The final weeks of the year are a time to reflect and prepare for what is to come. For general counsel, it's no different as they take stock of legal department performance and set a direction for 2019.

The Year Ahead

 Facing competitive threats, most companies are rapidly undertaking digital transformation projects, expanding into new sectors and markets and revamping business strategies. The political, regulatory and social landscape remains volatile. At the same time, legal departments possess relatively flat budgets with growing expectations while facing increased scrutiny to quantify their contributions to the company.

Despite this backdrop, legal's core mandate remains unchanged. Legal must support the achievement of business objectives by informing and enhancing the company's strategic position, reducing and managing legal and compliance risk, and efficiently executing business priorities. That translates into the following department goals:

• Enhance Strategic Position. Protect and extend legal assets (e.g., IP, reputation, market position/regulatory rights) and provide strategic clarity.
• Execute Business Strategy. Reduce legal cost/revenue and both execute work and provide advice in a timely manner.
• Reduce Risk. Manage legal and compliance risk appetite, and efficiently transfer or mitigate unnecessary risk.

In short, legal departments must support the company's competitive position, improve corporate decision-making and ensure the most efficient allocation and production with lean resources.

2018 Report Card

On the above goals, legal departments demonstrated mixed performance in 2018.

The good news is that 80 percent of general counsel and legal operations officers rate their departments as “effective.” Moreover, 88 percent believe their department manages the company's legal and compliance risks to the appropriate level.

But this confidence belies some less favorable indicators. Only 30 percent of legal departments have successfully reduced the cost of legal services to their company over the past three years. And just 9 percent of all legal departments believe that the entire department understands the firm's strategic objectives and maintains processes to help individual lawyers appropriately prioritize work.

And if anything, business clients are even more uncertain of legal department efficacy. In a survey of more than 1,700 senior executives and middle managers across the globe, legal's support led to appropriate legal and compliance risk-taking on less than 60 percent of projects. Worse, direct legal support led to on-time delivery of projects less than half the time.

Clearly there is room for improvement.

Planning for 2019: The Drivers of Department Effectiveness

How can legal departments improve in 2019? As a starting point, most general counsel set goals that directly link to business objectives (reduce legal spend by a certain percent, execute a merger, enter a high-growth market, etc.). But to build the capabilities for long-term success, legal departments should focus on the drivers behind the desired outcomes. That is, legal departments should focus on the capabilities that drive goal achievement. To that end, Gartner has identified four drivers of department effectiveness:

• Strategic Alignment. The extent to which legal department structure and services are in line with business objectives.
• Quality of Legal Work. The production of legal work that is fit-for-business-purpose.
• The conversion of legal resources into business throughput (used legal guidance).
• Legal Acumen. The business' capacity to make legally-informed decisions.

Fortunately, clear management focus and prioritization can help departments improve performance across these dimensions of effectiveness. Heading into next year, general counsel and heads of legal operations should ask themselves a few critical questions:

Strategic Alignment

 General counsel should ensure that the legal department and legal staff focus on the highest-value work. Lawyers must assess and prioritize the work they take on by identifying high-value projects and offloading lower-value projects.

• Looking at the next two-three years, how do you expect the nature of your work to change?
• What work is most strategically important to the company?
• Does this work require legal supervision at all and, if not, what nonlegal actor is best positioned to execute it?

Quality of Legal Work

General counsel should build processes that guide important work quality trade-offs as they occur by identifying critical decision points in workflows where legal staff or outside counsel tend to make the costliest choices.

• What aspects of legal work quality (accurate, comprehensive, timely, actionable, etc.) is most important to the business client?
• For this work, are there material costs to additional legal accuracy or risk management?

Department Productivity

 Heads of legal operations should reduce legal department time spent on unnecessary or redundant work, enable internal and external partners to handle discrete legal tasks, and improve department processes to minimize business delays.

• How do we identify and eliminate work without a clear legal purpose?
• What sets of legal work can be codified to help business owners' access critical legal knowledge or independently execute work?
• What legal processes can be owned by paralegals, legal process outsourcers, or software automation?

Legal Acumen

 Legal acumen is the business client's ability and desire to involve Legal when uncertain and appropriate adopt Legal guidance. Increasing legal acumen helps legal department improve the ratio of “good” clients with whom you have a strong working relationship. A few core questions can help assess the level of acumen across your business.

• Do business partners believe the law is important to company success?
• Are business partners able to apply legal advice and act on it to reduce compliance risks without seriously disrupting work processes?
• Do business partners understand the ways in which work processes deal with legal and compliance risk?
• Is managing legal and compliance risk seen as a critical part of work responsibilities?

Future department success will be measured by the speed and cost with which a legal department transforms new conditions—i.e., changing laws, regulations and interpretations— into strategic insight and standardized guidance embedded in operations to increase the company's capacity to make better decisions. Answering these critical questions will highlight places for the legal department to focus investment and create new processes that drive performance. It is only with this focus on the drivers of effectiveness that legal departments will be able to support business at necessary speed and cost while reducing the operational friction that limits corporate productivity.

Abbott Martin is VP of legal team research at Gartner, a research and advisory company headquartered in Stamford, Connecticut.