Legal ops 2022: Key trends and takeaways for the future
When we published our fourth annual Top 5 Legal Ops Trends whitepaper last year, the negative economic impact of the COVID-19 pandemic was finally starting to lessen. Legal ops teams, who had to strategically (and quickly) adopt new processes and tech to weather the global crisis, were primed to continue building on this positive evolution as business environments became less volatile.
Now that we’re in H2 of 2022, let’s revisit our predictions for legal operations’ growth, examining the current state of the industry and how these trends have impacted corporate legal teams.
By getting up to speed on how these 2022 legal operations trends have panned out across departments, you’ll be able to determine which actions your own team should take to close out Q4 strong and set yourself up for continued progress in the new year.
Departments continue bringing on new legal tech
Corporate legal departments and general counsel saw firsthand how new legal technology solutions allowed them to stay agile and efficient during the COVID-19 pandemic. That lesson stuck even as the impacts of the global crisis lessened, with many teams continuing to work remotely or in a hybrid model. And even teams who’ve gone back to the office are equally eager as their remote peers to use new legal software to support better strategic planning, productivity, and cross-department collaboration.
Historically, it’s been a struggle to get GCs on board with implementing new, pricey legal tech. But a widespread paradigm shift post-COVID gave top legal leaders a deeper understanding of the long-term ROI offered by legal tech. Bloomberg Legal analyst Rachael Pikulski noted a particular focus on how “digitization of processes, data management, and contract lifecycle management” ultimately saves departments time, energy, and money.
This perspective from legal leaders has also been a key driver of growth in the wider legal tech industry, with Gartner finding that venture capital investments in the field hit $1 billion for the first time on record in 2022. And in a Bloomberg survey, 48% of legal operations professionals reported an increase in legal tech spend in 2022.
How to take advantage of legal ops tech in Q4 2022
To reap the full benefits of a new legal platform, legal ops teams must receive solid training on how to use it. Just 53% of respondents in Bloomberg’s 2022 Legal Ops + Tech Survey said they felt “sufficiently trained” on their legal tech. When almost half of surveyed legal ops employees don’t know how to properly use their digital tool, it lessens its value to the department and bottom line.
The key to maximizing ROI on legal tech spend is thorough product onboarding and employee training. We recommend using a blended learning approach that includes both group sessions where team members can interact and ask questions as well as asynchronous individual trainings that let people learn on their own schedule.
Basic, single-session tech training — or worse, no training — creates a steeper learning curve in the long run that’ll make it harder for legal ops to level up. In addition to platform-specific training, it’s also a smart idea to connect with IT to share general resources on digital best practices, such as maintaining data security.
Legal management solutions will continue to evolve with features like machine learning and AI. In fact, Gartner notes that, by 2025, “100% of the leading CLM solutions” will include an AI element for contract review. While these advances should make legal ops tools easier to use, a solid knowledge foundation now means seamless scaling in 2023 and beyond.
Lastly, avoid rushing to bring new tech on without doing your homework or demoing the product. The last thing you want is to sink money into a tool that doesn’t align with your department’s goals or skill sets. By now, your team is likely used to using cloud-based tech to work remotely. Take your time to look for legal software that you can customize as needed to match where you’re at in your legal ops journey.
Data security and compliance remain a top priority
While the overall number of data breaches went down slightly in 2022, IBM found that breach costs reached an all-time high of $4.35 million this year — a 2.6% increase from 2021. Most of the organizations that IBM surveyed that experienced a breach had to increase the price of their products and services to try to offset the cost. Coupled with the current IT labor shortage, this risk to the company budget affirms the need for legal ops to step up in assessing potential data compliance holes.
And according to the 2022 Association of Corporate Counsel Chief Legal Officers Survey, “cybersecurity, regulation and compliance, and data privacy” once again took the top spots as the biggest challenges for legal. As data privacy risks and regulations continue to evolve, legal ops is continuing to increase its involvement in this area by working in tandem with IT.
How to secure your legal ops tech in Q4 2022
There are two key data privacy-related tasks you should try to check off in Q4 (or at least put on the agenda for Q1 2023):
1. An EOY security and compliance audit. While IT should focus on evaluating cybersecurity vulnerabilities, legal should concentrate on ensuring that the company’s data use is in compliance with the latest data privacy regulations. IBM found that the average breach cost shot up to $5.57 million for businesses with “high levels of compliance failures,” so an audit can help legal ops protect the long-term health of the business.
Make sure the audit extends to your own legal tech. Outdated legacy legal software is prone to security holes, and if you’re using a legal tech vendor, you want to ensure they take adequate measures to protect your data.
2. Draft or review your incident response (IR) plan. A clear IR plan sets up your team to manage the consequences of a breach while reducing the likelihood of costly litigation. As IBM notes, businesses with a tested IR plan saved an average of $2.66 million in breach costs. If you don’t already have an IR in place, check out our incident response template.
The use of alternative fee arrangements (AFAs) is slowly growing
With increased competition among firms and alternative legal service providers (ALSPs), law firms have become more amenable to using alternative fee arrangements instead of traditional hourly billing models. While there can be initial “sticker shock” for legal operations teams who switch from hourly rates to something like an upfront flat fee, more teams are requesting the change because it brings greater predictability to their legal spend.
In its 2022 Legal OPs + Tech Survey, Bloomberg found a 4% increase in AFA use by corporate legal departments from 2021 to 2022, with an average of 29% of work now performed under an AFA. As global economic conditions remain volatile and controlling legal costs remain central to the health of companies, we’re likely to see that number increase through 2023.
How to leverage AFAs to manage legal spend in Q4 2022
Use data-driven law firm benchmarking to identify opportunities for AFAs. With this process, you compare spend and AFA data on your own vendors with market rates to help you determine appropriate pricing — which Bloomberg survey respondents cited as their biggest barrier to “using AFAs more often.” Benchmarking will help you clear that hurdle with confidence, and you can then get calls on the books with vendors in early 2023 to discuss how the switch will be a win-win for both parties.
Data-driven vendor management helps legal ops get the most out of their partnerships
From law firm benchmarking in rate reviews to tracking diversity metrics of outside counsel, legal ops teams continue to incorporate more data in their vendor evaluations. This objective review process ensures they make hiring decisions that align with the overarching needs of both the department and the business. Additionally, using data on vendor performance drives more productive conversations with current vendors than unsubstantiated suggestions on what “should” be improved.
According to Bloomberg’s 2022 research:
- 38% of surveyed legal ops teams now have “formal metrics in place to help drive business decisions”
- The top KPI for measuring the value of legal ops teams was “outside counsel legal spend”
- 16% of surveyed legal ops teams now use dedicated vendor management software to collect and report on vendor metric
Drive objective vendor decisions with data-backed reporting in Q4 2022
To set yourself up for success in 2023, take the time to establish or review your formal vendor metric collection and reporting processes. If data analysis is a new skill on your team, don’t be discouraged — everyone has to start somewhere.
To nail down the new direction of your vendor evaluations and make them as consistent and seamless as possible, ask yourself these questions:
- What vendor metrics do we currently track, and which ones do we want to track moving forward?
- Do we feel confident about the accuracy of our vendor metrics?
- If not, what steps can we take to increase data quality?
- What tool(s) do we use to collect and report on vendor metrics?
- What do we like and dislike about each tool?
- Can different departments easily access our vendor metrics when they need to see them?
- What vendor metrics can we migrate to a single source of truth?
These insights will make it easier to effectively collect, track, and report on critical vendor information, which builds C-suite confidence in the value of legal ops. Clear vendor management processes and guidelines also help new hires get up to speed, and you can tweak your vendor evaluation and reporting procedures as your team advances in its legal ops journey.
Progress in legal diversity, equity, and inclusion (DE&I) is slow
Like most industries, legal ops has been taking action to improve diversity, equity, and inclusion (DE&I) for both ethical and business reasons. This extends far beyond just hiring diverse legal professionals to areas like mentorship, combating implicit biases, and holding law firms accountable by tracking diversity across timekeepers.
Lasting, sustainable progress in DE&I across the legal industry — an industry that has historically been dominated solely by white men — will take time. But data from H1 shows progress already:
More Mansfield Rule certifications. Over 75 in-house legal departments are in the process of becoming Mansfield Rule certified through Diversity Lab. The Mansfield Rule requires departments to “consider at least 50% historically underrepresented lawyers for 70% or more” of legal leadership roles, hiring, promotions, and career advancement opportunities.
Greater in-house diversity. According to a survey by ALM Intelligence, 37% of surveyed companies had a non-white GC or CLO, and 62% of surveyed respondents claimed their corporate legal department was “more diverse or much more diverse” than their outside counsel.
Big gains at big firms. American Lawyer found the largest year-over-year improvement in racial and ethnic diversity at National Law Journal 250 and Am Law 200 firms since 2001, with percentages of minority partners and non-partners both rising.
Key takeaways for legal ops initiatives for Q4 2022
The key to continuously improving legal DE&I is a concrete game plan. If you don’t have a formal DE&I initiative yet, now is the perfect time to brainstorm what goals you’d like to achieve in 2023 and how to get there. Check out our post on how to create a legal DE&I program for more guidance.
If you already have a legal DE&I program, take time in Q4 with your DE&I committee to review what worked and didn’t work this year. Use those insights to create your roadmap for sustainable, lasting progress.
Your 2022 legal ops journey will shape your success in 2023
While it’s undoubtedly helpful to look at the industry data to see if your team is ahead of the curve or if it needs improvement, remember: no two legal ops teams are the exact same. Your evolution and progress should be guided by your department’s unique goals and talents, not by comparisons to others.
If you’re looking to jumpstart legal ops growth in Q4 and beyond, sign up for our free newsletter to be one of the first to know when our 2023 trends whitepaper goes live!