Legal operations: Difference between revisions

====The rise of the [[Magic circle law firm|magic circle]]====

====The rise of the weaponised legal department====

====Here come the management consultants====

Now management orthodoxy has understood for decades that it isn’t [[Cost - waste article|cost]], but [[waste]], that is the problem in a distributed manufacturing process: raw materials do cost money. You do have to pay machine operators. At some point you can’t avoid the basic minimum costs of doing something properly. Rather, you rigorously test your processes to check you ''are'' doing it properly — and not ''over''doing it by wasting raw materials, overengineering, having your staff standing idle or engaging them in wasteful activity. The people at Toyota were very analytical about [[Toyota Production System|the types of waste you should eliminate]] in the 1950s and 1960s, and beat the American auto-manufacturers to a pulp.

But when the costs are so big, it is really hard not to obsess about them, in the abstract, in the round, as a thing in themselves. Especially if you are an accountant, and you don’t understand the manufacturing process that accounts for them anyway.

One last digression before we move on: Toyota’s [[lean production management]] technique works best in “tame” environments where all dependencies are mapped and all possible outcomes known. Where your environment is “[[wicked]]” — imperfect data, non-linear interactions, convex risks — you need three things that are generally designed out of production lines: expertise, flexibility, and redundancy.

In a perfect world, [[legal eagle]]s are at their best in purely wicked environments. You consult them when things go wrong, your normal assumptions don’t work and you don’t know what to do. But in the ''actual'' world, all environments — even factories — are a mix of wicked and tame components in some portion or other. In banking, the trade-off is between product development and tail-risk management on one hand — wicked problems — and scaling and monetising products on the other — tame problems. We can assess the lawyer’s value on the tame axis quite readily, and that is largely by ''how well she can keep out of it'': how can she standardise, simplify and de-complicate business-as-usual legal processes so it requires as little explanation to the muggles as possible and to what extent can she map out predictable legal processes into decision trees and playbooks and [[operationalisation|hand them off to an operations team]] (or, at the limit, automate them) altogether.

The other, [[wicked]] part of the lawyer’s day job — one humbly submits, the ''important'' part — is a ''lot'' harder to evaluate, and is ''impossible'' to evaluate if your only prism is ''cost''.  

Which brings us neatly back to the question of legal operations and what is really wrong with the legal department. If you accept these premises, it will be apparent that mea None of this addresses the difficult questions the credit crisis plainly posed.

Now acres of ink have been spilled, books written, monographs published, thought-pieces floated, on the problem of ''how to fix in-house legal''. [[LinkedIn]] is awash with them; all in awe of technology’s current gallop;  their mundane propositions all clothed in expressions of the richest finery. The operating theory: legal is profoundly broken, always has been, but, since we have some new ki t, [[this time is different|''this time is different'']]. We can rebuild it. We have the technology. ''We have the capability to make the world’s first bionic legal department.'' Better than it was before. Better, stronger, faster.   

*'''Over-reliance on external counsel''': [[In-house lawyer|in-house lawyers]] are still far too ready to send straightforward 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. In-house teams at investment banks are the size of middling international law firms. They skew more senior and have far more institutional experience than their private practice equivalents. They should not need to refer English law questions to outside counsel, yet still 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 documents''': Partly because any professional adviser is short an ugly option should anything go wrong, and partly thanks to the professional [[rent-seeker]]’s tendency towards [[Iatrogenic|iatrogenesis]], legal documents are absurdly over-engineered. They are far too incomprehensible, inscrutable and, even for those who do understand them, they are shot through with overblown protections 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 contracts that aren’t particularly high risk increasingly suffer from “[[Finance contract|banking envy]]”.

Now it is far easier said than done, but were we to address these ''cultural'' phenomena — neither are easily solved problems to be sure, but aligning systems and incentives influences behaviour a lot more than management theory does — then much of the 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.  

Now MBAs are not known for their imagination, but they do have a long suit in reductionist analytical rigour and they 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.  

* Vendor management