Roman P. Falta © QUADRAGON Management LLC

Roman P. Falta © QUADRAGON Management LLC

Roman P. Falta, born in 1976, studied economics and law at the University of St. Gallen (lic. iur. HSG) and holds degrees in socio-anthropology and psychology from Harvard University and UC Berkeley, among others. He began his professional career in a leading strategy consultancy, followed by work in court, in financial administration and in a law firm. Subsequently, Roman P. Falta was responsible for various areas of corporate legal and compliance at a Global Fortune 500 company. He has built up his own group of companies and is a co-editor of the „Praxishandbuch Legal Operations Management“. Roman P. Falta has been working for many years on the optimization of professional services management and the high performance of individuals and teams. In this interview with, he comments on legal clichés, talks about the importance of legal operations management and shows how corporate professional services departments (legal departments, compliance, risk management, finance or internal audit) can be sustainably optimized. Mr Falta, you are an entrepreneur, a lawyer and co-editor of the „Praxishandbuch Legal Operations Management“. Before we discuss this issue, I would like to ask you why many people often find it difficult to deal with your profession, the legal profession. It seems, and you can turn it around as you like, that lawyers are fraught with clichés. More possibly than people of other professions?

Roman P. Falta: You have a point there and some authors and interview partners take a very nice position on this in our book. On the one hand, many clichés are certainly connected with the fact that the understanding of law is difficult for non-lawyers; law can subjectively be perceived as unfair. Moreover, the law is often difficult for the layman to understand in terms of content. For example, the language of law has been kept very complex over the centuries – in some cases deliberately. Just take a look at the German Civil Code (BGB), which, unlike the Swiss Code of Obligations (OR), is generally not really understandable for an average reader. Moreover, our legal thinking is still based on that of the Romans in some areas. Important law books, such as the OR, are interspersed in many places with Roman ideas. Considering that courts still fall back on the two-thousand-year-old legal knowledge of the Roman Empire when dealing with difficult legal problems, this is quite astonishing. Therefore, until a few years ago, law students had to master the Latin language. These are all reasons why people outside the legal profession have rarely or not at all dealt with law.

On the other hand, part of the negative external perception is to be found in the lack of a qualitative assessment ability of legal work. It is relatively difficult for an outsider to measure and evaluate these, similar to the services of a doctor. Does a lawyer need an hour or five to review a contract? Why did he win or lose in court exactly? Without being able to answer these questions conclusively for himself, however, the client always receives a fee invoice at the end, so that the impression can arise that the lawyer – regardless of success or failure for his client – always emerges as the winner. Hollywood has certainly also contributed its own to the sometimes negative image. In many films and series, lawyers – especially in the forensic activity – are not only presented as above-averagely intelligent and extremely sharp-tongued, but also as particularly ambitious and unfortunately often morally questionable.

Economy and law - two sides of the same coin © QUADRAGON Management LLC

Economy and law – two sides of the same coin © QUADRAGON Management LLC And how is legal personell perceived in companies?

Here, too, we often encounter prejudices: The in-house counsel is often perceived as the „brake pad“ that complicates business. Although transactions have to be concluded in order to generate sales, corporate lawyers are also required to minimise the risks involved in concluding a business transaction and to lay their fingers on the sore points. This is a difficult balancing act in which legal counsels must have much more than just legal knowledge. To make this balancing act more successful, our book shows lawyers in companies and public administration how they can work more effectively, efficiently and professionally. But we also show them how they are increasingly perceived internally as cooperative and entrepreneurial specialists. In our opinion, the days when the legal department was an exclusive business defense unit are definitely over in most companies. Today, in addition to mastery of the legal profession, corporate and administrative lawyers are also required in practice to have a firm entrepreneurial mindset. However, for many who still grew up in the old „fire brigade“ understanding of legal departments, such a changeover to a modern and service-oriented legal operations management can be associated with certain challenges. You address the knowledge of economic contexts by in-house counsels. What does the term „Legal Operations Management“ mean and what are the interfaces to „Professional Services Management“?

Roman P. Falta: Both terms are very closely linked. Professional Services Management is all about how best to build, operate and improve Professional Services units. A distinction is made between two large groups: On the one hand the Professional Service Firms (PSF), such as law firms, tax consultants, management consultants, executive search, etc. and on the other Corporate Professional Services Departments (CPS). These are highly specialized departments in companies and public administration, such as legal, compliance, risk management, finance or internal audit departments. For example, if you want to optimize the legal department in your company or in a public authority, Legal Operations Management as a subdivision of Professional Services Management offers an appropriate arsenal of models, strategies and measures.

Lawyers in their daily legal operations management work © QUADRAGON Management LLC

Lawyers in their daily legal operations management work © QUADRAGON Management LLC Are the models, strategies and measures known from general management not sufficient to optimise the specialist departments or highly specialised service companies you are referring to?

Roman P. Falta: Unfortunately, this was mistakenly assumed for a long time. However, the development in both areas was different. To demonstrate this difference, a look back in the history of management theory is necessary, because the first company, the Dutch East India Co., was founded in 1602, which from a management point of view can really be described as „modern“. It took about 300 years for the Harvard University to launch the world’s first MBA course in 1908. An educational program that taught students what models, strategies and tools are used to administer large corporations. Most MBA courses – based on the Harvard approach – subsequently focused almost exclusively on the administration and optimization of large organizations until well beyond the mid-20th century. With regard to the management of Professional Service Firms (PSF), it was simply assumed that they worked in exactly the same way as large companies. The management content from the MBA programs was therefore simply applied to the much smaller PSF organizations, their small copies so to speak.

In the „golden“ 1960s to 1990s, few people in the Professional Services Firm environment thought about managing their specialized boutiques. The economy in the Western world buzzed even without dealing with PSF management. Apart from a few brief interruptions, everything knew only one direction: upwards. The use of sophisticated strategies, tools and skillsets was not necessary for the PSF organisations, most of which are organised in partnership, in order to be successful as a law, tax or consulting firm. Despite some early warners, such as David Maister, a rethinking on a broad front did not begin until the late 1990s. Until then „simple“ money-making was suddenly over and many of the insights gained in MBA courses were not sufficient in professional service firms to continue to be above-averagely successful.

Corporate Professional Services and Professional Service Firms differ significantly © QUADRAGON Management LLC

Corporate Professional Services and Professional Service Firms differ significantly © QUADRAGON Management LLC And what was the development in the Corporate Professional Services departments, e.g. in risk management or finance departments? Were the same mistakes made there as with the Professional Service Firms?

Roman P. Falta: Even less has been done about them. In the past, CPS departments had no great independent management significance in business administration. This can still be seen today in the fact that the relevant books on this topic can be listed on both hands in German-speaking countries. If you go even one step lower and look at some of these departments, it looks even more sparse. For example, there are only a handful of other German-language books dealing with the management of legal departments – in addition to the now published „Praxishandbuch Legal Operations Management“ – that deal with the management of law in companies and public authorities. I therefore estimate that in the area of the individual Corporate Professional Services Departments we are probably 20 years behind the developments at the Professional Service Firms. What is the difference between CPS- and other departments?

Roman P. Falta: I think one of the most important distinguishing features is the employees. Almost all CPS professionals have studied or even obtained a doctorate and are therefore highly specialized knowledge workers. As a rule, they see themselves as particularly independent personalities who do their work not only because of the money, but also accentuate their search for meaning, fulfilment and joy in it. As a result, CPS teams not only have special social dynamics between the individual employees, but also the relationship between the superior and his team as well as with third parties is much more complex than in „normal“ departments.

In addition, the operation of Corporate Professional Services departments is often not based on tailor-made models and concepts. I would like to show you this on the basis of the aforementioned image of corporate lawyers, who in many places – rightly or wrongly – are perceived as „business inhibitors“: A General Counsel wants to market himself and his team better within his corporation. In the absence of other information, it seems obvious for many to use concepts, strategies and measures from service marketing in such a situation, especially since a „service department“ is to be „marketed“ better. The problem here is that the specific theories and models of service marketing deal with the marketing of services to the outside world, i.e. to external customers in the consumer market. Therefore, they do not fit at all or in the best case only analogously to the described problem of the General Counsel. Instead of dealing with service marketing, it would therefore be necessary in the present case to deal with specific CPS identity design, which can sustainably improve the image and strategic positioning of the legal department both internally and externally – in conjunction with other important identity tools. Only the application of really appropriate content can ensure in practice that Corporate Professional Services departments are perceived as important and valuable business partners.

When concepts, models and strategies are not coordinated, often all that remains is to drink coffee and wait © QUADRAGON Management LLC

When concepts, models and strategies are not coordinated, often all that remains is to drink coffee and wait © QUADRAGON Management LLC So you say that Corporate Professional Services departments – such as legal or compliance departments – are too often based on the wrong models and strategies when problems arise. Are there no current concepts that would do justice to these special departments?

Roman P. Falta: When I started working on Professional Services Management in 2006, I quickly reached my limits: Although the general MBA toolbox contained a large number of non-specific models, analysis and optimization tools that could hardly be applied in CPS optimization, I could not find a convincing and self-contained system for setting up, analyzing and optimizing Corporate Professional Services Departments in my research. Today, of course, the situation is much more comfortable. We are currently working with a CPS model developed in-house and successfully applied in practice, which also formed the basis for our book „Praxishandbuch Legal Operations Management“. This model is the central theme for its chapter subdivision. The model was not created in the ivory tower of a university, but is based on the collected professional knowledge of myself and many other experts. Our approach has always been to learn from practice and make our findings accessible to others. Therefore, my co-editor Christian Dueblin and I also wanted to create a standard for the management of the legal function, which contains not only theoretical content but above all a great deal of practical knowledge. The 40 authors who contributed to the book were therefore absolutely free to work out their contributions when dealing with their special topics. We have merely encouraged them to focus as much as possible on their own experiences in order to contribute specific content. What is particularly important if you want to improve the functioning of a Corporate Professional Services department, such as a legal department?

Roman P. Falta: In order to optimize a legal department in the long term, three different levels must be addressed: It is very important to take a close look at the „fundamental level“ at the beginning, i.e. the design of identity, internal and external positioning and various management issues. The fundamental level represents the basis on which the downstream areas are built. The next step is to look at the more technical „structural level“. This has great potential for optimization in terms of internal structures, processes and resources and is the level that receives the most attention in the market today. However, since most restructuring and optimization projects deal exclusively with this level, without including the fundamental level, such projects often cannot produce the desired results in practice. Finally, the „operating level“, which is also very important, must also be examined, as this is where the effective cycle of measures by the legal department takes place.

The QUADRAGON Legal Operations Management Model © QUADRAGON Management LLC

The QUADRAGON Legal Operations Management Model © QUADRAGON Management LLC And where do you specifically start when it comes to the professional optimization of a legal department?

Roman P. Falta: When optimizing a legal department, it is particularly important to carefully analyze all three levels mentioned above and to identify problem areas that are not congruent with the optimization goals of the company or the General Counsel. The focus of the cooperation should not only be on the head of the legal department, but also on the legal team as a whole and on the individual employees. After all, it is no use to a company or a public authority if it has the best structures and processes, but its legal team is demotivated or individual employees have already internally resigned. Optimization at all three levels, including the relevant interaction partners, is so crucial because all parties involved must be regarded as one unit acting together. The linguistic separation of these areas is a semantic illusion that often creeps in unnoticed. Strong identification, positive internal and external social dynamics, high employee satisfaction and an overall increase in the productivity, effectiveness and efficiency of in-house counsels only work if the department and the team are integrated into the overall context and each individual team member can work in their psychological safety zone. Google, for example, has fully understood this as part of its research on team performance. I am therefore sure that other companies and public authorities will also deal with these findings. In addition to people business, measuring performance in legal departments is a major challenge. Especially for corporations, which often have large legal departments. In contrast to a purchasing or sales department in a company, it is difficult to express the activities of the legal department in figures. How can you measure the performance of a legal department in a company?

Roman P. Falta: That is a very important point and numerous personalities from business and education have also commented on it in our book. Unfortunately, a more detailed discussion of the findings would go beyond the scope of this interview. I would, however, like to stress the following: Measuring performance in legal departments is basically no more difficult than in sales or in other business defense units. This often seems more difficult from the outside, because many general counsels are not used to quantify qualitative aspects of their work and to analyse performance-weighted. As a rule, however, everything that actually makes sense can be quantified. The legitimate question is therefore rather what measurable things one actually selects and analyzes accordingly or uses for performance measurement. However, as long as the purely qualitative view prevails in practice – if a general counsel manages to avert a million-dollar liability case, this is usually sufficient reason to have him hired – in my opinion an honest discussion about performance measurement in legal departments is rather obsolete.

KPIs and Legal Risk Metrics © QUADRAGON Management LLC

KPIs and Legal Risk Metrics © QUADRAGON Management LLC But how can a General Counsel or an executive management measure the performance of the legal department if there is no one-off case, as you have just described?

Roman P. Falta: Exactly the same as in other departments. However, I advise General Counsels not to use more than five to ten specific Key Performance Indicators (KPI) in such cases. It is important to find the „right“ KPIs for my department and to integrate them into the existing Management Information System (MIS) if possible. Where these cannot be integrated, one should ensure that a sensible alternative solution is implemented – for example an individual balanced scorecard solution for the legal department – which can then serve as a data and argumentation basis at team meetings or in negotiations with the management. Our handbook provides a lot of valuable advice and detailed assistance in this regard. And what about the often invoked Legal Risk Management?

Roman P. Falta: Many General Counsels have the same problem of meaningful quantification when it comes to legal risk management. In this area, too, far too little professional work is still done today. Relatively simple concepts and solutions exist to set up and successfully operate a meaningful legal risk management system in a short time. This would actually be very important for every General Counsel, because with a professional, number-based legal risk management solution it not only corresponds to the often exclusively quantitative world view of the top management, but is then really taken seriously by them. After all, performance or risk measurement is always about obtaining meaningful data in order to reflect the past on the one hand, but also to draw the right lessons for the future on the other.

I believe, however, that the second aspect should be much more stressed out in the future: The evaluation of the KPIs or legal risk factors should be carried out in a forward-looking manner rather than backwards, i.e. with which indicators or factors can I best anticipate future changes and risks today? Performance and legal risk measurement as part of the screening and monitoring process of environmental and market changes is therefore an absolutely central instrument of every forward-looking Corporate Professional Services Management. The legal department – whether designed as a classic business defense unit or as a modern proactive legal business partner – naturally plays an absolutely central role for every company. If General Counsels were to communicate this fact more actively and propagate it in their respective organisations, legal departments would also receive more attention from their top management in this area.

Praxishandbuch Legal Operations Management, Springer 2017

Praxishandbuch Legal Operations Management, Springer 2017 What are your conclusions from the book project? Are there any aspects of Legal Operations Management that you would judge differently from today’s perspective due to your cooperation with so many other experts?

Roman P. Falta: Yes, I was pleasantly surprised by the variety of thoughts the authors have every day in connection with the management of the legal function in their own company or their public authority. As an external consultant, you always have a somewhat limited view of customer projects, as a clear goal that the client wants to achieve is agreed upon in each case. For this reason, your client often does not let you participate in his entire world of ideas on Legal Operations Management. It was therefore very exciting for me to observe how many of the personalities involved constantly try to question and improve their work. After four years of intensive work on this joint project, it is therefore a particular satisfaction that we can now give something back to the countless legal professionals in Germany, Austria and Switzerland who ask themselves the same questions as we do. Of course, you will find many of your own ideas on certain topics confirmed in our book, which in itself can already represent a high value. However, I am convinced that every reader will gain many new impressions, as we have also tried to show new and alternative perspectives. Finally, there are also areas in the „Praxishandbuch Legal Operations Management“ which I can assume are currently only known to a handful of legal professionals in the German-speaking countries. Dear Mr Falta, on behalf of I thank you for the time you have taken for this interview and wish you continued success with your projects!

(C) 2017 by Thomas Schmid. All rights reserved. Other publications are only permitted with the express permission of the author.