5 Takeaways from Axiom’s “Future Proofing Your Legal Department” Webinar

Includes A 6-Step Blueprint to Foster CEO-GC Partnerships

Legal department structures are like see-saws; sometimes the headwinds swing to a more centralized model and sometimes they swing to a more decentralized model. 

Don’t let the see-sawing dismiss their importance. The way a legal department is organized is critical: it impacts oversight, purchasing power, visibility, speed, revenue, and as a timely call-out, budgeting. 

As a result, Axiom commissioned and recently released a survey of GCs to benchmark current legal department models and identify any changes underway. On Wednesday, September 27 we also held a webinar to discuss the findings and the nuances of the topic. Joining us in the event hosted by legal industry veteran Zach Abramowitz were:

• Olga V. Mack, Digital Transformation Executive, LexisNexis | Above the Law + ACC Docket Legal Tech & Future of Law Columnist
• David McVeigh, CEO, Axiom
• Ashlin Quirk, GC, Axiom

What did the webinar reveal? 5 critical takeaways: 

1. Most organizations have centralized legal departments.
2. The C-Suite wants a decentralized department.
3. GCs are decentralizing their department – but it’s a move with which they don’t want or agree.
4. There are better ways to solve legal’s underlying pain points than decentralization.
5.  Flexible legal talent provides the outcome that CEOs and GCs really want…and really need. 
   
   

Takeaway 1: Most organizations have centralized legal departments

There are three primary legal models:

• The Centralized Legal Department: All legal staff report (via solid line) to the GC regardless of region, business unit, function, or legal practice area.
• The Hybrid Legal Department: Some lawyers report to business/geographic management, while other lawyers report to a centralized legal department managed by the GC.
• The Decentralized Legal Department: All legal staff report to regional heads, business unit heads, or other non-legal functional heads, though this may include a dotted line to a centralized GC. 

As David McVeigh also pointed out, “There are also crucial sub-models, such as central-leaning hybrid models, where most lawyers report to the legal department, and decentralized-leaning hybrid models, largely consisting of "embedded" lawyers reporting to regional or business unit heads.”

According to Axiom’s report, most legal departments have a centralized structure – a finding that was mirrored in a poll of the webinar attendees.

Takeaway 2: The C-Suite wants a decentralized department

Of late, and as the recent survey demonstrates, CEOs have been attracted to a decentralized-leaning model for their organization’s legal departments,” said McVeigh. “These executives envision the legal department as a commercial function—one that drives economic value for the business. And so there has been a burgeoning trend toward a decentralized legal team, in which lawyers are co-located with their business clients. This structure is thought to better equip attorneys to be revenue enablers, as it aligns legal goals to commercial targets, which incentivizes speed, drives down time-to-close, and accelerates revenue.”

“The bottom line,” said McVeigh, “is that CEOs want more responsiveness from their legal department, faster speed to action, and better alignment with business goals and objectives and they think decentralizing is the way to get there.”

Takeaway 3: GCs are decentralizing their department – but it’s a move with which they don’t agree or don’t want 

Seventy-one percent of GCs surveyed are planning to decentralize their legal department. 

The issue here is two-fold. First, GCs don’t want a centralized department. According to the survey, two-thirds of GCs prefer a more centralized structure. However, GCs not only feel pressure to follow executive requests, but they also want to be seen as a strategic partner.

Ashlin Quirk explained, “GCs are changing to ensure they give the perception to their CEOs that they are value enablers. But the problem with following decentralized mandates is that we, as GCs, know better.”  
According to Quirk (and the survey), most GCs believe a centralized-leaning model…  

• Optimizes in-house and external spend 
• Has the strongest corporate governance and universal legal operations standards 
• Allows for the most flexibility of resources
• Best mitigates risk
• Enables the most efficient shared services across business units and geographies

Conversely, Quirk said that decentralized models have significant disadvantages including “a lack of visibility into risk mitigation in how decisions are being made within the business unit and resource allocation. So, if you're now embedding the legal function or their resources within the business, and the business decides to cut back, and you as the GC don't have any control over that, how do you ensure that your legal needs are being met from a compliance or risk perspective?”

Visibility isn’t the only risk. According to the survey, GCs know that for all the perceived commercial advantages of a decentralized approach, there are more, and disproportionately larger problems. Three risks, in particular, should be deeply worrisome for GCs and for any CEO concerned with operational effectiveness:

1. Inefficiency: Legal competency duplication and/or inappropriate resources for novel needs; an elimination of purchasing power with outside vendors  
2. Lack of Visibility: As Quirk noted, limited transparency into overall spend and/or lawyer utilization  
3. Ineffective Risk Mitigation: Risk increases when commercial incentives are favored over standard legal practices  

In other words, a significantly decentralized structure exacerbates the GC’s most pressing pain points (resourcing and risk mitigation) without solving for the CEOs’ cost-control goal. 

In fact, Olga Mack argued that a decentralized model is antithetical to the CEO’s goal: “I've been asked to control legal costs many times in my career for all kinds of reasons, sometimes economics related, sometimes transactions related, etc., and have no way of doing it unless I am in control of resources as GC and can balance the resource allocation and service delivery. And that requires, functionally speaking, a centralized legal department. If you’re adopting a decentralized approach, then you’ll probably encounter suboptimal resourcing discussions, so any outside purchasing will be done with less oversight, ensuring those costs will be harder to manage and control.”

Takeaway 4: There are better ways to solve legal’s underlying pain points than decentralization 

“Putting my CEO hat on, I get why we are asking GCs to decentralize,” McVeigh said. “I think CEOs, business unit leaders, regional leaders, etc., often unfairly look at the legal department and say, ‘you're not moving quickly enough, you're not really understanding my business needs, you're not being responsive to my commercial pressures, you’re blocking business, etc.’ I think that's the underlying driver of this push to decentralization.” 

However, he urges business leaders to find better ways to solve for some of these business unit pain points beyond restructuring the legal department: “When you start decentralizing, and certainly when you fully decentralize, think of all the things you give up. It’s much harder to leverage your purchasing power with your outside vendors, including law firms.”

Quirk further stressed the importance of addressing business unit pain points through means other than complete decentralization. “One of the key goals of any GC is to make sure that you’re meeting the requirements and service level commitments to your internal clients,” Quirk explored, “But to do that, you need to think about how you're balancing work across the team. You need to staff for your specific lines of business or product, but then behind the scenes, you're able to manage the team, workload, and budget, both with outside counsel as well as internally. Decentralization takes a lot of that away from the GC.”

Takeaway 5: Flexible legal talent provides the outcome that CEOs and GCs really want… and really need 

Flexible legal talent is a “best of both worlds” solution. It can provide the flexibility, efficiency, commercial acumen, and speed needs that CEOs really want, without having to break apart the legal department or face the significant consequences that come along with decentralization.

GCs can staff their legal departments with a core team of generalists and support them with a virtual bench of flexible legal talent. By using a layer of flexible legal talent, GCs can leverage this bench of “always-on” lawyers, who combine legal experience with knowledge of in-house issues, while being far more cost-efficient and consistently available for ad-hoc needs. 

“I've worked a lot with Axiom because it’s actually easier to have a flexible solution,” said Mack. “It’s not only cost effective, but you can just focus on the work and not necessarily manage the career paths, the development, and the whole nine yards of keeping your lawyers’ morale up. It allows you to focus on operational excellence and you can make it as short or as long as you would like, and really allows, depending on the company's goals, to not only mitigate financial risk, but morale risk. Because nothing is worse than a demotivated lawyer.” 

Quirk added that flexible talent can provide the niche expertise that in-house departments need without the utilization worries of investing full-time hires while McVeigh shared that on-demand lawyers with specific industry or practice knowledge can provide the business teams with the speed and commercial acumen they’re seeking from legal.

Mack emphasized, “Being open to working with alternative providers like Axiom gives you many more instruments you can play with beyond legal department structure to better meet the expectations of your stakeholders cost-effectively.”

A 6-Step Blueprint to Foster CEO-GC Partnerships

So how can GCs make their case to CEOs? 

1. Partner with Fellow C-Suite Executives: Collaborate closely with CFOs and other executives.
2. Identify and Review Advantages and Disadvantages: Thoroughly analyze the pros and cons of centralized and decentralized models (as outlined in this report).
3. Propose an Ideal Compromise: Advocate for a centralized-leaning hybrid organization.
4. Staff the Centralized Departments: Focus on a core team of generalists rather than specialists.
5. Support with Flexible Legal Talent: Augment lawyers with a cost-efficient virtual bench of on-demand legal professionals.
6. Leverage Technology: Implement technology solutions to manage and optimize spending and resources effectively.
   

Mack concluded with advice to better facilitate these conversations with business partners: “I usually ask my stakeholders to close their eyes and imagine the excellence of legal services they would like to receive. Then I give them the data I have in my toolset, and I will invite them to be part of the conversation and help me solve for my gaps, so we can deliver on their expectations together. What I find is that in that conversation, they're willing to adjust their expectations, work with me on providing resources, and understand the benefit of a strong GC who is able to have those operational excellence conversations.”

💡 Watch the full webinar to learn insights into optimizing your department, or contact us if you are interested in finding flexible talent to build a better, more cost-efficient legal department.