Don’t Blame The GC, The CEO Decides

Sometimes it can appear from the outside that inhouse lawyers are reticent about legal innovation and tech adoption, but if you ‘follow the money’ then in reality it’s the CEO who ultimately decides. As Eric Topel, the new GC of IP platform Patsnap, told this site: ‘Not all executives have a strong understanding of legal.’

‘Some CEOs are from a sales and marketing background, some from tech,’ he explained, ‘so sometimes there’s a lack of familiarity [about legal tech] and the different tools that are available.’

‘Also, if there is a culture of blame at the company, then that culture encourages [the GC] to spend the money on law firms, not tools for the inhouse team,’ he added.

‘The more integrated we are [with the C-suite], then the better the level of trust, and more work is kept inhouse, and so the same goes for [legal tech] tooling and AI that can help us to improve and be more efficient and save money,’ Topel said.

That is to say, some companies’ C-suites don’t have a detailed understanding of what the legal team does or how they do it – nor perhaps want to have that level of engagement. This then makes them uncertain about the inhouse team’s overall value, and so they depend on law firms to handle more work, and also don’t want to invest in legal tech for their own team.

In short, don’t always blame the inhouse lawyers when you see a lack of progress on legal innovation, there may be some very good corporate culture reasons for this that are beyond their control.

And this goes beyond areas such as legal ops and improving the legal function. If the culture of the company is one where the CEO doesn’t have a feel for what the legal function can do to improve how it works, then that also has a follow-on impact on law firms. As, if legal advisors are under no external pressure to change due to client lack of interest, then don’t expect a powerful need to embrace legal tech there either.

So, what’s the answer? Topel told Artificial Lawyer: ‘It’s incumbent on the GC to educate the C-suite.’

But, will all GCs want to do that? He replied: ‘I see myself as a proactive attorney. But, if you are reactive then you may see no reason to change.’

‘A lot of this is about demonstrating the value of the legal team,’ he added, and underlines that this is not always easy. A CEO with a product focus will want to focus on R&D, one with a sales focus on that area,’ he stated.

Eric Topel, GC, Patsnap

Topel then reiterated some key points about inhouse legal: it’s not just a support function; it can generate revenue for the company as contracts are getting negotiated there; they also reduce risk for the business.

And of course, the legal needs of a company cut into the company’s profits, so any improvement there, while still achieving the above, has got to be worthy of the CEO’s attention….right?

One irony here that Topel points out that is if a company’s C-suite is not that interested in how legal needs are met, the costs don’t go away – they increase. They increase because the inhouse team doesn’t get the investment in tech and the better processes to do the same for less, and simultaneously work is handed out to external firms with little overview of the spending.

I.e. a company whose CEO and other top execs don’t want to worry about how the legal side of things work will end up paying more for those needs ­– both inhouse and externally. What you want is a CEO who brings the same financial rigour and business focus to this area that they might expend on sales or R&D.

Topel then added that at Patsnap there is a very supportive culture for the legal team and ‘we have had lots of healthy conversations’ where they evaluate the best way ahead.

‘We do not just run to outside counsel, we look at the pros and cons of how to do things,’ he noted – and perhaps this is helped by the fact that Patsnap overlaps with the legal world with regard to patent research.

Which brings us to the last point: billing and spending. First, does legal spend matter? It may seem like a question that’s easy to answer, but there are plenty of folks who say things such as ‘legal spend is only 0.5% of a large company’s total revenue, so it doesn’t really matter and there’s no need to focus on saving money’.

Although, if that’s true, i.e. ‘it doesn’t matter’, then we may as well all stop doing legal tech, because ultimately tech creates efficiencies and if those efficiencies ‘don’t matter’, then why do this?

For Topel it’s clear: ‘Yes, legal spending does matter. We are as mindful of legal spend as we are for any other part of the company’s budget.’

Some matters are so massive they go beyond normal budgets, he noted, but most companies are not dealing with things as huge as an IPO on a regular basis.

And fixed fees, i.e. making sure work is scoped out and modelled against similar matters so there is something akin to ‘a legal market’ in place when clients buy legal services?

Fixed fees [from law firms] make it easier for us to give approval. It gives us more control and it also encourages the law firms to be more efficient. If you have hourly work with no guardrails the law firm model in effect encourages people to work slower. If you are efficient then it’s harder [for a lawyer] to hit their annual quota [of hours],’ Topel noted.

I do see value in fixed fees, as otherwise the more efficient a firm is it hurts their bottom line,’ he observed and mentioned an example where sometimes a law firm will add using WestLaw to their bill for legal research, even though Topel knows they’ve paid an annual bill for that resource already. ‘I challenge the fee for online research,’ he added.

Amen to all of that.

Artificial Lawyer sometimes gets a bit downcast when considering the incredible buying power clients have which can be leveraged to change the legal world and drive impactful innovation across the sector – and how this is not always the case. But, clearly there is hope.

What is also clear is that we all need to talk to the CEOs of companies if we want change in the legal world. The GCs need to engage with CEOs so they understand what can be achieved. The law firms may also find they can give extra support for inhouse lawyers here. And legal tech companies, legal innovation lobbyists and consultants, also need to engage with the CEO and the rest of the C-suite more.

After all, the GC may nominally be in charge of the legal function, and from there comes the purchase of law firm services, but if the CEO of the business doesn’t want to know about legal innovation – or perhaps may want to know, but is not engaged with it – then how can we expect things to move forwards? CEOs have the ultimate power over the budget, and whoever controls that controls what happens with legal needs as well.

If you found this discussion of interest, then come along to the Legal Innovators California conference, June 4 and 5, San Francisco, where this and many other subjects will be explored.

Legal Innovators California conference, Jun 4 + 5, San Francisco

Day One is focused on law firms, and Day Two on inhouse and legal ops. 

We have many great speakers attending the event, along with a group of pioneering legal tech companies and service providers – you can see some more about our speakers here. It will be two great days of education and inspiration! Join us and get ahead of the curve on all things legal tech, innovation and legal AI! 

For ticket information, please see here. Don’t miss out on what will be a great event.