Legal function transformation – is it set up for success…?

Why is change in the legal space so slow?

People often claim that change in the corporate legal area is slow because “lawyers are change resistant”. I’ve worked with supporting change in Legal for many years now and while there are always some skeptics I honestly don’t think this is the main problem. My experience is that most legal and compliance teams are actually pretty excited about the prospects of change – at least if the story about that change is brought to them in way that resonates with them.

I think there are other root causes that need to be addressed.

Aiming higher – the low ambition level pitfall

One reason why change in Legal is not more profound (yet) is that there is too little real transformation happening. Don’t get me wrong, I’m a big believer in taking many small steps and building a culture where people can run with their individual ideas and improve every day. But that type of change, while great, is not sufficient when you need to fundamentally transform as a function at large.

There is still not enough sense of urgency in Legal on the need to go after bigger and bolder – more transformational – change, to keep pace with what is happening around the legal function, both inside the enterprise and in terms of new opportunities available to Legal in the marketplace. Many initiatives in Legal still focus too much on merely incremental improvements, such as slightly improving the status quo or putting out fires.

Investing more – the anorectic resourcing fallacy

Generally speaking, there is also a huge underinvestment in change in the legal space compared to other corporate areas like HR, Finance or Tax. Change is hard and takes time. It is not uncommon for legal teams that set a change plan to shortly thereafter find themselves failing. They often underestimate resourcing needs and the need to invest in proper change management. It won’t work if there is nobody there to implement or manage the change properly.

What is required for transformational change to happen?

The type of change that is needed now – the transformational type – requires a holistic strategic thinking, well thought-through design principles and alignment to overall strategy and business objectives. It must be programmatic and be led from the top, and it must be properly resourced – and be sold to people (both within the function and outside) with passion and conviction.  It takes bold and competent change leadership, dedicated budget and lots of feet on the ground to implement this type of change.

What can Legal learn from peers?

A really good way to understand how to approach transformational change is to take a closer look at what Legal’s peer functions (like HR and Finance and Tax) have done in the past years. They are often years into their transformation journey by now.

What have been the drivers for change in peer functions and how is it relevant to Legal too?

If we look at what made the peer functions onboard their transformation journey, many of the drivers apply to Legal too. Change efforts have often come out of a desire to:

1. better support overall business strategy and critical business objectives (align and contribute to business);
2. repurpose the team and the function, take another, more strategic role (redefine role and positioning to bring more value),
3. free up time for the truly important work, use team capacity and skillset better (improve resource effectiveness),
4. bring more business speed and keep pace with digitalization of the overall enterprise ecosystem (think in terms of processes and workflows and be part of enterprise-wide digital transformation of operations),
5. improve accessibility of service and experience for internal customers, users and stakeholders (keep up with evolving expectations) and
6. leverage data (make better decisions, show value better, move to more effective story-telling and support business intelligence).

An additional driver has been the need to simply find more effective ways to ensure compliance in a world with a steady flow of new regulation parallel to increasing organisational complexity.

All of the above examples are just as relevant to Legal – legal needs to transform for the same reasons and to meet similar end states. But why then is the approach often so different?

What peer functions have done to set themselves up for success

If you look at Legal’s peer functions, they often set up transformation programs with cool names, comprised of different projects, with several sub-streams, led by professional project managers, super-charged by external consultants and operationally backed up by new operations- or implementation focused roles in the team. These programs often run over several years and are viewed as, and communicated as, investments for the benefit of the enterprise, not just intra-function improvement.

Meanwhile, the inhouse legal function still often tries to manage its change just on the basis of current team capabilities, ‘cramming in’ some change initiatives on top of lawyers’ already busy work schedule – and resort to financing merely on the basis of the regular yearly OPEX budget for the function.

Getting funding for initiatives

Legal often does not go after their ‘fair share’ of overall transformation funding. Such money is often available in conjunction with post-merger integrations or reorganizations, large-scale cost-cutting exercises or regulations implementations. But even without such specific purposes funding opportunities, money for change initiatives is often available if you just know where to find it. It can be through the IT budget allocation, project management office allocations, general transformation programs or capex allocations. But you need to know how to get your share of this money.

Money may have poured into compliance preparedness or compliance implementation programs in the past years, like GDPR, or AML or KYC, often because it’s of board level interest. But not as much money has gone into transformation programs aiming to level up the legal and compliance function in the more profound sense, for example to develop the overall operating model – such as moving to more effective resourcing models or enhancing delivery models, building for scalability or speed or better experience, or to generate better data insights, real time monitoring or prognostics capabilities.

Where other peers are now well versed in building the business case to get funding to fundamentally transform their function, legal teams often still struggle with how to build the narrative around their change needs and illustrate the return on investment from different initiatives.

Some legal teams assume because their opex budget is tightened there is no chance they will get funding for transformation initiatives. When in fact it makes perfect business sense to invest today to save money or be more effective tomorrow or improve future competitiveness (be it in effective compliance management, information governance, sales turnaround, value generation from contracting or legal business intelligence).

Raising the bar, and finding the success formula

Only when Legal too can approach change programmatically and can resource properly will Legal have the same kind of impact and progress as their corporate peers. These are now often quite far into their transformation and have often moved on from just intra-function efficiency to be part of enterprise-wide transformation (such as to embed or to scale more effectively or bring more speed), whereas some legal teams are still mainly searching for ways to carry out daily work within the team slightly better.

There is some catching up to do for Legal, but lots of inspiration to find by observing, and copying others.

Now can be the right time to zoom out and reframe the change and reset the plans and do a more profound feasibility and capability assessment.

Some questions that can be worth looking into include:

• What is our long-term aspirations, where are we going and why? What problems do we most critically need to solve, and how? What’s the target operating model (TOM) we need to build?
• What is the relevant step-plan to get there? How does it translate into a relevant roadmap and how can we make it “programmatic”, yet realistic?
• How will we get people (inside and outside the team) onboard by conveying a compelling “why” and a clear “what”?
• Who need to be involved and who will do what work? What resources do we need in the team to deliver on the plan? Will we need support from other parts of the enterprise and if so, how?
• What external consultants or other outside partners can bring relevant know-how, best practice approaches and more capacity for us to be able to move faster and with better quality?
• How will our efforts be financed? How do we build relevant business cases to back up the investment needs, in the planning phase and in the implementation phase, and to maintain what we are creating over time?

It is never too late to start transforming or to reassess or rescope or replan ongoing change programs. The trick is to dare to get bold and know how to build the narrative for the change and get money for the necessary investments.

Are you aiming for transformational change yet? Do you know how to resource?