ALT_LOGO Kuberno.png

Will Covid19 trigger the rise of governance operations?

Updated: Jun 5, 2020

The Covid19 pandemic has shone a spotlight on flaws in many aspects of how we have been working.  Personally, the  weeks of lockdown have put into sharp relief what I have been mulling for some time – namely that Company Secretariat and Governance functions are years behind other functions, particularly the legal function, in terms of modernising ways of working and embracing the opportunities that technology can deliver. 

If we compare the current state of the in-house legal world with that of its cousin, Company Secretariat, the gulf between the two is clear. During my near on 20 year career as a General Counsel and Company Secretary, I have met only one individual with a leadership operationally focused role (Chief Operating Officer) within a Company Secretariat function – and it was only part of his role. This was within one of the largest (if not the largest) Company Secretariat divisions in the UK and within the last 2 years.

While lawyers have historically been seen as entrenched in their ways and wary of transformation, the growth of the legal operations function from its naissance in the US in the early noughties has been phenomenal.  The Law Department Operations Survey 10th Anniversary report produced by the Blickstein Group and Consilio in 2018, suggests that the number of US legal in-house functions that had legal operations team members quadrupled over the last decade.   There is evidence of significant benefits, both quantitative and qualitative, being derived from focusing on legal operations. CLOC calculates that for the average sized legal department in the US, the potential internal annual cost savings of employing legal operations team members is over $500k through removing non-law tasks from the attorneys. CLOC also states that some of the most significant benefits arising from the implementation of legal operations  (beyond cost savings) comes from the improved stakeholder engagement with cross functional business units like Finance, IT, and HR, as well as the improvement in department processes and project management. The UK is lagging somewhat in legal operations development , however while 10 years ago you would have been hard pushed to find anyone dedicated to legal operations, let alone a standalone team, today it is a recognised career path within the larger in- house legal functions. According to a survey carried out by The Lawyer in 2017, 45% of the FTSE100 Legal functions had legal operations team members although I expect that number is higher in 2020. Combined with the growth in the legal operations discipline has been the explosion in legal technology. From the early offerings of case management systems, e-billing, through the use of AI in e-discovery offerings and the burgeoning automation of contract management – the process of law is going digital. The contrast between Company Secretariat and legal functions is stark. While both functions face similar cost reduction pressures and increasing efficiency demands, the concept of governance operations is largely unheard of. Governance operations technology is primarily focussed on legal entity management systems and board portals for the distribution of board papers. The market for legal entity management systems is heavily dominated by two players in the UK and has been since the systems were created 20 years or so ago meaning that there is very little choice in the market. Company Secretaries, like lawyers, are professionals who deliver advice and guidance to directors and also ensure compliance with a range of requirements in relation to legal entities. While Company Secretaries have to be administratively effective, they seldom have the skills, and never have the time, to be process design experts, agile scrum masters, change and transformation agents, procurement specialists or Governance Operations Technology gurus – among the many other hats that are required to deliver efficient governance operations. Secretariat functions are run on process and are notorious for clinging to paper processes which require many manual steps and are often not clear on handoffs to other stakeholders outside of the Secretariat division. Most of these processes have not been recently reviewed, and if they have it is highly unlikely to have been through the lens of process efficiency. As with all business functions, the Covid19 lockdown has driven working practices online. While the general consensus is that moving board meetings online and adapting the approach to AGMs has worked effectively during the Coronavirus pandemic, it is as yet unclear what impact the lock down has had on the day to day activities of the Secretariat function. There are likely to be issues arising from a step in an entrenched process which requires a wet signature, or where multiple stakeholders are required to comment on and approve a document  which has to date been sent in internal post (yes that still happens).   A governance operations professional can work alongside their Secretariat colleagues and other stakeholders to re-design processes to improve efficiencies, increase auditable compliance and potentially ready the department for digitisation which could revolutionise the way Secretariat teams work. Despite some growth over the past few years (no doubt driven in part by significant regulatory and political change such as Ring-fencing in the Banking industry and Brexit ), according to the most recent DMJ Company Secretarial Market Survey in 2019, the average size of the FTSE 100 Secretariat function was 6 (FTSE 250 – 4) with 70% of respondents saying they were at capacity.

It is clear that Secretariat function leaders are going to have to find new ways to carve out additional capacity.  While the full economic impact of Covid19 is still unknown,  one certainty is that costs in all businesses will come under the microscope. The era of "more with less" is over - cost centre functions are going to have to start pulling rabbits out of the hat to continue to deliver high quality support to their stakeholders. Kuberno is a boutique governance consultancy, which specialises in working alongside Secretariat teams to navigate through governance complexity. Our approach involves combining deep governance expertise with design thinking methodology to seek out efficiencies which can be delivered through a range of measures from individual process redesign to design and deployment of entire Governance Frameworks. We also work with Company Secretaries and their teams to reframe ways of working, providing training on process improvement and ensuring that teams are embracing the new tools and approach, freeing up latent resource.  To find out more about our approach, including design thinking, workshops and updates, please register at our Website, follow us on Linked In or Twitter.  

43 views0 comments