The first of this two-part article explores why the legal function has difficulty proving its worth to business. The second segment will proffer how it can make its case.
Law is about persuasion. Trial work requires knowing your audience, producing evidence, meeting the burden of proof, and demonstrating entitlement to the relief sought. Commercial transactions, likewise, involve multiple elements of persuasion. Why, then, does the legal function struggle to establish its value to business leaders?
The World According To Lawyers
There are several reasons why the legal function—notably lawyers— struggle to prove their value to business. The seminal one is “the legal bubble”—lawyers have long operated amongst themselves. This created an insular culture. The profession and the business of delivering legal services were synonymous; both were controlled by lawyers. The profession has had little accountability to others outside its ranks—customers included.
Lawyer hegemony extended to the buy-sell dynamic. Lawyers in the corporate segment sold to other lawyers. That meant customers shared their mindset, skillset, pedigree-centricity, focus on practice excellence rather than value or result, and embrace of legal exceptionalism.
Retail lawyers priced their services beyond the means of most individuals and small businesses. Not only did this violate the profession’s social compact, but it also fueled public perception that legal services are for the rich. As Derek Bok, the former President of Harvard and Dean of its Law School famously quipped decades ago, “There is far too much law for those that can afford it and far too little for those that cannot.”
The legal function was its own sacred cow. It eschewed change and cherished tradition. It operated by its own rules, pace, language, culture, monolithic delivery model, and lawyer-centricity. Lawyers had little fiscal accountability, no competitive threat from outside competition, and no pressure to innovate. This redounded throughout the legal ecosystem—law schools, firms, corporate legal departments, the judiciary, and regulators. In contrast to the companies that engaged it, law’s stakeholders were committed to precedent and stasis, not experimentation and constant improvement that drives customer value.
The profession fashioned an insular, homogeneous culture. Lawyers controlled all facets of their domain— admission to the guild, legal education/licensure, language, practice rules, preservation of its artisanal approach, and delivery. Lawyers treated clients as supplicants, not customers. The profession relied on anti-competitive self-regulation to prevent ‘non-lawyers’ from engaging in what they defined as “the practice of law.” Its monopoly produced a “lawyer and ‘non-lawyer’” worldview, fueled hubris, and, over time, misaligned the legal function with its customers.
Culture is defined by what it values and what it measures. The divide between legal culture and its customers is pronounced. Legal culture, for example, values pedigree, not performance; “excellent legal work” (as judged by lawyers), not its materiality or satisfaction of customer objectives; and profit-per-partner (PPP), not net promoter score (NPS), the Holy Grail of business. Legal culture is rooted in precedent and mistake-avoidance; business—especially in the digital age—prizes innovation and paradigm-busting that improves customer satisfaction. These are a few in a long list of differences separating law from its customers.
Legal separatism—and the myth of exceptionalism that it created—has other manifestations. Generations of lawyers have crafted their version of a tribal dialect. It is an insular, idiosyncratic language that reflects an inward-facing culture and homogeneous, inbred community. The language of lawyers—often disparagingly referred to as “legalese”— is abstruse, verbose, rife with gratuitous Latin phrases, and designed to create a linguistic barrier between “lawyers and ‘non-lawyers.’” Legal parlance does not derive from mainstream vocabulary. This faux language is inimical to a profession whose mission is to deconstruct the vagaries of law and to help solve customer challenges.
Law’s linguistic barrier has been compounded by its unwillingness to learn the language of its customers—notably business. Few lawyers became fluent in the language of business, nor did they operate according to its speed, processes, metrics, risk-reward quotient (risk tolerance), data-backed decision making, or customer-centricity. This has contributed significantly to the legal function’s inability to demonstrate its value to customers.
Lawyers have traditionally dictated the terms of engagement to buyers, turning “the customer is always right” adage on its head. Law is a service business/profession, but lawyers have consistently received low marks for customer service . Lawyers have rightly focused on the unique characteristics of the attorney-client relationship. But they have done so to the exclusion of treating their clients as customers. The legal industry has a notoriously low net-promoter score compared to business and other professions. This results from the high, unpredictable cost of legal services, poor communication, lack of responsiveness, slow adoption of fit-for-purpose technology and data that would enhance early risk detection, strategy formulation, predictability, early matter resolution, risk mitigation, lost opportunity costs, and significant reduction of legal expense.
Law’s misalignment with business has become more pronounced in recent decades because the demands of its customers have changed significantly. The speed, complexity, scale, myriad of existing and new risk factors, competition, impact of geo-political changes, rapid advancement of technology, fluid strategic partnerships, and, more recently, the digital imperative have altered business profoundly. The legal industry has responded with hyperbolic claims of “partnering with clients,” “cutting-edge technology, and rate concessions. This is neither evidence of law’s client-centricity nor a meaningful effort to bridge a misalignment with its customers.
A handful of elite, tech-enabled, data-centric, multidisciplinary, capitalized, scaled, agile, fluid “business of law providers” are a salient exception. These companies have invested in the new tools of the legal delivery trade— technology, hiring and up-skilling highly-skilled, multidisciplinary workforces, data analytics, and customer service/experience. They are gaining market share, an expanded scope of work, and brand loyalty. They speak the language of business, operate at its speed, and can integrate seamlessly with it. The new providers are also able to demonstrate their value to customers by reshaping traditional boundaries and paradigms of the legal function, enabling it to be more proactive, predictive, and enterprise-impactful for customers.
Digital Transformation: The Great Change Accelerant
Digital transformation and its tech-enabled, re-imagination of business to better serve its customers, is transforming business at an astonishing pace. McKinsey describes it as “the next normal.” Digital transformation was a C-Suite priority before Covid-19; now, it is an existential imperative. The pace of digital transformation among leading companies is accelerating exponentially since the onset of the pandemic, and so too is the gap separating digitally advanced companies from digital laggards.
Digital transformation is an enterprise-wide commitment to reimagine existing paradigms, processes, workforces, supply chains, technological tools and strategic partners. The objective is to redesign all facets of business to improve customer outcomes, experience, and brand loyalty. No corporate business unit or function—law included— has immunity, because a digitally mature company operates as an integrated whole, not as segmented departments. Perhaps the most difficult part of the digital journey is the cultural transformation and change management that it requires. This will be particularly challenging for lawyers—less so for other legal professionals better acquainted with customer-centricity, change, considered experimentation, and up-skilling required to be competitive—both individually and collectively.
The legal function is being reimagined—not by lawyers but by business. It is being reconstituted not as a siloed department but as an integrated, fluid, and agile asset of multiple business units and stakeholders. The remit of lawyers has long been the defense of the company. In the digital age, the expectations of the legal function have become considerably broader and include: (1) the proactive, data-enabled early detection and avoidance of risk, (2) balancing legal risk with other corporate risk factors; (3) collaborating with business units to identify and create corporate opportunities; (4) enhancing the experience of corporate customers; and (5) transforming from a static cost center to an agile, value-creating pan-enterprise collaborator.
The legal function will no longer be divided into law firms, corporate departments, and other supply chain providers. These traditional paradigms will be replaced by platform-enabled, data-driven, seamless, fluid, agile and business-integrated ones. They will be reverse-engineered from the end-user perspective. The legal function is being re-designed to serve customers, not lawyers. It will operate as other business units do—except that confidentiality, privilege, and other core elements of legal practice will be preserved.
The legal function’s burden to prove its value to business will be more easily met when it aligns with its customers. That means it must:
· acquire business as well as legal fluency;
· understand business and its customers and advance their objectives while operating within the bounds of the law and legal ethics;
· utilize data and contribute it to the corporate data lake to provide business with insights and foresights that drive performance;
· function as an enterprise resource, not a siloed department;
· predict, eliminate, detect, mitigate, and/or quickly extinguish corporate risk as well as collaborate with other corporate functions to create value for the enterprise and its customers
The legal function is being recast by business, its end-user. Business is reverse-engineering the legal function to better serve its needs, not to preserve the primacy of incumbent legal providers and their anachronistic structure, economic model, and culture. The legal industry must understand digital transformation—what it means to business and its customers as well as how it applies to the legal function. This is a pressing imperative and a crucial first step towards establishing the legal function’s impact and worth in the digital age.