The Core / Peripheral Matrix
The modern in-house Legal function is an amalgam of in-house Lawyers, technology enablers, panel firms and alternative providers. How do you navigate this complex structure and understand which tool in your growing toolbox is best for a particular activity?
Hi, Adrian, from Plexus here. I just wanted to share today a model that I've found particularly useful in speaking with in-house functions about how to identify activities within their function that need a solution. And in particular, how to understand the characteristics of that activity and identify the right solution for that particular task. Now, the first thing I found really helpful to identify within a function is really what's the core deliverable of that function. What's the in-house team really here to do with their limited capacity? And the characteristics of those activities, activities that align best with a competitive advantage of the in-house team. That competitive advantage being activities that are aligned with the core capability of the function, activities that best leverage the proximity to the business of the in-house team, and activities that best align with the strategic objectives of the organization. Those activities are the activities that we as a function are going to focus on. They become our core deliverable.
What we're seeing in some of the more progressive functions is in addition to that core capability of an agility lab, that agility layer being a layer that's there to augment the capacity of the core team to meet fluctuations in demand from the business on legal services and fluctuations in capacity within the core team. Now in the biggest functions, we're seeing that team actually being an agility team of lawyers that are generalists, that are able to supplement the capacity of subject matter experts within the core, but obviously most functions don't have the size and scale to accommodate that. And more often we're seeing that agility layer being utilized with flexible legal resourcing. The key thing here is to understand really what are our core deliverables, and then to identify outside of that core, what are our peripheral activities? What are the activities that need to be done, but don't necessarily sit within our core deliverable to the business?
Now, the key here is not to think about this as the traditional approach, which was either it sits in the core and we do it, or it sits in the peripheral and we have to outsource it to one of our panel firms. The key is to go deeper than that and understand within this peripheral of activities, there are certain characteristics that segment those peripheral activities, the different types of legal work. If we draw a matrix through this peripheral work and look at a vertical axis of complexity and a horizontal axis of repeatability, we to define four quadrants, four types of peripheral legal work. Up here in the top left quadrant, we've got high complexity, low repeatability work. This is the one-off advice where it's very highly complex. It might be one or two advisors in Australia that could give me my competition advice, my regulatory advice, my tax advice.
Down the bottom left, we've got low repeatability works. There's still things that don't happen very often within my business, is still non-core, but they're less complex. Rather than there being one or two advisors I trust to give me that advice, there might be several thousand. On the right-hand side, we've got higher repeatability, low complexity work. These are the real business process operational tasks that happen all the time. And when they do they're very low complexity. This is non-disclosure agreements, sales and service agreements, sponsorship agreements, employment agreements, this type of thing. On the top right, we've got higher complexity work that's still very high repeatability. So it still happens all the time. And when it does, a large chunk of it is repeatable in nature, but it's higher on the complexity scale. I can't solve it all with a template. I can't solve it all with a process. I still need lawyer involved in that process. And you can go further than that and understand, "Well, what are the characteristics of these quadrants?"
So if you look at all the activities that are high on the complexity scale, you're really looking for expertise to be injected in that task. Where you're looking at the activities that are lower on the complexity scale, you're really looking for efficiency over expertise. To the point earlier, where in the top left-hand quadrant there might be two or three lawyers in Australia I trust, in the bottom left there's several hundred. I'm much more interested in how efficient the lawyer I choose is than their individual expertise. Similarly, with the repeatability axis, on the left-hand side of the repeatability axis, we're talking about one-off activities. We're really looking for an individual advisor to assist us on that. But as we get higher on the repeatability axis, we're thinking much more about process than we are, who's going to conduct that process for us?
And that hopefully starts dividing this into four quadrants. A combination of expertise and advisor in the top left. We need an expert advisor. Combination of efficiency and advisor in the bottom left. We need an efficient advisor. Combination of efficiency and repeatability process. We're looking for an efficient process. And a combination of efficiency and process. We're looking for an expert process. So in real terms, what does that actually mean? Well, we're seeing leading functions looking at, "Well, if I need an expert advisor for this type of work, I'm more interested in the advisor than where they sit." I might find that at the big law, I might find them at the bar. I might find them at a boutique. Increasingly, I might even find them one of the big four. I don't care where they are. I want the expertise.
Down the bottom left, we're increasingly seeing functions look to alternative legal service providers. That focus on efficiency means people are turning to new law, they're turning to LPs. They're looking at, "Yes, that process may only occur in my business infrequently, but I want a service provider who's conducting that process hundreds of times, thousands of times, across their client portfolio and has thought about being process and technology to bear in being the most efficient solution for me."
When we're talking efficient processes, we're really looking increasingly at process design. So functions starting to understand, "Well, if we're doing this hundreds of times a year, we need to really map out our processes. We need to understand where does this activity occur within the business? What tools, templates, checklists, whatever need to be documented to understand that process." And then going a step further and saying, "Well, once we understand this process, we can enable self-service. We can push this back to the business and we can do that through enablers, like expert systems and automation." And in the top right, we're looking at all of those things. We're looking at all of those process enablers, but because of the requirement of expertise, we need that to be backed up by an expert advisor. And we're looking at the emergence of the concept of a managed service, where leading functions are looking to external firms that can provide technology, process and legal support all in one package.
So hopefully that's been useful to just provide a very simple tool to help think about where your activities sit on this matrix and what solution might be right for you. Obviously, every function is different. A property business will certainly think of property as being much higher on the repeatability scale and much higher on the complexity scale than some other businesses. And similarly, some businesses might find IT services agreements much higher on the repeatability scale as well. But hopefully that gives you a tool at least to start categorizing where your own work sits and think about when we look at our panel of firms we engage, do we have support in each of these quadrants? Thanks again for your time.
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