Increased digitalization is driving the modern law department forward

The COVID-19 era has been an ongoing workshop for in-house legal departments. Many have been pushed to integrate technology into their operations more thoroughly than ever before. While the pandemic will hopefully abate soon, these changes may well be permanent.

Working through the pandemic has been challenging for in-house legal departments, who have been asked to do more with fewer resources. As seen in the Thomson Reuters 2021 State of Corporate Law Departments (“SCLD”) report, demand for external counsel fell last year by 2.5% as deals stalled, while nearly five times as many law departments endured budget cuts as saw their budget increase.

These challenges were highlighted in a recent webinar, available on-demand, by Thomson Reuters, Improving legal department process through technology: Lessons from the State of Corporate Law Departments report. One of the key themes raised from the expert panel on the webinar was how the increasing — and in some cases, rapid — use of legal technology helped law departments to weather the challenges of the past year.

As Agustin Sanchez, Director Business Development, Corporates at Thomson Reuters, noted, 44% of respondents reported an increased use of legal technology. “We saw that the role of legal operations innovation surged,” he said. Roughly 81% of law department hires in 2020 were for legal operations roles.

While there had already been a focus on implementing electronic billing and matter management systems, COVID made legal departments push further, rolling out e-signature, e-meeting/collaboration tools (like Microsoft Teams or Zoom), digital workflow and automation, and contract and document management solutions, such as those employing artificial intelligence (AI) within the bill reviewing process. This is “allowing lawyers to spend less time on things like invoice compliance and more on high value work,” said Arran Braganza, CEO of Jalubro, a London-based legal and technology firm.

Braganza said that one of the biggest effects he’s seen from the pandemic “has been around the rapid technology advancement and digitalization of the legal workplace.” There have been three distinct drivers:

• The need to adopt technology to enable all parties to work remotely.
• The need to increase cost savings, in part via reducing outside legal spend.
• The need to increase legal department effectiveness, not only through new technology but also giving lawyers new skill sets.

Adapting to a suddenly remote world

Andrew Marsh, legal counsel and director of human resources at the California-based cannabis distributor ManifestSeven, joined the company a month before the pandemic hit. Tasked with HR and legal responsibilities, he recalled how “we had to change how we ran the organization, how we managed people,” adding that “there was an urgent need to transition a person-to-person, face-to-face legal operation into one that mostly existed in the virtual space.” In particular, the “A to z of HR had to move completely online.”

On the legal side, Marsh transformed what had been a paper-driven process of revising corporate documents — “print out a draft, mark it up, hand it back”— into a purely digital one. He and his general counsel first moved to email-based processes, then installed a prototype system to allow all editing and revision functions to move fully online.

“My general counsel is in Houston, I’m in California — we didn’t even see each other face to face for most of the pandemic,” Marsh said. “We transitioned because we had to: there was no choice anymore. All stakeholders that needed to be part of the editing process now needed to be online and working with us. Everything that went into every version of a document is now in an online space.”

Marsh also took HR virtual, creating many processes from scratch. The result: where in 2019 a new employee at ManifestSeven got an onboarding packet on their first day, filled out tax documents and confidentiality agreements, and attended an orientation session at their workspace, in 2021 a new employee does all of that online.

“We had to adapt to essentially something we’d never done before,” he said. “Onboarding became a purely digital process. Your email will go live before you start and you will login into one of our platforms to complete documents.” ManifestSeven has done the same for offboarding, with Marsh conducting exit interviews via Zoom, for example.

The push towards more remote operations continues, as most of ManifestSeven’s meetings and townhalls are now digital. The pandemic wound up providing an impetus for a full transformation of the company’s operations. “We had a lot of these online tools prior to the pandemic but weren’t fully utilizing them,” Marsh said.

It’s also created substantial cost savings. Where ManifestSeven had an HR team of seven employees pre-pandemic, it’s down to a team of two “and we complete the same work as efficiently as the seven-person team did,” Marsh said.

Changing perceptions

The demands of the COVID era have helped to overcome a “historic resistance to change in the legal industry as a whole,” Braganza said in the webinar. “These unprecedented times have led to all of us to adapt quickly in ways that we generally didn’t think we could have.”

For one thing, many in-house legal departments are now far more intertwined in their company’s daily operations. “You used to be consulted when the business units felt the need to consult you — [you were] a side department that was there to make sure the contract was signed when it should be,” Marsh said.

“In a very real sense, legal went from being a peripheral part of the company to helping to run the operational day to day” he added. “We now have a line of sight on what had been separate business units.”

Again, this has led to cost savings. “Our need for outside consulting and counsel reduced dramatically through the pandemic. We could do a lot of things that we traditionally relied on outside counsel to do,” Marsh said. “We could now deal with operational matters immediately.”

Braganza said one challenge has been to help clients manage the oftentimes exponential growth of data generated by increased digitalization. “Clients have typically struggled in the past to leverage that data to drive better decision making,” he said. “We’ll work with clients to effectively help them understand how to set the right targets, promote transparency, and ultimately take responsibility for what they’re doing with that data.”