MEETING THE “CHANGE CHALLENGE” FOR LEGAL SERVICES IN THE PUBLIC SECTOR

In the current harsh economic climate with extensive budget cuts now a reality, the spotlight is likely to fall on back office functions proportionately more compared to frontline services. It is more important than ever for managers of functions like Legal Services to take stock of current performance, the extent to which customer demands on services are successfully being met and, where appropriate, implement change to deliver better value for money.

By Jonathan Russell, Senior Business Consultant, Proservartner

The aim of this paper is to inform you about trends within Legal Services and about a powerful methodology being used to comprehensively review the overall Function. The insights gained from this holistic approach to reviewing Legal Services will help you to understand the issues and opportunities supported by robust performance data. This allows the Legal Function to be reshaped into a more efficient and effective delivery structure; it will also provide key management information to optimise performance and help save money whilst maintaining quality of service on an ongoing basis.

Armed with this knowledge, steps can then be taken to tackle cost levels by helping to change the “way” services are delivered in a targeted manner rather than just imposing damaging cuts across the board.

Based on most current forecasts the imperative to make budget savings in the public sector really looks like being here for the next few years – at least. The steps taken now should provide the Legal Function with a welcome breathing space and a robust platform for effective and efficient service delivery over the next decade. Judged in purely financial terms, our experience shows that savings of 15-25% are typically feasible over the medium term. Key ways to realise these benefits are set out later in this paper.

“Robust steps taken in 2011 will have lasting financial and service quality benefits over the coming decade.   15-25% savings should be realised in the medium term”

Executive Summary

• 2011 is a watershed year for much of the public sector with a unique set of local, macroeconomic, and political pressures creating a demand for change that will continue well into the next decade
• Our research and experience in the last 12 months confirms that access to a strong set of operating performance metrics is not widespread within Legal Functions – as with most corporate and central support functions – this typically limits access to existing performance measures compared to “best practice” or peers. This lack of decision support data severely limits the ability to support structured change programmes that could achieve “more output with less inputs”
• Legal Functions now want to build a clear picture of how services are currently performing and how they can be delivered better in the near future. This focuses on the cost and quality benefits that come from having the most appropriate service delivery model in place.
• Key to success is a balanced use of internal and external resources that can only be achieved from knowing where your core strengths reside that contribute to competitive advantage in meeting the needs of customers
• The “Value Opportunity” is the improvement that would be attained from moving to a new service delivery model. This creates the roadmap that will determine how quickly “Best in Class” performance can be achieved
• Our experience shows that typically savings of 15-25% are achievable, together with measureable improvements in quality and customer satisfaction, thus accessing the “Value Opportunity”. This is only possible if the Legal Function and its stakeholders are provided with the necessary information and authority to make the changes
• Real and permanent change only comes with a cultural evolution that meets the changing requirements of the organisation and its customers. This has to be underpinned by ongoing, transparent performance monitoring, and ongoing outcome-oriented delivery for customers.
• Best In Class performance should be within relatively easy reach of all Legal Functions, within a relatively short timescale and with a payback investment period measured in months not years
• The challenge is to define for each unique organisation a delivery model that balances local requirements and pressures within a framework that delivers “best in class” service

The Pressures Facing Legal Functions in 2011

There is an unusual set of adverse circumstances that make 2011 almost a watershed year for the public sector due to a range of local, macroeconomic, and political reasons. Legal Functions face multiple pressures, and in particular:

• Ongoing growth in the demand for their services
• A leadership challenge to become more strategic
• Service departments requiring a broader and more complex set of support services
• Budgetary pressures that look for more output from less spend

Within Public Sector bodies, one of the common themes emerging from our work with Legal Functions is that they feel they can no longer take for granted that their advice and support is valued or regarded as essential. So, the challenge is how to evidence the value provided, measure the value delivered and systematically demonstrate the quality of what is carried out by each Legal Function.

“2011 marks a watershed with real opportunities for Legal Functions to deliver strategic change”

What Is The Starting Point for Legal Functions?

Even in “normal” times there are pressures to justify expenditure and the use of relatively high-cost, in-house resources and more expensive external resources. When perceptions and expectations are not aligned between support services and their internal clients then a focus on financial matters is often the route taken to initiate operational change.

While we have seen these pressures recently within Legal Functions the trend is also common across other back office Functions e.g. Revenues and Benefits, Finance, HR etc, with the initiation of a fair review being hindered by:-

• Low levels of baseline data to support decision making and defend the performance of the operation;
• Basic benchmarking available but used as an irregular snapshot, rather than adopting ongoing performance measurement as a means to identify improvements;
• High workload pressures leading to more of a focus on reactive delivery of services to the detriment of a more strategic direction
• Unclear or conflicting expectations from the internal customer base

This can leave Legal Functions in the unfortunate position of having to defend themselves while working at full capacity.

In addition, customers’ expectations are definitely changing. Increasingly the demand is for more specialist support, faster response times, and demonstrable added value. In the past lawyers have striven to meet all demands placed upon them, to stretch their services to deal with the impact of new laws and increased demand from customers. This is no longer sufficient.

Internal customers can be contradictory about their requirements, and our research confirms that they also want their Legal Function to be more strategic in what they offer, and to target their skills where they will add most value, rather than seek to do everything.

This is the great balancing act! It is an ongoing activity which has to be based around working closely with clients rather than doing things reactively for them, and engaging clients in specific detailed dialogue to agree what is to be provided directly and what can be provided in other ways.

“Clients are demanding a “Herculean” blend of strategic and service delivery capabilities. The “Great Balancing Act” requires robust data on existing capabilities and insights into the value derived from alternative models”

Key Steps Legal Functions Are Currently Taking

Over the last 12 months there has been a marked change in the way that Legal Functions address these pressures and issues, in particular;

• Undertaking early analysis of existing operations, to identify exactly where their strengths and areas for improvement exist
• Identification and analysis of the operational data available and looking out to the market to determine how their performance compares
• A real attempt to understand what service excellence looks like and the steps necessary to achieve it
• The development of a systematic approach to managing and evidencing performance
• Underpinning the change programme with a strategic focus on the cultural issues that will enable its success.

Data contained in Legal Functions’ Case Management Systems is useful to understand current service activity based costs and volumetrics by service line. But most benchmarking we have seen is one-off and relatively high level e.g. legal costs as % total organisational costs rather than focusing on deeper activity based unit costs, productivity levels and value add/ non value added activity splits. This failure to drill deep enough into the specific services being delivered by a Legal Function will limit understanding and impact on the ability to measure ongoing progress and to take effective action towards a commonly established “best practice framework”.

No measurement of success can be achieved without meaningful Service Level Agreements (SLAs) that reflect the real requirements of customers. With some exceptions, we see little real focus on these, and certainly low levels of commercial discipline around how they are used.

The real change we have found recently is an increasing openness to address issues which have been around for many years and, as a result, willingly embrace a move towards best practice. As a consequence most Legal Functions are able to free up 15-25% of their costs. These savings identified (and of course actually translated into action) can either be invested in the delivery of new, or the extension of existing, legal services or to contribute to overall organisational savings targets.

What Is Your Value Opportunity?

We introduced the concept of the “Value Opportunity” a number of years ago to help organisations determine the impact of achieving “Best Practice” within their support functions. It demonstrates the gap between the current cost base and service quality versus the desired target cost base and service quality. In effect, this is the “size of the prize” from moving to the future delivery model. Importantly we also obtain the views from a customer perspective to understand any gaps in expectations.

By understanding the current services provided, volumes, and current costs, then the gap between these and target benchmarks is the Value Opportunity. We also factor in the benefits of service improvements as measured in SLAs, reduced risk, enhanced customer satisfaction etc. This then opens up the questions about how to “realise the Value Opportunity” and the changes that are necessary to do so.

Establishing Your Future Delivery Model

We’ve stressed the importance of having an ongoing dialogue with customers at a strategic and operational level. Indeed, in any organisation a strong Governance Model that incorporates customer involvement is a common component of successful change programmes and ongoing operations.

““Best In Class” is achievable within a surprisingly short period of time. And it can be achieved by any organisation.”

Not all Legal Functions are the same or start at the same point, and a rigorous process by process analysis for each service line will provide the essential decision support information to determine exactly how each service should be delivered to achieve optimal results. Improved cost and quality driven outcomes typically involve a combination of:

• Ensuring, where appropriate, lower cost administrative support and Para-legal resource is used effectively to free up qualified lawyers to do the specialist legal work itself
• Devolving more routine Legal activities to service departments directly, such as issuing routine letters or simple debt recovery cases
• Eliminating certain non-value added Legal activities or duplication of effort between different parties altogether
• Adopting technology solutions to improve the efficiency of administrative legal support activities
• Building knowledge information databases (e.g. on web) to reduce repetitive requests for legal advice and allow increased levels of self-service
• Developing partnerships or collaborative arrangements with other authorities or public sector providers to share resources or work-load and thus build sufficient critical mass internally to support specialist areas across public sector organisations;
• Building the right skills in-house to meet the current and future challenges (and optimising the usage of internal and external Legal resource);
• Developing partnership arrangements or outsourcing of specific work areas to private practice; and
• Negotiating beneficial fee arrangements with counsel or external solicitors on a ‘call-down’ contract basis with well established best practice procurement techniques and supportive teams to monitor achievement of best value.

“Value Opportunity = the hard financial benefits and clear quality benefits available by achieving “Best In Class””

What many organisations also fail to realise is the “competitive advantage” available from certain specialism’s existing within their existing Legal Function e.g. Children’s Law, Property Planning and Litigation, etc. These specialist skills can potentially be sold to other public sector organisations, even at a premium, generating welcome revenues. The other side of the equation is that there are Legal specialist services that may not represent a particularly core strength but are essential to the organisation. This opens up opportunities to share resources across public sector boundaries on a commercial or quid pro quo basis.

“Our proven approach and methodology generates savings and delivers service improvement in a rapid timeframe; and creates a structure to meet the demands on Legal Services over the coming decade.”

We see the maximum value coming from establishing delivery structures that are nimble enough to meet current needs and adapt to the changes that will happen over the forthcoming years. This certainly involves:

• A strong highly focused and efficient Function
• Clear support for customers where it is anticipated that they should carry out the bulk of the work,
• “Overspill” support mechanisms to handle work volumes that exceed normal day to day levels, and
• The outsourcings of certain specialist work to external parties, whether in the commercial or public sectors.

Sustaining the Change

We have been impressed at how quickly some organisations can realign their operations and make rapid progress towards “Best In Class”, thereby releasing savings and delivering service improvements for customers. Clear objectives and structured leadership interpreting robust data throughout are essential requirements to realise these benefits. There are always structural barriers that need to be overcome in a change programme but the ability to achieve sustainable change can typically only be judged several years out. However, common themes for success (that can be implemented quickly and realise benefits) that we have noted are:

• Building the right skills blend from Day 1: Allocating work to the right skills level has been addressed in most Legal Functions. However, we still find significant opportunity to generate benefits from detailed analysis. For example, external pressures such as recruitment freezes can lead to false economies as more experienced staff take up the slack, leading to longer cycle time and, often, increased risks.
• Embed the Right Expectations: A strong ongoing dialogue needs to be maintained with all stakeholders: in particular “expectation management” is essential. This means setting out a clear picture of what will be delivered, to what standard, and measuring outcomes. Formal Governance Structures are an effective mechanism for setting and refining these expectations. However real expectation management relies on the day-to-day behaviours and results delivered by the Legal Function itself.
• Maintaining and Evolving Service Level Agreements: We have seen numerous examples of SLAs that are established, agreed upon, and then either never changed or never really looked at again. All SLAs need to be embedded effectively within the Legal Function and be fully understood by customers including the part they need to play in delivering service excellence. SLAs need to evolve over time either by changing what is being measured or to improve the target level of service; otherwise they are perceived to be irrelevant and, at best, only lip service is paid to them.

Conclusion

Despite the current pressures on the Legal Function (which are likely to remain intense for the foreseeable future), the Change Challenge is a real opportunity to reshape a structure that is focussed on customer requirements and incorporates externally recognised levels of achievement and best practice. Detailed analysis of current operational performance is the essential starting point. By determining the Value Opportunity available from adapting your delivery model and moving to Best Practice, a clear roadmap will be created against which your progress can be measured.

Our core message is: By adopting this proven comprehensive approach and methodology to a Legal Services review, we can generate valuable savings and deliver service improvement for the Legal Function in a rapid timeframe; a “win-win” on both the cost and quality improvement front. It will also help to shape a sustainable structure to meet the demands on the Legal Function over the coming decade.

ABOUT THE AUTHOR

Jonathan is an experienced Finance professional focused on providing Process Analysis, Performance Measurement & Benchmarking solutions for Shared Services & BPO organisations. He is skilled in the implementation of Finance & HR Shared Service Centres (SSCs) and has been involved in a number of start-ups – both internal SSCs and BPO operations (onshore & offshore). He has developed solutions to assist the successful creation and running of SSC’s during their entire lifecycle, including feasibility studies & visioning, preparation of business cases, benchmarking studies, ongoing operational measurement, customer reporting and post implementation review.

He is a Chartered Accountant who has held the positions of Financial Controller, Group Accountant and SAP implementation leader for two well-known publishing groups.

For more information about how we can help transform your Legal Function please contact:

Jonathan Russell jonathan.russell@proservartner.co.uk.

You can also download this whitepaper by clicking here: Legal Services in Public Sector