Best practices

Structuring your in-house legal team for success

February 7, 2024
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Melody Chen

Table of Contents

An in-house legal department is a crucial strategic asset, but only with the right structure and operational rigor. Here are some best practices for designing an efficient and business-aligned legal team. Whether leading a small team or a global legal powerhouse, you'll gain actionable tips for structuring an in-house legal department that drives business value.

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What does an in-house legal department do?

An in-house legal department plays a crucial role within an organization, acting as both a guardian of the company’s legal health and an advisor on a broad spectrum of legal issues that affect the company’s operations, strategy, and risk management. The responsibilities and functions of an in-house legal team are diverse, reflecting the multifaceted nature of modern business environments. The exact scope of the in-house legal department’s role can vary widely based on the organization’s size, industry, and specific needs. 

Here’s an overview of some typical functions and responsibilities of an in-house legal department:

  1. Legal Compliance and Risk Management: Ensuring the company complies with all applicable laws, regulations, and industry standards. This involves monitoring changes in legislation, advising on legal risks associated with business operations, and developing strategies to minimize those risks.
  2. Contract Management: Drafting, reviewing, negotiating, and advising on contracts with customers, vendors, suppliers, partners, and employees, and ensuring contracts are in the company’s best interest while managing legal and financial exposure.
  3. Corporate Governance: Advising on corporate governance practices, including compliance with corporate laws, drafting and implementing internal policies, and assisting with board meetings and documentation.
  4. Intellectual Property (IP) Management: Protecting and managing the company’s intellectual property assets, such as patents, trademarks, copyrights, and trade secrets. This includes advising on IP strategy, handling registration processes, and managing disputes or litigation related to IP.
  5. Employment Law: Helping the company manage its human resources responsibly and legally and advising on employment law matters, including hiring practices, terminations, employee disputes, and compliance with labor regulations, and 
  6. Litigation and Dispute Resolution: In-house legal departments often hand;e litigation and manage disputes, whether through negotiation, mediation, arbitration, or court proceedings. This includes developing litigation strategies, managing external counsel, and advising senior management on legal risks and strategies.
  7. Regulatory Affairs: Especially in highly regulated industries, in-house legal departments advise on regulatory compliance, engage with regulatory bodies, and participate in regulatory processes, including submissions, inspections, and inquiries.
  8. Mergers, Acquisitions, and Divestitures: In-house lawyers play a key role in mergers and acquisitions (M&A), from due diligence to negotiating terms and managing the legal aspects of integration or divestiture.
  9. Legal Education and Training: Providing legal training to various departments on relevant legal issues, such as compliance, data protection, and anti-corruption practices.
  10. Strategic Business Advisor: Beyond their traditional legal roles, in-house legal teams often serve as strategic advisors to the executive team, offering insights on legal aspects of business strategies, market expansions, and other critical business decisions.

The¬†ACC 2023 Law Department Benchmarking Survey¬†(the ‚ÄúACC Survey‚ÄĚ) found that the top five most common functions in the legal department are compliance (77%), privacy (70%), ethics (52%), risk (34%), and government affairs (27%).¬† For a deeper dive, learn about the in-house legal department titles, roles and responsibilities in our guide.

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How should you structure a legal department?

The answer to how to structure a legal department is the tried and true lawyer response to any question ‚ÄĒ it depends. There is no one-size-fits-all law department. Structuring an in-house legal department is a dynamic process that must adapt to the evolving needs of the business, the legal landscape, and the team itself. A well-considered structure enhances the legal department‚Äôs efficiency and effectiveness and aligns it more closely with the organization‚Äôs strategic goals. Thoughtful consideration of legal department structure can also help attract and keep legal talent engaged. A well-designed legal department structure supports attorney career growth and retention. Clear reporting lines to a general counsel allow mentoring, training, rotational assignments, and promotion opportunities to motivate and retain legal talent. Here are some key considerations and strategies for structuring your in-house legal department.

Service needs of the business

When structuring a legal department, it is crucial first to understand the business and its legal service needs. The department‚Äôs structure should align with providing timely, efficient, and effective legal intake and support for the business. The company‚Äôs industry and business model heavily influence how the legal department should be set up. Consider what legal expertise is needed ‚ÄĒ is it mainly to support headquarters operations or to advise a specific business line? Typical headquarters functions include the corporate secretary, tax, intellectual property, and benefits specialists. Other areas that are often centralized include litigation, employment law, mergers and acquisitions, real estate, and antitrust. Ensuring the legal department structure matches the business needs enables the attorneys to deliver top-notch counsel.

Location of the in-house and legal operations professionals

Legal departments primarily adopt either centralized or decentralized structures to align legal with the business’s service needs. In a centralized model, all legal functions are staffed at one location, share one budget, and report to a single general counsel. However, in-house lawyers may have specific responsibilities and relationships, like a product counsel assigned to an internal product group.

In a decentralized legal team model, the in-house counsel and legal operations professionals are distributed across locations to support each business unit’s unique needs directly. Co-locating counsel with their business clients can be beneficial. With decentralization, these attorneys often view themselves as part of the business team, reporting to different business and legal leaders and subsidiaries.

For multinational companies, the geographic location of legal team members can be a significant factor. Consider local legal requirements, language barriers, and time zones. A decentralized structure, where legal professionals are staffed close to key business operations, can improve responsiveness and local compliance, though it may require more robust coordination mechanisms.

The choice between centralization and decentralization depends on the company’s strategy and how the legal department can best enable business goals. This highlights the importance of adapting the legal department structure to meet organizational objectives effectively.

Size of the department

The optimal ratio of legal department size to company size varies significantly across different industries and is influenced by factors such as regulatory environment, company strategy, and the extent of legal work that can be outsourced. Highly regulated industries and companies with extensive intellectual property may require larger legal teams relative to their size, while startups and younger companies might lean on external counsel more heavily. 

According to the ACC survey, the average legal team size by company revenue is as follows:

  • Revenue under $1 billion: two lawyers and four legal staff members.
  • Revenue of $1 billion to $5 billion: ten lawyers and 17 legal staff members.
  • Revenue of $5 billion to $20 billion: 38 lawyers and eight legal staff members.
  • Revenue greater than $20 billion: 80 lawyers and 145 legal staff members.

The ACC Survey reveals that the typical ratio of in-house counsel to employees stands at 1:300 on average. When broken down by company revenue, the average ratio of in-house counsel to employees is as follows:

  • Less than $1 billion in revenue: 1 in-house counsel for every 193 employees
  • Revenue of $1 billion to $5 billion: 1 in-house counsel for every 515 employees
  • Revenue of $5 billion to $20 billion: 1 in-house counsel for every 467 employees
  • More than $20 billion in revenue: 1 in-house counsel for every 714 employees.

The size of the legal department often dictates its structure. Smaller teams may benefit from a more generalized approach, with attorneys handling a wide range of legal matters. In contrast, larger departments can support a more specialized structure, with lawyers dedicated to specific areas such as compliance, contracts, or litigation.

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Budget

Budget constraints play a critical role in structuring the legal department. It may limit the number of in-house specialists or the extent to which outside counsel can be leveraged. Efficient budget management might involve a mix of in-house generalists for day-to-day legal matters and external specialists for complex issues that require specific expertise.

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Skills of the existing team

Evaluating the skills and strengths of the current team is essential. A team of generalist attorneys might be flexible and adaptable, while a team of specialists can offer deep expertise in critical areas. Balancing generalists and specialists based on the legal department’s needs and the nature of the business is key to effective legal service delivery.

For example, a tech company likely requires more intellectual property and data privacy expertise, whereas a manufacturing firm might prioritize environmental and labor law attorneys. Understanding the unique legal demands of your industry is crucial for determining the necessary specializations within your legal team. This may involve establishing dedicated support for different business units or focusing on areas of high demand, such as contract management or regulatory compliance. The goal is to align expertise with the legal issues that drive the most business value.

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Existing legal team’s job satisfaction

The impact of structural changes on the legal team’s morale and job satisfaction cannot be underestimated. Engaging with the team, understanding their preferences, and considering their development aspirations will help design a structure that supports positive work dynamics and career growth.

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What the CEO and senior leadership wants

Ultimately, the legal department must serve the organization’s strategic objectives, which means aligning with the vision and priorities of the CEO, senior leadership, and the board of directors. Understanding their expectations can guide the structuring of the legal department to support the company’s overall goals best.

Regularly reviewing the structure of the in-house legal department, in consultation with senior management and in response to changes within the business and the legal environment, ensures that the department remains aligned with the organization’s needs and continues to provide effective legal support.

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What does legal operations do?

Legal operations, also known as legal ops, is a relatively new field focused on applying business practices and technology to improve the efficiency and effectiveness of legal departments. Essentially, they are the team tasked with running the legal department like a business so that the in-house attorneys can focus on legal analysis, not administrative work, budgets, and business planning. Here are some of the key responsibilities of legal operations:

  • Process improvement:¬†Analyzing and optimizing legal workflows and procedures to identify bottlenecks and increase productivity.¬†
  • Data analysis:¬†Leveraging legal spend, request volume, contract, and other data to inform legal strategy and legal department planning.¬†
  • Technology management:¬†Overseeing legal technology tool evaluation, selection, and implementation for software such as intake and workflow automation, CLM, e-signature, and e-billing software.
  • Vendor management:¬†Managing relationships with and spend on external legal service providers such as law firms and alternative legal services.
  • Budgeting and cost control:¬†Developing legal department budgets, forecasting, and monitoring legal spending.¬†
  • Cross-functional alignment:¬†Partnering with other company departments, such as IT, Sales, Finance, Procurement, Marketing, and more, to improve the delivery of legal services and systems.
  • Strategic planning:¬†Supporting longer-term initiatives around legal service delivery, policies, risk management, and more.¬†

The legal ops role helps apply modern operational rigor to legal departments. With business and technology expertise, legal ops aims to improve the legal team’s value delivery. This role is becoming critical for modern legal teams looking to become more efficient.

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When should you expand your in-house legal department?

The expansion of an in-house legal department is often dictated by the organization’s growth phase, the evolving complexity of the business, and the imperative for specialized legal expertise. Some situations include:

  • Business Growth:¬†If the company is rapidly expanding into new markets or acquiring new entities, more legal support may be needed to handle the additional workload and complexity.
  • New Regulations:¬†Entering a highly regulated industry or new regulations in your current industry may require additional legal expertise to ensure compliance.
  • New Company Initiatives:¬†Major strategic initiatives, such as new products/services, international expansion, or IP development, may require specialized legal skills.
  • Workload Increasing:¬†If the existing team is consistently working at capacity and unable to take on new work in a timely manner, expanding may be prudent.
  • Insourcing:¬†Bringing more work in-house instead of using expensive external law firms may warrant additional headcount.
  • Cost Savings:¬†In some cases hiring more in-house lawyers can reduce overall legal spend versus using outside counsel.
  • Response Time:¬†If legal issues are not being addressed quickly enough, more lawyers may improve responsiveness.
  • Risk Management:¬†Higher business risk may necessitate more legal oversight and support.

The decision should be data-driven, with workload metrics, KPIs, budgets, and business goals informing when to expand legal department headcount. The focus should be on adding value and capabilities to the business. These legal metrics can be tracked automatically with software like Streamline AI. Here are some helpful metrics and evidence to use when advocating for additional legal department headcount:

  • Workload Data:¬†Track legal requests and matters handled over time, by type, and by department to demonstrate increased volume. Look at legal requests trends and anticipated volume based on historical trends.
  • Cost Savings:¬†Estimate potential cost savings from replacing outside counsel work with internal team members.
  • Risk Management:¬†Outline areas of heightened legal/regulatory risk that require more attention.
  • New Business Initiatives:¬†Detail upcoming projects/expansions that will require enhanced legal support.
  • Response Times:¬†Provide examples where legal delays are impacting operations or decisions, especially when a lack of headcount can affect revenue or timely close of deals.
  • Attorney Hours:¬†Track hours worked per lawyer to prove capacity constraints.
  • Headcount Ratios:¬†Compare legal staff to revenue/profit, employees, or other metrics versus competitors and industry benchmarks.¬†
  • Internal Client Feedback:¬†Anecdotal feedback from internal clients can illustrate the need for more legal resources.
  • Talent Retention:¬†Attrition data can signal a need for more headcount and development opportunities.¬†

The strongest business case will include a mix of quantitative data like hours and budgets as well as qualitative impacts on risk, responsiveness, and business outcomes.

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How do you scale an in-house legal department?

Scaling an in-house legal department effectively is more than just hiring more people. It also requires a strategic approach to legal operations, embracing legal technology, and optimizing workflow processes. As legal demands grow with the business, in-house legal teams face increasing work volumes and complexity. 

To address this, legal operations become crucial in identifying areas for efficiency gains. This involves streamlining administrative tasks, such as legal intake, request triage, and matter management, to free up legal professionals to focus on more strategic initiatives. Implementing project management methodologies and adopting best budget and vendor management practices can also significantly contribute to scaling efforts, ensuring that resources are allocated efficiently and effectively.

Adopting new legal technology and software solutions is another efficient way of scaling an in-house legal department. Advanced legal tech solutions, like legal request intake, triage, and workflow automation software, can efficiently transform legal services within an organization. For example, legal tech platforms like Streamline AI enable the automation of intake triage and custom approval routing, thereby reducing manual effort and minimizing the risk of human error. This not only accelerates the legal process but also enhances accuracy and compliance with set processes. Streamline AI also offers real-time analytics and reporting capabilities, providing insights into key legal performance metrics, workload distribution, and process bottlenecks. Such data-driven decision-making empowers legal departments to optimize workflows and improve service delivery continuously at scale.

Furthermore, scaling an in-house legal department extends beyond merely increasing headcount; it involves enhancing the department’s capability to handle a larger volume and variety of legal work more efficiently. This can be achieved through training and development, promoting a culture of continuous improvement, and fostering collaboration within the team and across the organization. Integrating legal technology, like Streamline AI, with existing systems and tools ensures seamless operations and strengthens the legal department’s role as a strategic business partner. By focusing on legal operations, leveraging legal technology, and cultivating a skilled and adaptable team, in-house legal departments can scale effectively to meet the evolving needs of their organizations.

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Structuring an in-house legal department for efficiency and growth is a strategic endeavor that requires a careful analysis of the organization’s needs, a clear definition of roles, and the adoption of enabling technologies. By doing so, organizations can transform their legal departments from traditional support roles into dynamic growth and strategic innovation engines.

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