Comment: Here’s why innovation is the biggest challenge facing legal departments
Looking at studies that look at the in-house legal services market, and talking to the general counsel, it seems that the biggest challenge for corporate lawyers is to make ends meet. Legal budgets do nothing but contract year after year while, instead, the work in-house departments have to do only increases.
The issue of costs, even gazing into the near future, is a real hurdle for the legal offices. The study “Reimagining the Legal Function Report 2019,” published recently by EY (which interviewed over a thousand business lawyers operating in 25 jurisdictions) revealed that four out of five companies expect to further reduce their legal spending over the next two years. Among these, almost one in two (42%) imagine that the size of this cut will exceed 10%.
And if legal spending falls again, those who work in-house will have to do even more with less. No doubt they will have to reduce external legal expenditure, triggering the wrath of law firms, which are increasingly unwilling to come to terms with alternate fees. And it instead tempts alternative legal service providers, whose market share has expanded in the last year by 17% in smaller structures (always according to EY data).
But reducing the external budget will not be enough. The most conspicuous expense of all legal departments—as every general counsel knows—is not external, but internal. And “cutting” in-house poses a big problem: It makes it more difficult to attract and retain talent. An aspect that, according to the EY report, is already complicated for almost three out of five companies (59%). Making people happy is not easy. Companies must motivate them, make them feel part of the production process and create value. It also implies being ready to financially recognize their progress and achievements.
So why should the solution to all these problems be innovation? Because innovation is essential to keep pace with change. And to these, Darwin taught us, we must adapt. The market is changing and adopting a new operating model is imperative. Technology can certainly serve. But that’s not enough. We need a careful direction that, in addition to thinking about how to streamline some activities, do not forget to value resources. The more innovations will be courageous, far-sighted and wide-ranging, the more the legal offices will be able to increase their value.
Do you agree?
–Rosailaria Iaquinta/inhousecommunity.it (our affiliate in Italy)