The way legal departments work remained vastly unchanged for decades.
But, with the global FinTech market expected to reach a valuation of $324 billion by 2026*, legal teams in this space must adapt or they risk slowing down the business and losing competitive edge.
Now, we're seeing the legal departments of FinTech companies integrating into business teams and becoming a force for scale. But how can small legal teams achieve this while other business metrics are skyrocketing?
As a following on from her Legal Spotlight with us, we spoke with Frances Coyle, Legal Consultant and former Legal Director at Monzo Bank, to understand how lean legal departments can build a robust and scalable legal function in the FinTech space.
Firstly, thanks again for sharing your insights with us!
Having spoken about your experience in our Legal Spotlight, it’s clear that scaling is a bit of a superpower of yours! What would be your advice for small legal teams looking to build a robust, scalable legal function?
This is a really good question. When I reflect back, the non-legal skills that I've picked up while working in scaling tech companies like Monzo and Klarna are really valuable.
For instance, I would use a data-driven approach. To me, scaling is all about increasing the revenue and increasing the value of the legal department without having to increase the costs to the same extent. The only way that you're really going to know if you're achieving this, is if you're able to measure and track your costs and your value.
That makes sense. How challenging is this to do?
Measuring your costs is quite straightforward as it's common practice for legal teams; such as tracking how much a lawyer costs, tracking how much time is being spent on a task, or tracking where the demand is coming from. For example, I'm getting a bunch of contracts - which departments are they coming from? What are they for? Are they revenue-generating contracts or are they cost-based contracts? This information will enable you to make decisions.
Identifying the value that you're providing as a legal department is more challenging. Traditionally, a lot of people have derived the value of the legal team by the difference in cost between an employee and what you'd pay at for a law firm - but, honestly, I think this is really outdated. It doesn't actually tell you what value you're deriving.
In order to set yourself up to scale, you need a method to know if you are in fact scaling; even if you're using quite a rudimentary model. Without a data-driven model in place, you might find yourself growing but not scaling; and they're different things.
Great. So you're tracking your costs and your value. Now what?
I think that once you know where the input is coming from and you know where you can add the most value, this will help you set your key objectives. It'll help you understand how you're doing in terms of performance. You need to be able to track both your costs and your value add for an array of reasons inside the legal team - one of which is scale.
It's really to give the team direction as much as it is to do with scaling. We're increasing the value and increasing revenue, without increasing costs at the same level.
So to scale, in-house lawyers have to prioritise the activity that adds the most value in relation to the business objectives?
Yes. As a lawyer, you need to be focused on the things that are adding real value. Traditionally, a lot of lawyers will say 'yes' to whatever is asked of them. This is for a range of reasons but primarily as most lawyers are service-minded so they want to help.
However, in order to scale, you have to really think about what value will be derived from this work and whether it is something you actually need to be doing. Perhaps it's something that someone else could do. Perhaps it's not even legal work.
You're not going to be able to scale your legal team by saying 'yes' to everything. You have to add more value.
That's a great point! It sounds like in-house lawyers need to be strategic.
Exactly. In traditional organisations, the GC will be responsible for looking forward and for the strategic work. But, in super-fast startups and scaleups, there isn't enough time for that communication to happen. Everyone in the team needs to understand that scaling is a thing that needs to happen inside the legal team for the company to remain sustainable.
For instance, in the product space, you need to make sure the lawyers understand the bigger picture. They need to be super close to their teams to understand what their team's objectives are for the short and the long term. This is so that you streamline communication and bring the insight back into the core of the legal team, but also so that you have more eyes looking forward, planning for the future, and thinking about what we're doing in one, three, and six months time.
Scalable legal departments will always be thinking about what they need to put in place today to make sure their team doesn't become the blocker in the future. The more people in the team looking forward and the more communication flowing between the legal department and other teams, the more time you'll save. And saving time is money, which in itself can help you scale.
I love the point you made about the difference between simply growing and scaling. How would you define this difference?
Growing is just increasing numbers. You can increase the revenue of the legal team by hiring more people, but if your costs increase at the same rate as your value, it's not scaling - it's just growing. This is fine for some organisations who have significant amounts of money or whose investment structure doesn't put as much focus on scaling, but for scaling FinTechs, you want to be able to do more with less costs - it just makes sense.
You need to tap into your proactive mindset that is constantly thinking "how can we do this more effectively"? It is true that the traditional lawyer model of the billable hour doesn't lend itself to trying to spend less time on tasks. But scaling legal teams want to execute tasks more effectively. They're reducing the time they spend on tasks and they're potentially automating themselves. It sounds counterintuitive, but you're almost making your own role obsolete - which doesn't come naturally to humans!
You should be thinking about "how can I make my own role redundant?". "What could be done to automate some of the stuff I'm doing constantly?". It's not cost-effective for me to be repeating the same process - providing your objective is cost economics and not the billable hour (although I do think there's evolution in this space too). All of these models are being rethought to make them work for modern companies such as FinTechs.
You talked about a proactive mindset. Are softer skills important for lawyers to enable scale and keep pace with the rest of the company?
Definitely. Communication is really important.
As a few examples, you obviously need to communicate how you add value to the rest of the business in order to work effectively with the departments that you primarily serve. You'll need to communicate to understand what the business is doing in the short term and the long term so the legal team can prepare and act in line with these goals. You'll also need to communicate what is driving your influxes in demand so you can reassess priorities and make improvements in collaboration with other departments.
Especially for companies going through the scaleup phase, they'll often have more people or more departments than their communication structure is set up for. With this in mind, you need to be proactive in getting your information. If you wait until someone comes to you and tells you "this is in our pipeline", it's probably too late. There's an opportunity for you to be in the standups of the teams that you work closest with so that you have all the information first-hand. Be proactive in getting your data points.
I would also say resilience is very important. This is particularly useful when you're up against the unexpected turns that scaleup companies experience. The nature of this environment means asking your team to not only do their legal work but also be thinking ahead strategically about what needs to be in place. It's quite a lot to ask. And with scaleups, there's never less work and it keeps 10x-ing which can get overwhelming at times. The waves keep getting bigger and they keep on coming, so resilience is crucial.
Personally, I have been so lucky to have amazing GCs as my managers and they really held that umbrella to protect the team from the rest of the mayhem that is often unfolding during the scaleup phase. This helped us stay focused and motivated and proved them to be amazing, resilient individuals. This resilience kept us moving forward, even on those especially crazy days.
What if you need more resources to help you scale?
This comes back to both the point on tracking and the point on communication. In order to add the most value, sometimes you might need to add an extra lawyer, an engineer, or even a technology resource to the team. But, to successfully get this request, you need to proactively communicate what value this additional person or resource will contribute. Hopefully, you will be able to show this through the data that you've been measuring and perhaps using some sort of predictive model. With this you can say "with this additional person or resource, I think we can drive value here and by this much".
Essentially, communication is huge!
How does the tech environment lend itself to building a scalable legal team?
There's a lot you can learn from engineering teams! When you see other teams using a certain technique or tool, and you understand the benefit of it, you can then evolve the legal department too.
For instance, if you see product teams doing retrospectives (or "retros" as they're known) and you can see there are so many benefits, then you can implement that in the legal team too. You get the opportunity to work with these amazing people so make sure you're taking the things that you're learning and implementing them into the legal team where it makes sense.
That's great advice. Thanks again Frances - we really appreciate you sharing your insights and expertise with us!
You can learn more about Frances, her consultancy, and her time at Monzo in her Legal Spotlight here.
*Market Data Forecast, 2021