We move forward by challenging the way things are today. It is easy to look at the world, see what is happening, and assume that is the way it has been and will be. It is hard to imagine a different future, but if we do, we often find ways to improve. The chatter today is about a world with different types of large law firms. In this essay, I’m going to ask a different question, “Is there a future with different types of law departments?”
Law Departments Are Not Immune to Change
There was a time when large corporations operated without law departments or, at most, had a general counsel. The legal work was done by law firms. Often, a lawyer from the main outside law firm representing a corporation would sit on the corporation’s board of directors. Practicing law was not considered, in the terminology we use today, a core competency of a corporation. Law firms were trusted advisors to corporate leaders.
If the corporation had a small law department, the lawyers were gatekeepers handling the legal work flow between inside clients and firms, and they handled simpler matters, such as routine corporate governance for subsidiaries. A general counsel might be a well-respected internal strategist, but the substantive work was done outside the corporation.
For many corporations, having a law department is a recent thing. Forty years ago, when I started working in law firms, it wasn’t hard to find a large corporation, even a Fortune 500 corporation, without a law department. I remember when Continental Bank, one of the largest banks in the United States, outsourced its law department to the law firm known then as Mayer, Brown & Platt. My first in-house job was with a Fortune 500 corporation that had started its first law department less than a year before I joined.
If you have been around corporations long enough, you have seen them go through organization philosophy phases. At one time, corporations boasted large IT departments charged with running the heavy metal computers that comprised the IT infrastructure. The people in IT were not closely intertwined with the business. They were there to make sure the corporation’s backbone (accounting, ordering, etc.) functioned.
Over time, the heavy metal phase gave way to lightweight servers which gave way to the cloud phase. IT departments became integral business partners often charged with developing technology structures to support or implement new business models. IT leaders still must make sure the bills are paid and the orders tracked, but they do far more than that in a good corporation. At the same time, they have shed the routine, day-to-day work to outside providers.
We have seen corporations go from no law departments to large, labor-burdened law departments. Is it time for a phase-shift in law department philosophy?