8 September 2020 | By Marten Männis
Do the importance and maturity levels of legal department areas correlate with each other?
Last time we saw how legal departments in Europe are planning on increasing their departmental value. Companies both small and large are eyeing on increasing their usage of digital tools and solutions. Now, we will be assessing what legal departments consider integral to their departments. Is there an overarching theme of areas across Europe that are prioritised over others? Establishing it helps understand what legal departments consider important for their core functions and which areas should require more consideration within the day-to-day life of a corporate lawyer.
The article uses Legal Departments in a Digital Era, a comprehensive project done by ECLA and Wolters Kluwer that establishes the digital status of corporate lawyers in Europe as a basis.
More than nine participants out of ten see collaboration possibilities as highly important for the effective functioning of a legal department. An additional 7% of respondents assessed it to be of medium importance, with another 1% seeing it as low importance. There were no legal departments, to which this aspect is of no relevance. Compliance and risk management also garnered high ratings, with 72% of European legal departments considering it to be highly important. An additional 18% of legal departments consider this area to be of medium importance. Given the increased regulatory challenges that legal departments have faced over the last decade, compliance has taken a key role within companies across different sectors and does imply that compliance management tools would be solutions that could be desired.
Contract management is another highly rated area, with 70% of respondents giving it a high importance level and an additional 23% considering it to be of medium importance. The high proportion of legal departments considering it to be highly important indicates just how central managing contracts are for legal departments across all sectors and industries.
Similar conclusion can be made for case management. A proper matter management procedure in-house aims to cut external costs and also improve the traceability and reporting capabilities of an in-house team. This makes a proper case management procedure desired by legal departments, as 68% of legal departments consider it to be highly important. Just 2% of legal departments do not consider it to be relevant.
It is positive to see however that legal departments, in general, do not consider any of listed areas to be highly irrelevant. Intellectual property management, an area that not all legal departments have to consider, saw the highest proportion of participants assessing it as not relevant, standing at 14%.
The numbers do demonstrate that ensuring the proper functioning of a legal department within a company is the top priority for nearly all legal teams. By ensuring a good flow of information between the legal and business sides, companies can receive a quality legal service, addressing the issues most important to the company. If that were not the case, the effectiveness of the legal team would very well be moot. Quality collaboration can be set up in a number of ways, but certain key elements must persist, such as a streamlined flow of information between the departments. The legal and business teams must understand each other and what the goal of the business is.
The high regard for contract and compliance management highlights the nature of a large number of legal teams today. While the former has been a cornerstone in the work of any legal department since its inception, the latter has come to the forefront, as businesses have become more global and are faced with more regulatory scrutiny, including ethical and cultural questions. Having an effective system in managing such issues that are either high-volume, high-importance, or both, certainly is a necessity for the viability of a modern company.
There are three areas, where a considerable proportion of legal departments consider it to be of low importance: technology management with 24% of respondents, metrics and analytics with 32%, and e-signature facilitation with 37% of legal departments. This again highlights that though legal departments highly praise the concept of introducing legal technology, the overall introductory process and steps that have to be taken to efficiently introduce new processes is met with a lukewarm reception. Nevertheless, the areas that are considered to be less important are the same areas that are essential for a proper introduction of legal technology within the department. Both technology management and metrics & analytics ensure that legal departments have a better overview of their operations and necessities, highlighting what could be improved and also get timely feedback on their ongoing and newly implemented processes and solutions.
The question then remains, whether legal departments are more mature in areas that they consider to be more important for their activities as well. Across Europe, none of the 14 listed areas are considered by at least 40% of legal departments as advanced. The highest rated area concerns collaboration possibilities between the legal department and other business units, in which 36% of European corporate legal departments consider it to be on an advanced level within their organisation. A further 46% of legal departments consider this area as intermediate for them.
Compliance and risk management are considered by 34% of participants as advanced. A further 42% consider their departments on an intermediate level, when dealing with compliance issues. It does highlight that the three areas that legal departments across Europe consider to be the most important aspects are also the three areas that organisations consider themselves to be the most advanced in. All four areas in which at least a third of legal departments considered their functions to be on an advanced level are closely connected to the intrinsic work of a corporate lawyer.
There are two areas, where 50% of respondents have assessed their departments to be on an intermediary level: case management and knowledge management. 28% of respondents see their case management activities as reaching an advanced level, whereas only 18% feel that their knowledge management structure is advanced. Both areas saw almost two out of three legal departments considering these two aspects to be highly important. This does indicate that legal departments are aiming to become more mature in these areas within the upcoming years.
Half of respondents have identified their activities to be on a basic level in at least three areas: E-signature facilitation; technology management; and metrics and analytics. All three areas also see at least 10% of legal departments assessing these areas as irrelevant for their departments. In-house counsel did see these areas to be less important as well.
The findings for both questions do show that there is a direct correlation between the maturity of an area and the importance of it within the legal department. Similarly, aspects which are not closely related to the business side of legal, but more focused on improving the efficiency and functioning of the legal department, do see lower numbers in both the importance put on it and the maturity levels as well. One can hope that once the high importance aspects are fully covered and considered to be on an advanced level, that the focus will spill over to other areas as well.