Legal Operations Management - Strategies Proven to Reduce Cost and Increase Efficiency in Legal Departments

Akiko Funatsu, Strategic Client Solutions, Consilio

In today’s rapidly changing legal environment, efficiently managing increasingly complex and growing workloads has become a universal challenge across industries and organizations. According to a recent survey by the Corporate Legal Operations Consortium (CLOC), in the US:

• 83% of legal departments anticipate an increase in demand for legal services, and
• 63% identify workload and resources limitations as their top challenges.

The trend is also clearly visible in Japan. We are seeing a sharp rise in demand for legal services, driven by factors such as:

• An increase in the number of contracts handled,
• Heightened regulatory requirements and global compliance obligations, and
• Strengthened corporate governance practices.

According to a 2024 survey by Nikkei, around 80% of major Japanese corporations reported a shortage of legal professionals. The main reason cited for this was an increase in the volume of legal work handled by in-house legal departments.

In light of these circumstances, we believe that one of the most important solutions to address the challenges faced across the legal industry moving forward is the function of “legal operations” within corporate legal departments.

What do we class as Legal Operations?

Legal Operations refers to a function focusing on optimizing and managing processes, technology, budgets, and resources, so that legal departments can operate more efficiently and strategically. Typically positioned within the legal department, legal operations goes beyond the traditional execution of legal work. It plays a critical role in supporting business growth and enhancing competitiveness through cost reduction, operational efficiency, digital transformation, risk management, and stronger collaboration with other business units.

While the concept of legal operations may still be relatively unfamiliar in Japan – where the adoption rate is estimated to be around 25-30% - its history in the United States is surprisingly long. Legal operations began to be recognized as a specialized role certainly by the early 2000s. Since then, the number of companies implementing legal operations has grown rapidly. According to a study by Thomson Reuters, by 2021 over 80% of companies in the US had a legal operations function or an equivalent role. Among companies with annual revenues exceeding 10 billion yen (approx. 100 million USD), that number rises to 95%.

Why has the adoption of legal operations in Japan been relatively slow? Multiple surveys have pointed to a lack of human and budgetary resources within corporate legal departments as a major reason. Even though legal operations is recognized as a potential solution to help address the growing demand for legal services, many companies find themselves in a paradox: they understand the need for legal operations, yet they lack the personnel and financial resources to implement it. This creates a kind of vicious cycle.

However, this situation has started to shift in recent years. The digital transformation of internal processes driven by the COVID pandemic, along with the enactment of workstyle reform legislation in Japan, have served as catalysts for change. As a result, interest in legal operations has grown rapidly.

According to a recent survey, 42.6% of Japanese companies stated that they plan to establish a legal operations function within the next one to two years, and 57% of corporate legal departments in Japan indicated that they either plan to introduce or strengthen their legal operations capabilities.

Legal operations offer new solutions to the challenges and demands faced by today’s corporate legal departments – such as improving operational efficiency, enhancing the quality of legal services, increasing internal client (i.e. other departments within the company) satisfaction, and driving cost reduction.

Therefore, the core purpose of legal operations is to improve efficiency and achieve cost savings without compromising the accuracy and integrity of legal work.

Legal operations capabilities go beyond the traditional, somewhat reactive legal strategies. They serve as the cornerstone for building and implementing a more proactive legal strategy – one that focuses on optimizing processes, technology, budgets, and resources. In this way, legal operations plays a central role in transforming how legal departments function in the modern business environment.

Key Areas of Legal Operations Initiatives?

While legal operations cover a wide range of areas, let’s take a closer look at how legal operations can function in practical terms to enhance efficiency and reduce costs.  The three key areas that are closely interconnected are:

1. Technology Adoption
2. Process Optimization
3. Data Analytics

For many corporate legal departments that are chronically understaffed, leveraging technology is essential to reduce repetitive manual tasks and allows legal teams to focus on more strategic and high-value work. In recent years, the increased complexity of compliance regulations and social shifts such as the COVID-19 pandemic have driven heightened interest in the use of technology across legal operations.

The most notable technologies are:

• Contract management systems, which centralize all processes related to contracts – from drafting and approvals to updates and renewals.
• E-billing platforms, which enable real-time tracking of legal spend and help prevent billing errors before they occur.
• Document automation tools, which support the creation and management of legal documents, such as employment contracts and M&A related documents, reducing the need for manual drafting.

These technologies are already being considered for implementation by many companies. By reducing manual tasks, they help lower the risk of human error and significantly accelerate overall processing times.

Furthermore, the legal technology landscape has entered a new phase of transformation with the emergence of GenAI. With GenAI now integrated into existing legal technologies, automation of legal tasks has significantly advanced, resulting in faster processing and turnaround times. One of the greatest advantages of GenAI-enabled tools is their ability to continuously learn and improve – enhancing performance over time.

These tools have attracted considerable attention in the legal industry. According to a 2024 survey, over 40% of corporate legal departments reported that they are either considering or preparing to implement GenAI tools within the next two years.

The second key area is process optimization in legal operations. This begins with a thorough analysis of the legal workflow to identify inefficiencies or bottlenecks. Many challenges faced by legal departments stem from inefficient processes. Once those pain points are identified, companies can either eliminate redundant steps or replace outdated processes with legal technology solutions. Through this iterative approach, legal departments can rebuild and streamline workflows.

One effective method of optimization is through standardizing and automating legal processes. Based on the challenges identified, companies must choose the appropriate solution. For example, if inefficiencies are found in the contract lifecycle, implementing a CLM can be highly effective. CLM helps automate the drafting, negotiation, and approval of contracts. Standardizing contract template shortens negotiation times, makes compliance review easier, and helps track obligations to prevent oversights or delays.

If the issue lies within litigation management, using document review platforms can simplify legal hold process and allow for efficient management of electronic evidence.

Or, if the problem is identified as overall inefficiency and lack of transparency in legal service delivery, introducing legal-specific workflow management tools can be a powerful solution. These tools help visualize and centrally manage internal client requests and track progress across legal matters.

By employing these various strategic approaches, legal departments can significantly reduce processing time and optimize resource allocation.

The third key area is data analytics.  Corporate legal departments manage a vast amount of data. Centralizing this data into a database, making it visible, and analyzing it effectively helps both the legal function, and the broader organization make informed and strategic decisions.

For example, by analyzing data on legal workload, case turnaround time, and legal spend, the legal department can objectively assess its own performance. This, in turn, enables necessary actions such as reallocating resources where they are most needed.

Likewise, analyzing litigation-related data allows the legal department to identify trends in disputes, anticipate future legal risks, and shape proactive litigation strategies.

By continuously collecting new data and performing ongoing analysis, the legal department creates a virtuous cycle of improvement: identifying areas for enhancement, measuring the impact of implemented strategies, and taking targeted action accordingly.

Reducing Legal Spend

In recent years, legal spend in corporations has remained at a relatively high level. According to a 2024 survey conducted primarily with U.S.-based companies, the ration of legal spend to company revenue ranges between 0.5% and 3%, depending on the industry. In contrast, surveys conducted with Japan-based companies suggest that this ratio ranges from 0.05% to 0.5%.

While these figures suggest that Japanese companies invest significantly less in legal-related operations compared to their U.S. counterparts, other data shows a clear upward trend in legal spend among Japanese companies since 2015. Notably, companies engaged in international business have reported an over 20% increase in legal costs over the past five years.

Here we will explore three practical strategies to reduce legal spend:

1. E-Billing and Spend Management
2. Outsourcing and Alternative Legal Services Providers (ALSPs)
3. Fee Arrangements

One of the most effective approaches to tackling this growing challenge of legal spend is the implementation of e-billing and spend management systems. E-billing refers to the use of electronic invoicing systems. These systems allow law firms and service providers to submit invoices electronically, enabling end-to-end processing – including receipt, review, revision, rejection, and approval – within a single platform. E-billing is not just about going paperless. It has the potential to deliver greater operational efficiency, while also optimizing legal-related expenses, particularly in managing outside counsel costs.

By automating the review of submitted invoices, companies can more easily identify billing errors such as overbilling, and significantly reduce the time needed for invoice processing. Moreover, standardization of the billing process ensures greater transparency, which in turn reduces compliance risks.

Perhaps most importantly, the centralized data collected through e-billing systems can be analyzed to provide a clear understanding of legal spend trends. This improves spend predictability, enabling more accurate budgeting and financial planning for the legal department.

The second approach is the utilization of ALSPs, or Alternative Legal Service Providers. In Japanese, these are often translated as “代替法務サービスプロバイダー.” These entities offer legal services through methods different from those of traditional law firms. As a more refined strategy for achieving cost reduction and efficiency, the adoption of ALSPs has been rapidly expanding in Japan in recent years.

By strategically outsourcing traditional legal tasks, previously handled by law firms or in-house counsel, to lower-cost contract lawyers or legal technology providers, organizations can achieve greater efficiency and cost savings.

Some of the specific benefits of leveraging ALSPs include:

• Assigning high-volume or routine legal tasks to lower-cost professionals, allowing internal resources to focus on more critical, high-value work.
• Scalability, with the ability to adjust the volume of services based on need.
• Rapid and efficient access to specialized expertise for niche or complex legal areas.

And finally, the third key approach is the optimization of fee arrangements. To achieve meaningful cost reduction, it is essential to ensure that legal fees are appropriately structured.  Traditionally, hourly billing has been the standard fee arrangement with law firms. While the hourly rate has the advantage of being straightforward and easy to understand, it also presents challenges – such as the risk of unpredictable costs.

By leveraging platforms like e-billing and contract management systems, organizations can analyze historical billing data stored in these systems. This allows for a more flexible and objective selection of the most advantageous fee arrangement from a variety of methods – such as flat fees, volume-based billing, or success-based fees, depending on the nature of the matter and the company’s strategic needs.

Enhancing Collaboration & Communication

Effective communication and cross-departmental collaboration are essential to successfully implementing the strategies outlined above.  Rather than operating in isolation, the legal department must work in close coordination with finance, compliance, IT and business units.

Such collaboration enables more efficient problem-solving and ultimately leads to greater overall corporate value. In this context, the legal operations function as a central hub, optimizes workflows and facilitates effective cross-departmental cooperation.

One of the key approaches to workflow optimization is to establish a standardized knowledge management foundation, transforming individual knowledge into organizational knowledge. This means not merely storing the legal department’s or company’s information in a single location, but rather strategically capturing, organizing, and enabling efficient access to that information whenever needed. It is common for legal departments to repeatedly answer the same types of questions from other departments. It is also frequently necessary to retrieve relevant insights from a vast archive of past cases when addressing a current matter.

By building environment where stakeholders can access collective knowledge – in other words, a solid knowledge management base – organizations can solve recurring challenges and enable faster, more informed decision-making.

To ensure smooth communication within the team and with business stakeholders, and to build a knowledge management base that transforms individual knowledge into shared organizational intelligence, the use of collaboration platforms and communication tools is highly effective.

By leveraging tools tailored to the specific needs of the legal department, organizations can achieve tangible benefits such as:

• A reduction in volume of random email exchanges,
• Shortened timeframes for contract execution and case closure, and
• A significant decrease in repetitive internal and cross-departmental inquiries.

These improvements contribute not only to operational efficiency but also to enhancing stakeholder satisfaction and legal team productivity.

Measuring Success & Continuous Improvement

In cost-conscious companies, legal functions have traditionally been perceived as cost centers. To be recognized not merely as a support unit but as a strategic partner in corporate management, it is essential that the value of legal operations be demonstrated with objective and compelling data.

By quantifying value or successful outcomes, analyzing and understanding feedback from internal clients, and flexibly responding to ongoing process improvements based on that feedback, the smooth operation of legal services can be significantly enhanced. But what exactly constitutes “success”?  Terms such as service quality, efficiency and value are often used, yet they tend to be ambiguous without context.

Without measurable and objective data, it is difficult to accurately assess the current situation or implement meaningful improvements. This is where the use of Key Performance Indicators (KPIs) becomes crucial. KPIs help make abstract concepts such as “quality” or “value” more concreted and measurable.

Common KPIs for evaluating legal performance include:

• Turnaround time for legal matters
• Cost savings and budget efficiency
• Utilization of internal and external legal resources
• Management of legal and compliance risks

By regularly measuring these indicators, legal departments can better communicate their strategic value and align more closely with overall business objectives.

After analyzing the current state using KPIs and making necessary optimizations, the next critical step is to gather feedback – both from internal clients and within the legal department. This can be done through regular surveys or by incorporating review checkpoints at the conclusion of legal matters to evaluate whether the process was carried out effectively. Using this feedback, legal teams can periodically review workflows and technology and identify opportunities for improvement to adapt to evolving business needs, By continuously following this cycle – quantifying legal performance through metrics, gathering structured feedback, and using both to drive ongoing improvements – the legal department becomes a powerful, value-adding function aligned with the company’s strategic objectives. In doing so, legal teams contribute not only to risk mitigation and compliance but also to enhance the overall enterprise value.

Conclusion

In this article, we've explored what legal operations is and why it’s more critical than ever. As today’s business environment grows more complex and globalized, the demands on legal departments continue to evolve—expanding in both scope and strategic importance. Meeting these demands requires a shift away from traditional, reactive legal support toward a more proactive, forward-thinking approach. Legal operations is the key enabler of this transformation, empowering legal teams to deliver greater value, improve efficiency, and align more closely with business goals.

Akiko Funatsu / afunatsu@consilio.com

Director, Strategic Client Solutions

Consilio

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About Consilio

Consilio is a legal services company that helps corporate legal departments and law firms to reduce the cost, improve the efficiency of and manage the risks of both large legal projects and the day-to-day business of running a legal department.  We are not a law firm and do not provide legal advice. Consilio has more than 5,000 members of staff based in key locations across the US, Europe, the Middle East, Asia and Australia, and has maintained an office and a datacenter in Tokyo for over 15 years assisting Japanese companies and local and international law firms in Tokyo.

For large legal matters such as US litigation, government investigations or M&A processes, we provide industry-leading AI-enhanced eDiscovery technology, specialized Tokyo-based technical consulting staff and flexible, large scale legal resources to undertake document review tasks in any language (including Japanese) that cannot yet be undertaken using technology.  We host data for over 12,000 matters in our 15 global datacenters.

To enhance day-to-day efficiency of the legal department, we consult with our clients to implement enabling technologies such as electronic billing, matter management and contract lifecycle management systems, or assist with process improvements such as external spend analysis and outsourcing of basic legal processes to low-cost teams.  We also provide experienced in-house counsel through our “Lawyers On Demand” business to assist our corporate clients to manage projects requiring additional specialized in-house resource in situations where a permanent hire is not the ideal solution.

For more information, please visit www.consilio.com or email us at info@consilio.com