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2023 Facts and Figures: Legal’s Self-Perception vs Business Expectations

Legal Department

2023 has been turbulent. Although the Eurozone has entered a technical recession, and fears still exist that the United States may also experience a recession, there is hope that a “soft landing” is in the cards for the global economy.

These hopes are born from data that indicates inflation has started cooling down. This has led many to expect central banks to pause and slowly start easing interest rates in the near future, giving businesses a chance to recover from the fastest hiking cycle in almost 40 years.

Since it seems people can tentatively see the proverbial light at the end of the tunnel, where does this leave Legal?

Onit’s Enterprise Legal Reputation (ELR) report provides some insight into this question.

Previously, we explored Chapter 1, which revealed how non-legal professionals view their legal counterparts. This time, we’ll be exploring Chapters 2 and 3, which discuss how Legal sees itself and how Legal can build a path for growing and moving forward.

Chapter 1 Recap

Just as a quick reminder, near the end of last year, Onit worked with Provoke Insights to gather data for Onit’s 2023 ELR report.

This involved asking 4,000 non-legal employees and 500 legal professionals a set of questions to create a portrait of Legal. To ensure that the ELR results reflected corporate Legal, respondents couldn’t be part of a non-profit, educational, or governmental organization.

Chapter 1 showed that while Legal continues to be seen as the company’s protector and trusted legal advisor, Legal struggles to be seen as a true business partner. Concerns about Legal’s responsiveness, communication, and workflows stifle Legal’s ability to work with other teams.

But Chapter 1 focused just on how non-legal teams saw Legal. Chapter 2 dove into how Legal saw itself and how it interacts with others.

Quality of Interactions

The 2023 ELR report reveals the importance of tracking metrics over time. That’s why it can be said that this year’s report shows that interactions with Legal are a mixed bag.

On the one hand, Legal’s interactions with all departments are positive. In the worst-case scenario, a department has a 2 in 3 chance of having a good interaction with Legal. This is the good news.

On the other hand, the quality of interactions with Legal is in a state of decline for all departments. As an example, the quality of interactions between the IT department and Legal dropped sharply from 78% in 2022 to 69% in 2023. This is the bad news.

The silver lining is that the second half of 2023 has the potential to ease much of the burden on both legal and non-legal teams. The past 18 months likely took their toll and pushed many teams to their breaking point. Assuming that the next six months proceed more calmly, it’s possible the quality of interactions with Legal will begin to improve again.

Onit’s 2023 ELR report also highlighted that for the second consecutive year, Legal rates its interactions by department much higher compared to how non-legal teams rate their interactions with Legal.

For instance, whereas 67% of Legal professionals report good interactions with Procurement, just 22% of Procurement specialists acknowledge positive interactions. Similarly, 66% of Legal say they work well with both Sales and Marketing teams, yet 30% and 27% of Sales and Marketing say the same.

Improving the quality of interactions will be essential for Legal if it hopes to achieve its priorities.

Legal’s Priorities

One potential reason why there is such a discrepancy between Legal’s perception of interactions versus other teams could be differences in priorities.

Most enterprise teams are razor-focused on maximizing profit and adding to the company’s bottom line. In contrast, Legal concentrates on controlling and minimizing risk.

This focus drives Legal’s self-reported priorities for 2023:

  • Increased data privacy / cybersecurity (29%)
  • Minimizing risk exposure (28%)
  • Increasing lawyer productivity (26%)
  • Automating workflows (25%)
  • Hiring talent (20%)
While Legal excels at protecting the company behind the scenes, moving forward, Legal will need to pivot into a more active role where it can generate a material impact for the organization.

Legal’s Challenge

In order for Legal to have a greater material impact, one major obstacle that Legal will need to overcome is the fact that 67% of non-legal colleagues admit they bypass their company’s legal department.

While concerning, more than 9 in 10 (91%) legal professionals know that their department is being bypassed. This means that since Legal recognizes the problem, they can take steps to address the problem.

53% of legal employees think the main reason they’re bypassed is because they slow processes down. 36% think it’s because Legal can be overly bureaucratic, while 35% believe it’s due to the possibility that Legal doesn’t comprehend business needs.

In any case, Legal understands that its current approach to operations is insufficient for satisfying the needs of the company and other teams.

Legal’s (Lack of) Efficiency

Just 39% of legal respondents believe that other teams view Legal as efficient. This means that Legal thinks the majority of their colleagues see Legal as inefficient. What’s more concerning is that this number is down 9% year-over-year.

In Legal’s own words, the reasons for this inefficiency include:

  • Lack of communication
  • Too many processes and policies
  • Poor collaboration
  • Challenging to work with

This reflects Legal’s perception of itself. 82% of legal employees report that their communication and collaboration are struggling, and their processes are complicated.

According to them, some of the barriers that prevent them from becoming more efficient include the lack of budget for solutions, technology, value from leadership, and employee skill sets. Not only do teams need to recruit, hire, and train talented individuals, but they also need to retain high-performing talent.

Legal’s Potential Materiality

If Legal can find a way to improve its efficiency, there are several areas where Legal can have a clear material impact that drives the company’s growth.

  • Revenue generation
  • Sales negotiations
  • Procurement
  • Innovation

However, only 22% of legal respondents believe their company’s contract lifecycle management (CLM) process is efficient. The poor efficiency continues to risk holding back Legal’s potential.

There’s plenty of opportunity for Legal to generate value as 83% of companies handle up to 2,000 contracts each year.

A lot of time and effort goes into managing data, compliance, and contracts. Currently, legal teams spend 4.5 hours every day manually creating, reviewing, and managing contracts.

That’s over half the day. What’s more shocking is that 21% of legal professionals dedicate 6 to 8 hours daily to contracting.

When almost every hour goes to contracting, Legal doesn’t have much spare time for other priorities, much less constructing better communication and collaboration. This results in Legal becoming a bottleneck.

Consider this: 84% report that sales contracts take over a month to execute. 26% of contracts take even three months. If Legal is able to shorten their time on a contract from 3 months to 1 month, this would open up 2 months of time for other matters.

This could even triple revenue, since a month per contract would allow Legal to execute three contracts in the time it used to complete one. If the average contract is worth $300,000, this growth could be the difference between $1.2 million and $3.6 million of annualized revenue.

To tap into this potential, Legal will need to transform itself into a driver of business growth.

Creating a Path for Legal to Move Forward

One fact is certain: For Legal to revamp itself and its operations so that it can help drive business growth, Legal must address the elephant in the room.

Specifically, Legal spends too much time on manual contracting. Juggling entire days of contract management plus other legal matters has pushed Legal teams to the breaking point as 54% of legal professionals admit to feeling some degree of exhaustion.

Making the situation more complicated is that executive leadership teams are under more pressure than ever to deliver. So when leadership asks Legal for a breakdown of Legal’s material impact, just 44% of legal teams report that they’re capable of measuring their return on investment (ROI).

The inability to measure its own ROI stalls Legal’s efforts to assert its position as a strategic business partner. Even though legal teams influence a company’s top and bottom lines, the lack of data for validating their contributions and operational value could stop Legal from evolving.

The simplest way to capture all data that can prove Legal’s materiality while speeding up contracting is to leverage contract management software and other emerging trends. Additionally, Legal will need some quick wins under its belt to build up momentum to help it reach its goals.

Leveraging legal technology

The irony is that even though technology is the easy fix for many of the obstacles facing Legal, just 61% of legal teams describe themselves as an “average” adopter of technology while 9% call themselves late adopters. In other words, Legal isn’t implementing what can help them.

Here are the top three reasons why Legal is slow to adopt technology for their work:

  • Lack of budget
  • Insufficient time to learn new tech
  • Aversion to change

The first two are relatively straightforward to address. The right contract management software will essentially pay for itself by generating savings that outweigh the initial investment. This fact makes it easier to pitch a CLM system to Finance and other decision-makers.

CLMs like ContractWorks can also be very user-friendly. Although you may lose a few hours during the onboarding and familiarization process, the payback is that the CLM will save you 80% more time. So if you used to spend five hours a day on your contract management workflow, a CLM software can cut that to one hour, and you receive four hours you can apply for other purposes.

But when it comes to change itself, change can be terrifying. And in times of economic trouble, teams are incentivized to dig in and weather the storm. However, braving the harsh conditions and pushing forward will demonstrate Legal’s value as a key business partner.

For this to happen, Legal needs the right tools.

A CLM system that includes generative AI can tackle many of Legal’s most time-consuming activities:

  • Development of a contract playbook with up-to-date templates
  • Contract drafting and approvals
  • Generation of a clause library and simple swap of clauses
  • Automatic extraction of key data for storage and auto-fill into related documents

These are just some of the benefits.

More importantly, the right solution has the potential to shrink contract cycles by 20% while accelerating time to revenue by 24% and generating legal spend savings up to 33%. Becoming more efficiency will pay huge dividends for Legal.

Boosting Legal’s efficiency

Companies pay close attention to efficiency metrics. Typically, the more efficient the company, the more revenue it can generate.

However, there are two primary types of efficiency to pay attention to: operational efficiency and cost efficiency.

The first describes the speed at which matters can get resolved. For Legal’s internal clients, this metric is arguably more pressing. After all, if Legal takes three months to execute a contract, it stops other teams from pushing forward to close the deal. The faster these matters get solved, the more teams can focus on making money.

The second is critical for evaluating company success, and it's what executives tend to look at. Cost efficiency ultimately indicates whether or not a team is generating more value than its cost of doing business. When it’s positive, it’s great, but when it’s negative, there will be some hard discussions.

This is where Legal has some room to grow. Just 35% of legal teams see themselves as cost-efficient.

Historically, Legal has never been as pressured to be cost-efficient, unlike Finance, Sales, or Marketing. But in times of economic turmoil where every cent counts, Legal can step up to the plate and deliver in a big way for the company: better collaboration, faster response times, streamlined workflows, smarter cost containment, and minimized revenue leakage.

Moreover, just like the right CLM will help Legal become more efficient, the right CLM will help the organization as a whole become more efficient. A simple yet powerful CLM software opens up the possibility for Legal to delegate certain high-volume, low-value contracts to non-legal teams.

For example, Legal can allow Sales or HR to independently execute NDAs without input from Legal except for major issues. As a result, other teams can significantly speed up their own processes while freeing Legal to shift from doing to leading.

Wrapping Up

While the stormy economic waters of the past 18 months are still a bit choppy, they are starting to calm. In time, this will allow companies some breathing room for loosening some of the harsh austerity measures they put into place.

It also gives Legal a chance to gear up for making a push to become viewed as a worthy business partner and not just the company’s protector. But for this to happen, Legal will need to adopt solutions and frameworks that give it full visibility into contracts and opportunities for proving their impact on the company’s bottom line.

The adoption of an end-to-end CLM system can provide Legal with the tools they need for maximizing not only operational efficiency, but also cost efficiency.

Book a demo to learn how ContractWorks CLM can help Legal optimize its performance. 

2023 Enterprise Legal Reputation Report

How corporate legal departments affect company growth and efficiency

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