For a long time, lawyers have concentrated on practice instead of process.
In recent years, clients have forced law departments to focus on their numbers, productivity, and operational efficiency.
Considering the high competition in the market and clientele demanding better service at a lower cost, law firms had no choice but to change their business model.
Many put legal operations at the top of those changes.
Legal operations refer to a set of processes and activities that improve the way law departments deliver services to their clients.
Management processes and automation tools like contract management systems and eSignature technology are at the core of these improvements that lead toward efficiency and cost reduction.
What are legal operations? What are the core functions? How do you best implement legal ops in your organization?
In this article, we’ll provide answers to these questions and more.
Furthermore, we’ll furnish insights into the technical side of legal operations that PandaDoc is well-versed in due to our know-how in contract management.
What are legal operations?
Legal operations are a range of processes and activities that make in-house legal departments run more efficiently.
Legal ops focus on business aspects that are not directly related to the law: budgeting, data analytics, compliance, vendor management, and other areas.
Legal operations cover how to work in an optimized, repeatable, and efficient manner.
Their primary duties include:
- Analyzing the performance of a legal department
- Expanding the use of legal technology and automation tools
- Building and using metrics
- Improving internal communication
The role of legal operations has constantly been changing in recent decades.
During the early 1990s, legal ops was a fledgling concept focused primarily on managing outside counsel.
By the mid-2000s, legal ops shifted to work on more strategic topics. Instead of focusing on outside counsel, they cared more about where the money goes and what ROI is produced.
In the late 2010s, legal ops incorporated automation tools to support their primary function of reducing costs and driving efficiency into law departments.
20 years ago, only large legal departments could afford a legal operations team as part of their organizations.
These days, it has become a more common tendency to hire a legal operations team or a specialist in small to midsize companies.
Statistics speak for themselves:
- Today, more than half of legal departments spend their money on funding legal operations
- 40% of respondents in the CLOC’s 2021 State of the Industry Report have increased the number of full-time legal operations employees
- 80% of legal departments have at least one legal operations specialist on the team, according to Reuters’ Legal Department Operations Index.
Core competencies of legal operations
A significant shift in legal operations happened in 2016 with the introduction of the Corporate Legal Operations Consortium (CLOC), which focuses on the study of legal operations.
They came up with 12 core competencies of legal ops that every legal department must manage.
While every organization should develop its own list of functions, the following core competencies help initiate this process.
1. Financial management
Legal ops are responsible for managing the departmental budget, tracking money transfers, identifying spending trends and potential cost savings.
2. Vendor management
Legal ops teams work toward building and maintaining relationships with vendors along with holding regular business reviews.
3. Business intelligence
By building business intelligence competency, legal teams can utilize data to make better and more informed decisions and focus on measurable outcomes.
4. Information governance
This competency focuses on designing and implementing information policies across departments and offices.
5. Knowledge management
With legal operations taking care of knowledge management, everyone in the company can access a standardized library of templates, policies, processes, memos, and other materials.
6. Organization optimization & health
Legal ops create a standardized hiring process, encouraging employees through perks and promotions, supporting well-being and creating a talent pipeline.
7. Practice operations
Legal operations create specialized teams that take care of areas such as IP management, contracts management, or eDiscovery to maximize its value in an organization.
8. Project/program management
With legal operations, companies can implement initiatives and projects with trained professionals who have specific skills for that kind of work.
9. Service delivery models
The legal ops team works toward creating an ecosystem of best-suited vendors to get desired outcomes at the best price.
10. Strategic planning
Those tasked with legal ops are responsible for setting long-term goals, aligning them to overall corporate strategy, and helping a team understand an organization’s big picture.
One of the legal ops duties is to incorporate technology solutions — like contract management tools, eSignatures, or eBilling — that meet the needs of an organization.
12. Training & development
Legal operations set up targeted training courses to help employees stay effective and compliant, as well as to learn new skills.
The ACC Maturity Model is another way to measure how legal ops operate in an organization.
Whether or not you have legal operations, the following 14 functional areas will help you identify areas of improvement to progress into the next stage of maturity.
- Change management and communication
- Contract management
- External resources management
- Financial management
- Information governance
- Innovation management
- Intellectual property management
- Internal resources management
- Knowledge management
- Metrics and analytics
- Project and process management
- Strategic planning & legal operations leadership
- Technology management
The 5 main advantages of legal operations
While the lists of competencies and functional areas might read somewhat varied or even abstract, there are some concrete changes that legal operations bring into law departments.
1. It changes the way legal services are delivered
Legal ops change the quality of delivering services.
When a team applies financial management, project management and other skills in daily work, the effort produces insights that can serve as advice for both the organization and outside council alike.
Seeing metrics and performance indicators helps to understand if you’ve invested in the best outside counsel and third parties, as well as to support the culture of continuous improvement.
2. It helps to enhance communication
It’s a well-known fact that legal departments don’t speak the same language as non-legal departments.
Getting a clear response or status updates from legal teams can be a tough process.
That’s where legal ops are handy.
They act as a translator and facilitator between a legal department and a non-legal one by making a transparent workflow of the way processes operate.
For example, if both teams are working on the same project, the goal of legal ops is to make sure the information on what stage is reached stays clear and how much work remains is always transparent.
One way to foster inter-departmental collaboration is to use the same tools and systems between the teams.
For example, with a contract management system: If your marketing and sales teams work with the same lead, they can see the status of a particular contract, leave comments on specific sections in a document, and use a chat to negotiate together.
Leveraging a common system not only simplifies inter-departmental communication, but also accelerates a contract workflow and allows teams to stay on the same page.
3. It helps to free up the legal department
The times of misplaced documents, forgotten deadlines and having contracts on hold have passed since legal operations have become a solid function in a legal world.
One duty of a legal ops team is to make sure that roles in a law department are clearly defined, and that employees have a predefined set of tasks.
Legal ops can also set a clear protocol for handling documents and contracts so that nothing gets lost.
Additionally, these protocols ensure that important emails don’t vanish and that the approval process stays on track and on time.
A contract management system with an easy and automated workflow is a good solution to ensure everything happens without delay. It helps to create, sign, and track contracts faster and more efficiently.
4. It helps to establish handy templates
Organizations oftentimes ask their legal teams to review every single document no matter how simple or complicated those documents may be.
In the long run, the reviewing process slows down a legal team from doing other tasks and keeps their focus away from advising clients.
The way out of this is to create common contract templates.
A legal ops team should work together with lawyers to create a library of templates with common guidelines and terms.
A more simple yet proven way would be to use ready-to-go contract templates that are a part of contract management software.
By leveraging them, you can free yourself up from spending hundreds of hours communicating, drafting, and systematizing contracts together.
5. It helps with contract processes
A legal department with a heavy workload can sometimes disrupt a whole contract lifecycle. Or they can spend days reminding a number of people to approve a contract.
In order to make your contract lifecycle shine, think of incorporating a contract management software in your processes.
With this system in use, it is easier to set up and implement agreements as well as to get insights into contract estimates.
Today, around 65% of businesses use contract management software, according to CLOC.
And this number will grow significantly — Gartner reports that money spent on legal tech will increase 3x from 2020 to 2025, which shows the importance of these tools for legal teams.
How to build and integrate legal operations into your business
Step 1. Understand your needs and processes
First of all, examine the needs and the processes that you have in your business.
Talk to your colleagues and ask what their pain points are.
You will likely find out that these pain points happen in the day-to-day processes connected to finances, vendors, and other areas.
Once you get buy-in support from the people you work with, make sure your business leaders support you as well.
You will have more chances if you align the legal operations strategy with the business strategy and present it to your bosses.
Step 2. Establish a legal operations function
Now that you’ve gained support from business leaders and employees, it is time to build a legal operations team.
Depending on the size of your legal department and organization, you can hire a legal operations team or just a manager.
A person or a team should have business management experience and a financial and data analytics background.
The typical structure of a legal ops team includes a director of legal operations, a legal operations manager, a legal operations specialist, and data analytics specialist.
There has been a tendency to hire a legal operations team in recent years.
In 2020, six of 10 corporate law departments hired at least one legal operations specialist. 40% of respondents to CLOC’s 2021 State of the Industry Survey increased the number of full-time employees.
Today, half of legal operations teams are led by a director or a manager.
59% of legal ops directors report to general counsel, which is a sign of the increased perception of value associated with legal operations.
Step 3. Adopt technology
According to the survey results by CLOC in 2021, eSignature, eBilling, contract management software and document management software are the top four technologies that are widely used in legal departments.
The 2021 ACC Law Department report states that a contract management software is a go-to solution used in teams as well as a priority area for investment.
It is not a surprise, since contracting eats up the most time and can only be done in-house.
Organizations have to draft, negotiate, execute and manage a variety of agreements every day, along with tracking the parties and executing deadlines.
Contract management software can streamline this work and reduce risk of errors in the process.
No matter what technology or process you decide to bring to your organization, keep a balance while initiating and implementing change.
Knowing the adoption rate of change management within your organization is helpful too. It is never a good thing to make drastic changes in a short period of time — you will likely lose support from stakeholders and add to everyone’s stress levels.
Leverage the use of PandaDoc’s contract management system
Legal operations run legal departments like a business and focus on budgeting, data analytics, compliance, vendor management, and other areas.
While companies keep hiring legal ops specialists, they also tend to invest more money in technological solutions, such as eSignature, eBilling, document management system and a contract management system.
With PandaDoc’s contract management software, you can use 200+ templates of common contracts instead of creating them from scratch.
Your team members and customers can sign a contract instantly using an eSignature function, which is a secure and fast way to go through a contract workflow.
As PandaDoc’s contract management tool is equipped with collaborative redlining and commenting tools, several departments can negotiate and update terms in real time.
When it comes to contract approval, you can use a conditional approval setting that automatically sends out a contract after it has been signed by all stakeholders.
Legal teams can keep contracts in PandaDoc’s Document Repository.
It has a powerful search that helps to find agreements easily and share them with key stakeholders.
Having a legal operations team helps to free up legal departments from administrative work. And having the right software tools on hand makes everything more efficient.
Doing so helps firms concentrate on their primary goal — advising clientele.
And when departments do what they are supposed to, it pays off in the end. Something to think about when setting up legal operations in your company!