What are the best ways to drive change within corporate law departments?

Zach Warren: Welcome to Clarity, a podcast powered by the Thomson Reuters Institute. I'm Zach Warren, the institute's legal insights and strategy lead. In each episode, we dive deep into a single question from decision makers and thought leaders from legal, corporate, tax, accounting and audit, and government communities.

On today's episode, we discuss the big question: How can the legal department undergo a change journey that becomes the model for the business in the process? Let's face it: the legal department isn't exactly known as the most innovative department within a company. For a long time, the running joke was legal is the "department of no," existing to tell the rest of the business what they shouldn't do. But GCs have worked hard to try and reverse that trend in recent years. And now, bolstered by new technologies like AI, some have found a path for legal to actually take the lead on change.

So, what does legal as a change agent actually look like today? TRRI's Elizabeth Duffy talks with Shaun Edwards, managing director and head of legal corporate finance and asset lending at SMBC Bank International. They discuss how his department has helped take the lead on innovative thinking and earned a seat at the corporate table in the process. Take it away, Lizzy.

Elizabeth Duffy: So Shaun, thank you so much for doing this podcast with us and having this conversation. Um, we want to talk about the topic of legal as a change pioneer, and I couldn't help but think of your story when we opened up that topic because you and I have chatted about it before. I'm really keen to dig into it, um, and hear from you what that looks like—both in terms of changing the legal department inside and what that means for how it changes the way legal is viewed by the business.

And so, if I can start us off with, um, a headline finding from our recent State of the Corporate Law Department report... Um, we saw that 17% of the C-suite believe that legal is a significant contributor to their business's success, and you compare that with 86% of GCs who believe that to be so. There's a real gap there, and I think of that as a visibility gap rather than a material gap, a reality gap. Um, and a lot of that, as we know from our research, it comes from, um, the lack of metrics and data to really tell the story of legal. And, and we've consistently seen in our research that the C-suite underestimate the value of legal, um, in their business. But I'd love to start there. And when you first saw data like that, were you surprised by it, or was that something you felt confirms what we're already seeing?

Shaun Edwards: No, I, I mean, unfortunately, I wasn't surprised by it. Um, it, it definitely confirms what, what I see. Obviously, I work in a large bank. It's very regulated. Um, it's a relatively small legal department, the size of bank we have. And, and actually, in the past, I've been told nothing happens in legal—you know, nothing ever goes on there. And, I mean, the reason for that is that we don't have too many cockups... um, very few cockups, and we get things right most of the time. So, therefore, the perception is nothing goes wrong, you're not really doing anything. Um, so it's an unfortunate...

And I know this is something that a lot of my fellow heads of legal and GCs said to me, but the better you do your job, you know, the less problems there are that rise up to the C-suite to deal with, I think, and get prominence, the less you're seen as important. Whereas, of course, we know as lawyers the opposite is true.

But the, the other point you mentioned there, which is the lack of metrics, is, is very important. So, very often we're having to pro- to prove our value. We're having to, having to prove a neg- prove a negative or, you know, "this wouldn't have happened but for us," or it's a hypothetical. Uh, you know, "you would have gone down, you would have taken the left turn and not the right turn. Thanks to us, you took the right turn," but nobody sees what's on, you know, the road not taken, to be a bit more poetic. So, uh, it, it is difficult, and it doesn't surprise me that you, that we, that that we get those figures.

Elizabeth Duffy: I'd love to start by talking about your transformation story. Um, and I think of it as having two sides. One is driving change within the legal department, and then there's also legal being the transformation model for the rest of the business. So, if we start with the internal piece, um, maybe just situate for us what was your transformation goal that you started with and what was the catalyst that made you decide now is the time, this is the moment to drive transformation? Was it an internal pressure, or you saw the opportunity? What did that look like?

Shaun Edwards: Yes, I think look, there, there is actually quite a good news story for legal. So, it was, the catalyst was the opportunity to get in on the AI bandwagon, in a way. There is AI... you know, as a, as a large global, highly regulated bank that, that, that does business across a number of different sectors, you know, from trade finance to project finance to, to uh, to asset-based lending to, to aerospace. Everybody is looking at, across all those different, all the, all those different industries, looking at how we can, how we can get AI in the bank and how we can get it, can get it in place as an end-to-end process.

And that would be ideal, you know, we would have a, we would have a sort of one AI that can do everything for a, for a regulated bank. And, and I think, you know, for a large regulated bank, and, and I think that's maybe where we will end up. The reality is that you're having, you know, it's like how you eat an elephant, right? Small chunks. And we are, we were a, a very good use case, uh, for, for AI.

And actually, our journey started, you know, prior to, to, to our, uh, adopting Co-Counsel, which we did yesterday. Um, and, um, the, it started with a feasibility survey within the bank where we looked, and our AI team looked at a number of different departments, and, you know, we tested which one was the most suitable for AI treatment at this stage. So, again, this is, these are the chunks of the elephant, right? Um, and, and legal came out on top. Now, um, it's a really good use case for, uh, for legal. So yeah, that's where we are.

Elizabeth Duffy: Yeah, um, I love the elephant analogy, uh, whether it's biting an elephant in small pieces, but I also think, you know, an elephant's a good analogy for a legal department—the large, they can be slow to turn. And I think lawyers, legal departments, they're not known for embracing change quickly and then jumping on it. So, I'd love to know a bit more about that people side. You know, what did resistance look like, and how did you work against it?

And I, I just heard, um, uh, comment yesterday from a GC who talked about change management as, um, you know, it's working when people feel like they are co-creating the change with you. It's not that the change is happening to them. So, how did you, you know, what's the resistance? How are you building genuine buy-in rather than people feeling like that change is happening to them?

Shaun Edwards: Yeah. So, there, there's positive and, and negative aspects to that, to, to the answer to that question. The positive aspect is that, you know, we, because we're, we're, say, a large bank, a lot of different, um, uh, sectors that we do business in, we have specializations within the team. Um, some, some of those are very suitable, uh, for, for optimization, uh, with AI. Um, some, some less so. For the more bespoke parts of what we do, AI will only ever provide a starting point.

For some of the more routine stuff, that's actually going to be an enormous time-saver, and it's going to be a quality uplift, I think, because there is a, there's a lot of good, good and bad practices that have gone on and been recorded in our documentation, uh, to what AI at that level. So, I'm talking about that's a lot of the flow business, a lot of the standard contracts. I mean, procurement is the one, you know, that comes to mind. I was at a legal tech conference yesterday, and that journal was coming out from everybody, um...

The interesting thing there, and I can see it happening here, is that not only do you, does, does, does an AI allow you to process incoming third-party paper much more quickly, but you can also analyze, you know, the, the, the information—sometimes important commercial information—that you've got hidden within, within the contracts. And that, I can see really... so not only is it providing faster service, um, it's, and, and enabling us to do, to do more with less—I guess that's the big phrase I hear everywhere—um, but actually there's, there's also, um, I think a real opportunity. I don't overexaggerate it because, you know, sometimes I hear GCs and people studying AI saying, you know, "You can effectively become the hero in your institution. You know, you can find all these hidden opportunities, hidden savings." That's true to a degree, um, in, in a, in a sort of regulated bank, uh, such as ours. I think the scope for that certainly exists, but it's going to be, it's, it's going to be, it's going to be limited. But we need to test how that is. So, um...

And so, certain, certain, so certain people will find it very useful, others um, less so. Uh, in terms of sort of the, the internal buy-in, um, I have to say, and I was slightly surprised, there was a, um, I wouldn't call it resistance, but there was nervousness, uh, when we started talking about... we started our AI journey... well, I was, I've been sort of trying to get tech in here, this place, for almost decades... But um, you know, when we started really on the real, the current AI journey that we've, uh, that we've, uh, that we've crowned with, uh, with the go-live yesterday, um, there were certain people who were nervous about it.

I think some people who just didn't like technology, um, they felt maybe their, uh, that, that, that their, their sort of specialist value was going to be undermined because suddenly it was going to come up that the AI was going to come up with, uh, with all sorts of great ideas that they wouldn't have had and do it for them. And of course, if, as I say, a lot of front office people are using, or middle office people are using it, um, then, you know, that, that question might come up someday: Why do we have lawyers when we can do it ourselves? Um, so I think there was a bit of nervousness on that.

I think, I think that nervousness is misplaced. I think what we're seeing, actually, is even with people... and I said, I think generally I see this as a positive, that the marketing and middle office people are using it... there, you know, there, there's a slight governance issue there, which we'll deal with, uh, but actually, it, it's, it's really surfacing the importance of, of legal. It's, it's stoking that interest, which we then, of course, have to, have to sign off on. The lawyer-in-the-loop is super important, and I think that sort of calmed, you know, it smoothed a few furrowed brows, uh, uh. So, I think that, that was, that was the internal buy-in within legal.

Elizabeth Duffy: Yeah, um, well, it sounds like there's a lot of work going into understanding what people are nervous about and where that's coming from—whether it's that their skills and expertise might become devalued or they're nervous about how the technology works. And I do think, um, getting comfortable, getting, um, new habits built around using the technology, building it into the workflow, I think that goes a long way. But I also was interested when you said that you, you were surprised the resistance wasn't necessarily always from older folks or more experienced people in the department.

Shaun Edwards: Yeah, and I think to, to qualified, experienced lawyers who, who've gained that experience the traditional way, you know, putting in the hard yards and the long hours—we've all done that in private practice, at least in the city... But actually, if you look at the more junior lawyers, actually, the opport- and I think this is another opportunity which I think is, is really important to emphasize, which is that we can become better lawyers at whatever level we're at—junior, middle level, senior—we can become better lawyers using AI as a, as a training, as a training partner, really.

The, that, that, you know, you have, you have that, you know, effectively that, that, that experienced, um, listening voice, um, that, you know, will hear you and give you good advice, that sort of legal agony aunt to you, in a way. And so I think that's, that's, that's really, that's really sort of important, I think, I think for everybody at, at every level. And I think once that is the case, uh, once people realize that's the case, they'll see that it's, it isn't, uh, it isn't a threat.

But, you know, inevitably, if people do more, at some point, there's going to be, there are going to be a few fewer lawyers, I think. They're going to be better quality lawyers, I think we're all going to gain from it. So, um, a- and once you start proving this in ways that are crucial to the, to the, you know, to, to, to the executive board, to the C-suite, actually, within your institution... I think this is probably the most, um, the most PR-worthy event that our legal team has had within this bank, which has grown considerably over the last five years. It's the, it's the most, you know, it's, it's, it's the one that's given us, garnered us the most attention.

So that's really important because, as a lot of GCs and heads of legal will tell you, you know, fighting your corner, getting the resource, um, being seen amongst all the myriad different departments that a big institution will have, it's, it's, it's quite a hard piece of work. I get back to my point at the beginning: legal is a really good use case for showing, um, how powerful AI can be. We can do it quickly, we can do it really well. We need to measure it. There are some challenges, um, but I think it's a great opportunity on all counts.

Elizabeth Duffy: Yeah, I, I, I agree. And I want to pick up on a few things that, that you've said there. I definitely want to come back to metrics, but first, maybe start with this opportunity for a newsworthy story. It's an opportunity to put legal up front and center of what transformation can look like for our institution. Was that a goal that you had, um, at the start, or did that emerge, um, as you went along? So, was it more a case of "we know we've got to this opportunity to transform, transform how we work in the legal department" and then realize "this is a great way to up our profile within the institution," or was that part of the early goal, and, and how has the rest of the institution been responding so far?

Shaun Edwards: Okay, so, um, I mean, it was always my, I suppose, my, my, my covert mission, uh, was to, was, was to, was to get us more prominence, to get us, you know, to get us, uh, more brownie points, if you like, and to get us, uh, you know, to get our face in the picture. Um, so I think that was always, um, that was always my sort of, a, a goal, but it's a goal that will only work if, if the, if you're going to deliver a quality product once you've, once the bank has paid a lot of money for, for an AI system. Um, so I always wanted that, but we had to deliver something real.

I, I like to think that those two things will depend a lot on your institution. If you're in a small company, yeah, you are going to be more prominent. Um, in a bank, in a large global bank like ours, as I say, grown considerably over the last, over the last five years, um, it, it is sometimes hard to get, you know, uh, to get, to get a place at the table, uh, to be honest. Um, and so being the pioneer for this, but also showing that we could do it well, was always something I wanted. It was always a goal of mine. Yeah, uh, but you know, it, it, it went along, it was complimentary to, to getting, to getting a better legal department.

Elizabeth Duffy: Yeah, and is it working yet?

Shaun Edwards: Yeah, is it working? Well, you know, we launched it yesterday. Um, we got in just in time—a little bit of PR management—we got in just in time for a large, uh, regional conference. Uh, and, you know, that illustrates... yeah, and we were seen, we were heard. People have come up to me and said, "Yeah, you're the first." I've, you know, I', I've, I've put some, uh, I put some spoilers out in advance of this... Um, so, you know, uh, people from actually very disparate parts of the bank have said, "Oh, you got legal... now you've got AI now in legal." Um, but there is a lot going on.

And I think, you know, don't expect this to be, uh, to be... if you are very, um, underexposed in your associate, in your institution, don't think this is going to be, uh, the great panacea, um, this is going to solve everything. It's, it's part of it. Um, we always, we have to provide a quality service. I think the next thing is, and you can ask me a question about this, is, is the metrics. So, it's great you're part of the AI bandwagon, uh, youve done something very cool, and you've got a really good system in place. Um, and, you know, you're the first because actually AI works really well with, uh, with legal, uh, with legal services. Um, now, how are you going to measure?

Elizabeth Duffy: And that's something you and I have talked about quite a bit, especially when it comes to not just measuring the success of AI, but measuring the value of the legal department overall. And that gap we talked about, uh, at the beginning of our conversation—the gap between everything legal actually does for the business versus the very concentrated set of metrics that are usually at play in legal departments, which focus on things like spend and headcount. The hard data, it doesn't tell the true, true story.

And we've built our Value Alignment Toolkit at the Thomson Reuters Institute to help GCs and legal departments to better define, measure, and communicate their value to the business. So, it's things like a strategic framework for setting goals that connect to business outcomes, metrics that show not just the efficiency piece, but how the department is enabling and protecting the business, and how it works with stakeholders.

Um, and we also, importantly, have a piece on writing for business, because it's then how you communicate, you know? You collect a lot of data across those metrics, but it's then what are you choosing to communicate back up and out to the business to tell that story? And when I think about all of that, you and I have talked about AI success metrics, and so it's important that they are also connected to business outcomes and they're not just focused on, you know, how much time or resource AI has allowed us to reduce in order to produce the same legal work. Because if you're only focusing on those reductive metrics, that opens the door for headcount cuts or budget cuts, and really this needs to be an investment conversation. So, how are you measuring the success of AI, um, and, and, and communicating that back out so that it, so you avoid that, uh, efficiency trap?

Shaun Edwards: Yeah. So, uh, you're, you're right on all those things, and you've got some great advice and tools, um, at Thomson Reuters. Um, what, what I would say is, especially in a bank, you know, it is, it is very much about the bottom line. That has to be the core of any metrics that you produce. It's a pounds, shillings, and pence... you do have to show financial saving.

Now, that is difficult because, you know, one obvious way of doing it is to say, "Well, last year I spent X, this year I spent X minus Y." But I might have spent X plus Y, and the reason that might be is that we're doing a whole lot of different business. I said my bank is expanding, uh, we're doing a whole load of different business... um, so some of that will be about, uh, you know, about topical savings where we have... maybe, you know, we've done things a certain way in the past by using external counsel, now we let match that cost us. We can do this less, uh, we can do this, um, now ourselves potentially. So, we'll save the whole cost of that.

Um, some of that may have been quoted for the quality of the preparation of the, the instruction that goes to external counsel is also something that you can do on a, you know, on a deal-by-deal basis. So, you start off, something will cost you... either you've got a quote for 500,000 to do something, you refine your output, you, you refine your instruction, and you realize there are certain parts of that you can do, and it's reduced to say 300—completely hypothetical, uh, arbitrary figures—you save 200,000. That's something that you can show. You do need to, depending on where you are, but especially in a bank, uh, you do need to, you do need to, to, to, to have those sorts of figures.

Now, the other, the more, more valuable part of it is a little bit about: Are you getting better lawyers? Can we do more? In our case, one advantage potentially of AI, as I said, we are expanding, moving into new areas. Can existing lawyers do that with the help of AI? Can we become, um, better lawyers? Are there those strategic, uh, opportunities to find within data sent within, for example, procurement contracts? Can you find things that actually of commercial value? There is some scope for that, I wouldn't exaggerate that, there is some scope for that.

So it's really, Lizzy, the answer is it's going to be, it's going to be slightly dependent on what kind of institution you're from. For banks, it's very much about, you know, "Show me the money." Um, in other, in other institutions, other corporates, some other, other, um, uh, other kinds of company, it's going to be, it's going to be different. It's going to be, you know, "Have you been able to deal with regulators better, uh, competition problems better?" Um, and, and I think, you know, inevitably over time, um—and it's not going to be immediate, but over time—there is potentially going to, there is a real interesting issue about staffing, I think. So, couple of thin- three things I would say.

Firstly, some of the law firms have said to us, with AI that we're using, there's going to be work we don't want to do. Where is that work going to go? It's going to come, it's going to come to us. Um, uh, it's going to come to us, potentially. Um, and so we're going to have, you know, we're going to need to, we're going to need to manage that. Um, there's then, you know, there is, as I said, the quality... uh, the quality... can we get better lawyers, um, out of, out of the existing team?

And then what's interesting also, and I mentioned at the beginning, is there is generally AI, which is, you know, a form of technology that, that everybody, uh, can use... um, is that actually... and we've seen this mentioned, factual tech conference I went to yesterday, but we, we're seeing this already within our bank... people doing more work themselves. I say it's, it's dangerous if that's where they stop. You know, it's the self-diagnosis, um, thing. But actually, is that going to be more work for the lawyers? Um, and are we, are we going to end up with a position where actually we are, uh, we're having to deal with more things when we're dealing with them better? Um, so, you know, we're upping our game. So, this is the qu- this is the quality improvement angle, which I think is very important. So, how that's going to play out longer term in terms of staffing, I, I'm, I'm not sure. There will be, at some point, uh, some pressure on that, but I think there's a very good argument for saying that actually you're going to need your lawyers even, even more, you know, um, because you're going to be producing more.

Elizabeth Duffy: So, I do see this increasing, um, opportunity and pressure from a legal department standpoint to be able to push more of the work out to a self- serve... a well-managed, and, and with oversight, but self-serve for that lower value, lower, lower stakes piece. Because they're self-diagnosing anyway, as you say, they're the AI Google doctors or, or lawyers for themselves, and you want to keep a quality control over that. Um, is that something that you're looking to formalize as, you know, if you were to put a sort of milestones in place for what your transformation looks like, is that a key priority? Is there something that comes before that?

Shaun Edwards: So, I think it's, it's a governance issue for us. And, and I think, Lizzy, you've been a fly on the wall in our bank, uh, because this is exactly, or at least in our legal team meetings, this is exactly what we've been, what we've been talking about—this sort of self-diagnosis thing actually could be potentially, it, it has some risks. I, I, I like to look on the positive side of it, which is that people are understanding the legal issues a bit better—not perfectly—uh, the danger is that that's, they stop there and that's... and so that becomes, uh, that becomes a governance issue for us.

But I think in terms, you know... but I, I like to look at it on, as something, as something positive. I think, you know, the Dr. Google thing, I think we all understand our health a lot better if we, we use Google properly, and, and that is a good thing. It's a bad thing if we don't go, you know, if we stop there, we don't go to see a doctor... But um, so I, I see it generally as a positive that it's something... because AI is so democratized, you know? Most people have some sort of AI on their phone. I mean, Google now, the first, the first, uh, first one call is their own AI, right? So, everybody inevitably is using some AI.

And that really puts you, you know, it, it, it, it takes you out a little bit from, you know, from being a backroom boffin to somebody who knows better, uh, about something that we're all now, or they are all more interested in because it's more accessible. But yeah, there are, there are certainly, for regulated institutions, there, there are some risk issues. We will deal with those. I really like on the positive side... so, part of that is about the, the, the, the, uh, the organic growth, um, of AI, not just within, within banks and not just within legal, but across the whole, you know, across the whole, uh, across the whole business.

Elizabeth Duffy: Yes. Um, it's, it's so fascinating, and, and, um, I could talk to you so much longer about this, Shaun, and, uh, ask you so many more questions, but I know we've, we, we're coming to the end of our time. But my last question, um, for you, uh, is thinking about where you are today, where you set out on the transformation journey, and I know there's more ahead to come... Um, but what is something that you would advise a GC who's starting out, or alternatively put, what do you wish somebody had told you and you'd listened before you started?

Shaun Edwards: So, well, on the latter, I, I, I, I'd like, I'd like to have been told that there were so many, uh, internal hoops to, to jump through. I, I have to say that that has been that... but that is inevitable in a, in a highly regulated institution, um, with a new technology like AI. So, I wish I had been told because we were nearly derailed at the 11th hour by yet another approval that came in, amusingly, on April the 1st, that nobody knew about. So, we were the sort of the April fools of that of that particular... but which nearly, you know, did actually delay us very slightly.

So, I wish sort of somebody had told me that, because you go into this AI, and all tech really, is quite exciting. So, you go into this, and you're like a big kid in a candy shop, and you know, and, and, and you want it to go ahead. You want it to happen. You don't, you don't, you don't sort of, uh, you don't sort of understand, you know, why there are all these, these hurdles, barriers in your way. So, I think, you know, that's what I'd like to have been told.

There's going to be more and more AI, I think. We, we, we did run, um, a little bit before we could walk, and now we've caught up, but at a, at a faster pace. Um, I think, you know, what I would say to somebody doing it now is actually, is, is, is actually take the opportunity now—and it won't last very long—take the opportunity now of showing how suitable, how much better your AI, uh, uh, your, uh, your, your legal department can be with AI.

And I think, you know, that's a window of opportunity we, we have, because it is very suitable for AI treatment and optimization. You need to get there, uh, in front. Get, get chummy—I mean, I'm very chummy with our head AI, you know—but get in there, you know, take them out for drinks or whatever. But you know, get in there and really sell the legal department as, as the best candidate for AI optimization. And I think it really is. So, that's what I would say. You need to, you, you need to do a little bit of the political ground, I think, first, uh, unfortunately.

In my case, that, I, I didn't have to do that so much because I had really great buy-in, um, from my AI innovation team, but, you know, other places, that's the advice. If that, if you don't have that, then that's the advice I would give.

Elizabeth Duffy: Yeah, well, that's great advice, and I'm sure having gone through all of those internal approval loops now, you have all that knowledge you can help other departments, um, when they're ready to go through theirs and, and get a bit of reciprocal value that way, too. Um, but that has been fantastic. Thank you so much, Shaun, for spending this time with me and sharing your story, and I would love to keep in touch and, uh, keep up to date as it progresses. Um, but for now, that's all our time. So, thank you.

Zach Warren: I'd like to thank Shaun and Lizzie for joining us today. What really hit me about their conversation was the need for proactivity. Particularly with the pace of change for business ever-increasing, nobody is going to go to legal and ask for change. It will take a concerted, proactive effort from the legal department, but one that could pay off bountifully. Hopefully, you were able to take some cues from Shaun and SMBC Bank to help jumpstart your own innovation and change journey.

Thank you as always for joining us for Clarity, powered by the Thomson Reuters Institute. You can follow or subscribe to this podcast in your favorite podcast platform. And don't forget to share with your colleagues, leave a five-star review, or a positive review on YouTube. For more data-driven analysis of today's professional services market and in-depth conversations with industry thought leaders, please visit us online at thomsonreuters.com/institute or follow us on LinkedIn under the Thomson Reuters Institute.