Some highlights from the 2019 in-house legal counsel survey

Since 2014 there has been a 30% increase in New Zealand-based in-house lawyers compared to a 15% increase in all lawyers practising in New Zealand. Earlier this year ILANZ, in partnership with Deloitte, surveyed its members to gain some insights into the key drivers for this growing force in the legal profession.

Our aim was to build a view of what in-house lawyers spend their time on, what issues they see on the horizon, how prepared they are for disruption, and what skills, both legal and non-legal, they identify as being required in the future.

The picture that emerges is of an in-house legal community growing in breadth and maturity and both influencing, and being influenced by, the environments they work in.

Growth and changes

Many factors contribute to the growth of the in-house legal community. One highlighted in the report is the increasingly complex world that organisations operate in and the growing power of both regulators and consumers. Whether the motivator is risk management in regard to regulation, or in regard to brand and reputation, organisations are more mindful of the value and contribution that an internal legal resource provides.

There is also a steady move from a support/functional role (where the legal team is consulted on routine items to obtain legal advice and/or approval) to a more strategic focus. This is perhaps best illustrated in changing reporting lines for CLOs. 44% of CLOs responding to the survey reported to the board or chief executive two years ago with another 24% reporting to the senior leadership team. In addition, 10% reported that the CLO role did not exist two years ago.

In the present day, the number of CLOs reporting to the board or chief executive has increased to 53% with the number reporting to the senior leadership team increasing slightly at 27%.

In-house teams remain lean with 60% of our survey respondents working in teams of 10 or less people, with 44% working in teams of five or less. Respondents predominantly worked in centralised in-house legal teams and our interview subjects gave numerous examples of the ways in which teams are working strategically and collaboratively within their organisations, often involved in project teams and at the beginning of new work rather than asked for an opinion further down the track. The volume of reactive work though meant that many still identified they could be more strategic and devolving “routine” work and upskilling and assisting other parts of the business via education and standard documentation, whether automated or otherwise, were examples of how this was being achieved.

Skills for the future

Over the next two years, respondents overwhelmingly identified issues identification as the most important legal skill, reflecting again their assessment of the value of in-house legal expertise in being involved early on in project development and decision-making. Issuing triage and legal instruction followed, with opinion writing trailing behind. The ability to apply legal skills and knowledge to analyse and explain complex legal issues to colleagues efficiently, and in succinct, accessible terms, saw communication skills and analytical skills featuring most prominently in the non-legal skills.

The surprise result was the low ranking of financial and business acumen in the list of non-legal skills. This drew a variety of responses from our interviewees. For some, this could be explained by the expertise available in other parts of the organisation or the nature of their organisation and role. For many, financial skills and business acumen were seen as vital. As always, the devil is likely to be in the detail with one interviewee noting that one reason in-house lawyers might not rank financial acumen as highly as other skills was not so much actually holding that acumen but having enough knowledge to “know what I don’t know”. From a government perspective, the observation was made that if we substituted business for political, we might have got quite different responses.

Compliance and ethical issues

The survey indicated that many in-house lawyers were concerned about compliance issues reflecting the increased range of regulations and power and influence of regulators. Interestingly, there was a disconnect between this concern and the amount of time that in-house lawyers spend on compliance issues. Our interviewees attributed this gap between importance and time spent on compliance to compliance work not being sufficiently valued by organisations or in some cases, efficiency (ie, it is important but can be efficiently managed and therefore not time-consuming).

In-house lawyers are keenly aware of their role in assisting their organisations to make ethical decisions and discussion of the value they could offer in this area included an acute understanding by several interviewees of the delicate balance between being an enabler who could identify a full range of the available and ethical options and the power of “no” when used sparingly and judiciously.

Working with external providers

Despite the significant growth in in-house legal over the last 10 years, in-house legal teams still outsource a considerable level of legal work to external law firms. Perhaps what may have evolved though is the management of this spend. The highest-ranking management practice for containing external legal costs were sending all/most work to preferred provider panels and regularly reviewing overall law firm performance and providing feedback.

Reflecting this focus on the relationships with external firms, satisfaction levels were high.

Corporate/commercial, litigation and employment and labour ranked as the largest three areas of legal spend over the past two years.

Specialist expertise was rated as the predominant reason for briefing external firms with comments reflecting that in-house legal roles often, though not always, require a breadth of knowledge and understanding rather than the depth of specialisation.

Disruption – are we there yet?

Disruption in the in-house legal profession was measured by the extent to which technology is expected to change how people work. The definition is broad ranging from the organisation of ways of working (eg, hot desking, remote working) to artificial intelligence taking over tasks being performed by the team. Survey respondents fell into two distinct camps – those who believe they are prepared for disruption and those that are not. Despite technology having a significant impact on other industries, the general feedback from in-house lawyers interviewed is that they are still waiting to see the reality of full-scale disruption.

Some expressed hope that technology improvements would free up in-house lawyers from more routine tasks whilst others saw disruption as a given with gradual changes resulting in significant change when viewed over time. Current investments in in-house legal practice appears generally to be focused on document management and electronic signatures rather than digital platforms.

Half of survey respondents expected investment in technology to increase over the next 12 months though it was noted by some of our interviewees that large investment in technology for legal teams is not likely to be the “first cab off the rank” for organisations in terms of spend.

But wait, there’s more ...

This overview covers only some aspects of the survey results. For ILANZ, the survey provides us with an overview of issues that matter to our members and will feed into work in development.

We also hope that a review of the survey report will stimulate discussion both within and between in-house legal teams as well as with their stakeholders.

This inaugural report provides us with benchmarking information to build on in the future as well as a platform for discussion and debate about what the results really mean. As American businessman and futurist John Naisbitt once said: “The most reliable way to forecast the future is to try to understand the present.”

Copies of the Deloitte/ILANZ 2019 in-house legal counsel survey are available from ILANZ or Deloitte.

Gabrielle O’Brien gabrielle.o’brien@lawsociety.org.nz is the Executive Manager of ILANZ – the section of the New Zealand Law Society for in-house lawyers.

Genesis of the trends survey report

• February 2019 online survey sent to approximately 3,000 ILANZ members.
• 544 in-house lawyers (18%) responded to the online survey.
• 122 of these were chief legal officers (CLO) or equivalent on behalf of teams.
• February/March 2019 initial trends from online survey results identified.
• February-May 2019 22 in-person interviews conducted.
• May 2019 panel discussion at ILANZ conference based on draft results.
• July 2019 final trends report published.