It’s no secret that we are living in difficult economic times. Regardless of industry and location, the mantra everywhere seems to have become “do more with less.”
Germany is no exception. “We are at a time of great upheaval,” Chancellor Olaf Scholz announced earlier this spring after emerging from a cabinet assembly at the baroque palace of Schloss Meseberg. The invasion of Ukraine has taken a seismic toll on Germany’s dependence on Russian energy, severely limiting investment and spend due to electricity costs skyrocketing 600% and a crippling 73-year high in factory inflation. Though a formal recession has been averted, challenges to stabilizing domestic energy supply, defining forward-thinking foreign policy, and fostering social cohesion in a time of war remain paramount. This turbulence is, Scholz says, the “new German speed” and it is being felt by every corner of business – corporate legal departments included.
However, the 2023 Enterprise Legal Reputation (ELR) Report – a multinational study commissioned by Onit that showcases year-over-year (YoY) changes in the perceptions of how 4,000 corporate employees and 500 legal professionals spanning Germany, France, the United Kingdom and the United States view their interactions with each other – reports a growing demand for greater speed, agility, and efficiency as businesses face more pressure than ever during this uncertain macroeconomic period.
Although more than three in four (77%) German non-legal respondents still acknowledge the enduring image of the legal department as a trustworthy protector that offers sage advice, less than one in four (24%) considers Legal a good business partner. Further, only one in three (35%) employees in Germany views Legal as efficient, a 15% downturn since last year’s inaugural ELR Report. This is often attributed to the perception of Legal as bureaucratic (cited by 36% of employees), as slowing employees down (32%), and as lacking visibility and responsiveness (30%). For these same reasons, nearly every legal professional – a startling 94% – acknowledges that they are aware their department is bypassed by internal clients, at least on occasion.
Yet ELR has also uncovered that Legal is at a remarkable crossroads. Legal does not only exist to protect. It can have a direct and positive impact on an enterprise that enables and accelerates every aspect of business – from revenue generation to operational efficiency and corporate culture, even in this era of economic distress.
The people, process and technology of Legal
In recent years, corporations have begun to more frequently adopt a long-standing business framework triangulating people, process, and technology (PPT). Designed to maintain balance and optimize efficiency, PPT has revolutionized myriad disciplines. People will always be required to provide expertise and talent, process is required to accomplish work with purpose and scale, and technology assists people in streamlining and advancing process.
While all three are fundamental to maximizing a business’s material growth and success, the ELR Report revealed that internal clients’ quality of interactions with Legal has fallen noticeably across every function since last year. This is especially applicable to go-to-market teams striving to hit pipeline numbers; in Germany, there was a 29% and 35% decrease in quality among Legal’s interactions with Sales and Marketing. Moreover, eight in 10 (82%) legal professionals feel their communication and collaboration with people is faltering, while nearly half (46%) believe their internal clients deem their processes overly complicated.
Legal has the power and opportunity to help grow the business in every capacity. Adopting PPT for Legal provides corporate legal departments with a chance to evolve the way they interact and how they are valued, reshaping their image from a back-office function to that of a more visible and efficient business driver. The answer of how to make that happen is the third element of the PPT framework: technology.
Unifying people and process – a case for legal tech transformation
Technology is not merely a collection of complicated and shiny tools. It is a catalyst for progress, fostering collaboration and serving as a valuable instrument for modernization to empower faster, smarter responsiveness and execution.
Businesses that invest in and adopt next-generation technology powered by automation, artificial intelligence, and machine learning have been shown to surpass others in the best of times, but especially so during times of economic disruption. In fact, the number-one priority cited by German legal departments for 2023 in the ELR Report is automating workflows.
The latest innovations in enterprise legal management (ELM) are not disparate systems for either matter management or spend management, but complete, configurable, and proven end-to-end legal management solutions. As a single system of record and source of truth for matter data, robust ELM platforms provide numerous benefits, such as time savings, error reduction, and streamlined workflow. Next-gen ELM also removes the need for data duplication across two systems and specifically and seamlessly addresses the requirements of European corporate legal teams, including compliance with the General Data Protection Regulation (GDPR) and multi-tax / currency issues – and it integrates with other enterprise technology as well.
ELM systems provide legal departments with centralized, secure access to detailed invoice data facilitated by legal coding standards, ensuring comprehensive information about timekeepers and invoiced activities. Not only can this identify immediate cost savings, it can also extract data-driven insights and generate powerful analytics to track metrics, enhance strategic decision-making, and establish future strategy. And with only 39% of German legal respondents saying they feel they can effectively manage the value, or return on investment (ROI), of outside counsel, the time for such modernization to connect more with people and streamline process is now.
But while Germany expected the largest increase and growth in budget for technology last year, this year there has been a dramatic drop: Only two in five (44%) legal respondents believe budgets will increase, a shocking plunge of 40% since 2022. Legal departments may feel as though they are fighting a losing battle, with three in 10 (30%) also citing lack of leadership support.
With the current state of the economy creating a major focus on margin control, it is perhaps natural that budgets have dropped for what might seem like just “nice to have” systems. But in a global climate besieged by fluctuating interest rates, inflationary risk, and geopolitical strife, digital transformation can open doors to the greater efficiency required for faster revenue acquisition – for legal departments and throughout the enterprise.
Legal’s moment of impact: Becoming a true business driver
Paradoxically, in a world where digital innovation is skyrocketing, human connection is becoming even more profound, especially as a way of adapting to crisis and developing resilience. And it is the PPT framework – better interaction among people, new efficiencies in process, and the embrace of modern technology – that will distinguish world-class legal departments from bypassed, back-office functions.
Some corporate legal departments are already embracing this triangulated vision and are not merely surviving but actually thriving, even in this challenging economic climate. However, there are many others that are not – either because they are afraid to change, not aware that they may need to, or they are being stunted by bureaucracy, executive teams, or corporate culture.
Yet it’s simple: Legal’s moment of impact is here today, with a chance to take control and become a more strategic business influencer, material powerhouse, and protector – or, unfortunately, potentially fall behind. What happens next lies within each company’s legal department and its willingness to transform into a more visible, interactive, and efficient partner for the future.