General legal counsels should be centres of profit
Comment: CEO in Contractbook, Niels Martin Brøchner, takes a look at what is in store for general legal counsels in the near future.
If the hourly rate for a good lawyer continues to rise, more companies will choose to set up their own general legal counsels. Though the trend is not equally paramount in every country, there has been a clear development in recent years where more and more lawyers are choosing a better work-life balance as corporate counsels over 80-hour working weeks in large law firms. Also, the general counsels are handling more and more tasks internally rather than buying expensive law firm hours. A report from Exterro entitled In-House Legal Benchmarking Report shows that 29 % of the respondents are handling more than 75 % of the legal work internally - compared to 17 % last year. The primary reason, if one is to believe the report, is to reduce expenses.
Legal counsel roles may offer more stable work-environments for now, but they won't be shielded from the general digital transformation in the legal industry. And, in-house legal counsels can't even hide behind innovation blockers such as rigid partner structures and the billable-hour model that doesn't reward efficiency. Modern technologies will not be limited to law firms – they will change the whole landscape. There is, however, no reason to panic if you just anticipate the change and deal with it now.
Traditionally, the main role of legal counsel has been to mitigate risks and the fundamental success criterion has been to ensure their employer’s legal compliance. However, as more of the time-consuming tasks are getting digitised and automated, legal professionals must now reconsider their role. If they don't embrace trends, rationalise with technologies and free themselves as resources that deliver more value-added insights, they will be redundant in 5-10 years when technology can manage repetitive tasks and external legal services will take care of the overall legal strategy.
Furthermore, automated technologies will enable each department in a company to be autonomous: the sales department can negotiate their own contracts, HR can enforce their competition clauses, and procurement can ensure timely renegotiation of cooperation agreements with company suppliers. Meanwhile, the established law firms are increasingly focusing on being proactive and client-centric in their approach or adopting a highly specialised consultancy-style approach. So where exactly does the in-house lawyer fit into this?
First of all, they must embrace the newest trends and come to terms with the new technologies so they can free themselves as resources and deliver more value-adding work. If they do not rethink their role, they will be redundant when the new technologies are solving manual tasks both cheaper and faster.
If general legal counsels are to have a future, they must become proactive. They need to reinvent themselves as profit-centres, focusing on enforcing the company's contractual rights. They must become strategic advisors and see changes in legislation and new geopolitical conditions as opportunities to develop new services and take up new markets. Furthermore, legal departments must become centres responsible for assessing the company’s risk through data analysis, so their boards can make enlightened decisions.
Embrace the digital future and brace yourself for a more strategic role as drivers of profit.