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Why and How to focus on good ROI for legal services?

Summary :
Overall, the article emphasizes that with the right tools and strategies, legal departments can transition from cost centers to key drivers of organizational growth and efficiency.

The profitability of legal services is a topic frequently discussed within organizations, particularly by financial departments. Why? Because companies are seeking growth levers, especially internally. The skills of legal professionals are now valued not only for their technical expertise but also for their ability to contribute to the company’s economic gains.

Moreover, in an economically and politically turbulent context since 2020, and now confronted with artificial intelligence, legal professionals must address issues of profitability and productivity.

Historically viewed as risk managers for the company, corporate lawyers are now becoming, thanks to technology, new resources for the company—internal experts who create value.

How will the role of the legal director evolve?

Today, the legal department is already positioned within the company’s strategy, but it is not responsible for budget allocation or the distribution of value among departments.

The legal department has always apologized for spending money… To change this perception, the legal department needs to internally equip itself with tools and skills to propose new growth levers.

The legal profession is undergoing a transformation both in terms of organization (tools) and human aspects (individual skills). In a value-creation perspective, legal professionals have access to opportunities from outside that they need to learn to analyze from a commercial perspective. What commercial opportunity lies behind a legal decision or a legislator’s decision? And how can this opportunity be translated into value to foster the organization’s growth?

In this context of profitability and productivity, today’s and tomorrow’s legal professional profile combines legal, financial, and commercial skills. The use of legal platforms is becoming increasingly important.

For instance, take legal monitoring. This monitoring is purely informative for the organization, and the value of the information is lost if not used. However, it is possible to transform this legal monitoring into “economic value,” thus moving from a “risk manager” role to a “value creator” role, utilizing market analysis, legislation, and opportunities to propose solutions, anticipate constraints, and better manage them over time, in collaboration with all company resources.

In this context, FinTech and LegalTech have already advanced, supporting this change by identifying growth levers and key financial and legal performance indicators.

What is a legal service?

Legal services encompass advisory, control, and legal representation tasks. This also includes contract drafting, implementing pre-litigation strategies to avoid conflicts, risk analysis, and ensuring compliance with internal procedures to adhere to prudential rules or simply applicable laws. Common legal services performed by corporate lawyers include (but are not limited to):

  • Drafting contracts and other legal documents
  • Advising clients on their legal rights and obligations
  • Representing clients in contentious matters such as civil trials, criminal cases, administrative hearings, appeals, etc.
  • Negotiating settlements with opposing parties in disputes and other conflicts
  • Conducting research on regulations and legal precedents
  • Implementing internal procedures or training to comply with public authorities’ controls
  • Constantly monitoring the company’s compliance with laws as it grows commercially
  • Providing advice on corporate law, mergers, and acquisitions
  • Handling labor law, intellectual property, and other business law areas
  • Managing litigation when necessary
  • Negotiating settlements or arbitrations
  • Providing advice on environmental legislation

The list is long and depends on the industry. Legal professionals are now true partners of economic decision-makers, akin to financiers. Involved in all fronts, they have a comprehensive view of the company’s activities, laws, and regulations to anticipate key changes for the company’s commercial development.

What is the ROI of a legal service?

ROI (Return on Investment) measures the profitability of capital invested, in this case, in legal services.

A legal service is not just the service performed and executed by a legal professional (lawyer, jurist) within a team but all the time spent on the case. Breaking down a legal service’s life, there is always time for understanding, analyzing, delivering the output, and coordinating with internal teams to implement the solution, support it, and ensure the results meet legal constraints within the company’s accepted risk limit.

A unique aspect of legal professionals is their interaction with many external providers (lawyers, accountants, notaries, bailiffs, etc.) while coordinating the analysis results internally with collaborators and internal clients (sales, logistics, finance, etc.).

For such services, our studies with clients show that, on average, 50% of the time spent on each recurring case is dedicated to recurring and/or time-consuming tasks. These indispensable but low-value-added tasks have costs:

  • Financial
  • Human
  • Ecological

According to the 2019 Legal Trend Report by Clio, this time represents an annual equivalent of €32,000 per employee.

What costs should be considered?

  • Salaries for legal department or general secretariat staff
  • Costs of external advisory services (lawyers, bailiffs, notaries, etc.)
  • Internal service billing within corporate groups
  • Time spent training new recruits during team renewals
  • Hidden costs such as time spent setting up commercial operations, processing emails, supporting internal clients, searching for lawyers and external advisors, etc.

These elements help estimate the profitability of a legal department and allow the legal director to collaborate with the financial director to identify growth opportunities, develop talents, find savings sources, and invest in automation to reduce unnecessary costs.

Examining performance indicators, organizational changes, and refocusing the team’s activities on technical expertise leads to a simple conclusion: it is possible to spend less time on recurring and indispensable legal tasks to devote more time to strategic tasks.

Thanks to automation projects, each legal professional becomes an expert who can dedicate more time to their expertise. The legal department is no longer seen as a cost center but becomes a contributor to the company’s or firm’s profitability and productivity.

How to go further?

However, changing the team’s position and organization requires team involvement and understanding of key performance indicators to engage in innovation and new ways of collaborating with these new tools.

To support this transition, thousands of LegalTech dedicated to legal activities have emerged over the past decade.

Implementing these “new technologies” is now considered a significant investment for the organization, a tool for retaining high-performing and strategic teams, and consequently, an internal growth lever. Organizations deploy the necessary means to integrate these new tools as long as the benefits for the company or team are clear to everyone.

Justifying the implementation of a legal service automation tool? Choosing the right tool?

Typically, legal professionals seek the right legal solution to solve all their problems… However, this belief is not realistic because—beyond the necessary technology to solve these problems—these tools must also be flexible and respect both the working habits and the know-how of each individual in the organization.

Initiate a change or engage in a revolution of internal organization?
Changing to gain efficiency is one thing, but to garner support, it is better to keep what works well and change what no one wants to do anymore… The good news is that some tools, like Alf, allow centralizing various complementary tools on the same interface according to each one’s needs, offering flexibility so that each user can decide what they want to automate and what they wish to handle manually. Gradually, habits change, the benefits of automation win over skeptics, and everyone finds their new comfort zone… Alf becomes a useful companion for automatically handling often-forgotten tasks (archiving, automatic recording of documents, emails, validations, etc.).

Therefore, no revolution, we propose a flexible approach to avoid the pitfalls of revolution.

A good legal service automation tool should allow:

  • Better case management (time-saving, efficient exchanges, significant error risk reduction, etc.)
  • Optimized collaboration (knowledge sharing, case centralization, tracking optimization, collaborator satisfaction, etc.)
  • Increased efficiency of legal professionals as less time is spent on time-consuming tasks and more time on high-value-added tasks (more quality time with clients, more cases handled, client retention, etc.).

How can this saved time become a growth driver?

This saved time benefits the organization in several ways:

  • More relaxed teams
  • Loyal and connected clients
  • More efficient organization, notably

The legal director, a true actor for the company’s growth, sees their role evolve in their relationship with the financial director, internal clients, and teams. Automation creates a virtuous circle where the saved time can be devoted to more detailed analysis of the company’s challenges or the development of a law firm’s clientele.

Saving time to focus on the company’s or firm’s strategic issues is our mission at Alf. Contact us to learn more.