Legal Management Trends & Benchmarks by Voxius International B.V.

Legal Management Trends & Benchmarks

Harm Cammel Version 19v1 February 2019 2

Content

•

Introduction / Framework / Survey / Summary

p 4 - 13 Business needs

Mission: ‒

Business needs

‒

Scope & Objectives of the Legal Department

Strategy: Organization & Operation

p 14 - 21 1. Legal Mission

1. Structure & Coordination

p 22 - 32

‒

Structure & Coordination

p 33

‒

Tools & Tech

p 34 - 41

‒

Firms & Alternative Service Providers

p 42 - 49

‒

Team & Professionals

p 50 - 60

‒

Management Information

p 61 - 64

Plan & Realization

p 65 - 70

Consequences for Legal Professionals & Legal Managers

p 71 - 74

•

Appendixes

p 75 - 77

Scope & Objectives

2. Tools & Technology 2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realisation

4. Consequences for individuals

The goal: an effective strategy, organization and operation induce Legal Departments, teams and professionals to excel Legal Departments play an important role when it comes to creating a healthy business and organization, but the way in which they achieve this is changing. With this, the role and working methods of company lawyers are also changing â&#x20AC;&#x201C; a positive development, which brings about many opportunities and options. We have had the privilege of working intensively with Legal Departments and firms for more than 20 years, providing search, interim and advice. Our aim is to help people and teams to get the best out of themselves. In the turbulent year of 2008, our clients increasingly posed questions about how to improve the organization of the legal department. In the process, the Legal Management Framework was established: this model aids General Counsel (GC) to find the optimal set-up and development of the role, strategy, organization and operations. This soon resulted in a call for reference material, which was the start of this Trends and Benchmarks survey: an ongoing analysis of all Legal Management aspects, in correlation with each other and in context. It is a source of market information that gives GC a realistic image of how the playing field is developing, where their own organization stands and what the logical steps are for further development. Much gratitude, therefore, to the many participating GC. Their input gives clear insight into where Legal Departments actually stand, what the priorities are, where progress has been achieved and where obstacles remain. Also, where teams make different choices, what the backgrounds to these choices are and how they turn out. However good the model and information may be, management is no exact science and there are no universal solutions. The most suitable approach is the one that is developed in practice, through analysis, making choices, action and adjustment. The insights and experiences of others are valuable. We hope that this report with its management information will, once again, be useful for you. On behalf of Voxius, Harm Cammel

The Legal Management Framework: Developing the role and working method of Legal on the basis of organisational needs The Trends & Benchmarks survey follows the structure of the Legal Management Framework with which we have been assisting GC and their teams in their organisational development since 2008. This has resulted in a business orientated and associated Legal plan that the team can largely put into practice themselves (with some assistance if desired) and with which GC and staff are able to further develop their individual organizational knowledge and expertise.

Business needs

1. Legal Mission

Over the past ten years, the Framework has been continuously honed and simplified as a result of various projects and market developments, but the basis of the Framework remains a regular management cycle of 1) analyzing what is necessary, 2) determining which approach and resources will achieve this, 3) implementing this and 4) evaluating how it can be improved. In this way, the Trends & Benchmarks survey establishes the scope, status and developments of Legal Departments:

• What are the status and plans of the organization and how do they translate into its legal requirements, including external demands placed on the organisation; • How do these requirements and demands translate in terms of the role (mission) of the Legal Department: which of these needs fall within the scope of Legal and which concrete goals do they entail; • Which approach and resources (strategy) are best suited to realize these goals; • What plan, with concrete action points, projects, budgets, etc., assist the Legal Department in taking the right steps at the right time and in the right way; • How can a successful and efficient implementation be ensured? What does all this mean for GC and staff themselves: what are the options for self-development, what choices should be made and how should they be achieved?

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Legal Management Trends & Benchmarks survey: a pragmatic, coherent analysis of the development of Legal Departments The aim of the Trends & Benchmarks survey is to provide GC with practical and coherent Management Information in context and with the right background information, because a lack of coherence and context creates more noise than direction. Costs, for example, need to be related to size, sector, phase and strategy. Only then does analysis give useful insights. The scope is therefore broad and deep with attention for both market developments and for the specific data and context of each company in the survey. • The starting point is the survey with 99 questions. This covers all Legal Management sections so that they can be analyzed in relation to each other. The scope has been kept essentially the same since ’08, thus providing a useful account of the developments over time; • This is followed by a one-on-one interview to enhance the survey data and to place it and interpret it within the company-specific context; • The information and models are further enhanced with insights out of assignments that we carry out for Legal Departments and firms • We also integrate information, insights and models gathered from an array of Dutch and international surveys and publications (as long as the goal, scope and backgrounds are sufficiently clear and objective: see appendix covering sources) • All this information leads us to produce regular up-to-date versions of the Trends Report; featuring important figures, trends, observations,

quotes, etc. • Each participant receives an individual confidential Benchmark of their own Legal Department with respect to the market • The developments are regularly discussed, including at select round table dinners upholding the Chatham House rule, which boosts the exchange of information between the table guests, giving added insight and depth. The research has been running since ’08 and includes parts carried out in collaboration with De Brauw Blackstone Westbroek, Ebbinge & Company, Boer & Croon, Eversheds Sutherland and Nyenrode Business University – to whom we extend our thanks. All company-specific data remains fully confidential and the reporting is unbiased. Our goal is to help Legal Departments, teams and people to get the best out of themselves, we are independent of the means and the pace at which this is achieved. Although market knowledge is important, it is its concrete application that is needed: analyzing the company’s own context, making choices, negotiating and adjusting. We hope that these Trends & Benchmarks once more give you a useful insight and are gladly available for further explanation and discussion.

Summary

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

The hype phase and economic upturn give an impression of sudden disruption with new suppliers, models, propositions, etc. The legal sector has moved from being relatively static with limited attention for development, to a hype phase with abundant communication about “disruptions” that, supposedly, have shaken the foundations of firms and Legal Departments. Underneath all the publicity, there is a longer-standing need for development of the Legal role. Additionally, the economic upturn during ‘18 has resulted in a focus on growth and funding for development. All these factors have resulted in a rapidly growing supply of, amongst other things: • Services and products aimed at (parts of) legal activities (see chapter on Tools & Technology); • Organisational models that translate management methods into legal service providers (such as our Legal Management Framework and the recently launched models by, for example, Deloitte); • Publishing and content models concerning membership such as ACC (Association of Corporate Counsel), CLOC (Corporate Legal Operations Consortium) and GCN (General Counsel Nederland); • Education such as the Masters in Legal Management at the Amsterdam University of Applied Sciences which now, five years down the line, offers a fully funded study program (in which Harm Cammel lectures on the subject of Strategy & Innovation). These are positive developments, but it is clear that many initiatives are still in the early stages of development and that the extremely rose-colored communication is partly driven by commercial interests. It is therefore important to maintain a certain degree of common sense and an analysis of demand and supply, especially in the present hype phase.

In reality, for more than 10 years we have seen an evolution from a stand-alone profession to an integrated business function The actual development is not so much disruptive as gradual, making it more acceptable and thus accelerating the pace. In short, the focus of GC has moved from: • 80% “Legal is a profession, organized around expertise” in 2008; • To 80% “Legal is a business function and needs to follow business operations” in 2013;

Organizational model 100% 50% 0% 2008

2013

2018

• To 95% “Legal is a fully integrated business function” in 2018. This development is systematic. The survey asks what the priorities for the coming three years will be. Since 2008, the priorities mentioned have been consistently realized without much deviation. The prognoses for the coming three years also suggest a gradually accelerated and expanded continuation of this development. The most important short-term priorities include optimizing the working processes around: 1) Contracting life cycle; 2) Compliance life cycle; 3) IP / Licensing life cycle (within the sub-group of organizations where IP plays an important role).

When it comes to the approach, the most important priorities are: 1) “triage” (a term used for rapid analysis and correct allocation of work. In 2013, visibility was a goal for many GC. This has been achieved in the meantime, resulting in a greater workflow. It explains the current focus on proper work allocation);

2) outside counsel management, and 3) development of team and staff The fact that the pace is gradual risks reducing the feeling of urgency. However, it is important to maintain consistent steps in development: “A frog placed in slowly heating water stays put and gets cooked.”

Summary of key issues Business Needs & Legal Mission • A broad range in responsibilities is the standard

p15

• High quality legal services provide 1) business impact, 2) consistent coverage and 3) high efficiency

p16

• (Ad 1) Focusing on business impact leads to other must-have non-professional service elements

p17

• (Ad 1) Focusing on business impact makes non-legal considerations such as Risk / Reward and CSR more important

p18

• (Ad 2) Consistent coverage requires not only managing business, but also the underlying processes of the in-house work

p19

• (Ad 3) Efficiency means optimal (re)use of money, time and knowledge. This increases the portion of work done in-house

p20

• The short-term priorities of GC: to continue the more business¬ focus on cost / benefits

p21

Overall Strategy • Focusing on impact, consistency and efficiency requires integration in management

p23

• De GC serves as senior manager “in the boardroom, not necessarily on the board”

p24

• The broader goals are not optimally achievable with the classic organisation & operation model

p25

• The Operation & Organisation becomes more company-specific and business-oriented

p26

• The Operation & Organisation is built up out of a growing arsenal of resources and models

p27

• Options in strategy and resources are determined by various company-specific factors

p28

• Legal has more impact when costs decrease

p29

• The costs per section point to a shift towards more work performed in-house

p30

• The share of work for the firms declines as the share of costs rises

p31

• Growing maturity leads to more coherence in the deployment of resources. Various business models begin to emerge

p32

Summary of key issues Structure & Coordination • Organisational structure & governance determine the Legal structure and coordination. Basic models arise here too

p34

Tools & Technology • There is a good deal of attention for new resources & services; application still remains at the beginning of the curve

p36

• Good choices, timing and approach are based on needs, maturity and absorption

p37

• Use of Tools & Tech is still modest in practice, and only with Low-tech resources

p38

• Optimizing contracting and compliance has a priority

p39

• Few tools hold a substantial market share

p40

• There are organisational obstacles to the adoption of tools. The use of High-tech will follow later and as a part of services

p41

Firms & Alternative Service Providers • Deliberate allocation is decreasing the firms’ share in two categories

p43

• Outside counsel management has high priority, evaluation criteria become more specific

p44

• PR value of “Innovation”, “Tech” and “Operations” is calculated. GC requires concrete improvement of service provision

p45

• Evaluation of firms becomes more important and is primarily aimed at improving the existing relations and service provision

p46

• Direction and evaluation of firms are increasing but are still only applied to a limited extent in a structured and consistent manner

p47

• Alternative Service Providers have only a modest foothold next to firms

p48

• The input of firms varies strongly. Determining factors include company size, maturity and degree of (de)centralization

p49

Summary of key issues Team & Professionals • More work going in-house leads to the growth of the team

p51

• Interim is stable and becoming more professional, there is a slight increase in the development of companies’ own flexpools

p52

• There is a growing demand for non-legal competencies within legal departments

p53

• Broadening competencies cover four main categories with a different weight for each team and each position

p54

• Actively directing diversity in profiles and intake / throughflow / outflow of employees is increasing

p55

• Personal development is increasingly linked to business goals

p56

• “Non-legal” roles are growing in numbers, diversity and recognition. Recruitment, on-boarding and supervision require attention

p57

• Two examples of recent new non-legal positions (PHV Tommy Hilfiger / De Brauw Blackstone Westbroek)

p58

• Diversity requires flexibility in the reward policy and makes team management more important

p59

• There are also differences in team structures among the various models: benchmark figures need to be understood in context here

p60

Management Information • Management information is necessary; however its use is still limited due to a lack of reliable data

p62

• Information needs to be easy to generate and interpret

p63

• In line with broader goals and internal management, GC ideally seek a broad palette of metrics

p64

Summary of key issues Planning & Realization • Development is carried out gradually on the basis of realistic planning

p66

• Systematic working has become a standard component when it comes to management and development

p67

• In substantive terms, the plans have been further refined. Project-based developments have made a big leap

p68

• Budgetary allocation of costs has not shifted much

p69

• However good the plan, implementation is difficult and also follows the change management rules when it comes to Legal

p70

Some consequences for individual professionals • More diversity in positions also requires diversity in competencies

p72

• Mobility and dynamics for GC and other legal positions are on the increase

p73

• To succeed with greater dynamics: be alert, make constant adjustments and keep actively developing your skills

p74

Appendices • Profile of organizations and participants

p77

• Own research and desk research: open collaboration benefits the legal sector

p78

Part 1

Business Needs & Legal Mission

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

A broad scope of responsibilities is standard The responsibilities of Legal have once again become broader. Compared to 2013, GC have acquired a growing part of the domains with a high legal content in their range of responsibility – the range has grown in almost every sector (see graph).

Contracting M&A transactions Housekeeping / Entity Management Commercial disputes Corporate Disputes

The rule of thumb, that all legal-related domains fall under the GC unless there is an explicit reason not to do so, is applied.

Governance Exec Board advice (ad-hoc… IP (asset protection)

Some examples of such options are: • Combining the Corporate Secretary position with Legal has the advantage of a good exchange of information between the strategic and operational levels. However, sometimes a deliberate choice is made to shield information by separating these two positions

• Combining compliance and Legal has advantages if the advice aspect is the most important. Where operations are heavily regulated (such as finance) or if the sector has had major incidents (such as projects in the public domain) and there is more need for control, the positions are often set up separately • IP & Licensing are often set up separately or placed under R&D if such assets are part of the core business (as in the case of Life Sciences, for example) • Labor law-related work is often specialized operational work that is strongly associated with the HR role. This is why it is often placed with HR, although the combination with Legal is growing

Claims management Regulatory Compliance Internal Investigations Relations with external Supervisors Procurement Supervisory Board advice (ad-hoc)

Exec Board support (Corporate… Licensing Treasury / Financing SB support (Corporate Secretary) Insurance HR / Labor law Crisis & Continuity management Risk management Corporate Social Responsibility Tax management 2013

2018

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

High-quality legal services supply 1) business impact, 2) consistent coverage and 3) high efficiency Not only has the scope of Legal increased, the definition of good service provision has also become broader. In the past, the primary goal was to give sound professional ad-hoc advice with a high level of service. Nowadays, the requirements of organizations have grown to include: • a concrete contribution to short-term operating results and • safeguarding long-term continuity Because of this, the role of Legal has shifted to ensure an optimal legal functioning of business operations. This is a much broader goal than the earlier professional focus and can be divided into three chief categories: 1. Business Impact: do we contribute to optimal operating results within the intended risk / reward framework? 2. Consistent coverage: do we achieve this impact on all business operations and in all organisational units? 3. Efficiency: do we make optimal use of the available resources and do we apply the right cost / benefit balance? Professional quality and a high service level remain important but have become a part of the broader expectation and service provision. In the meantime, the general principle is that “extra” professional quality over and above the target level adds costs but no relevant value and should be avoided.

(Ad1) Focus on business impact leads to other must-have service elements that are non-professional Focusing on “business impact” means doing everything necessary to achieve the operating results. This not only means delivering all the professional legal aspects, but covering all the related elements needed to achieve the intended result. In July 2016, for example, the legislation relating to price-sensitive information was changed.

Example: new needs & old services

A GC described the organisational needs as follows: “The change of legislation relating to price-sensitive information means that we … — need to know what the new rules mean for our organisation, — inform and train all those involved within the organisation, — establish audit-trails, - monitor as management information, — and, if necessary, be able to report to regulators/supervisors. — The legal team needs to spend the least possible time and attention to achieve this — and the relevant staff needs to meet the requirements in the shortest possible timeframe. — “We use (software) as an internal distribution platform for spreading company information, so it needs to fit into there.” The graph illustrates the difference in coverage of classic (dark blue) and broader, new (light blue) service provision for this demand. This expansion accounts for a large part of the legal requirements. However, Legal does not need to cover all these requirements itself. In this case, for example, HR could also take responsibility for didactics. Legal is, however, responsible for ensuring that all the elements are covered.

Reporting

Expertise 10 9 8 7 6 5 4 3 2 1 -

Distribution

Company knowledge

Implementation

Didactics Traditional services Wider needs

(Ad 1) Focusing on business impact makes non-legal considerations such as Risk / Reward and CSR more important Focus on impact means that besides legal-technical considerations, the commercial, strategic and social considerations are increasingly important.

Sound Risk Management is increasingly cited as an important basis for steering Legal. In terms of responsibility within the range, it remains modest (<30%, see p13), but as a measure in deliberations, it is clearly gaining ground.

Some examples: • Different GC point out that a good connection with Risk Appetite is essential to connect with the organization's commercial and strategic requirements: — “Ideally, we translate all our choices into Risk / Reward

consequences and compare this with the organization's risk management. This entails a broader financial analysis and substantiation from us.”

• Different GC make different considerations for various business unit: — “Our A-brands are our core assets, we want 100% cover for them

and give them as much attention and protection as they need. With other brands we accept more risk and we are less meticulous and far-reaching in our approach.”

The same more or less applies to Corporate Social Responsibility (CSR): as final responsibility it is modest (<20%, see p13), but as a measure in deliberations, it is gaining importance. Opinions about the exact role Legal should play differ on this score: • GC 1: — “Big data has much potential, but can damage the consumers’

confidence in our company. This is a greater consideration than the legal frameworks. Legal is well qualified to weigh this up.”

• GC 2: “ — “I personally don’t think lawyers should burn their fingers on CSR considerations, those are too far removed from us.”

(Ad 2) Consistent coverage requires not only managing business but also the underlying processes The second key objective for Legal is achieving consistency: full coverage of the organisation and all its activities so that legal goals can be achieved throughout. This means that the focus on specific issues also shifts towards controlling underlying operational processes. One GC illustrates this with a contract life cycle example:

• notifications on all relevant contract elements, including renewal • the monitoring of all post-termination rights and obligations, • good training and support from all authorized managers, and • frequent assessment to see how it can be done better and more simply.”

“Our management is spread over many small branches with many

clients worldwide. Commercial agreements have a long duration and require good IP protection. However, we don’t operate on a scale that allows us to have central or local lawyers overseeing each contract.

Example: contracting

This is why we need a simple but watertight contracting process that helps branch management to safeguard agreements both legally and commercially. Therefore we have to establish … • guidelines beginning at the pre-negotiation contact, • good templates for all agreements starting from the test-suppliers, • clear contracting frameworks, authorizations and escalation

pathways,

• simple local registration and central contracting application,

(Ad 3) Efficiency means optimal (re)use of funds, time and expertise. This brings a growing amount of work in-house Susskind’s ‘more for less’ concept has now become commonplace: the amount and complexity of Legal work is increasing and the definition of quality has broadened. At the same time, the pressure to do so with fewer resources has mounted. This makes efficiency the third important target for Legal. For the GC, efficiency mainly concerns three variables that need constant attention: 1. Funds: do we allocate work where the required quality is realized at the lowest cost? 2. Time: do we try to accomplish the work in the shortest possible (total) time? 3. Expertise: do we ensure that the expertise that has been developed is used optimally and reutilized?

“We are back to taking a few lawyers in our employ. We frequently deal with standard disputes; this approach gives us a better grasp and lower costs.”

These deliberations come back in all sorts of options: • When delegating: “Effective (contracting) tools make internal clients self-reliant. That is the most efficient way.” • With staffing: “Correct allocation means that more and more work is done by the right level staff.” • With outsourcing: “Niche firms offer the best value for money, that is what we increasingly opt for.” “In-house unless” is increasingly the rule: work carried out in-house better matches the business operations and this is perceived as better service provision by internal clients. Moreover, internal time is roughly half the cost of (external) office time. Exceptions to this rule of thumb are: • Highly specialized work with a low frequency. Specialized work continues to be invested in firms because it cannot be carried out internally in a cost-efficient manner and at the right level (for example complex litigation of changing laws and regulations); • Generic volume work with a low value / risk. Here procedural optimization is a decisive factor by which Alternative Service Providers (see p46) are able to offer cost benefits (by processing large numbers of NDAs, amongst other things).

The short-term priorities of GC: continuation of greater management focus on costs / benefits The priorities mentioned by GC for the coming three years indicate the continuation of a focus on the following issues: Further adjustment to specific business processes: • “.. satisfied internal clients, (..) in control on the basis of risk appetite” Making steps in the process optimization: • “.. further steps in legal and compliance processes/trials, (..) optimization of templates, (..) progress made in digitalization” • “.. goals for standardization ..” Better outside counsel management: • “.. lower costs through this option and management by external legal advisors..” More attention to the development of the team & professionals: • “.. more lawyers in business leadership teams.” • “.. lawyers’ satisfaction about development opportunities.”

Short term priorities: Develop processes

Develop team Manage Outside Counsel Strategy & Plan Align with business 65%

70%

75%

80%

85%

More systematic development and management based on sound management information: • “.. if the team (..) has been able to spend substantial time on improvements” • “.. besides facilitating, more navigating according to the Legal multi-annual planning • “.. new contract management tool generates substantial data and insight enabling me to manage more effectively.” • “.. if monthly business review offers guidance.”

Part 2

Strategy & Operations: Overall

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Managing impact, consistency and efficiency requires operational integration The objective regarding impact, consistency and efficiency requires Legal to have full and current information and an understanding of the entire context. This requires integration into the business operations and organisation.

(GC) “In the past, we were informed on a ‘need to know’ basis. Now we are far better connected. I also share much more with the team. For the right impact you need to know what’s going on and know the context.”

Much progress has been made in this regard as is evidenced by various indicators: • The position of GC has been further strengthened: – 100 % reporting to “C-level” (was 80% in 2013), of which 85% to CEO/CFO (was 75% in 2013). This growth of 62% is the result of mainly reporting to the CEO (was 52% in 2013) – 100% has access to business planning (was 96% in 2013) – 70% is member of a Senior Management body such as ExCo, for example • The connection to operations has also been strengthened: – Legal Departments have a continuous working relationship with 86% of the internal clients (was 75% in 2013 and 56% in 2010) Role with business planning

Continuous working relations

GC member of Sr management

70%

40%

60%

35% 30%

12% 32%

30%

32%

15%

70%

10%

24%

informed when ready varies

Yes

2013

90%

involved in drafting when we ask

100%

80%

2018

non Clevel

70%

2013

other Clevel

60%

CFO

50%

CEO

40%

10%

20%

30%

20%

25%

30%

20%

40%

50%

10%

GC rapports into

2018

The GC must function as senior manager “in the boardroom, but not necessarily on the board” Whether the growing position of the GC as senior manager needs to culminate in a formal (Board of Directors) board position remains a subject for discussion. There is, however, consensus that the GC at senior management level needs his or her own table and chair: — “You need to be present in the boardroom, but not necessarily formally on the board.” The aim of the chair is good access to the information, context and considerations of Senior Management which puts the GC in a position to safeguard short-term and long-term sustainability. The best management body and formal status for the GC in this regard depends heavily on the circumstances. Different GC continue to point out the disadvantage of a senior management position over and above the role as most senior lawyer, especially if it is a formal role: — “As senior manager you carry joint responsibility for decisions. That conflicts with a neutral advisory role.” Another observation is that by operating outside of the operational framework, the GC also becomes part of the political game. Not everyone is comfortable with this: — “ExCo politics are complex and dangerous.” Certain GC notice that a good position for lawyers not only needs attention at group level, but certainly also within Business Units or country management. This especially counts where decentralized organizations have been given a lot of local independence. This is further exacerbated when potential local lawyers report hierarchically to decentralized management.

The broader goals cannot be realized optimally on the basis of the classic organisation & operation model The broader aim translates into the Legal Departments’ missions which have far broader starting points. These points have remained fairly uniform and stable for a number of years, as illustrated by the (anonymized and slightly edited) example below from 2013:

Legal is a .. • proactive • continuously involved • business manager • • • •

who, based on business goals / strategy / risk management etc. optimally provides, organises, delivers & continues to perfect 1) business impact, 2) consistency and 3) efficiency for all business activities and processes

During which his/her working method • optimally connects with all other business units and – processes • Is as simply and transparently as possible • and stimulates staff to get the best out of themselves and each other

(rather than reactive) (rather than ad-hoc) (rather than legal advisor) (rather than expertise) (instead of signalling and controlling) (rather than professional advice) (rather than specific files)

Source: Voxius Consulting

The classic organisation & operation model is based on personal service provision by legal specialists. This model is very suitable for customized professional work, but not suitable for a mission that is aimed at business impact, consistent coverage and efficiency. This is due to limitations in scalability, connectivity to business processes and transparency, amongst others.

The Operation & Organisation hereby becomes more companyspecific and commercial The goals of broad, consistent and efficient Legal service provision which connects with the operational management in terms of its working method, lead to the adaptation of the underlying organisation and operation model of the Legal Department. As a result, this model becomes more: â&#x20AC;˘ Company-specific: the working method increasingly follows the regular operations of the company Commercial contracting can, for example, be improved by linking it to the existing commercial process. Often this passes through the sales, operations and financial positions. By joining this existing workflow and sound alignment of the relevant parts, Legal can achieve impact, consistent coverage and efficiency. â&#x20AC;˘ Operational: other processes and resources become fixed parts of the legal operation In the above-mentioned contracting process Legal can, for example, make use of: (i) workflow software to streamline the flow, (ii) templates and document drafting tools to produce uniform contracts, (iii) digital signature software to safeguard authorization and (iv) once again, workflow software to facilitate filing and notifications. This connection with company-specific working processes has led to growing differences between companies and business units in the legal set-up and working method. These more unique and company-specific choices do make use of basic models created for processes such as contracting. The specifics therefore rest more in the business processes than the (related) tooling.

The Operation & Organisation is built out of a growing arsenal of resources and models Legal Departments have a growing arsenal of resources available. Their use is still modest, but the interest in what is now called “Legal Operations” is great. In the last few years, various organizations have emerged that wish to stimulate and give a framework to collective language and models, such as CLOC (Corporate Legal Operations Consortium) and the Legal Operations branch of the ACC (Association of Corporate Council). Central to this approach are the aids and applications that (could) belong to the operations domain, such as: • Strategic Planning: the schematic development of the Legal Departments (see the chapter on Plan & Realization) • Vendor Management: the use and management of law firms (see the chapter on Firms) • Technology Support relates to the use of Tools & Technology (see chapter on Tools & Technology) • Growth & Development: the management and development of the team and individual professionals (see chapter on Team) • Data analytics: the use of management information (see chapter on Management Information) For each of these elements, CLOC and ACC offer a description of the development from “basic” to “mature” as a guideline for possible development steps (see p65).

Options in strategy and resources are determined by various company-specific factors Various factors determine which strategy and input of resources are best suited to a particular Legal Department. This means that organizations that seem similar at a first glance, increasingly often make different operational choices, which emphasizes the importance of knowing the context. Relevant factors include: • Size A worldwide operating company with local trade and production stimulates autonomy, with Legal strengthening its local grip by imposing the local organisation model. Autonomy remains local on the basis of a clear and uniform framework. • Operating phase Regarding project organisation, Legal was very decentralized when it came to facilitating the management of projects. Increasing risk has recently led to tighter risk management, and in turn, to more centralization. • Culture

A traditional company transforms itself into an “agile” innovator. The Legal Department responds to this by moving lawyers out of their classic legal expertise and engaging them in project-based work in which the primary motivation is no longer to deepen their legal development, but rather to broaden the scope of their expertise and skills. • Autonomy of business units Two companies have the same size. One has a central organisation with a lot of in-house work and a large range in seniority within the team. The other has a very decentralized organisation, much of the work is outsourced to firms and LPOs (Legal Process Outsourcing providers) by the subsidiaries because of their small scale, and in the in-house team is relatively senior

Legal has more impact with declining costs. Prognoses by GC show a continuation of this trend The general projection of Legal and internal clients is that impact and consistency grow while the associated cost level drops. In order to make cost levels comparable, we relate the total legal costs (in-house + outside) to the total turnover in which we also look at, amongst other factors, comparability in scope. In both 2008 and 2013, the average total cost of Legal was 0.40% of the turnover. In 2018 these costs have dropped to 0,36% of the turnover. Analysis shows that the drop in costs correlates with options such as: • better delegation of responsibilities to the business; • better allocation of work in terms of seniority within the legal team; • carrying out more work in-house and a more selective use of firms. In 2018, the cost range varies from 0,1% to 1% of turnover. This is identical to 2008 and 2013. Various factors influence this range in cost within a Legal Department, such as: • size: a higher volume of work allows economy of scale and higher efficiency; • maturity: a mature business is more predictable and is therefore easier to structure more efficiently; • degree of regulation: more regulation brings about more costs; • geographical spread: management in Anglo-Saxon countries is more expensive than in Asian countries when it comes to legal issues

• centralization: decentralization with more autonomy at BU / country level generates more costs — “in the light of the cost evaluation which is being conducted with an

external consultant at the moment, we expect that centralization of legal activities will take place.”

Average total legal cost / total revenue:

0,50% 0,40%

0,40%

0,40% 0,36%

0,30% 0,20% 0,10% 0,00% 2008

2013

2018

The cost per unit indicates a shift towards more work being done in-house The importance of individual cost items (resources) within the total costs of Legal, is a good indication of utilization and importance. The associated growth prognosis per cost item gives a good indication of how the use will develop: • 38% of the total cost is spent on the in-house team. For the coming 3 years, GC made a prognosis of 18% growth (or an annual growth of 3,5%). This is far above the average of 11% growth over the total budget. • 4% of the cost goes towards flex-personnel. That is the same as in ‘08 and ‘13. The growth of 12% is almost equal to the average which indicates a stable role for flex-personnel overall. • 3% of the cost goes to Alternative Service Providers such as LPO (Legal Process Outsourcing) suppliers and the Big 4. The growth

percentage of 13% is a little above the average, which indicates a small increase in importance; • 2% of the cost goes towards Tools & Tech. This is a small share and it should be noted that the tools currently in use are relatively cheap. The growth percentage of 17% is, after 18% for the team, the highest figure, signaling that GC are staking their bets on increasing the size of the in-house team share of the tasks: 1. With an above-average growth of the in-house team (read more in the “Team” chapter). 2. Through greater application of Tools & Tech, which helps the inhouse team to achieve more coverage and consistency and facilitates some self-sufficiency from the business (and hereby delegate work to the business)

Cost per operational element 45% 40%

38%

35% 30%

25% 20%

18%

12%

15% 10% 5%

13%

17%

Flex

ASPs

Tools

16,0%

12% 3,6%

10%

8,3%

7,6%

0% Team

% of TTL

3Y growth

Firms: regular

Firms: disputes

Firms: regulatory / Compliance

Firms: projects

Firms: other

The share of the work done by firms declines while the share of the costs grows The share of the work done by firms is declining, but there are great disparities in the type of work:

International research shows a comparable development, for example:

• 16% of the budget goes towards “regular” work by firms. That constitutes support with frequently recurring and relatively standard tasks such as contracting. This is a large share, but the growth percentage of 5% is substantially lower than the average of 11%, which indicates a relative decline in this kind of work;

— “in-house departments are the

biggest competitors to law firms”

• Another 16% goes toward regular and relatively standard “dispute” work by firms. This is also a significant share, but here the growth of 2% is the lowest, which indicates a relative drop in this work too;

— “.. median inside legal

spending increased by 4 percent (..) while median outside counsel spending decreased by 2 percent.”

• 3,6% of the budget goes towards regulatory / compliance work of firms; the associated growth percentage of 12% indicates the maintenance of this share;

(HBR 2017)

• 7,6% of the budget goes towards “one-off projects” such as M&A, complex litigation or fraud investigation. The growth percentage of 10% indicates the maintenance of this share. It is striking that the combined “firm” elements represent 52% of the total Legal budget. In 2013, this was below 50%. This illustrates the impression that many GC have, that although more work is done in-house, the costs of outside counsel nevertheless remain relatively high.

One result is that outside counsel management has a high priority (more on this topic in chapter “Firms”).

Cost per operational element 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

38%

18% 12%

Team % of TTL

13%

17%

Flex

ASPs

Tools

3Y growth

16,0%

Firms: regular

16,0%

2% Firms: disputes

12% 3,6%

Firms: regulatory / Compliance

10%

8,3%

7,6% Firms: projects

Firms: other

Growing operational maturity leads to more coherence in the use of resources. Various basic models are emerging A mature operational strategy has a logical coherence when it comes to resource deployment, for example: • Efficient housekeeping / entity management leads to the combined use of streamlined work processes, specific tools and relatively junior personnel In 2013, such correlations were still limited and indicated the relatively young phase in development. In 2018, more correlations are visible, an indication of the growing maturity. This creates various basic models for processes.

An example: Various organizations with relatively autonomous country-organizations (or BUs) formulate a blueprint for local legal management with target results and working method. For this, a distinction is made between the working methods for small and big country organizations:

This trend is also apparent in international research, for example:

The use of a contracting Centre of Excellence is gaining traction as a method of driving efficiency. 32% have a dedicated CoE for standardizing and centralizing contracts. (HBR 2017)

• “Big” have their own in-house lawyers who – within the framework of HQ – have freedom of interpretation. • “Small” have no in-house lawyers and primarily use standard processes and associated tooling such as workflow and templates for contracting. • A fixed local firm selected and managed by the country management is enlisted for support and periodically instructed and evaluated by corporate legal in terms of results and working method. With big cases, corporate legal is directly involved. Such basic models arise from responsibilities such as Contracting, IP & Licensing, Claims & Disputes, Regulatory & Compliance and Corporate Housekeeping.

Part 2: Strategy & Operations

Structure & Coordination

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Organisational Structure & governance determine the Legal structure and coordination, basic models develop accordingly The structure and coordination (governance) of organizations varies and this has a great deal of influence on the structure and coordination of Legal Departments. Sometimes the structure and coordination are modelled on that of the organisation to delegate responsibility and facilitate the business in this way. In other cases, the choice is for a different structure and coordination with the aim of more control and command of the business. The structure and coordination of the company-specific set-up also grows at the same time as the development of the basic models. For example: • A worldwide corporation managed from the Netherlands, supported by (limited) local, commercial and operational activities with a Legal team that is fully established in the Netherlands. Both contracting and compliance are supported by (web-based) tools. Personal interaction with local management is conducted via biannual local or regional meetings. The HQ team is relatively big and diverse in professional seniority. • A worldwide organisation with much commercial autonomy in the countries has local legal staff that report hierarchically to local management, but through a strict functional reporting framework to HQ in the Netherlands. HQ team is relatively small and senior. • A worldwide, decentralized project organisation with local legal staff reporting to local management. This reporting can be to any management position except commerce, to safeguard control. HQ legal gives functional coordination and actively participates in cases above a certain (potential) impact. The HQ team is small but relatively senior to be able to offer guidance. • A holding company with primary financial management of subsidiaries, has a small and very senior team at HQ. The subsidiaries have independent legal positions with limited guidelines and mutual alignment and are fully equipped in terms of their own management, turnover, etc. 34

Part 2: Strategy & Operations

Tools & Technology

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

There is considerable focus on new resources & services, though application still largely stands at the start of the curve In the last few years, there has been a virtual (communication) hype about legaltech tools and legal operations services. This is fed by, amongst other things, a widely-held opinion that there is a demand for development in the relatively high margins of the legal market and the high-risk readiness of investors in search of returns. This movement is good, nevertheless, it is important to keep the rule of thumb in mind when it comes to innovation, i.e. “more than 75% of start-ups disappear”. The greatest number of start-ups cease to exist or are taken over by other players. Many initiatives are valuable but will only bring about change at a later phase or in another shape and context. — “Changes are overestimated in the short-term, and underestimated in the long-term.”

Source: Thompson Reuters / Wolters Kluwer

Good decisions, timing and approach are based on organisational needs, maturity of the resources and absorption capacity of people The hype phase creates uncertainty for many General Counsel over what, when and how, when it comes to Tools & Tech. A number of simple considerations can help to navigate this hype phase. • The starting point for each consideration is the requirements of the company itself and its own Legal Department, and not what is being offered by the market. Only when you have clearly established your needs, can you evaluate if a tool has any added value. • Next, it is important to have a realistic view of maturity. New initiatives often follow the Gartner hype curve (graph 1): first big promises (of publicity), then disappointment over the real results, and after a period of time, the good balance between promise and reality. • Actual application of innovation in products and working processes follows the adoption curve (Rogers, graph 2): start with pilot schemes and then scale up gradually when the experience and practical value increases. For most organizations there is no value in spending a good deal on tuition fees in the early phases, and far wiser to wait until the teething problems have been sorted out elsewhere. • Integrating innovation is also a change for people and that always triggers a period of resistance according to the mourning curve (Kubler Ross, graph 3), especially if it is a big change. People can only process a limited amount of change in one go: the absorption capacity is limited and the incubation time is long.

Therefore, the availability of new tools is but a small part of successful innovation. Know your needs, establish the right priorities, be realistic and ensure an effective and pragmatic management. 37

Actual use of Tools & Tech is still modest and limited to LowTech tools The expenditure on Tools & Tech constitutes 2% of the total Legal costs (it was 1% in 2013). This percentage is low but somewhat misleading, in that the tools used are relatively cheap; expenditure and use have doubled since 2013, and the 3-year growth prognosis of 17% is the highest figure together with the growth of expenditure on the team.

Awareness tools & training Entity Management Data Room software

Corporate Data Management Legal Research Internal Portals Board information / meetings Contract workflow / lifcycle management

The top 5 tools used consist of relatively Low-Tech tools that have been around for some time: 1. Awareness Tools & Training (often eLearning) 2. Entity Management (often Effacts) 3. Corporate Data Management (often based on Sharepoint) 4. Legal Research (services such as Legal Intelligence and PLC) 5. Internal portals.

IP management Digital Signature

Individual productivity Contract / document drafting eDiscovery Collaboration Governance / Risk / Compliance Due Dilligence Billing / Spend / Outside cost management

Knowledge Management / Expertise Automation

The selection criteria that are often mentioned (ease of use, limited to relevant features, low investment in time and money) underline the conscious preference for simple tools: — “.. (application xyz) does its work, is accessible, does not have too many features and does not demand a big investment. That’s what it’s all about.”

Claims / Escalations management Matter Management Contract / document review In-house cost management Prediction Technology Project Management

It is notable that only five tools have an adoption rate of more than 50%. Closer analysis also shows that adoption drops as the size of the organisation decreases. Smaller organizations therefore make even less use of Tools.

yes

50%

100%

not yet, but interested

Optimizing contracting and compliance take priority The priority of applying tools is mainly aimed at longer existing and relatively low-tech tools: contract life cycle, document drafting, document review and digital signature (see red arrows on previous page). Moreover, all four play a role in the contracting process that has high priority for almost all GC. This is reflected in the answers to the question about which working processes (broader than tools) need to be prioritized in the coming three years: 1. Contract Management (90%) The commercial contracting process is fairly high among the GCâ&#x20AC;&#x2122;s priorities, depending on the profile of the organisation. The use of contracting tools is growing but is less high: A part of the optimization does not come from Tools & Tech 2. Regulatory / Compliance (54%) Privacy, data security and export control are predominantly named as the most important when it comes to compliance.

Priorities in development Contract Management Regulatory / Compliance Disputes / Litigation

Claim management Matter management Entity Management Due diligence Board management Outside counsel management Knowledge management Time management Diagnostics 0%

50%

100%

3. Disputes / Litigation (16%) and Claims Management (8%) are also frequently named but are clearly less urgent It is remarkable that in organizations where IP is a core asset / activity and falls under Legal, this is also mentioned as a high priority for further process development.

Few tools have a substantial market share There are relatively many tools with a small market share of just a few users. It would seem that the market is still fragmented. Only a small number of tools have a large market share.

A sub-group of strongly regulated organizations, such as Financials, use “RegTech” tools that support regulatory / compliance; which are increasingly used in and in a broad way. Various applications offered by firms and niche suppliers such as Charco & Dique are mentioned here.

The applications that are often mentioned are: • Effacts (Kluwer) – for entity management and contracting, amongst other things • Docusign – digital signature for contracting and governance • Sharepoint (Microsoft) – data management platform for, amongst other things, corporate claims, escalations and contracting — “Document Management is done with Sharepoint – like everyone

Tools that are related to other specific regulatory functions such as third-party compliance, e.g. Navex, enjoy much interest. Especially in these domains, it is true that such tools provide quick and flexible access to current and (country) specific content more efficiently. Regulatory seems to be the domain in which practical tools are becoming an essential part in the service provision.

else. But it does not work well. Specialists are, however, still too small and the market is fragmented which makes investing in something else still too risky.”

Some large organizations mention Tymetrics (Kluwer) as a tool for management of costs. It is noteworthy that these are longer-standing users who no longer scale Tymetrics under ‘innovative’.

There are organisational obstacles to the adoption of tools. The use of HighTech follows later, and as a part of services. GC mention a number of organisational issues when it comes to the implementation of Tools & Tech for Legal: 1. Limited skills when it comes to broad process-oriented thinking. – “Success requires a good process, good selection, good implementation and good use. That is all new for us .” 2. ICT decides, Legal is low on the priority list and has problems formulating their business case. – “IT has been instructed to minimize the costs and platforms and we are at the bottom of their list.” – “Cloud solutions bypass IT problems, but cause all sorts of data security complaints.” 3. Legacy systems (SAP and Oracle, for example) are difficult to connect to. – “Ideally we would connect to our Finance and ERP systems, but they are not made for legal departments.” – “Instead of legal tools being brought to the business, we are required to adjust to business tools. That is a slow process .”

4. The legal culture is not used to change. – “It is a cliché, but lawyers are still craftsmen and do not like change.” GC have great interest in the potential of HighTech tools but do not expect to acquire them themselves. The expectation is that complex tools will become a part of the offerings of service providers. — “Artificial Intelligence has a lot of value for M&A, amongst other things. I expect that this will become a part of the service provision by firms.” Moreover, the view is that many developments first needs to mature: — “I was at ACC in the US: the supply is big, but still very conceptual and with only limited use.”

Part 2: Strategy & Operations

Firms & Alternative Service Providers (ASPs)

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Conscious allocation decreases outside counsel support in 2 of main 4 categories The three-year prognosis is that growth in the in-house work load will further decrease the share of support by external law firms. The drop is modest in two of the four categories, but causes increasing price pressure in these segments. • Regular “Bread & Butter” work, such as support for normal contracting, is currently 16% of the total Legal costs. The growth prognosis of 5% is far below the average of 11%: this work will be carried out in-house more often. From the firm’s perspective, this is still a small growth, but there are many suppliers for this work which increases the price pressure. — “Negotiations are about more service for less money. I expect

broader services such as free helpdesk services for 30 minutes a week and storage of all advice documents in the cloud.”

• Ordinary “Disputes” entail 16% of the total Legal costs and with a growth prognosis of just 2%, an increasing amount of this work will be done in-house. The supply is great and the price pressure will increase too. — “We are back to having just a few lawyers in our service. We have

many ordinary disputes; this gives us a better grasp and lower costs.”

• Regulatory / Compliance is 4% of the total Legal costs and with a growth prognosis of 12%, this work and its share will grow somewhat. This is specialist work that most GC will continue to buy in. — “I am certain that the costs will rise, in view of worldwide

developments. This means more programs (..) and also more local expertise.”

• One-off projects such as M&A and internal research constitute an average of 8% of the total costs and have an average 10% growth estimate. This is also specialist work that GC will continue to outsource. — “Difficult to predict and remains the work of firms.” Cost of firms 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

16%

12%

10%

8% 4%

5% 2% Firms: regular

Firms: disputes

% of TTL

Firms: regulatory / Compliance

Firms: projects

Firms: anders

3Y growth

Outside counsel management has a high priority, evaluation criteria become more specific Despite a smaller percentage of the work going to firms, the share of firms in the total costs of Legal has risen somewhat; from 50% in 2013, to 52% in 2018. This bigger share in the costs combined with – in the eyes of GC – a slow transition towards better cost management, makes it a high priority issue for outside counsel management.

The evaluation criteria show that, for the first time, the lawyers’ market / organisation knowledge (8,4), holds a higher position than their expertise (8,2). In 2013, this was the opposite. The explanation is that expertise remains the basis, but that application in a specific context is increasingly decisive for the value perception of the client: — “I’m looking for EQ: understand the people and the context. Technical knowledge is easy to buy. It’s about context, daring to be unorthodox and flexible in advice and way of working.”

Transparency in the form of clear planning (7,8) and good, timely reporting (8,0) remains important, just as cost management in terms of, amongst other things, good fee arrangements (7,6) and billing (7,9). — “Transparency could be much better. This requires strong relations and consistency on the part of the firm.” — “Alternative Fee Arrangements (AFAs) do not go far enough in risk sharing. I want 50%

bonus / malus, for example.” “In the US we use a lot of AFAs. Here it still takes too much time.”

— “I need a full overview of progress and billing. That is still surprisingly difficult to get.”

Division of cost 53%

52%

52% 51% 50%

50%

49%

48%

48% 47% 46% Firms

In-house

2013

2018

Evaluation criteria Market / Organisation knowledge Expertise Progress reporting Billing checks Project Management Evaluation Firm AFA's Evaluation Inhouse Operations Panel Pitching -

5,0

10,0

PR value of “Innovation”, “Tech” and “Operations” has worn off. GC needs concrete improvement in service provision During the growing hype of the past years, “innovation”, “legaltech” and “legal operations” were rewarding subjects for firms to profile themselves. In the meantime, the novelty has worn off and the PR value has disappeared. These subjects are now measured from a practical point of view:

“Clifford Chance launches two new innovation units: the next stage of the firm's Best Delivery and Innovation strategy” Source: Clifford Chance

— “Nice PR but it’s improved and more efficient service provision that counts.” — “The quality and cost have to be right. How this is realized is an internal question for the firm.” The general view is that firms take many initiatives but that these seldom translate into better value for money for Legal Departments. One explanation offered by many GC is that there is little interest in actually modifying the service provision and revenue models; especially in the more economically buoyant firms. The change must therefore come from the outside, from smaller providers or firms with the ambition to grow. Despite the more critical approach nowadays, GC have high expectations when it comes to innovation and product development in the legal profession. They eagerly await better proposals at a better price. However, they expect this to take some time: — “Real changes in services and operations require a good deal of time and focus.”

— “The incentive for the present firms is not yet great enough.”

Evaluation of firms becomes more important and is primarily aimed at improving existing business relations and service provision From the criteria that GC use to evaluate firms, it appears that the first priority of GC is the improvement of service provision for existing business relations. Only when the firm does not develop enough to meet the requirements, does GC consider the selection of new firms. The use of Panels varies. Some Legal Departments have a formal panel selection process that can be very elaborate with various rounds for specifying service provision and negotiating the price. The implicit objective is to optimize the price at the right quality and service level: — “I require more global alignment, increase the volume per firm and improve the discount in this way.” — “We start the process with a pre-selection of certain areas of

expertise. Selected firms offer their hourly rate through “reversed auction” with hourly rate. The firms with the lowest fees join the panel. Internal clients provide their feedback, per firm, about the service provision. With new cases, at least 2 firms are selected by the panel on the basis of expertise, feedback and fee to make a pitch. During the pitches we expect broad service proposals and alternative fees based on the panel fees.”

Others consciously operate without a formal process, but do use an informal panel: — “We have an informal panel that bases itself on prior experience. The selection per case is also informal.” The use of panels is not often very strict in practice: there are many examples of panel firms that, after an extensive selection process, receive little work. Conversely, there are examples of firms that operate without panel positions that do acquire work. Pitching also varies without a marked trend. It is usually applied by the bigger companies for bigger projects: — “We don’t require real pitches. I know the firms. Selection is partly based on personal click.” — “The allocation of most work is done on the basis of personal contact and a simple proposal.”

Instruction and evaluation of firms is increasing but lacks structure and consistency Despite the often explicit impression of GC that firms can deliver more value and efficiency when it comes to service provision, evaluation is often inconsistent and unstructured: • 80% evaluates after specific (big) projects (was 45% in 2013) • 50% evaluates (bi-)annually (was 20% in 2013)

• 35% evaluates incidentally (was 20% in 2013) The set-up and content of evaluations are often not very detailed, nor are they based on previously agreed criteria: — “We evaluate on the basis of conventional aspects pertaining to service delivery: availability, responsiveness, support with respect to training, and so on. We would like to link this much more specifically to the underlying goal of the work that we invest in the firm.” — “The outside counsel analysis and evaluations of projects are now carried out on lump sum costs, this should be carried out on workstream so that we are able to steer better.”

Frequency of evaluations 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% after projects

bi-annual

annual

infrequent

2013

2018

This is fairly similar to developments in, for example, the US and the UK. Here too, there is still little structural instruction and evaluation: 79% gives firms instruction (billing, staffing, etc.). 60% enforce this by means of evaluations (Altman Weil 2017). 30% has no form of evaluation (CLOC 2017). Good outside counsel management is still carried out in the most efficient way through a deliberately simple cycle that links instruction, pitching, reporting, evaluation and concrete streamlining.

Besides firms, Alternative Service Providers have managed to establish themselves only modestly Nowadays, Alternative Service Providers (ASPs) are seen as viable options. Although their 3% share in the total costs is modest, the cost is low and the number of users has grown appreciably in certain categories. The prognosis gives an almost average 3Y growth of 13%. Niche providers, with a utilization of 66%, are the biggest; have grown the fastest, and have a growth prognosis of more than 85%. — “Niche means focused, not small by definition. Focus is a big advantage.” — “We use niche firms more and more often for their expertise. That gives us the best value for money.” Legal Process Outsourcing (28%) and Entity Management providers (18%) have, in line with the GC prognosis in ‘13, acquired a modest place when it comes to taking over volume work (was 10% in 2013)

Cost of in-house 45% 40%

38%

35% 30% 25% 18%

20%

13%

12%

15% 10% 5%

17%

Flex

ASPs

Tools

0% Team

% of TTL

3Y growth

ASP usage

The use of the BIG4 has also doubled with respect to the previous survey, but remains modest at 13% (7% in ‘13) and a low growth prognosis (3%) — “I understand the thinking, but they remain small groups in a big, foreign environment, I can’t see it happening yet.” — “.. eventually perhaps, but only process-based or volume work.”

Niche other LPO's Entity Management

This development is reflected in international research with, for example, 20% use of LPO, and fast growth in the use of niche providers focused on better service (63%), more innovative (43%) and better expertise (40%) (HBR consulting 2017).

Big 4

0% yes

20%

40%

60%

80% 100%

not yet but interested

Use of firms varies strongly. Determining factors include size of company, predictability and degree of (de)centralization The use of firms and the type of management vary strongly. Factors influencing the use of firms are, for example, size, maturity of business and the degree of centralization: â&#x20AC;˘ In line with the observation that bigger Legal Departments hold more possibilities to structure operation and organisation efficiently, is also the use of firms in relation to the size of the company. Small departments with lower volumes of workstreams are less able to draw knowledge and skills in-house. Small Legal Departments are therefore more likely to use the more expensive option of outsourcing their work to firms. This disadvantage gradually declines as the volume of work increases. Greater volume gives Legal Departments more leverage in price negotiations with firms, which gives bigger organizations in this regard more potential for cost advantage. Both elements are reflected in the data. In both cases the potential advantage is not fully utilized in the eyes of GC. â&#x20AC;˘ A second factor is the predictability of the business: the higher the predictability, the more space for efficiency. Relatively new business is still often in development and therefore less predictable. This heightens the use of more flexible resources such as firms. Efficiency is consciously sacrificed for flexibility, so costs become relatively higher. â&#x20AC;˘ A third factor is the degree of (de)centralization. A high degree of decentralization cq. high degree of autonomy divides a large, combined volume into smaller volumes with less space for efficiency, both in terms of undertaking work in-house, and in negotiating with firms based on big volume.

Part 2: Strategy & Operations

Team & Professionals

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

More in-house work leads to team growth The share of in-house staff in the total cost dropped to 38% from 40% in 2013. This is the result, in part, of an incidental correction in team formation: in the long aftermath of the financial crisis, there was a great deal of uncertainty with staff turnover dropping while average seniority grew. Many GC therefore had a goal in 2013 to restore the balance in expertise-seniority. That was done successfully. The share of: • Senior Counsel has dropped to 32% (was 38% in 2013)

• Counsel has risen to 27% (was 21% in 2013) • Paralegals has risen to 10% (was 6% in 2013) The optimal balance in seniority varies per team, but in general the smaller teams have a higher average seniority in years of expertise. At 18%, the 3-year growth prognosis for in-house assistants is the highest of all resources. This is a consequence of the aim of doing more work in-house: — “After the crisis, we went a little too far with in-house cutbacks.” It is also noteworthy that operational roles now have a (modest) headcount of 1%, which was not the case in 2013 (see “Non-Legal Roles”).

Cost of in-house team 41% 40% 40% 39% 39% 38% 38% 37% 2013

Team composition 45% 40% 35%

38% 32%

30%

25%

27% 21%

20% 13% 10% 10% 7% 6% 6%

15% 10%

The number of lawyers outside of Legal has declined to 13% (from 15% in 2013), which matches the development in which the scope of GC is increasingly broader with a growing number of “legal” responsibilities. — “My team has grown with the addition of 3 IP assistants and 2 compliance officers.”

2018

5% 0%

2013

15%

13%

1% 0%

2018

Interim support is stable and is becoming more professional. The development of company flexpools has slightly increased The use of interim manpower represents 4% of the total Legal costs, identical to 2008 and 2013. The growth prognosis of 12% is about average, so the use of interim is expected to remain relatively the same. The use of interim manpower has, once again, professionalized slightly through more conscious deployment:

Cost of Interim as % of total cost 5% 4% 4% 3%

• The greatest input (+/- 75%) is aimed at extra capacity, to cope with peak pressure periods or for replacements to fill vacancies, and during illness or maternity leave. — “Interim only works on the basis of capacity, not for expertise.” • A smaller part (+/- 20%) of interim input is aimed at specific projects, such as recent implementation of privacy / data security.

3% 2% 2%

1% 1% 0% 2008

2013

2018

• Certain organizations used interim capacity as an alternative for ad-hoc firm input (<5%). This model has existed for several years, but has not (yet) been broadly accepted: — “We use interim expertise now and then, mainly for second opinions. This is an ‘eminence grise’, as it were. Further ad-hoc expertise requires the backing of a firm.” A fixed flexpool has been established by +/- 6% (was 2%), but actual use is still modest. The ratio behind setting up a flexpool instead of ad hoc interim support, is that the interim staff acquire more knowledge of the organisation via the flexpool connection, so that their input is more efficient when used. Within law firms flexpools are becoming common practice, Legal Departments make moderate use of flexpools of interim staff. 52

There is a growing need for non-legal competencies within Legal Departments Through the expanding role and working method of Legal Departments, the demand for broader knowledge & skills has grown. This has led to more focus for diversity of profiles within the team: — “Diversity of thinking benefits the decision-making process and the results. That demands attention – by nature we have a subconscious preference for people who resemble ourselves.” — “Diversity for all variables is important. We also look at nationality and culture, for example.” The importance of specialist expertise with a score of 8,0 has remained the same with regard to 2013. The importance of more general expertise has risen from 8,1 to 8,2: — “Less custom work requires fewer specialists. Greater participation in business processes, means broader expertise.” — “The team is still technical and operational. When we received a request to set up a foundation, we were up and running. What we should have done is to first ask what the objective was, then consider what the best means were to achieve that. Foundations represent a lot of work and are therefore not the right means. It’s important to ask questions and think matters through, rather than just focusing on the technical implementation..”

Competences Communication Business knowledge Generic Legal knowledge Specialist legal knowledge Time management Project management Management Info Vendor management Process management 0 2013

2018

The importance of business skills has also risen across the board: — “Communication with the internal client, time management, setting the right priorities, knowing when to escalate.” — “Lawyers need to be good project managers.” Managing trials scored 5,5 in 2013, with the comment that lawyers mainly attended to case-specific issues. Since then, the difference with other sections has dropped, in line with a rise in the attention for trial development. However, the idea is that trial optimization should be the task for only a few lawyers. 53

The broadening of competencies covers four main categories that have a different weight for each team and each position The competency profile for teams and positions spans a growing number of sections, spread over four main categories: 1. Professional content: which areas of expertise are required in terms of knowledge and level of experience within the team and specific positions / employees? 2. People management: what are the lines of position and hierarchy that determine mutual cooperation between lawyers? This is partly the position in the “hard” structure, but especially in the “soft” skills of managing up, down and laterally. Each direction requires a different set-up, in which for example, lateral management is often made complex through the lack of a formal relationship. The writings of David Maister, for example, on the subject of “leadership” address this subject. 3. Business impact: who are the internal and external clients / stakeholders and what do they require from the Legal Department and staff for them to be the “trusted advisor” to provide the right considerations in the right form and context for, for example, the Executive Board / Supervisory Board (managing “up”), other business units (“lateral”) or regulatory bodies (“external”). 4. Strategy, Organisation & Operation: this involves all activities concerning needs analysis, defining targets, determining metrics, setting up processes, deploying tools and providers such as firms,

annual planning and project management, team development, and allocation of work. Popular themes such as “legal operations”, “lean” and “LegalTech” fall into this category. For effective team development and individual development, it is important to be clear about how the Legal strategy translates into the required competencies, and then considering which competencies you already have and which need to be developed internally or brought in from outside. Competence profile versus status (ficticious) People Management 5 4 3 2 1 Legal Expertise

Organization & Operation

Business Impact

Need current Coverage

Active management of diversity in competence profiles and intake / throughflow / outflow of staff is increasing The expanding range of competencies that are needed in the team underlines the importance of actively managing diversity. Not only professional expertise, but also other categories need to be present and sufficiently broad and deep: — “We need to proactively evaluate whether we have the right people in

the right roles, whether we can combine positions and talent well, and timely close the gaps.”

In this regard, the number of organizations that carries out a “fleet inspection” (a structured evaluation of the whole team and its competencies), has increased from 4% in 2013, to 15% in 2018. Such a fleet inspection comprises: • Defining all the tasks & responsibilities; • Determining the associated palette of knowledge & skills of the team at job level; • Evaluating the team and the individual employees.

The fleet inspection then serves as the basis for further team development with: • Individual development plans for staff; • Focused recruitment to fill gaps; • Focused throughflow / outflow of staff whose profile or development no longer meet the demands. Managing the throughflow /outflow becomes more important for both team and assistants. Certain organizations therefore limits the time an employee ideally should stay in one position: — “Without throughflow, you get ‘blockers’ in senior positions. That drives off talented staff.” Fleet review 16% 14% 12% 10%

At the moment, most of the attention is given to the more senior positions, where not only expertise plays a big role:

— “We carry out a fleet inspection annually in which we plot employees on the basis of expertise and organisational skills.”

8% 6% 4% 2% 0% 2013

2018

Personal development is increasingly linked to business goals The development of staff competencies has made a big leap. There are programs such as Personal Development Planning (PDP) used by big organizations that are often based on formalized, company-wide HR programs. In smaller companies, the approach is more often informal and ad-hoc. An important goal is to allow staff to link their own personal development to the business and Legal goals:

• Everyone makes a PDP based on one of three scenarios: 1) specializing within the job, 2) broadening within the organisation or 3) leaving after a certain period of time. Most development programs are geared towards professional development (82%), long term ambition (75%) and organisational skills (70%). People management still gets significantly less attention (53%), although this has great influence on results.

The individual budget for development varies from EUR 1,500 to EUR 10,000 with only a few lower or higher exceptions. The most important resources used to stimulate development are: • External training (>80%) for business skills, e.g. at De Baak, Nijenrode and IMD; • Job rotation (45%) to other locations, different expertise, regions (experience abroad) and positions; – “Employees work in a flexpool and rotate when it comes to projects and assignments. That gives broader employability” • Coaching / guidance in development (80%); • Note: attention to healthy living and a healthy working culture are also mentioned frequently.

Personal Development Shared objectives Joint training

Formal feedback on team PDP: Long Term Ambition PDP: Legal Expertise PDP: Business Impact PDP: People management Coaching Formal feedback Job Rotation within Legal Job Rotation with non-legal Job Rotation outside organization yes not yet, but interested

50%

100%

— “However, personal development is not embraced by everyone: many younger staff find it inspiring; many older staff find it threatening.” 56

Non-legal roles are growing in numbers, diversity and appreciation. Recruitment , on-boarden and supervision require attention The broadening of service provision and adjustment of the underlying operation and organisation changes the organisation model. The BCG Rocket Structure, for example, illustrates this for the legal profession (see graph). It makes “non-legal” roles more important; something that is increasingly evident in job vacancies, both in the legal profession as well as in-house (see following page). For Legal Departments the more business-oriented set-up demands a different set of knowledge and skills. In 2013, these management aspects were not yet clearly defined. Amongst others, this was evident in the absence of a headcount at the time. In the meantime, there is a modest headcount available (average of 1%) and the number of specific operation positions at the bigger companies shows a (still modest) growth. — “In the US, we have had an operations expert for some time. In the Netherlands, they have only just started. We are already making some big steps in coverage and costs in the US – I estimate a few million in savings.” Historically, legal teams are very homogenous in composition, with an organisation that is focused on lawyers. This is why recruiting, successfully integrating and retaining people with different backgrounds requires extra attention.

The need for extra focus is further compounded by the fact that the understanding for such a role is still limited, and because a proportion of lawyers is not exactly looking forward to operational and organisational change. A successful development of non-legal roles therefore requires various steps, such as: • defining new tasks & responsibilities and determining the associated knowledge & skills; • selecting people with the right profile and, moreover, enough (re)cognition by lawyers; • good “on-boarding” with clear introductions and realistic goals for the starter and the organisation; • effective sustained organisational management and support to control the unavoidable initial resistance; • continuous substantive development: operational positions will undergo much development; employees should have all the room to connect to this change. 57

Examples of new non-legal positions (in-house & firm) Legal Operations Specialist - PVH (2018)

.. identify, analyze, implement and coordinate opportunities to optimize the operational and organizational aspects of running a top notch inhouse legal function. Responsibilities .. project management relating to topics such as Contract Lifecycle Management, Knowledge Management and Cross functional projects .. workflow / process analyses, unbundling and improvement .. (legal) tech / tool selection, implementation, evaluation and support .. outside counsel and supplier management .. team communication .. training / education / support / self-help tools for colleagues .. management information, analytics and reporting .. department strategy & planning process Profile .. legal education at bachelor level or higher (or comparable knowledge) .. > 3 years of relevant experience in a legal services environment .. experience with legal working processes and process optimization .. affinity with (legal) software / technology .. affinity with outside counsel management .. affinity with financial- and quantitative analyses and reporting .. project management knowledge and experience .. potential and ambition to develop toward a functional managerial

Pricing Manager â&#x20AC;&#x201C; De Brauw (2018)

Responsibilities .. financial and commercial analyses, scoping and budget modelling .. making legal spend more predictable and controllable .. work with the partners, lawyers and other colleagues .. pricing for our value added services as well as for the entire life cycle of matters .. continuous improvement in efficiency and effectiveness of our legal services .. working on practical pricing solutions for clients (..) optimize our pricing strategy .. pricing models (fixed fees & risk sharing for example) .. build matter databases and budget models .. generate management information on pricing for the board and partner group .. optimize the work processes and tooling for reports .. train lawyers on pricing and how to provide the best service to our clients Profile .. Business Administration, Economics, Finance, Econometrics or Marketing .. experience in the field of pricing, LPM or Finance .. analytical skills and can collect and analyze complex historical data in order to make pricing decisions. .. Experience with business intelligence tools

Diversity requires more flexibility in reward policy and makes team management more important Many GC of namely big teams indicate that the building up and maintenance of the team is becoming more important and requires increasing attention. Reasons mentioned are the growing changes in the role and working method, increasing diversity in team roles and profiles, spread of team over various locations, and difference in cultural backgrounds. Good team management requires clarity on a number of “hard” elements (mission, plan, roles, resources, etc.) and a number of “soft” elements (leadership, communication, trust, autonomy, feedback, development, etc.). — “Visibility and stimulating much contact is important. We have a

weekly call scheduled with the global team and a meeting twice a year. It’s expensive, but essential.”

The remuneration policy is increasingly becoming more customized due to growth in the diversity of positions. Two positions with the same seniority in years of expertise can, for example, be very different in terms of the impact on the business or role in the company processes.

Differences in demand and supply in profiles also acquire more influence: • A lawyer with 8 years of contracting experience who manages the entire contracting workflow, including templates for an international company, has much more impact than someone with the same experience who only advises on specific contracts. People with such operational experience are also scarcer, which requires different conditions. These non-professional aspects create growing friction in that they do not fit easily into the HR salary scales. The solution, on the basis of job specification, is to make the deviations to the standard profiles more comprehensible, substantiating deviating working conditions. Another solution is reward in the form of development such as appealing training courses, rotation to an attractive location, or involvement in interesting projects: — “Innovation is still a USP. With deployment in such projects we can hold on to talent longer.”

There are also increasing differences in the models for team building: benchmark figures should be viewed in context here too As the Legal Operation & Organisation becomes better focused on the business operation, so basic models for team building show great differences: • Across the whole line, the trend is for more balance in team building, in which namely the bigger organizations are just below the average seniority. A few more decentralized organizations, however, consciously move towards more senior staff and try to outsource more standard work. Trend-wise, this gives deviating but well substantiated options:

— “We invest in more seniors and no longer take on juniors. You have to train juniors and they don’t adequately oversee the nuances. Put bluntly: juniors do more harm than you would like.” — “We have sensitive administrative work and very standard work. Between these two, there is relatively little work. The standard work will be outsourced to a service provider. The team becomes more senior in the process.” Both the general strategy with more balance in seniority, as well as the strategy illustrated in the two examples above showing rising seniority and outsourcing, have a positive impact on the business goals. The result is a growing difference in successful models for team building. When diverging figures such as these are combined in an analysis without knowledge of the context, the average gives an incorrect impression of continuity in development. And this when different models have clearly emerged. This development underlines the importance of analysis on the basis of context knowledge and – in the long run – further research in which different models / segments are analyzed side-by-side.

Part 2: Strategy & Operations

Management Information

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Management information is necessary, however, use is still limited due to a lack of reliable data Business development and management of the Legal position requires good Management Information, something that is often mentioned by GC as a priority. The aim is not so much internal reporting, but : • Operational management of Legal activities — “I don’t need it for reporting but for management.” — For example, comparisons between countries in volume, duration and percentage (non)conformity to the standard gives direction when it comes to further development and contracting. • Substantiating investments in structural improvement to the Board of Directors — “We have introduced web-based conversations with internal clients. This is more expensive than

FAQs, but gives much better analysis and treatment and saves so many costs. It’s more than worth the investment.”

• Expanding support within the organisation — “Changing the structure of signing of procurement, amongst others, has shortened the duration for clients from two weeks to two days. That is greatly appreciated.” Application is, however, still modest: only the monitoring of costs in specific cases reaches more than 60% when it comes to application, and the prognosis is that it will remain that way. Four of the top five metrics are cost related, especially because data is available for this. Impact metrics are simply not yet sufficiently available and applicable as management info: — “We have, alas, got no further than the costs on the basis of invoicing and basic relations as lawyers / assistants, HQ / Local and claims / contracts.” The modest application of management information is also reflected in international data: “46% reported having legal spend analytics, up from 39 percent in 2016.” (HBR 2017)

Use of metrics Cost: specific cases

Cost: specific firms Cost: overall Compliance Cost: Specific expertises

Dashboard Internal clients Internal benchmarks Impact Legal Operations cost software Other efficiency Topics / Clients External benchmarks Disputes Corporate Other expertises yes

20%

40%

60%

80%

not yet but interested

Management information must be simple to generate and interpret Management information must be simple to generate and interpret, neither of which yet succeeds enough. — “It still involves a lot of work to gather management information and interpret it.”

An (old) example, consciously chosen from 2008: • A legal team in a project business could not substantiate to the Board of Directors, why the work pressure and need for resources for Legal increased while the turnover remained the same.

Much data still requires much extra work in terms of manual collection and processing. This soils the data and makes it expensive. Tools that support work procedures entail metadata being documented as a biproduct. Various GC expressed the hope that this will become a good and simple source of data for management information. In the meantime, there are some initiatives to achieve this by using Effacts, for example.

An analysis of the insurance data, however, showed that in a number of projects the deviations from the standard Terms & Conditions had increased from 2% to 20%. The commercial goal was more customized work with a higher margin. However, this meant a much greater number of projects for Legal to pay special attention to ensure that contracting was kept within the risk profile of the company.

Another way of accessing data that has become available is by connecting to the regular audit process with specific queries for legal processes. However, not even 10% of the GC uses this.

This analysis convinced the board of the increasing work load for Legal and substantiated a business case for expansion of the legal team.

Besides accessing information, the interpretation is a point of concern. A practical way of analysis on the basis of the present imperfect data, is still to combine available data and compare it, over time, or over different business units. In this way, trends can be discerned from the basic available data to substantiate the options for the Legal Department.

“Metrics are important, but I do struggle with a dilemma: the practical value of a metric must be higher than the effort it takes to administer it. A metric that you maintain but do not use is killing for the validation of your combined results. The problem is that you don’t know on beforehand which metric is useful and which is only a nice to have.”

In line with better goals and more business management, GC would ideally like a broad palette of metrics When asked which metrics GC would ideally opt for, a broad palette of options is mentioned. Some examples include: Impact: status and development of…

• • • •

Risk Profile: quantification of risk / reward % of activities within risk profile % claims with respect to contracts Number of issues involving compliance

• Delegation of work: % by the business itself in terms of correct authorization levels, tooling, process, etc. • Allocation of work: % to correct process (triage), % to professional seniority • In-house time used, lead time, % on-time, etc.

Consistency / Cover: status and development of …

Sustainability: status and development of …

• for each business unit, the “% in line with policy” for all key processes such as contracting

• Client satisfaction of all internal clients: such as, what is the net promotor score? – “only output and working method, not professional technical work.” • Employee satisfaction • Employee development • Intake / throughflow / outflow with analysis

Efficiency / Costs: status and development of … • • • • • • •

Total costs vs turnover (in time & in terms of benchmarks) Budget / Actuals on on-going activities Spread of costs over resources Costs of external work Salary costs in terms of job profile & weight Relation internal / external costs Relation fixed / variable costs

Part 3:

Plan & Realization

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

Development is gradual in terms of realistic planning Development is carried out in many small steps in which the pace is, for a great part, determined by the absorption capacity of the organisation. Successful development of both the whole Legal Department as well as specific units, therefore requires well-chosen steps on the basis of a realistic plan.

2. The expansion phase (at present +/- 40%) in which analysis and development is refined. Detailed operational decisions are made for important processes in line with (risk) profile and volumes. There are KPIs aimed at performance and there is attention for structure and culture. Often the operations role is vested in someone at counsel level.

There are roughly three phases in development:

3. In the mature phase (at present <5%) there is on-going analysis and planning on the basis of good KPIs. There are effective processes for all responsibilities (contracting, compliance, IP, claims/disputes, etc.) and resources (team, outside counsel, knowledge management, etc.). The operations role is vested in a senior staff member who reports to the GC.

1. In the foundation phase (at present estimated to be +/- 45% of the Legal Departments) there is a rough Legal Plan with rough long-term goals, projects for the coming year, a budget and simple KPIs. A few important processes and simple tools have been identified for development and there are basic agreements with the outside counsel about service provision, reporting and billing.

There are now various models that describe this well, amongst others, the ACC Maturity model (see contracting example below).

Source: ACC

Working systematically has become a standard part of management and development The previous page set out how +/- 90% of Legal Departments are in one of the three described phases of development. Working systematically is an important part of this.

Legal plan: frequency 80% 70%

The data reflect this development: • 91% works on the basis of a plan (85% in 2013, 61% in 2010). Goals mentioned are, amongst others: – resource planning for “going concern” activities (82%) – identifying requirements for structural improvement (70%) – determining the development of the team and other staff (75%).

60% 50% 40% 30% 20% 10% 0%

For many GC, the process of planning is a goal in itself because: • It entails thinking outside of the daily activities • It offers joint analysis and establishing priorities • It requires commitment • It helps staff to determine individual priorities — “Everyone must allocate xx% of their time to specific structural development of the legal position. Progress on these issues is a part of the evaluation.”

2013

2018

Yet there is a need for further development: — “We are too concerned with the daily tasks and have too little control over our contribution and approach.” — “Our goals and projects must be better linked to the business targets. At present we are too busy with our own priorities. That does not provide a good business case to acquire resources.”

Content-wise the plans have been further refined. There has been a big leap in project-based development The plans have been improved in terms of content: Where the emphasis was previously on managing the going concern, this has now shifted to structural development: • 100% of the respondents have access to their business plans and base their plans on it (82% in 2013, 52% in 2010) • 85% name the business priorities, 38% the internal requirements • 80% name the (project-based) development of key tasks (was 62%) • 22% name KPIs (was 15%) • 68% name specific development projects to structurally improve the Legal Department (was 45% in 2013) The increased focus on structural development also demands extra attention for implementation. Time is always scarce and making time available for structural development requires discipline:

Legal plan: contents 90% 80% 70%

60% 50% 40% 30% 20% 10% 0%

2013

2018

— “There are always important legal cases that demand attention. Lawyers are best at

professional issues, so that structural development and the more organisational projects are the first to be put aside if there is no push.”

One GC anticipated this by asking all staff to make an individual plan with attention for: 1) going concern, 2) legal one-off projects and 3) structural improvement of the working method. All three are part of the evaluation, so progress needs attention on all three fronts.

Budgetary allocation of costs has not shifted much The budget cycle is a natural moment to regularly inform the board about the contribution, planning and development of Legal. A good plan and budget help to build support and acquire resources. This makes the budget cycle more than a financial exercise for many GC. The budget is also important because it determines the space for development: which costs fall under “own” budget, which costs fall elsewhere or can be allocated. This allocation of costs has changed relatively little since 2013: • Regular in-house costs (such as salaries) fall within the Legal budget for 94% (was 94% in 2013)

• Costs for the further organisational development of Legal (such as optimizing processes) are part of the Legal budget for 91%. The exception here is the expenditure on software, which often falls under IT (this is reflected in conversations, but is not specified in figures in the survey) • The regular costs of firms (the categories “bread & butter” and “standard litigation” (on p41), fall under Legal for 50%, a drop of 15% (was 65% in 2013). One explanation is that more costs are allocated to the business units for which the work is done.

Costs allocated to legal budget 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

2013

2018

• One-off escalations fall within the Legal budget for 28% of the respondents (was 19% in 2013) — “Litigation is the full responsibility of Legal, but the costs are allocated to the BU. The polluter pays, giving a good incentive for prevention.” • One-off projects such as M&A or internal research fall under the Legal budget for 20% and are carried by the business for 80%. — “Impact of big projects on total expenditure is big. Of course, we manage the project costs, but they don’t belong in our department budget.” 69

However good the plan, implementation is fairly difficult and follows the rules of change management, also for Legal A good plan is important, even if it merely leads to thorough thinking. • Sketch the long-term goal while making it manageable: take it one step However, the implementation is where the real complexity can be found. at a time and describe them in familiar terms; don’t sell them long-term Implementation often means changing frequently, and changing people hype, remain realistic (including the mention of setbacks) and habits requires much attention, perhaps more than average when it • Find support at all levels: seek sponsors at senior management level, comes to lawyers. work with people who are enthusiastic (in the first instance) and don’t Many starting managers see a plan / planning as a plan of action, while in be afraid of setbacks, keep detractors at a distance reality most of the actual implementation deviates directly. The plan • Celebrate successes and take responsibility for problems serves to establish the context, but effective implementation is flexible to • Establish change through repetition and on-going support while actively accommodate the developments. putting an end to old methods, etc. At strategic level, this applies to: • A company has, over time, moved from classical to innovative. The Legal Department has developed along with the company and now leads with all sorts of developments. This would not have been possible within the old company structure. The ability to keep tread with big developments was essential in this case. This also counts at operational level: — “We need to be realistic. At Legal we are merely a small cog in a big

organisation. We can influence, but we cannot change the entire machine.”

Implementing plans is tough and follows the regular “Change Management” lines (see Lawgeeks list) such as: • Seek urgency: explain why a change is necessary in terms of the interests of the staff

Source: Lawgeeks

Part 4:

Implications for individual Legal professionals and Legal managers

Business needs

1. Legal Mission

Scope & Objectives 1. Structure & Coordination 2. Tools & Technology

2. Strategy & Operations

3. Firms & ASPs 4. Team & Professionals 5.Management Info

3. Plan & Realization

4. Consequences for individuals

More diversity in positions requires more individual diversity in competencies “Lawyers will need to focus on human skills. There will soon be no more business in just applying the law.”

with software driven processes are important. Business impact competencies are also important, while technical professional competencies carry relatively less weight.

The shift from stand-alone expertise to an integrated business role affects the positions and development opportunities of individual lawyers. As a result of a more business-oriented set-up of Legal Departments, the diversity in legal positions is growing, both in associated responsibilities and in underlying working methods.

• Positions concerned with regulatory work more often work with RegTech, so that any interest in tools is of importance. The interpretation of law & legislation (technical professional) and bringing this to the attention of the business in the right way (business impact), remain the most important competencies. These sort of differences in competency profile are only going to increase.

At individual level, the four competency categories discussed earlier (see p52), also apply: 1. Professional content

Variation in competence profiles (illustration only)

2. People management

People Management 5

3. Business impact

4 3

4. Strategy / Organisation / Operation The weight of the difference categories and the implementation varies in increasing measure per position: • Positions concerned with contracting work with workflows and tools with which many tasks are delegated to the business. For these kind of positions, organisation & operation competencies such as working

2 1 Legal Expertise

Business Impact

Commercial Organization & Operation

Regulatory

Mobility and dynamics related to GC and other legal positions are on the increase Change in required competencies strengthens the mobility and dynamics in positions. In 2013, the participating GC held their positions from more than 5 years. In 2018, the average was merely 4 years with a median of 3,5 years. Other factors also indicate a faster throughflow of people in the GC position.

The observation that especially business competencies are growing in importance prompts the question of whether a GC or Legal Manager can be someone without a legal background. Both research and experience indicate that basic professional knowledge is still required:

The background is that many GC are experiencing broader involvement with business management (see p21) and this broader involvement creates higher expectations, higher visibility and greater demands in three of the four competency categories:

leading, and part of what makes them successful in a management role is technical competence.” (Harvard Business Review, Nov. 2017)

• People management in the form of the building and maintenance of a well-balanced team requires more attention for, amongst others, changes in role and working method, diversity in team roles and profiles, spread over various locations and differences in cultural background. • Business impact requires excellent understanding by the GC of, amongst others, the company, the envisaged risk / reward model, the key players and their skills in working method and communication to connect here. • Strategy / Organisation / Operation require knowledge of business processes and the best manner in which Legal can connect, so that impact, coverage an efficiency is achieved.

• (..) the best leaders know a lot about the domain in which they are

• In recent selections for legal management, or legal operation positions, a legal background is more often a prerequisite. Especially because a familiar background gets more support from colleagues, which removes an important counter argument when introducing change (“you don’t understand because you have no experience as a legal professional ”). Average tenure of GC (trendline) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% <1

>10

>15

Succeeding through higher dynamics: be alert, adapt constantly and continue to actively develop competencies General Counsel make an overview of the required competencies in the team on the basis of the strategy. They specify the positions and responsibilities and substantiate the conditions of employment on the basis of the competencies and possible scarcities. They carry out a fleet inspection to determine the status and required development of the team and other staff. Together with employees, GC make personal development plans and, in this way, manage a healthy intake, throughflow and outflow of staff. The management of team, position and employees become more refined in all aspects in the process.

A few simple practical suggestions in this regard are:

The growing diversity in positions, increasing professionalization in management and accelerated dynamics and throughflow require a growing number of options and refinement in terms of thinking about and managing personal development; also in individual roles – from that of young lawyer through to accomplished General Counsel. A linear career is becoming less frequent, and suitable personal determination in terms of working and living is increasingly easier to achieve.

• Ask for information, feedback, supervision, coaching. Formally and informally

• Regularly carry out a good analysis of your own interests and aptitude • Adjust your long-term plans and determine realistic short-term steps • Do your own fleet inspection: what are the competencies that you need for the short and long term and what is their current status?

• Make a personal development plan: do courses, carry out projects, use other jobs to gather experience in various environments. Mobility helps to broaden your competencies and aptitude to adapt

• Stay alert and watch your own progress and motivation, in terms of the response in your environment, and in development in the playing field, etc. Be two steps ahead, but remain flexible • And contact one of our experienced colleagues at Voxius. Our aim is to help you be more successful in all the above!

Many GC and lawyers notice that many of the “new” competencies remain understated during the years of professional education and therefore require extra attention if you wish to develop yourself.

Appendices

Profile of participating organizations and GC In the 10 years since the start of this research in 2008, more than 350 Legal Departments have participated, of which some two or three times. In a few instances a large segment survey was carried out with 70 to 80 Legal Departments during which they were benchmarked in a period of a few months.

Between the end of 2017 and June 2018, we analyzed close on 80 Legal Departments. Profile details of this group are reflected on this page – this profile is in line with that of earlier participants, so that comparisons can be made and developments over time give a realistic view. Here are some key indicators of organizations and participants: • Turnovers vary from EUR 100 million to EUR 50 million, with a median of EUR 2,2billion and an average of EUR 6 billion • More than 90% is multinational. De median is active in 20 countries • 94% of the organizations has its headquarters in the Netherlands • 100% of the respondents report to C-level (namely CEO and CFO) • More than 95% of the respondents is the person with final responsibility / highest ranking lawyer within the organisation and has an overview of the entire legal organisation • 70% of the respondents is a member of a senior management body (Board of Directors, ExCo, etc.) and has full overview of the business context and considerations

Own survey and desk research: open cooperation benefits the Legal sector Openness and sharing insights help the sector to make progress.

Many thanks, therefore, to all who share their knowledge and information in different forms and measures, including:

With this thought in mind, we have carried out frequent Round Table diners for GC since 2006, and started the Trends & Benchmarks survey in 2008. We share our observations with the sector.

• Altman Weil

In the last few years, all sorts of organizations, initiatives and surveys have come to focus on the legal management sector – a beneficial and healthy development.

• HBR Consulting (Hildebrandt Baker Robbins) • Thompson Reuters • Wolters Kluwer

• Acritas Consulting • ACC / Association of Corporate Counsel (an international GC network with a Legal Operations Chapter)

We continue to organize our own Round Tables, surveys and projects, but also make good use of the available research and insights from other sources, making sure we acknowledge them, of course.

• CLOC / Corporate Legal Operations Consortium (a network of operations specialists, active since 2008 in many big and smaller surveys, publications, events, etc.)

And we invite others to do the same with our findings.

• NGB (active since 2008 with their Company Lawyers monitor, an annual survey with a new focus each year)

Sharing information and insights helps to develop the sector and we like to play our part in this.

• GCN (active since 2014 with a biannual benchmark for subscribers: lawyers with a management role) • LegalTech Nederland (network of LegalTech events, newsletters, etc.) • TGO Consulting (originally a Dutch consulting organization focused on firms and the legal sector)

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