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[[File:Twiki.png|450px|thumb|center|Inhouse legal of the future, yesterday.]]
{{image|Twiki|png|The inhouse legal of Tomorrow, yesterday.}}}}{{d|Legal operations|/ˈliːgəl/ /ˌɒpəˈreɪʃənz/|n}}<br>Recursive rent-extraction ''from the consummate rentiers''.
}}A tremendous new wheeze for rent-seeking from [[legal eagle]]s. Legal operations is a [[second-order derivative]] [[Rent-seeker|military-parasitical complex]] that feeds off the direct first-order rent-seeking of those already in the in-house legal profession. The history of [[Inhouse counsel|inhouse legal]] is interesting, by the way.
==The history of the [[in-house legal eagle|inhouse legal eagle]]==
Legal operations are industrialised [[second-order derivative|second-order rent-seekers]] who feed off the direct, ''first''-order [[rent-seeking]] of those members of the legal profession who, shipwrecked on the sacred voyage from pupil to partner, found themselves washed up on the deserted shores of a [[Legal department|in-house legal department]].
Once upon a time there were deals, and banks who did them would engage law-firms to do the legals. Each one of these deals — [[Merger|mergers, acquisitions]], equity offerings, [[bond]] issues, syndicated [[Loan|loans]] — involved parties who didn’t know each other awfully well transferring each other lots and lots of ''[[money]]:'' not merely millions, but ''tens'' or even ''hundreds'' of millions of dollars. Every now and then, even ''billions'' of dollars.
Two rather obvious observations:
The history of [[Inhouse counsel|inhouse legal]] — how it went from “sleepy backwater for awkward, work-shy, typo nuts” to “military-forensic complex in need of taming with extreme prejudice by [[management consultancy]]” in twenty short years is [[The history of inhouse legal|interesting]], by the way.
*Firstly, if you are funnelling hundreds of millions of dollars around the financial system to randoms, things quite easily can go wrong, and when they do go wrong, they go ''badly'' wrong. Just ask [[Citigroup v Brigade Capital Management|Citigroup]].
*Secondly, a ''very small portion'' of “a couple of hundred million dollars” is still a ''very large sum'' of money, even if you do charge out at £400 per hour.<ref>In 1990 pounds. The going rate at the time of writing, displaying a sustained immunity to gravity and the general principles of mean reversion, is more like £1,000.</ref>
Therefore bankers, who themselves might collect as much as ''seven'' percent of the value of a deal, would quite happily expend say ''one'' percent of that value, on a decent firm of lawyers to make sure nothing went wrong. After all, the lawyers usually wind up doing the hard yards, churning out thousands of pages of [[verbiage]], running down quixotic ideas, accommodating spurious considerations and regularly working through the night generating needless “turns” of the documents to accommodate an artificial deadline imposed by an uncomprehending analyst who would then, when it was met, ignore the produced draft for a couple of days before advising that the deal had changed and this draft could safely be junked without review in any case.
== What the MBAs bring to the party==
====The rise of the [[Magic circle law firm|magic circle]]====
Now MBAs are not known for their imagination, but they do have a long suit in reductionist analytical rigour and they do love an over-arching metaphorical schema. Management consultants are keen on publishing these, and they will throw [[Microsoft PowerPoint|PowerPoint]] thought pieces around at the gentlest invitation. Lacking the [[subject matter expert]]’s deep grasp of the market, the “in-house legal problem” may be impervious to front-on attack, but they can ''analyse'' it into submission.
So was born the [[Magic circle law firm|magic circle]], which has been with us since at least the time of the [[First Men]], and even before them to the primordial pagan era where the [[Children of the Forest]] roamed the [[Bretton Woods|Woods of Bretton]]. The game was this: we will over-turn heaven and earth to document whatever you require us to document, by whenever you want us to document it, with two considerations: firstly, our opinion will disclaim all practical responsibility for any of the stupid things you made us put in the documents, and secondly, and more importantly, you pay us handsomely, by the hour for doing so. Our service is blood, sweat, toil and tears in the pursuit of whatever entertains you. Yours is to pay us through the nose for it.
For many years, this state of affairs was all fine and capital: everyone clipped their tickets, lived prettily, maintained nice homes in the stock-broker belt to and from which they commuted in late-model German cars. It was the corporate end-clients who paid for it, after all, and since their executive teams were commuting from the same stock-broker belt in the same sorts of cars, they weren’t bothered.
You do this by breaking down the intractable whole into [[Legibility|legible]], familiar components that already exist in the MBA toolkit. Each becomes its own little sub-domain, with its own [[LinkedIn job descriptions|workstream lead]]-led [[workstream]], going out and gathering evidence and, basically, getting in the way of the lawyers who are busily trying to execute on their own time-worn business model.
As the roaring nineties wore on, the deal pipeline grew ever fatter. [[The Jolly Contrarian:About|Aspiring young contrarians]] started arriving in London from all sorts of far flung places, wanting a piece of the action. Law firms hired them without question, supposing (for the most part rightly) that they would work like Spartans for a couple of years, expect a pittance in [[compensation]], and bugger off home to spend the rest of their lives pleasure-boating on Auckland harbour and kicking the crap out of the rest of the world at Rugby Union.
Perversely, [[Workstream lead|change manager]] interference only further slows down the lawyers even — every other day they are fending off a call from a well-meaning analyst asking for feedback on some innovation or other they didn’t ask for and have little interest in using — while the size of the legal operations team grows, and it foments its plans to entrench itself into the legal team.
====The weaponised legal department====
The bankers did start to wonder whether they couldn’t rationalise that legal spend: “the less we spend on legals,” they reasoned, “the nicer our German cars will be.” One obvious touchpoint was the hand-off between the bank and the law-firm. “Why don’t we hire some lawyers to manage that legal relationship? If they filter out all the stupid questions, and head off the wild goose chases, we won’t burn so much in legal fees. We will encourage them to work for us by paying them an investment banking bonus, and letting them go home at 6pm.”
So began the modern in-house legal team. This worked very well for everyone: deals were executed more efficiently, the embarrassing sensation of seeing your firm’s name mis-spelled in the final prospectus disappeared from the commonplace and the banks started to structure ever more elaborate deals, as the cost and capability of practical legal structuring inside their organisations mushroomed. The [[legal eagle]]<nowiki/>s started to do more than just steer instructions to law firms, translate banking gibberish and check the [[football team]]. They started to ''add value''.
But at the same time, the [[Legal|legal department]] started to get really ''big''. Teams that had numbered a handful in 1995 were running into the hundreds ten years later.
====Here come the management consultants====
With the encroaching [[modernist]] orthodoxy of management to margins grew, it was inevitable that the bean-counters would get involved. And so they did, a bit tentatively after the dot.com bust and the [[Enron Corporation|Enron]] collapse, but they started to find their line and length in the wake of the [[global financial crisis]].
“We seem,” they wryly noted, “to be spending a ''shit''-ton of money on lawyers, and it doesn’t seem to have done a lot of good. We now have an internal team of three hundred legal eagles costing us one hundred million dollars all told and, added to that, we are spending half a billion on external legal firms. And everything still seems to be blowing up. Can we not ''do'' something about this?
So began the great retrenchment of inhouse legal. But it didn’t happen, as you might expect, by asking the difficult questions the credit crisis plainly posed. Instead, management consultants got in on the act.
== What’s ''really'' wrong with in-house legal ==
Now acres of ink have been spilled, books written, monographs published, thought-pieces floated, on the problem of ''how to fix inhouse legal''. [[LinkedIn]] is awash with them; all in awe of technology’s current gallop; all clothe their mundane propositions in expressions of the richest finery; all seek to ride the vanguard leading edge. Legal is profoundly broken, always has been, but [[this time is different]]. Now we have the technology to rebuild it. The ''bionic legal department'' is nigh.
But, friends, the problem is not technological, it isn’t new, and it doesn’t require much vision. It is rather dreary and age-old. It is quite easy to state, if not to fix:
{{Quote|''Legal is too expensive and too slow.''}}
This in turn hinges on two things, neither of them new much less soluble by [[Chatbot|chatbots]]:
* '''Over-reliance on external counsel''': [[In-house lawyer|in-house lawyers]] are still far too ready to send easy, English-law work out. This was the original plan, to be sure, and it made sense when the bank only had three lawyers covering the whole investment bank, but times have moved on. Inhouse teams at investment banks are the size of middling international law firms. They have, generally, more senior and have far more institutional experience than their equivalents in private practice. There is generally little substantive need to refer complex English law material to outside counsel, yet they routinely do it.<ref>It is said that Banks’ reluctance to buy [[Professional indemnity insurance|professional indemnity]] insurance for their legal teams may propel this, but this strikes me as a fatuous argument. Banks are classic self-insurers. If ever the amount of a legal call is sufficiently grave to warrant claim on a professional indemnity policy there are better questions to ask, such as ''why is a bank adopting such a risky strategy in the first place''? If that is too naive an outlook — ok, guilty as charged — then maybe ''that'' is the triage point for engaging external counsel.</ref>
* '''We over-engineer legal docs''': Partly because external counsel feel short an ugly option should they screw anything up, and partly thanks to the professional [[rent-seeker]]’s general will to [[Iatrogenic|iatrogenesis]], all legal documents are absurdly over-engineered for what they actually do. They are far too incomprehensible, inscrutable, and even for those who do understand them, they are shot through with protections that the parties do not need and will never use, but which are nonetheless argued about and nickel-and-dimed over for weeks of months. Even those contracts that aren’t particularly high risk suffer from “[[Finance contract|banking envy]]”.
Now it is far easier said than done, but were those tasked with realigning legal to address these ''cultural'' phenomena — neither are easily solved problems to be sure, but aligning systems and incentives could help — then the need for much of the modern millenarianism we are seeing would melt away. You don’t need [[artificial intelligence]] to review your confidentiality agreements if the market agrees a [[OneNDA|short, plain, standard form]]. You don’t need document assembly if you standardise and simplify your ISDA schedules.
But these problems require imagination, an understanding of [[Behavioural economics|human psychology]] and a [[Subject matter expert|deep grasp of the legal and market conventions]] — qualities with which your average [[Master of Business Administration|MBA]] is not liberally endowed.
== What the MBAs bring to the party ==
Now MBAs are not known for their imagination, but they have a long suit in reductionist analytical rigour and they do like an over-arching metaphorical schema. They see the “inhouse legal problem” may be impervious to front-on attack, but they can ''analyse'' it into submission. This they do by breaking down that intractable whole into [[Legibility|legible]], familiar parts that already exist in the MBA toolkit. Each of these components becomes its own little sub-component, with its own workstream, and workstream lead, going out and gathering evidence and, basically, getting in the way of the lawyers who are busily trying to execute on their time-worn business model.
Perversely, this slows lawyers down even further — every other day they are fending off a call from a well-meaning analyst asking for feedback on some innovation or other they didn’t ask for and have little interest in using — while the size of the legal operations team grows, and it foments its plans to entrench itself into the legal team.
The legal work catalog, comprises the following components and opportunities:
The legal work catalog, comprises the following components and opportunities:
The JC puts on his pith-helmet, grabs his butterfly net and a rucksack full of marmalade sandwiches, and heads into the concrete jungleIndex: Click ᐅ to expand:
Recursive rent-extraction from the consummate rentiers.
Legal operations are industrialised second-order rent-seekers who feed off the direct, first-order rent-seeking of those members of the legal profession who, shipwrecked on the sacred voyage from pupil to partner, found themselves washed up on the deserted shores of a in-house legal department.
The history of inhouse legal — how it went from “sleepy backwater for awkward, work-shy, typo nuts” to “military-forensic complex in need of taming with extreme prejudice by management consultancy” in twenty short years is interesting, by the way.
What the MBAs bring to the party
Now MBAs are not known for their imagination, but they do have a long suit in reductionist analytical rigour and they do love an over-arching metaphorical schema. Management consultants are keen on publishing these, and they will throw PowerPoint thought pieces around at the gentlest invitation. Lacking the subject matter expert’s deep grasp of the market, the “in-house legal problem” may be impervious to front-on attack, but they can analyse it into submission.
You do this by breaking down the intractable whole into legible, familiar components that already exist in the MBA toolkit. Each becomes its own little sub-domain, with its own workstream lead-led workstream, going out and gathering evidence and, basically, getting in the way of the lawyers who are busily trying to execute on their own time-worn business model.
Perversely, change manager interference only further slows down the lawyers even — every other day they are fending off a call from a well-meaning analyst asking for feedback on some innovation or other they didn’t ask for and have little interest in using — while the size of the legal operations team grows, and it foments its plans to entrench itself into the legal team.
The legal work catalog, comprises the following components and opportunities:
