Why Law Departments Struggle to Improve Productivity

As mentioned in a previous post, the ACLA/CLANZ Legal Department Benchmarking Report 2008 found that Australian and New Zealand general counsel overwhelmingly view workload / time pressure as the most pressing issue they face.

However, relatively few law departments manage to improve their productivity and thereby reduce the workload of their lawyers. According to former CLANZ president Ron Pol (whose company conducted the survey for the benchmarking report):

"Many legal teams could implement systems to improve productivity and save money. The hold-up is not usually financial – there’s always budget to boost productivity – but more to do with attitudes. One general counsel recently told me that his legal department would rather just tell the chief executive that they’re doing a good job than take the risk that objective measures might indicate areas for improvement. For most of the participants in this research, however, ‘it works, so why change?’ is probably the wrong question. ‘It works, but can it work better?’ is the mark of a new breed of legal managers, constantly on the lookout for new ways to improve the effectiveness of legal service delivery. For some companies and government agencies, even a 10% improvement can mean millions of dollars in savings."

I certainly agree with Pol that process improvement can potentially deliver millions of dollars in savings. However, I think there are a number of reasons why some law departments are unable to unlock these savings, including:

• Background - the majority of in-house lawyers started their working life in law firms. Process improvement projects often don't make sense in law firms where the "time billing" business model prevails. Accordingly, in my view, most lawyers are not taught to think in terms of analyzing and improving business processes.
  
• Attitude - lawyers, by nature and by training, look for risks before they look for opportunities. As with anything, the opportunity to save money by improving processes has attendant risks. Accordingly, for many general counsel a process improvement project just feels too risky.
  
• Organizational culture - it is difficult to imbue any team (let alone a law department) with a culture of continuous improvement. However, for an exception to the rule, see the Dupont Legal Model.
  
• Resources - law departments are often simplistically viewed as cost centers that should not be allocated the resources (people, processes and systems) necessary to successfully implement process improvement projects.
• Metrics - in the case of Australian and New Zealand law departments, the dearth of industry data has meant that there has been a lack of awareness of what's actually possible.

The good news is that our customers are testament to the fact that there are innovative law departments out there that have managed to embrace change and save their companies millions of dollars as a result. But more on that another time.

Benchmarking Data for Australasian Law Departments

In the United States, legal industry consultants have been publishing law department benchmarking reports for years. (See, for example, the annual law department surveys produced by Hildebrandt and Altman Weil.) Such reports provide the proactive general counsel with lots of useful information for analyzing the current performance of his or her department against that of industry peers and taking corrective action where appropriate. Unfortunately, similar data is far less common for legal departments in other countries.

So, the release this month of the ACLA/CLANZ Legal Department Benchmarking Report 2008 was big news. Commissioned by the Australian Corporate Lawyers Association (ACLA) and the Corporate Lawyers Association of New Zealand (CLANZ), the report delivers the results of a survey of more than 125 Australian and New Zealand companies and government agencies that together spend over a billion dollars on lawyers each year.

One survey metric of particular interest is the list of most pressing issues for general counsel. 32% of respondents cite high workloads / time constraints as the most pressing issue their law department faces today (more than double the next most pressing issue).

Click chart to enlarge

The top six issues (by percentage of respondents) are:

• Workload/time pressure (32%)
• Attract/retain/motivate good lawyers (15%)
• Demonstrate value of legal dept (14%)
• Keeping appraised of activities with legal implications (9%)
• Reduce outside legal costs (8%)
• Resource/budget limitations (6%)
  

Asian Legal Business found it surprising "that a reduction of outside legal costs ranked only fifth on general counsel's list of most pressing issues." I, however, am less surprised given that many law departments have long had sophisticated tools for managing outside legal spend (such as tender processes, panels, mandatory estimates and e-billing).

I would expect workload to be far more of a problem because, in my experience, relatively few law departments actively try to improve productivity and deliver meaningful workload reductions. So the question then is, why do so few law departments try to improve their own productivity? Well, that's a topic for another post.