Introducing Portability as an "acid test" for legal departments

When used by financial analysts the "acid test" evaluates the strength and viability of a business. It is done by taking the short-term assets minus accounts receivable and inventory and dividing by short-term liabilities.

This reveals a company’s ability to meet its immediate cash requirements. It is one of the more common business ratios used to assess a company's financial situation. It is an extremely simple and powerful method to determine a fundamental health indicator.

Off Road Legal are not aware of a similarly simple fundamental test to determine the strength and viability of a legal department. We thought we'd have a go at thinking about just such a valuable test.

Our fundamental test of strength and viability for a legal department is to consider 'portability'. How 'portable' is your department?

We have come to believe that 'Portability' is achieved through maturity and excellence in all aspects of our 6P framework. When the fundamentals of purpose, planning, process, platform, people and performance are delivered to a high standard the result is 'Portability'.

Off Road Legal defines 'Portability' as the ability to change, transform or move aspects of the legal function or work without disrupting performance.

Portability enables GCs to maintain a constant performance level to customers while changing, transferring or transforming any major components of their legal operations. Taken to the extreme, being fully 'portable' would mean that the legal function itself is entirely replaceable with no detriment to the business or customers.

Reaching a state in which legal operations become portable means everybody has the ability to respond to business needs, & knows what to do. Legal risks are entirely clear and activity is totally focused on customer needs. Simplicity, clarity and interoperability are the norm.

Thus the major dual benefits of Portability are:

greater flexibility in the face of forced changes, and

the necessary capabilities to create sustainable deliberate change.

For more thoughts on the distinction between 'forced' and 'deliberate' change see the part one Green Paper.

Examples of activities that benefit from Portability (changing or move aspects of the legal function or work without disrupting performance) include:

• changing scale or volume of service

• lowering your investment or cost-level

• changing location or other aspects of the delivery model

• changing your organisational structure, location, skill sets, personnel

• integration of a target business, or splitting out a sub-business

• increasing your digital capability

• reassessing and changing your law firm panel

• optimising specific work by changing geography or service team line

• taking the decision to outsource work

• changing your law firm panel

• switching to a new CLM tool, or other digital platform

• creating a new department structure

Portability is activated when legal services are built to a high standard on the 6P framework.

Because it is hard to achieve without high levels of maturity and success in the foundational aspects of running a legal department, it means a great deal to say you have achieved Portability. We think that Portability is therefore a potentially useful acid test to apply to legal services.

Decisions about change are made easier when you know that performance will remain independent of any transformation projects.

At this level of maturity wider change becomes a deliberate choice.

Shall I move this category of work to a new internal team (offshoring)? To an external team (outsourcing)? To a manged service team? Easy to do when process, platform, planning are all optimised. Can I rely on my team? Easy to do when your people are motivated, engaged, well trained and qualified. Do we know why we are doing this? Easy when purpose is clear and well communicated. Do I know what 'good' looks like and can I measure performance?

Thus, we propose an acid test for a GC to take that answers the key question, "How 'Portable' is my legal function?"

Unlike the financial formula there is a degree of subjectivity involved here, but we propose a two step analysis to reveal:

... the part to whole ratio of portable legal department activity divided by the activity that could become portable...

Start by asking first what proportion of your legal department activity is already portable? Then consider what portion of activity could become portable?

Love to hear any thoughts... and we are happy to organise a webinar on this topic. If you are interested, please let us know.