Source: EY
In today’s rapidly evolving business landscape, legal departments must transform to deliver more strategic value. Many legal teams remain “too static in their thinking and ideation,” according to Ashley John, Head of Legal Operations for Anglo American. To effectively meet business needs while controlling costs, legal departments need a systematic approach to change.
Based on recent research, any transformation should first focus on understanding the problems facing both the business and legal function, along with the priorities legal must support. Only then can legal departments effectively allocate budget, control costs, collaborate with the business, source work, upskill talent, and implement technology as an enabler—rather than driver—of change.
Here are six crucial steps legal departments can take to build a foundation for meaningful transformation:
1. Gather Deeper Insights for Better Decision-Making
While three-quarters of legal departments conduct some annual planning, most skip deeper assessments that could help prioritize critical challenges and prepare for the future. Less than half have documented their operating strategy and goals.
“To be a more effective business partner, General Counsel need to increasingly think like business leaders, as well as being lawyers. A broader lens and strategic focus are vital,” advises Bjarne Tellmann, Founder and CEO of FjordStream Advisors, and former General Counsel for Haleon, GSK Consumer Healthcare and Pearson Plc.
Only 11% of legal departments have conducted stakeholder interviews in the last year, while just 20% have established continuous feedback cycles for ongoing improvements. This lack of stakeholder insight leaves many legal teams operating without crucial information that could help focus resources and identify progress blockers.
“Plans and decisions are made in the business. Being present there provides immense learning opportunities and builds confidence in the fact that we as legal professionals have a lot to give!” notes Sinikka Ilveskoski, Vice President, Legal & Compliance, Wärtsilä Marine.
Legal departments should also establish metrics that demonstrate business impact. While many focus on litigation and risk metrics, fewer measure performance and efficiency—metrics that better align with strategic business goals.
2. Understand and Optimise Spending
Given budget constraints, most legal departments plan to increase various cost-control tactics. Some drive efficiency (technology, automation, legal project management, knowledge management), while others directly reduce costs (legal process outsourcing, resource allocation, alternative fee arrangements).
Yet only 24% of legal departments have conducted a spend management assessment in the past year, and just 38% have automated invoice review. Deeper analysis of expenses, spending patterns, and industry standards can reveal cost drivers and value received, enabling more informed budgeting decisions.
Roughly half of legal departments partially charge back expenses to business units, while 29% fully charge back all legal expenses. Chargebacks increase transparency around legal spend and can reduce costs by encouraging business units to carefully consider requests and proactively address potential legal issues.
3. Develop a Diverse Sourcing Strategy
While 75% of legal departments report that rethinking sourcing strategies is a priority, only 21% have reviewed their internal and external sourcing practices in the past year. A proper assessment should include data-driven spending analysis and evaluation of sourcing options compared to industry benchmarks.
“Legal departments should find a way to mix and match suppliers because a luxury sports car isn’t always the right solution,” asserts Tellmann.
Over the coming year, legal departments expect to use an increasingly diverse mix of resources as they adopt new ways of working. For example, 60% plan to increase the use of Big Four organizations or alternative legal service providers, and 53% plan to increase the use of internal business centers or centers of excellence.
4. Engage and Develop Talent
All legal departments report needing additional expertise, with 64% planning to upskill or reskill current talent. As a result, talent retention is a high priority for 57% of legal departments.
While many legal department leaders are implementing initiatives to improve work experience, fewer focus on talent development or career advancement—despite these being top motivators for in-house legal teams.
“It’s very important that we show internal lawyers the opportunities for growth and for future positions. Some of the opportunities we provide our lawyers include gaining exposure to management or moving into the business divisions they are supporting,” noted Hiroshi Mori, Group Chief Legal Officer, Mitsubishi UFJ Financial Group.
“Regular engagement surveys, monthly team webinars and skills gap assessments are important tools we use to stay connected with team members and guide leadership on things that are going well and areas that need attention,” explained Fiona van Lede, General Counsel of Randstad N.V.
5. Align on Risk Management Approach
Eight out of 10 legal departments say their organization expects to increase investment in risk management over the next year, yet many organizations haven’t aligned around a detailed risk management program.
“The legal team is not just a division which handles risk at the last minute, but the legal team should be the division to collaborate with early to determine how much risk we can take on or avoid,” says Hiroshi Mori.
While 63% of legal departments indicate their organization has a program vision, goals and charter, less than half have a governance and operating model (49%), stakeholder communication cadence (36%), or third-party risk management (29%). Further, less than one-third have documented risk tolerance levels, risk owners, standards, a risk assessment matrix, communication plan, or contingency and mitigation plans.
“Legal departments sit at the intersection of risk and opportunity and are constantly evolving their reactions based on the environment,” notes Samantha McGonigle, Partner & General Counsel, Hg.
Regulatory compliance is a high priority for 75% of legal departments, but managing it effectively requires an enterprise-wide approach. “The best approach is one that is coordinated, automated and offers curated updates,” offers Kenny Robertson, Head of Innovation & Technology, Legal & Regulatory Affairs, NatWest Group.
6. Use Technology as an Enabler, Not a Driver
Legal departments need data and technology to inform decisions, increase efficiency, and add value. Indeed, 75% report that their top digitization priority is developing or refining their legal technology or data strategies. However, technology is often treated as the driver of change rather than an enabler, limiting its impact.
“Technology should remove friction and pain points so it’s important to engage with internal teams to identify the things that are standing in the way and then work out the best solution and what can be automated,” asserts Robertson.
“A small successful pilot with tangible results is a great way to justify larger investments, but it’s still important to highlight the overall business benefits,” advises Rosser.
Even though 96% of respondents acknowledge that ROI influences their technology investments, few legal departments go beyond general time and cost savings to consider other metrics. Looking more closely at all aspects of ROI may provide critical insights for developing more impactful technology initiatives.
By following these six steps, legal departments can better position themselves to meet growing expectations while controlling costs and delivering enhanced value to their organizations. The key is creating a solid foundation that enables continued innovation in alignment with broader business goals.
Read more: EY
