LEGAL
Between high-profile data breaches, managing budgets, and staying abreast of regulatory issues, Chief Legal Officers (CLOs) have plenty to keep them up at night. These and other concerns became clear in the 2017 Association of Corporate Counsel (ACC) Chief Legal Officers Survey. Corporate Counsel Connect had the opportunity to talk with Iohann Le Frapper, chair of the ACC board of directors and general counsel at ChetWode, about some of the findings of this global survey, from the rise of legal operations to outside counsel relationships and more.
What keeps CLOs up at night
The CLO survey is now in its 18th iteration, and for the past five years, CLOs were asked to cite their biggest concerns. As Le Frapper pointed out, "In some ways, the issues keeping CLOs up at night have remained steady over the past few years." Ethics and compliance remains the number-one concern as it has for some time, followed by regulatory or governmental changes.
However, some issues have a growing percentage of CLOs concerned. "Over the years, we have seen an increase in importance for tech-based issues for GCs. This year, information privacy, data breaches/protection of corporate data, and technology developments round out the top five issues keeping CLOs up at night," Le Frapper shared. In fact, the number of CLOs citing data breaches as a concern rose 17 percent from the previous survey. "In addition, since the last survey cycle, the large change is found in the 'extreme' importance CLOs attribute to regulatory or governmental changes," said Le Frapper. The percentage of survey respondents who rated this as extremely important rose eight percentage points.
Half of outside counsel relationships to be terminated
One of the more surprising findings from the survey was 46 percent of CLOs/general counsel (GCs) definitely or may replace a law firm for underperformance this year. "That's nearly half, and it seems there is a lot of discontent underlying many inside/outside counsel relationships," shared Le Frapper. He further explained, "While respondents in the survey plan to replace their terminated law firms, they are not moving away from outside counsel altogether. This suggests there will be a great deal of shifts in the market and also underscores the opportunity for firms and law departments to work more closely together toward greater value and stronger communication."
Thirty-one percent of CLOs say they will actually increase the amount of work they outsource to outside law firms in the coming year. Some CLOs are taking a different approach, with 21 percent of those who terminated a law firm last year saying they will make significant additions to their in-house lawyer staff instead.
The increasing importance of legal operations
When queried what trend would have seemed unexpected five years ago, Le Frapper felt the quick rise of the popularity of legal operations has caught the industry by surprise. "It is growing faster than expected," explained Le Frapper. "We've always seen an interest in attaining better results and efficiency in the law department, but we have really seen the legal operations professional role flourish." In the previous survey, the percentage of CLOs reporting that they had a legal operations staff member in their department more than doubled, and this year, 43 percent of CLOs reported that they have at least one legal operations professional. Furthermore, shared Le Frapper, "This is on top of the rise in delegation of legal operations, which grew from 16 percent last year to 23 percent this year."
Staffing
Nearly half of all CLOs intend to increase budget in the coming year, but with an increasing number of CLOs looking to decrease budgets, some of those budget changes will affect staffing. Twenty-six percent of CLOs report that they will be adding lawyers. In addition, in order to stay within budget, work that would traditionally be assigned to in-house counsel is now, in specific situations, being delegated to less-expensive alternative nonlegal professionals.
Of note, 23 percent of CLOs in larger companies are reporting staffing cuts. Le Frapper explained, "We don't know the exact reason behind the drastically higher percentage of cuts at larger companies (by revenue of $4 billion or more) compared to medium and small companies. However, we are aware that larger companies and those with larger revenues are placing greater attention on automation and lean processes, creating opportunities for non-lawyers to perform work formerly handled by lawyers." Companies with $4 billion or more in annual revenue were significantly more likely than those with lower revenue to use certain efficiency-based management practices, such as automating work processes and formal process improvement.
Keeping connected with other CLOs
Undoubtedly there is a variety of concerns to keep CLOs up at night. In order to stay up to speed and address some of these issues, Le Frapper has relied on his peers for many years: "I would recommend that corporate counsel have a well-established network in order to talk about these complex issues with their peers and stay up to date on the rapid changes in today's legal landscape. For me, I joined ACC 10 years ago when I needed to quickly learn the nuances of the U.S. Foreign Corrupt Practices Act (FCPA) for my employer. Having a local and global peer-to-peer network has proven invaluable."
You can view more information about the ACC Chief Legal Officers 2017 Survey online; the next CLO Survey will be released in January 2018.
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