06.07.2020 | KPMG Law Insights

One-stop store – the legal department of the future

One-stop store – the legal department of the future

The day-to-day work in the legal departments of internationally operating German companies is constantly changing – analyzed for 15 years by KPMG Law’s Global Legal Benchmark Survey. Prominent trends: strengthening central governance, strategic insourcing and law firm management – with shrinking external budgets. Added to this is the digitization of support processes. The current report provides detailed insights into the assessments of general counsels at the top 150 German companies.

Since 2005, more and more companies have opted to manage their global legal departments centrally – right down to personnel decisions. A comparison with companies in the same industry that operate a decentralized model shows that this development also has financial reasons: Here, total costs as a percentage of sales are nine to 15 percent higher. In addition, central governance scores with more transparency and a better risk structure.

Strong growth in internal teams – strategic law firm management expanded
Because outsourcing was long considered expensive and insourcing a cheaper alternative, in-house teams grew by an average of a full 92 percent through 2019. In the meantime, this development of strategic insourcing has come to an end, and company managements are focusing more on improvements to structure and ongoing operations. However, industry-specific differences are noticeable: The chemical industry has up to eight lawyers per billion euros in sales, while the pharmaceutical industry has as many as 16. Automotive, on the other hand, is well below this, with only 2.6 lawyers per billion euros in sales.
The situation is different for support: The ratio of support staff per lawyer fell successively in all sectors. Fifteen years ago, there was one support staff member for every 1.2 attorneys; by 2019, there were 4.5 attorneys. Although the figures do not differ by industry, they do differ according to the degree of specialization. The more specialized and usually the larger the legal department, the lower the number of assistants.
At the same time, the firm’s management has undergone an increasingly strategic transformation over the years. This means a clear limitation of the circle of external law firms with which a company cooperates. More than 60 percent of the top 150 work with a maximum of 30 partners worldwide – often on the basis of comprehensive provider management. This approach brings more reliable quality and billing controls, as well as better control and evaluation of individual law firms. Except for costs in specific areas such as litigation or M&A deals, expenditure on external legal advice thus fell steadily.

Digitalization: Legal operations and legal tech determine the future
In terms of technology, until a few years ago, legal departments mainly invested in IT tools for better support processes, such as archiving, expense control or case processing. However, although these tools had a positive impact on internal management, they largely had no effect on cooperation with internal clients. This is increasingly changing, as more and more companies are now using legal tech to structure and accelerate the actual services provided by the legal department.
Digitization is already being used more purposefully today than it was a few years ago. Internal clients find support through legal self-service modules and IT-based processes; lawyers already spend less time on repetitive and more low-risk tasks. Further automation will enable even greater workload reduction and more accurate evaluation of legal department performance, while allowing lawyers to focus on more value-added tasks.
In future, basic work, evaluations and standardized processes will always be carried out digitally. Legal operations and the support provided by legal technology solutions are becoming increasingly important. The degree of standardization will increasingly determine the future success of a legal department. As a result, not only lawyers, but also internal clients will increasingly empower the processes and documents themselves. For example, global contract management or the adaptation of documents can be carried out much more quickly than before.
Sourcing will also be more strategic in the future, with standard work being taken over by external legal services providers or tools as part of managed services. This saves costs, relieves the in-house teams and brings more flexibility in terms of resources. Finding the right balance between internal and external will be a key challenge for legal department heads.

Information and control on a central platform
The resulting fully integrated, digital service model will be accessible to legal department staff and clients on a unified platform. All services are integrated and merged on this. This enables in-house lawyers and internal clients to create documents and solve legal tasks – chatbots and artificial intelligence, such as for legal monitoring or contract automation, help them do so. However, specialized lawyers will also be available in the legal department of the future to provide personal advice, and the digital systems will also refer complicated questions directly to them.

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