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Naomi Seward of Nationwide discusses how her company implemented a central legal function and the significant impact it has made.
How was the business structured before you centralised legal services?
As with many organisations, the provision of legal services was provided by various different business areas. Each business area would set and be responsible for their own budgets, and would then instruct their own counsel as necessary. While a good level of service was being provided, the size and scale of the business required a more co-ordinated approach. By centralising the function, we were able to develop a stronger function that was joined up, enabling us to become a stronger partner to the business as a whole. Nationwide is a growing brand and the biggest building society in the world. We needed to match that growth and aspiration with a model that was future-proof. We think we’ve done that quite well.
How did Nationwide start bringing legal services into one place?
We began by centralising the budget. This pulled together all the areas within the business that instruct lawyers. The next step was to create a panel to ensure consistent provision of legal services to a specific standard across the organisation.
We needed to determine what legal departments were needed to service the business’s requirements. For us, this meant undertaking a significant piece of work around organisational effectiveness. It was about setting up the right structure for the provision of the advice we give in order to ensure we had the right people in the right place to do that work.
Total centralisation is not the desired end result. The aim is to get a firmer grip on risk elements by creating a framework where no one within the organisation can instruct a lawyer to carry out any legal work without going via the legal department. It is about developing a stronger, more cohesive function that is a valued and trusted business partner, with a seat at the table at the highest level.
What are the benefits of centralisation?
Centralising the budget enables you to understand where the organisation is spending its legal budget. It also gives you the ability to leverage relationships with law firms and take control over instruction, which is difficult when you are thinly spread across an organisation. If you don’t know what the business areas are actually doing from a legal perspective, then you have no central oversight over the risks that are being taken.
Once you centralise, you can address how strategically to organise the provision of legal services. For example, we now have tighter control over strategically important pieces of work for the organisation. This is hugely important, particularly today, when compliance is playing an increasingly important part of legal activity.
It also ensures best value for the business: we work on the basis that firms return to us approximately 10% of our spend in the form of value-add activity.
How do you make all the business areas comply?
You encourage an understanding of what the business does, ensuring that there is an interconnection between all the steps that you take. Having that clarity is vitally important for the organisation to establish a framework to mitigate risk. If there’s a chasm between our clients and us, this can damage both relationship and reputation, in addition to outcomes. It is only when there is a mutual synergy that you can then create your own sanctions between legal and compliance.
Where does outsourcing fit in?
The panel and outsourcing are linked, but the decision that drives outsourcing is what you are going to do internally versus externally. We have an outsourcing policy that will determine where we outsource and that will be dependent on risk. We tend to use outsourcing to mitigate risk, but we are also aware there’s a danger that if you do that wholesale, then you just send all the high-profile and interesting work out. We have a fantastic team who is able to deal with issues across the board, which is why we ensure we retain enough responsibility and accountability internally that decisions can be made, using external firms to ratify decisions made. For example, we would still draft the terms and conditions, but we would then effectively get them blessed, as you would expect with an organisation of our scale.
How is the relationship between the regulator and in-house team? What’s the practical effect of the different controlled functions hierarchy?
CF10 [CF10 is the term given to a person who is registered with the FCA or PRA as an ‘approved person’ to oversee the compliance functions within a financial services firm] creates responsibility and the duty to give information directly to the regulator. You’re an internal police officer effectively. In-house teams now have a responsibility to the regulator to inform on things that are going on, whereas I think historically the lawyer’s role has been to avoid and to advise within a context. The latter, certainly in financial services, has gone. It has been precipitated within our division because we’re now part of compliance. The whole world of compliance requirements is subsuming financial services organisations at the moment. Frameworks, governance and risk management are key.
How do you ensure the provision of legal services helps the organisation reach its business goals?
We tend to be less demand-led than many in-house teams. We start from the other end and ask, as a financial services organisation, where are we looking to grow and what do we need to do to help the organisation do that? Also, we ask what are the risks and issues that affect our organisation, and how do we provide a legal department that actually services that? Part of that is having the right structure to do it—we are quite top heavy and are embedded in the business to get things moving when there is a requirement or business need.
As general counsel, my job is to make sure I meet with the right people and understand their business needs. I can advise them on where the law is changing, what they need to do and what the impact might be. This ensures we are continuously on the front foot and that we’re involved at the right time. If you get involved at the back end, you never solve anything because the mistakes have already been made. Whereas if you get involved at product initiation, you understand where the business is going, and can make sure the advisors are involved when they can be most effective.
What has been the impact of analysing processes to ensure the legal provision is streamlined?
It has forced each of the teams to develop their own lean plans to work out what do they need to do to be able to focus on high-end, high-impact work. It’s now business as usual to consider what work you’re doing each week, each month and each year, making sure that it’s being done at the right level and that it is core to the business. The benefit of this is being able to say we’re responsible for making sure that we are doing the work that we need to be doing. And that’s about making sure that the organisation’s strategy feeds through to the strategy within group legal.
How do you manage your visibility and reporting in the wider business?
Rather than having an annual report, we create a partnering plan. The plan is partly for resourcing purposes but also for the cross-management of legal spend in other business areas. Every key partner will have this kind of document. It is annual, but must be a living document.
A partnering plan includes a front-end document that sets out our strategy, states our goals and indicates what the business is planning to do in the next 12 months. We then measure our performance against our strategy at relationship meetings, focusing on the planned timeline for changes within a given business area, what we think is going to happen in the legal and regulatory framework, and the resourcing and costs in relation to that.
In terms of visibility, we’re in the process of working out how we need to cut our data to create the reports we need to identify areas of risk, avoid duplication in risk management and identify resourcing pinch points.
How do you survey satisfaction with the in-house team?
What we do is capture feedback on the team at each of our quarterly relationship meetings and then discuss that. We have a real direct link to the corporate strategy, which you wouldn’t normally find within an in-house legal function. As an organisation, we had a goal of being above our nearest rival for satisfaction for six months continuously. It was a real struggle for some areas to see their connection with the customer, but for an organisation where customer service is at the heart of what it does, it’s really important.
And, finally, any lessons learnt?
Centralising the legal function and budget creates an administration issue, and one with which we’re still dealing.
We get a lot of feedback from business areas that says we couldn’t have done this without you, which is absolutely fantastic. It is really rewarding, but there needs to be a balance, and that’s where the challenge really comes in. You can resource for it, but understanding the business involves a lot more meetings. That in itself raises questions—which meeting is it crucial that you attend? Where do I need to be involved and where can I just receive information? It comes as part and parcel of delivering for the business as a whole. It can be difficult but it needs to be if we are to get the best results. Nationwide is a great place to work, with a great culture. Part of what we have found is that since becoming a centralised and co-ordinated function, the business expects a high level of service and that we will always be there. By harnessing our service, we have raised the bar for ourselves. It is a great motivator and shows that we are not complacent as we strive to provide the best possible service every time.
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