Businessman and businesswoman searching through telescope on top of the world
The Association of Corporate Counsel recently released the 2020 edition of its Chief Legal Officers Survey (CLO Survey). It is chock full of data that confirms the changing role of the Chief Legal officer, corporate legal departments, and, by extension, the entire legal supply chain. The Survey results are a barometric reading of focus areas, changing dynamics, and expanding enterprise expectations of the legal function. CLO’s are its bellwethers. The expansion of their role and influence—and the “ultra-legal” skills required—foreshadow changing expectations of all lawyers and allied legal professionals.
The ACC Survey confirms that legal expertise is now table stakes for CLO’s. It must be accompanied by other skills—notably business acumen and leadership. Additional competencies include utilizing technology to drive efficiency and enhance customer value, data analytics, holistic problem solving, management, emotional intelligence, and creativity. The CLO may be the top legal officer, but the role now transcends traditional legal boundaries and is inextricably fused with the enterprise. The legal team is no longer a self-contained department that operates by its own metrics-or lack thereof, speed, and operating standards. Legal’s legacy hall pass for fiscal accountability, use of data, and other standard business norms has been revoked. The legal function is being transformed from a budget drag to a value enhancer.
CLO’s Are In The Vanguard Of A Reimagined Legal Function
The legal function is being reimagined— not so much by CLO’s as the C-Suite. The expectation—and mandate—is that the legal function must not only proactively defend the enterprise but also collaborate with business to create enterprise value by better serving its customers. “Customer-centricity” is not a buzzword; it is a paradigmatic shift in mission, culture, and delivery designed to align providers with customers, improve the customer experience, demonstrate value, and establish a “sticky,” long-term relationship. Customer-centricity is a process that is at the core of digital transformation. It is not declared but achieved over time by sustained client value, adaptation to changing customer needs, and outstanding delivery.
CLO’s are law’s astronauts. They are the first to explore the new frontiers of the legal function, paving the way for others to expand existing professional/industry boundaries. Their mission is to advance enterprise goals and objectives. As professionals, they must adhere to ethical principles and operate within legal bounds. As business collaborators/partners, they must evaluate legal exposure with other risk factors. Their recommendations must be data-driven and holistic, balancing enterprise risk tolerance with reward. This is a different calculus than traditional legal risk assessment where risk is viewed through the narrow prism of legal training and its cardinal rule of mistake avoidance.
CLO’s understand that legal risk is not in the forefront of risks from the C-Suite’s perspective. The ACC Survey reveals that legal risk receives far less management support—15.4%, as a risk category— than business, 63.4%, and financial risk, 23.1% . This is not to suggest that legal risk is trivial. But the data confirms that keeping the business humming and proactive financial risk avoidance—not legal risk—is what keeps the C-Suite up at night. The legal team must align its risk prioritization with those concerns. This is part of a larger process of realigning the legal function with the enterprise and its customers. Legal must widen its lens to capture the business landscape from the customer perspective, not its own narrower one.
The legal function is becoming as much about partnering with consumers as it is about legal counseling. It is about creating value and aligning with the customer, not simply managing a legal portfolio and balancing a budget. It is about integrating the practice of law with the business of delivering legal services and leveraging that by collaborating with business to drive enterprise value. This is a paradigmatic shift for the legal industry, one that has profound implications for hiring criteria, diversity, legal education, training, and career development. It requires a cultural shift that is underway in-house and will soon extend to the broader legal ecosystem. This is law in the digital age where data is the new oil and customer satisfaction is paramount. The CLO is the conductor tasked with orchestrating this new composition.
Chief Legal Officers operate at the intersection of law, business, and digital transformation. In the span of twenty years, the role has morphed from the practice-centric oversight of legal work—most of which was sourced to law firms—to proactive enterprise defender, early risk detector/mitigator; supply chain manager; and business collaborator/enterprise value driver. This is not what most lawyers—even leaders of large in-house departments— were trained for.
Upskilling has become a constant of the CLO position and, as the ACC Survey reveals, a departmental focus for the majority of CLO’s. So too must the CLO create an agile workforce—in-house/sourced/hybrid— that can anticipate and respond to new risks, many of which result from the Warp-speed advances in technology. It’s not surprising that the 2020 Survey listed data privacy and cybersecurity—together with compliance—as the top corporate organizational focus areas according to CLO’s.
Technology provides enormous opportunity to drive efficiency; detect, calibrate, and mitigate risk; automate; create self-help tools, and a legion of other benefits. CLO’s must capture those opportunities. At the same time, they must proactively manage new threats emanating from the unanticipated (mis)use of technology. This does not require CLO’s to be technologists, but it does demand that they anticipate and respond to its impact on corporate advancement and risk. Technology underscores the dual role of the CLO. Ben Heineman, Jr., an in-house pioneer who helped redefine the GC role at General Electric, remarked that GC’s play “offense and defense.” That is more true today than ever.
The Digital Imperative
The legal industry has had an ambivalent relationship with technology, principally for economic and cultural reasons. That is changing, because, as the ACC Survey and numerous other studies confirm, digital transformation is a C-Suite priority. Why? Companies that embark on the digital journey have a significant competitive advantage over those that don’t. The stakes could scarcely be higher; a Harvard Business Review survey reported that digital companies achieve an average 55% increase in gross margins over a three-year period. A McKinsey report also quantified the upside of digital transformation— data-driven organizations are 23 times more likely to acquire customers; six times as likely to retain them; and 19 times as likely to be profitable as a result.
Unsurprisingly, the legal function is generally lagging business in this existential transformation process. Gartner reports that only 19% of in-house legal teams are prepared to support digitally transforming enterprises. That will soon change. The high stakes, elevated CLO interaction with the C-Suite, and cultural divide separating legal and business explain the ACC Survey finding that digital transformation is a CLO priority. The digital journey is a process, not a declaration. Organizations do not “go digital”—they become digitally transformed. This is a staged process that does not happen overnight.
At its core, digital transformation is about customer-centricity and using technology, design thinking, new ways/resources/tools of problem solving, data, rethinking the division of labor, and constant improvement to drive customer value and enhance alignment between buyer and seller. This is a holistic, paradigmatic shift that Klaus Schwab coined “The Fourth Industrial Revolution.” The legal function has no choice but to become part of it, and that requires a shift from its default business as usual mindset to the art of the possible.
The CLO Survey: What The Numbers Reveal
General Counsel remains the predominant title for in-house legal leaders, but the Chief Legal Officer moniker more accurately captures the role’s growing alignment with the C-Suite. Consider, for example, that 80% of survey respondents report directly to CEO’s—up from 64.4% just two years ago. This coincides with a steady rise in CLO input to the C-Suite on key business decisions. CLO’s weigh in 72.7% of the time compared to 59% just 4 years ago. These numbers underscore the expanding scope and importance of the legal function. They also confirm that today’s CLO must not only have legal expertise, but also possess business and technological acumen, management skills, and leadership qualities required to galvanize new ways of delivering legal services.
New functions and responsibilities—and the rewards and status that accompany them—demand new skillsets and mindsets. The augmented skills required of CLO’s must be accompanied by intellectual agility and creativity. CLO’s must have the ability to reimagine how things could be done to better align with the enterprise and to meet its objectives. They must possess creativity, leadership, and management skills. This is a vastly expanded core competency list for CLO’s; it will have a trickle-down effect on the entire legal industry. The legal ecosystem—like business—must jettison insular, legacy notions of the legal function and adapt them to client needs.
Spoiler alert: lawyers are no longer the center of their insular, self-selected/regulated/managed/perpetuated universe. Their focus must be on consumers and society, not themselves.
A Look Ahead
CLO’s take their cues from the C-Suite. CLO’s participating in the ACC Survey rank ordered the following as enterprise priorities in the next five years: (1) delivering value to customers; (2) maximizing profit (driving value); and (3) investing in employees. These organizational priorities are what CLO’s and the broader legal industry should focus on. Customer value and satisfaction is the desired end of digital transformation and the sine qua non of business. It is noteworthy that customer value/satisfaction a higher enterprise priority than maximizing profit—a reminder that short-term profitability is no substitute for customer loyalty. Investing in employees—upskilling— is another indicator that investment in a long-term talent management strategy is essential to business success. This is in stark contrast to the volatility and turnover endemic to law firms specifically and the legal industry generally.
The paradox is that in the age of breathtaking fast technological advances, long-term strategies for customer loyalty and alignment are the focus.
The ACC 2020 CLO Survey confirms the lead role CLO’s are playing in legal transformation. The rest of the industry should focus less on “disruption” and self-styled “innovation,” and more on understanding anticipating and satisfying customer needs. That’s what CLO’s are doing and what the rest of the legal ecosystem will be doing soon.