Crafting a legal operating model: a blueprint for in-house legal teams

While often overlooked, a well-defined legal operating model can significantly enhance the efficiency, effectiveness and value contribution of an in-house legal team.  Here, Lucy Powell explores what it means and how to define it for your team.

What is a legal operating model?

A legal operating model (LOM) is a strategic framework that outlines how an in-house legal team operates and delivers legal services to an organisation.  It encompasses a wide range of elements, including the team's structure, processes, technology and governance.

Think of it as the engine that powers the legal department.  It defines:

• Who does what: roles and responsibilities
• How work is done: standardised workflows and processes
• What tools are used: technology solutions that drive efficiency and effectiveness
• How decisions are made: governance structures and risk tolerance levels

A well-designed legal operating model provides clarity, reduces duplication and ensures that resources are allocated effectively, enabling the legal team to deliver consistent and predictable value.

Why should in-house teams focus on the legal operating model?

Several compelling reasons exist for in-house legal teams to invest in developing an LOM: 

1. Improved alignment with business goals: by streamlining processes and focusing on value-added tasks, the legal team can proactively support business priorities.
2. Increased efficiency and productivity: standardised processes and technology-driven solutions reduce inefficiencies, enabling the team to handle higher volumes of work without compromising quality.
3. Cost control: clear frameworks mean legal teams can manage budgets more effectively, optimise the use of external counsel and ensure that resources are allocated to the right work for the right price. 
4. Enhanced risk management: a well-structured LOM can help identify and manage legal and compliance risks more effectively. 
5. Stronger collaboration: a shared understanding of the LOM can foster better communication and collaboration both within the legal team, and between it and other business units.
6. Future-proofing the legal function: a flexible LOM can help legal teams adapt to changing business needs and emerging legal challenges.

Practical steps to define and manage a legal operating model 

Developing a LOM may seem daunting but breaking it into manageable staps can simplify the process.  Here’s how in-house teams can approach it:

1. Assess the current state: begin by conducting a thorough assessment of the team's current operations. Identify strengths, weaknesses, and opportunities for improvement. Consider using tools like SWOT analysis or a legal maturity model to gain a comprehensive understanding of the team's capabilities.
2. Identify and engage key stakeholders: determine who will be impacted by the LOM and involve them in the development process. This will include members of the legal team as well as business leaders, users of legal and other functional areas such as HR and Finance.
3. Define the team's mission and vision: clearly articulate the team's purpose and long-term goals and align with the organisation’s overall strategy.  Identify the core legal services that the team should focus on to help prioritise efforts and allocate resources effectively.
4. Design the organisational structure: determine the optimal structure for the legal team, considering factors such as team size, geographic distribution, and specialisation needs, including both technical legal knowledge and other skills and competencies.
5. Establish governance structures: define decision-making protocols, escalation routes and risk thresholders, balancing the need for control with the flexibility to respond to emerging business needs.
6. Map out processes: create detailed standard operating procedures (SOPs) for key processes, such as contract review, template management, litigation management and regulatory compliance. This will ensure consistency and efficiency across the team.
7. Leverage technology: invest time and budget in tools that support the team’s needs and ensure the technology integrates seamlessly with existing systems.
8. Establish key performance indicators (KPIs): identify relevant KPIs to measure the team's performance. This could include metrics such as turnaround time, matter costs and client satisfaction.
9. Develop a communications plan: ensure transparency by communicating the purpose, benefits and implementation timeline of the new model to all stakeholders, providing regular updates and feedback loops to encourage and maintain buy-in.
10. Create a culture of continuous improvement: an operating model isn’t static so foster a culture of learning and innovation. Regularly review and update the LOM to adapt to changing circumstances and evolving business needs.

By following these steps, in-house legal teams can develop and implement a robust LOM that will drive efficiency, improve quality and enhance their value contribution to the organisation.  The legal team will be well-positioned as an indispensable partner to the business and while thoughtful planning and ongoing adaptation are required, the rewards are more than worth the effort.