The in-house law firm – the future of corporate law departments?

I'm a big fan of Tom Peters. Not just because he genuinely interacts with his followers on Twitter, not just because he's passionate about what he writes about, and not just because he presents (presentations, books) in some pretty cool ways. I'm a fan because he has some great ideas.

If you look back to his book "Re-imagine, business excellence in a disruptive age", which was written nearly a decade ago, so much of it remains fresh and inspiring (and you should buy a copy if you've not seen it - it was required reading by my General Counsel when I was an in-house lawyer!).

But there's one concept, right at the heart of the book that seems more appropriate than ever in the legal marketplace right now. Tom describes the principle as "From cost centre to stardom - the professional service firm (PSF) transformation".

Let me outline some of the detail behind this principle, and then I'll tell you why I think it's SO relevant right now.

Tom starts by ranting (his words!) that aiming to improve departmental efficiency and effectiveness is no longer enough. Heard about effectiveness and efficiency in the context of corporate law departments recently? It's the opening paragraph of pretty much every report about General Counsel these days. Hell, I've written about it myself!

He goes on to assert that working 50 hour weeks in a cost centre is not sustainable - rote work will be outsourced  and the core that remains will be the traditional domain of the PSF - the accumulation and application of creative intellectual capital. With the amount of publicity the legal process outsourcing business is getting these days, this shouldn't seem farfetched for General Counsel either.

So what's the solution? Tom breaks it down into the following four key parts, to which I've added a law department spin.

1. Outsource it - if the work can't be done economically or the law department isn't demonstrably great at it, outsource it.
2. Now in a legal department this might be "volume work" which can be systemised and done off-shore cheaply, or it might be more complex but the legal team doesn't have the skills in-house to do a great job, in which case the work might be passed to a retained law firm (or even another internal department).
3. Productise it - if the work can be done in-house, break it into a "product" that someone will pay for. Now for lawyers care needs to be taken here as while there are certainly plenty of tasks that internal clients will pay for (doing deals, litigating etc), there are some jobs where the key beneficiaries may be the shareholders who won't have a notional budget to cross-charge. The key point to me however is that the work creates real, demonstrable value for the organisation.
4. Web-ify it - Tom challenges us to put everything (policies, procedures, contracts) on the web. Now many lawyers will no doubt be holding up their hands in horror here, but the reality is that this concept is already starting to take hold in the more progressive corporate legal departments. Use up a lot of bandwidth drafting standard sales contracts for the business? Take instructions, do a first draft, internal client reviews and makes changes, lawyer reviews changes, lawyer clarifies, lawyer redrafts, internal client reviews..... you get the picture. How much time has that taken? What's the internal client satisfaction score looking like? Never mind that of the lawyer or the external client. By contrast, how about this - automate the document, internal client follows online guidance and prepares good quality first draft, lawyer reviews and amends, internal client sends document out.
5. If it's great, celebrate it. This to me has two important themes. The first is about communicating value to the business. There are plenty of legal departments that are really good at this, and are highly valued by their business colleagues. But there are plenty who don't communicate success and value, and in my view they need to start. The second theme Tom mentions is more interesting - if an in-house legal team can become genuinely world class, could they start to provide services outside their company?

This is the idea that got me starting thinking about this topic.

With the Legal Services Act allowing non-lawyer ownership of law firms, is it conceivable that some in-house teams might think of converting to a law firm?

At a recent conference for in-house lawyers, the very progressive GC of a company with a global brand indicated that he was thinking using this type of framework to provide legal services to the company franchisees. Another GC joined the debate and floated the idea of pooling compliance resources with other companies in the industry - sharing the overhead for work that was mandatory but provided the company with little competitive advantage.

This is a time when radical thinking is possible. Sure, there are undoubtedly regulatory questions to answer, and professional ethics issues to resolve, but what is clear is that the future can look very different.

The obvious question is how this might it affect your legal team? Tom talks about "Exciting [legal] departments selling their creative services far beyond the company's border".

The more interesting question is how might it affect law firms? Will they find themselves competing with their clients? What about collaboration opportunities.

As Tom would say - to improve is not enough, now is the time to transform.

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