 

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