Building a strong in-house legal team: Structure and strategy

Today's general counsel plays a critical part in shaping the success of their organization. A key question they must continuously ask is: "Is my legal department's structure optimized to provide strategic support and meet the needs of the business?"

This question typically emerges when the general counsel starts in their role. However, it becomes vital during leadership transitions, significant company changes, service quality concerns, and the aftermath of a crisis or failure during which the department didn't perform as expected.

Consider several things when evaluating your legal department structure.

Types of legal department structures

There are three types of legal team structures to consider: 

• Functional. Lawyers specialize in distinct legal areas — contracts, IP, litigation, etc. — forming a centralized team that promotes efficiency and consistent advice. 
• Client focused. Attorneys are integrated directly into business units or geographical regions, which fosters strong client relationships and a deep understanding of specific business needs.
• Hybrid. This model aims to balance the strengths of both functional and client-focused structures. It provides flexibility and customization but can be complex to manage.

Each structure has pros, including efficiency, consistency of advice, and cost. The cons might include the strength of client relationships, visibility into problems, and divided loyalties among the lawyers. Career development opportunities can also vary depending on the structure.

AI in legal departments

Artificial intelligence (AI) is rapidly transforming the legal landscape and should factor into decisions about your legal department structure. There are many opportunities for efficiency and optimization, so legal departments must proactively assess how AI can support their chosen structure and develop guidelines around its use. Critical applications include automating tasks like contract review, legal research, and due diligence, freeing attorneys to focus on higher-value strategic work.

However, selecting industry-specific AI solutions trained on reliable legal data is crucial to mitigate potential risks like biased outputs or poor legal judgment. By carefully integrating AI tools and investing in training, legal departments can use AI to enhance service delivery, reduce costs, and gain a competitive edge.

Choosing your legal department structure

There is no “one time and forever” decision for legal structure — innovative general counsel review structures yearly and in consultation with senior management.

Factors to consider include:

• Nature of the business
• Size of the legal team
• Location of the attorneys
• Budget
• Skills of the existing legal team, like generalists versus specialists
• The team's reaction to change and the impact of the structure on job satisfaction
• Service needs of the business
• What the CEO wants

Sometimes, the decision is clear — but not always. For example, despite its complexities and costs, a hybrid model may be the answer when no right structure is clear from other models.

Legal team best practices

No matter your chosen structure, there are a few “must-dos” to ensure cohesion and mitigate any possible negatives.

These include:

• Consistent communication with the legal team through regularly scheduled meetings, intranet site or portal announcements, department newsletter, project collaboration, and recognition of birthdays and significant events.
• Career development opportunities for in-house legal teams, such as allowing team members to develop areas of responsibility; get exposure to senior management; move into different sections or geographies, even if only short-term assignments; train the business; help with department administrative tasks; and focus on promoting from within.
• Use of technology, like webcast and video conferencing and “Slack”; common matter; budget; legal document management systems; templates database; dashboards; document assembly; and more.

The evolving role of the general counsel

The role of general counsel is shifting. Today, it often extends beyond just legal expertise. Usually, general counsel play vital roles in the business, acting as partners and strategic decision makers. They must use their knowledge of the legal landscape, company goals, and industry insights to weigh in on everything from compliance and regulatory requirements to litigation prevention and cost controls.

This skill set requires balancing proactive risk management with business growth, which is especially difficult when faced with ever-present budget constraints. "Do more with less" is a common refrain; research shows that 69% of general counsel globally are under moderate to significant cost pressure from business leaders. Collaborating with the rest of the C-suite can help general counsel demonstrate department value and their value as critical contributors to the organization's overall success.

Benchmarking and performance metrics

Data-driven insights are critical in today's legal department, especially as cost controls are among the highest priorities. Focusing on automation and efficiency and using data-driven insights can help general counsel track key performance indicators (KPIs) to optimize efficiency, control costs, and better inform strategic decisions. Doing so can also identify trends and anticipate challenges, keeping the organization agile.

Key areas to benchmark include:

• Operational efficiency. Track metrics like matter turnaround times, cycle times, and technology adoption rates.
• Budget management. Analyze internal legal spend, external counsel costs, and alternative legal service provider usage.
• Departmental staffing. Track the size and skill mix of the legal team, identifying potential gaps or opportunities for right-sizing.

Benchmarking against industry standards helps general counsel identify areas for improvement and demonstrate value to the C-suite, especially as volume increases across the board. By embracing data and metrics, legal departments can evolve from cost centers into strategically aligned drivers of business success.

Find the right structure for your organization's needs

Your organization's legal department structure is critical to the success of the team and the quality of the services provided to the business. To provide the best possible service and meet today's challenges, general counsel must review their structures on a regular basis, consider the specific needs of their businesses, and ensure that they have the right mix of skills on their teams.

General counsel can ensure that they’ve structured the legal department for success by taking the time to consider all the factors involved and communicating regularly.